The local impact of the US financial crisis
Inquirer.net - Philippines
This was proven to be untrue in the 1930s with the Great Depression when up to a fourth of the workers in the US were out of work. The Great Depression had ...




Washington Post Surviving Tough Economic Times? Readers Say, Bring It!
Washington Post - United States
By John Kelly Acouple of weeks ago, I printed some money-saving tips that I gleaned from books printed during the Great Depression. ...


WASHINGTON DIARY: Socialism for the rich —Dr Manzur Ejaz
Daily Times - Lahore,Pakistan
But this may not halt the global economic collapse: either there will be a 1930s-like depression, or a 1970s-like stagflation where inflation and interest ...




Wall Street Journal Blogs Clinton: We Need More ‘Sensible’ Regulation
Wall Street Journal Blogs - New York,NY,USA
Clinton said it was “imperative” to start considering an entity similar to the Depression-era Home Owners Loan Corp. to buy and modify mortgages and save ...



The Moscow Times A Frightful Wake-Up Call
The Moscow Times - Russia
The US financial crisis is clearly the worst since the Great Depression. New York University Professor Nouriel Roubini has long forewarned that this crisis ...

Economic woes evoke memories of Depression
Daily Mail - Charleston - Charleston,WV,USA
Glenn C. Roberts was 14 when the stock market crashed in 1929, launching the Great Depression. Roberts, 94, and several of his contemporaries talked about ...


A Christian View of the Economic Crisis
Christian Post - USA
Comparisons to the Great Depression are inevitable, but today's crisis bears little resemblance to the total economic collapse of the late 1920s. ...


Bush Speaks Out About Economic Bailout Plan
WBKO - Bowling Green,KY,USA
A little more than an hour ago, President Bush spoke to the nation to gain public support for the administration's request for Congress to approve its ...


President Bush steers clear of the D-word
Los Angeles Times - CA,USA
With use of the "long" and "painful" adjectives, that seems close to the description of a depression. But Bush, in his speech, avoided invoking that specter ...


Bernanke warns of credit meltdown threat
Business Day - Johannesburg,South Africa
Administration officials were warning of a looming economic disaster akin to the Great Depression of the 1930s if an angry and rancorous Congress failed to ...



The Associated Press Trump tops off Chicago tower; endorses McCain
The Associated Press
Trump says the bailout is "probably needed" to stave off an economic depression brought about by "lots of bad policy by the Bush administration. ...


Text of President Bush's speech on economic crisis
The Associated Press
Text of President Bush's speech Wednesday on the economic crisis and a financial rescue plan, as transcribed by CQ Transcriptions: ___ BUSH: Good evening. ...


Today on the presidential campaign trail
The Associated Press
Palin says US could be facing another Great Depression if Congress doesn't act ... Sarah Palin received blessing in 2005 to keep her free from 'witchcraft' ...


1 in 4 Michigan voters: US in depression
Detroit Free Press - United States
"Right now we're nowhere near the kinds of economic catastrophe that would cause one to have called the downturn of the 1930s a depression," he said. ...


Bush sells bailout to skeptical nation
Globe and Mail - Canada
Mr. Bernanke, who as an academic specialized in the Great Depression, stopped short of likening the current situation to the Dirty Thirties. ...

Housing Horror: Sales of 34.5% YoY

Newest figures out from the Census Bureau on housing sales and prices came out this mroning - and they are very bad:

Sales of new one-family houses in August 2008 were at a seasonally adjusted annual rate of 460,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.5 percent (±11.7%)* below the revised July rate of 520,000 and is 34.5 percent (±7.3%) below the August 2007 estimate of 702,000.



The median sales price of new houses sold in August 2008 was $221,900; the average sales price was $263,900. The seasonally adjusted estimate of new houses for sale at the end of August was 408,000. This represents a supply of 10.9 months at the current sales rate.

It gets worse when you drill down into the numbers. The average sale price in August of last year was $313,600 in the report. That's down 15.8%. The median price decline was less (about 6.2%) so no doubt the happy-talk media will focus on that one.



The real number to watch? Home sales were 460,000 in August of this year, versus 702,000 in August of last year. So sales are down 34.5%!



Durable Goods Collapsing

While there's talk that the Big Bailout Deal is close, what this country doesn't need right now is another economic problem, but here's a very, very big one: The new durable goods orders out this morning show orders for big ticket items collapsing:

"New Orders New orders for manufactured durable goods in August decreased $9.9 billion or 4.5 percent to $208.5 billion, the U.S. Census Bureau announced today. This was the largest percent decrease in new orders since January 2008 and followed three consecutive monthly increases including a 0.8 percent July increase. Excluding transportation, new orders decreased 3.0 percent. Excluding defense, new orders decreased 5.0 percent.

Shipments Shipments of manufactured durable goods in August, down following two consecutive monthly increases, decreased $7.7 billion or 3.5 percent to $210.1 billion. This was the largest percent decrease in shipments since December 2002 and followed a 2.3 percent July increase.

Unfilled Orders Unfilled orders for manufactured durable goods in August, up thirty of the last thirty-one months, increased $3.0 billion or 0.4 percent to $827.2 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.8 percent July increase.

Inventories

Inventories of manufactured durable goods in August, up thirteen of the last fourteen months, increased $2.4 billion or 0.7 percent to $338.5 billion. This was also at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 0.9 percent July increase.

Capital Goods Industries

Nondefense

Nondefense new orders for capital goods in August decreased $5.6 billion or 7.5 percent to $68.9 billion.

Defense

Defense new orders for capital goods in August increased $0.9 billion or 9.4 percent to $9.9 billion.

As durables orders collapsing, on top of all the banking issues, will likely drive a large increase in layoffs/firings over the next couple of months as companies adjust staffing levels to cope with lessening demand. And already there's this:



Mass Layoffs Up

• State in depression, says trade action group
The Ann Arbor News - MLive.com - Ann Arbor,MI,USA
AP BUSINESS NEWS by Rick Haglund | The Grand Rapids Press DETROIT - Michigan is in the midst of an eight-year-long economic "depression," primarily the ...


Shattered illusions for US
The Australian - Sydney,Australia
The spectre of systemic financial collapse and global economic depression is stalking the world. The daily play of politics matters, now more than ever. ...


JP Morgan says California home prices face further drop
MarketWatch - USA
More like the Great Depression than the '70s, I think. Pure scare tactics! The fact is, that would be exactly the solution to the current economic problems! ...


Economic depression makes for happy families
Olive Press - Orgiva,Granada,Spain
According to the Spanish Family Law Association the economic depression is forcing a rising number of unhappy Spanish couples to stay together. ...


The bailout: What's at stake
CNNMoney.com - USA
During the Great Depression, unemployment shot up to as much as 25% in 1933. That came after the gross domestic product, the broadest measure of economic ...


Washington Mutual Collapses Under Weight of Depression
Hollywood Today Newsmagazine - Los Angeles,CA,USA
... the worsening financial crisis panicked politicians have yet to identify as an economic depression, the largest savings and loan in the United States, ...


America’s bail-out plan
Economist - UK
Mr Schumer’s interpretation: failure to act would cause “a depression”. Mr Bernanke and Hank Paulson, the treasury secretary, had met congressional leaders ...


Trust financial system, Congress during crisis
DetNews.com - Detroit,MI,USA
When this happens, such as during the Great Depression, the savings and loan debacle and during the current housing-led crisis, the federal government must ...


Economic bailout: Socialism to the rescue?
Drexel University The Triangle Online - Philadelphia,PA,USA
The bailout may not be so surprising if considered in the light of our last economic disaster. Certainly not since the Great Depression has our economy ...


El Paso May Not Feel Effects Of Economic Bailout
KFOXtv.com - El Paso,TX,USA
Fears of another Great Depression are far from becoming a reality. "It has not translated into the type of overarching economic weakness that occurred in ...

Economists say bailout necessary, but every option has drawbacks
Detroit Free Press - United States
BY LEDYARD KING • GANNETT NEWS SERVICE • September 27, 2008 WASHINGTON -- The nation's economic crisis is drawing comparisons to the Great Depression: ...


Economic woes front and centre as federal campaign week wraps up
The Canadian Press - OTTAWA
OTTAWA — Lengthening shadows of economic uncertainty are dominating the election trail as the federal campaign approaches the end of its third week., ...


Bankers downbeat on economic impact of crisis
Reuters - USA
... the worst since the Great Depression and another saying that the US consumer is "toast". The comments, made at a meeting of the World Economic Forum in ...


It happened once. Could it happen again?
Globe and Mail - Canada
Even when an economic recovery got under way, the Depression had left a legacy of the reassertion of state control over economic life that was no longer ...


Economic problems worry some people but few predict another Great ...
Black Hills Pioneer - Spearfish,SD,USA
Larry, 68, said he’s optimistic and doesn’t believe the country is heading towards a Great Depression. “I think things will turn around and be OK,” Larry ...


Current Economic Situation vs. The Great Depression
WTVY - Dothan,AL,USA
Financial Professor Robert Earl Stuart of Troy University says one of the major factors in both The Great Depression and our current economic crisis is too ...


• Study: State is in depression
MLive.com - MI,USA
AP UPDATES by Rick Haglund | Detroit Bureau DETROIT -- Michigan is in the midst of an eight-year economic depression, primarily the result of manufacturing ...


US Economy: Even Hank Paulson's bail-out plan cannot detox global ...
Telegraph.co.uk - United Kingdom
Can the rescue package really halt our slide into a new Depression, asks Ambrose Evans-Pritchard. By Ambrose Evans-Pritchard Even if Congress backs the ...


Wall Street financial collapse spells the end of American ...
Laval News - Laval,Quebec,Canada
While short term this action may avoid an immediate economic depression long term the federal government has taken what should have been a private debt ...


Economic depression unlikely, analysts say
United Press International - USA
Further, the year before the Great Depression, the gross domestic product dropped 13 percent, an economic jolt that has not occurred so far this time ...
See all stories on this topic

Between US presidents, a leadership void
International Herald Tribune - France
By Peter Baker The winter before Franklin D. Roosevelt took office as president was among the darkest periods of the Great Depression. ...


LETTER: Borrowing $700 billion is sheer madness
Torrington Register Citizen - Torrington,CT,USA
Currently, it threatens to plunge us into a new depression unless we take immediate action. To avoid the impending market correction the Bush administration ...


ERIC SHARP Economic crisis threatens the environment
Detroit Free Press - United States
The economic mess will become an excuse to open more public lands and offshore waters to oil drilling, even though that won't do anything to lower the cost ...


It follows: GOP, economic collapse
Monroe News Star - Monroe,LA,USA
Classic economic textbooks teach a recession is when the GDP declines two consecutive quarters, while a depression is a GDP decline of more than 10 percent. ...


Barack Obama Says Economic Crisis Affects Young People Most
MTV.com - USA
That's what happened during the Great Depression," he explained. "And at that time, it was just banks that were in charge of capital. ...


Waiting to Lead (or Not)
New York Times - United States
... on some economic programs. “Hoover really wanted FDR to be involved and be more active in struggling with the Great Depression,” said John P. Burke, ...


Economic View What’s Free About Free Enterprise?
New York Times - United States
By PETER L. BERNSTEIN THERE was a time, in my childhood during the Great Depression, when the streets of Manhattan were filled with unshaven men in ...
See all stories on this topic
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Will the Financial Crisis Lead to a Prolonged U.S. Recession Despite the Bailout Package?

• Roubini: the Treasury plan also does not explicitly include an HOLC-style program to reduce across the board the debt burden of the distressed household sector; without such a component the debt overhang of the household sector will continue to depress consumption spending and will exacerbate the current economic recession
• After stronger than expected growth in Q2-08 boosted by rebate induced consumer spending and export growth, GDP growth is expected to weaken significantly in Q4-08/Q1-09 as consumption is expected to contract (rising job losses, falling wage/asset income, high debt, tightening credit), along with slowdown in capex (high borrowing cost, weak corporate earnings, elevated production costs), softening exports (slowing G-7 and Em growth, stabilizing USD); fuel and commodity prices in spite of easing will remain elevated; longer housing correction and financial turmoil might lengthen the recession and lead to a slow and sluggish recovery
• Fed: Downside risks to growth over the next few quarters due to financial turmoil, contracting housing sector, softening labor market, consumer spending, export growth, and tighter credit conditions
• IIE: Sluggish consumer spending through 2009, and declining contribution of net exports to GDP ahead will lead to modest negative growth in H2-08 (0% or negative) and modestly positive growth in H1-09; 2008 growth:1.5%, 2009: 1.3%
• Alliance Bernstein: Weakening 6-mo diffusion index on leading indicators; slowdown in growth even before financial crisis worsened will impede economic recovery resulting in a longer trough (U-shaped recovery)
• Bloomberg Survey: Growth will weaken to 0.7% in Q4-08 and 1.1% in Q1-09 and 1.8% in 2008 as financial crisis worsens, consumers and firms face tight credit conditions
• Wachovia: Continued weakness in labor market implies consumer spending will decline in H2-08; high production costs, low demand will cause corporate profits to decline in H2-08
• Goldman Sachs (not online): GDI (a better indicator) is showing more weakness than GDP; Contraction in employment, industrial production, real sales at the turn of 2007 indicates economy dipped into recession during that time; rebounding in mid-2008 on fiscal stimulus; but starting Q3 a contraction in consumer spending esp. on services (due to fading impact of rebates, declining consumer/auto credit, home equity credit lines, employment, high food and energy prices), persistent weakness in housing and financial sector (home prices will bottom only in early 2009 and bank losses continue), fading boost from net exports (slowdown in EU, Asia), spillover of slowdown to other sectors (state/local govt spending, capex) will thus lead to -2% growth in Q3-08, 0% in Q4-08 and Q1-09 with a sluggish recovery; but no deep downturn due to structural factors (weaker multiplier effects: tighter inventory control, capex, hiring, exports supporting manufacturing sector)
• Merrill Lynch (not online): Peaking of 4 determinants of recession indicate recession began during Oct-07-Feb 2008; real GDI growth (which is a better indicator than GDP in recognizing the start of A recession) was negative in Q4-07 and Q1-08; GDI witnessing a much weaker trend than GDP; Amid slowing capex, decline in manufacturing employment GDP growth will be roughly flat in Q3 (0.8%), negative in Q4-08 (-2%) and Q1-09 as net export contribution declines; we won't see a recovery until mid-2009 at the earliest; GDP growth forecast 2008: 1.8%; 2009: -0.5%; longer duration of recovery is a bigger risk than magnitude of decline in growth
• JPMorgan: Amid declining capex, credit constraints in housing, auto, growth will be flat in Q3-08 (0%) and contract -0.5% in Q4-08 and Q1-09
• TD: Econmy will improve only starting H2-09 and growth and consumer spending will rebound only in 2010; 2008 growth:1.7%; 2009: 1.1%
• Feldstein: U.S. may now be in a very long recession that will drive the unemployment rate higher. Downturn began in Dec-07/Jan-08 but recovery not on the horizon; exports not strong enough to support economic recovery and impact of tax rebates will fade in H2-08; further rate cuts will not be effective in stimulating growth; higher taxes (as proposed by Obama) will prolong the downturn
• IIF: Sub-par growth through 2009 on weak disposable income, consumer spending in H2-08 (impact of lower gas prices offset by end of rebates) and housing and inventory adjustment offset by weaker boost from exports, along with weak hiring (no major lay-offs), capex and commercial construction
• Fed's Stern: continued modest expansion (though with further rise in unemployment and decline of inflation) due to better 'initial conditions' compared to previous downturns like lower unemployment, interest rates, inflation, and financial condition of banks and corporate sector
• Krugman: U.S. may have an L-shaped recession as home prices are yet to fall to pre-bubble levels; unemployment may continue to rise; growth may remain sluggish until 2010-11 even after the official recession is over, esp. as the Fed battles modern asset-based recessions fueled by interest rate cuts
• Via FT: Stronger than expected H1-08 (led by rebates-induced consumption, exports in spite of negative monthly GDP growth); but recent intensification of housing and financial sector crisis, reinforced by oil-led inflation, and the time lag b/w financial crisis and the impact of credit squeeze on real economy and back on the financial sector may lead to negative growth at the turn of 2008
• Berner (Via FT): 50% probability of a W-shaped recession as consumers buffered by rebates are facing increasing financial pressure
• Fed revised 2008 GDP growth forecast upward from 0.3-1.2% in April to 1-1.6% in June; kept unemployment rate forecast unchanged at 5.5-5.7%; it kept the 2009 GDP growth forecast unchanged at 2-2.8% but raised the unemployment rate forecast to 5.3-5.8% from 5.2-5.7% in April
• IMF: Weak 2008 as GDP will grow at 1.3% y/y in 2008 led by H1-08 growth but economic activity will deteriorate in H2-08 (as higher food and gas prices and tighter credit conditions hit consumer spending); growth will recover gradually in 2009 at 0.8% y/y; need to keep interest rates on hold with housing and banking sector targeted stimulus packages and contingency measures and regulatory reform for financial sector (rather than generalized fiscal stimulus)

Sep 28, 2008

How Stuff Works: How an Economic Depression Works
istockAnalyst.com (press release) - Salem,OR,USA
But what exactly is an economic depression? And what makes a depression so painful? One way to understand a depression is to look at its opposite. ...



AFP Obama calls for deposit insurance hike
AFP
"Yesterday, within the course of a few hours, the failure to pass the economic rescue plan in Washington led to the single largest decline of the stock ...


UPDATE 1-Bush says US economy needs government action
Reuters - USA
He pledged that his economic advisers would press ahead this week with talks with key lawmakers aimed a formulating legislation to deal with what analysts ...


Creating a great depression
Asia Times Online - Kowloon,Hong Kong
Like Roosevelt, Obama would be full of clever ideas to solve the nation's economic problems; like Roosevelt's, his ideas would mostly be half-baked leftist ...


For outraged public, bailout bill is a matter of distrust
Seattle Times - United States
He tried to put the best possible face on the economic downturn: "I don't think it'll be as bad as the Great Depression." But Houston said he is bracing for ...


Those who remember the Depression fear its return
McClatchy Washington Bureau - Washington,DC,USA
By Amy Wilson | Lexington Herald-Leader The worldwide economic depression that began on Oct. 29,1929, is still everywhere if we'd look. ...


US politicians scramble to find way to avoid economic calamity
Xinhua - China
29 (Xinhua) -- The White House and Congress on Monday scrambled to figure out the next move to avoid economic calamity after the House of Representatives ...


Time for political bailout
Indianapolis Star - United States
... of the worst financial crisis since the Great Depression. The answer was crisp and complete. "This is a final verdict on eight years of failed economic ...


Congress agrees on tentative plan for $700B bailout
Newsday - Long Island,NY,USA
... released a 110-page document detailing the bill for the bailout plan, which would be the largest economic rescue since the Great Depression. ...


The Great Recession?
KTKA.com - Topeka,KS,USA
The good news is Washburn Finance and Brenneman Business Professor Robert Weigand said the US should avoid the economic depression of the 1930's. ...


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Trichet Says ECB Discussed Rate Reduction as Turmoil Hurt Economic Growth European Central Bank President Jean- Claude Trichet indicated the bank is poised to cut interest rates for the first time in more than five years as the credit crunch hurts the economy and damps inflation.

Financial-Rescue Bill Sent to House for Second Vote After Senate Approval The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version.

U.S. Factory Orders Fall 4%, More Than Forecast, as Companies Cut Spending Orders to U.S. factories fell in August by the most in almost two years, signaling that business spending slowed down even before the recent worsening of the credit crunch.

Greenspan Says Markets, Economy Will Recover as Investors Regain `Trust' Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover ``sooner rather than later'' from the worst turmoil in seven decades.

IMF Says U.S. Faces Danger of `Sharp Downturn' as Financial Crisis Worsens The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world's largest economy since the credit crisis began last year.

Home Prices Fall in 24 U.S. Cities on Foreclosures; Las Vegas Hit Hardest Home prices dropped in 24 of 25 U.S. metropolitan areas in July, led by declines in Las Vegas and the coastal cities of California, as foreclosures depressed prices and accounted for a fifth of all sales.

`Serious Economic Crisis' Looms in Latin America as Credit Freeze Deepens Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities.

European Union Officials Squabble Over Bank-Rescue Plans in Finance Crisis European officials squabbled over how to respond to the global credit crunch, with Germany opposing a coordinated approach and the Netherlands calling on states to set aside funds to help troubled banks.

Banks Borrow Most in Three Days at ECB Emergency Rate as Turmoil Persists Banks borrowed more than 15 billion euros from the European Central Bank at its emergency rate for a third day yesterday, pushing the amount lent over a three-day period to a record.

U.S. Initial Jobless Claims Rise to 497,000, Highest in Seven Years: Table Following is a summary of the Sept. 27 initial jobless claims report from the Labor Department.

Labor Market Set to Weaken Further as Financial Crisis and Recession Worsen

• Oct 2: Initial jobless claims rose to 497,000 in the week ending Sep 27 (highest in 7 yrs); 4-week moving avg rose to 474,500; Avg Claims ytd: 388,000; Continued claims also rose to 3.591 mn (highest since Sep 2003); jobless rate was unchanged at 2.7% (but highest since late-2003)

Click Here For Full Analysis

If we can get Congress to give up on bailing out Wall $treet, there are a lot of things that they could do that will help America out:

1. Set up a Federal "Lender of last resort" finance company to help businesses with payroll and inventory.

2. Set up a Federal Housing Court to re-negotiate the terms of those toxic mortgages.

3. Create some WPA style programs to fix crumbling bridges and roads.

Add your own. Government is not bad by nature - it becomes bad by mismanagement.

100% Agree.

The problem is not a lack of money. The problem is too much reliance on money masters in governing.

And the failure of the government to regulate them.

A government that believes that government is bad will be a bad government

Job Losses Pushing U.S. Economy Into `Significant' Recession
By Rich Miller and Shobhana Chandra

Oct. 4 (Bloomberg) -- The U.S. may be heading for its worst recession in at least a quarter century as the credit crisis forces employers across the country to cut workers and ratchet back spending.

Labor Department figures showed yesterday that payrolls fell by 159,000 in September, the biggest reduction in five years. While the unemployment rate held at 6.1 percent, that's up from 5 percent as recently as April. Some economists, including Goldman Sachs Group Inc.'s Jan Hatzius, said it may rise to 8 percent as the credit crunch hammers consumers and companies.

``We're in this self-reinforcing negative cycle,'' said Mark Zandi, chief economist at the West Chester, Pennsylvania-based Moody's Economy.com. ``It's going to be a very significant recession.''

That's bad news for Republican presidential candidate John McCain as the campaign enters its final month. The jobless rate has only risen twice in the year leading up to elections since World War II and in each case the party in power lost.

``Voters praise or blame the incumbent party in the White House for the economy,'' said Ray Fair, a professor at Yale University in New Haven, Connecticut. ``Rising unemployment is a negative for McCain.''

A computer model Fair has developed to forecast the election based on the economy shows the 72-year-old Arizona senator losing to his Democratic rival, Senator Barack Obama, 47, on Nov. 4.

Mounting job losses also put pressure on policy makers to do more to aid the economy. Federal Reserve Chairman Ben S. Bernanke is slated to speak to economists in Washington on Oct. 7 and some central bank watchers said he might use the opportunity to signal that a reduction in interest rates is in the offing.

Rate Cuts

``The Fed is expected to cut interest rates soon and ultimately take the federal funds rate down to 1 percent,'' said Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts. The target federal funds rate -- the rate that banks charge each other for overnight loans -- is now 2 percent.

At the Treasury, Secretary Henry Paulson moved quickly to put a $700 billion bank rescue plan approved by Congress into effect. He's recruiting asset managers, bankers and lawyers to help the Treasury get the plan off the ground.

While that may eventually help limit the damage, economists said the economy is likely to get worse before it gets better.

``It's just gotten to the point where a lot of companies will be forced to cut costs more aggressively and they'll look for those in jobs,'' said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.

Losses Spread

Job losses in September were widespread as the weakness that began in the housing market expanded to other parts of the economy. Aside from a 9,000 gain in government payrolls, all major categories dropped except education and health care.

Edelmira Clark, 53, of Chicago, said she was concerned about losing her job as a hotel housekeeper. Her company has already cut her work hours to two days a week.

``I'm trying to find a part-time job in the morning to balance, because I can't do only two days of work,'' said Clark, who immigrated to Chicago from Belize in 1997. ``But a lot of people, my friends, have lost their jobs for good.''

The September employment report showed that the work week shrank to match the lowest level since records began in 1964.

Even lawyers are hurting. Peter Cronan, a former professional football player who is now vice president of a litigation support firm in Boston, said the company is stepping up its layoffs as the economy weakens.

``We've just put the accelerator on'' firings, said the 53- year-old Cronan. ``It's survival.''

Vicious Spiral

The risk now is that the 13-month-old credit crisis and the recessionary economy begin to feed off each other in a vicious spiral that makes both worse.

Companies from newspaper publisher Gannett Co. to slot machine maker Bally Technologies Inc. are finding it harder to raise cash as frightened investors and bankers pull back. That's undermining the economy and deepening the recession, giving lenders yet another reason to hoard cash.

``The credit flow appears to be a trickle,'' said former Fed governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington. ``If that persists, we'd be seeing job losses of 300,000 to 400,000 a month and consumer spending collapsing.''

The National Bureau of Economic Research, which is the official arbiter of U.S. economic cycles, has yet to call a recession. The group, which bases its assessment on indicators including employment, sales, incomes and industrial production, usually takes six to 18 months to make a determination.

`Waiting Mode'

As gross domestic product figures have still ``not recorded the bad news, we are in waiting mode,'' said Robert Hall, the Stanford University economist who heads the committee.

Still, many economists have little doubt that a recession has begun. The only questions are how long it will last and how deep it will be.

Zandi and Gramley said the economy already looks likely to suffer a bigger decline than in the last two recessions in 2001 and 1990-91 and may rival the 1980-82 slump, during which GDP shrank by 2.7 percent.

The increase in the jobless rate may be even worse. If unemployment rises as high as the 8 percent forecast by Hatzius, Goldman's chief U.S. economist, that would mean that it had jumped by more than it did in the early 1980's.

``The economy is being hit on all fronts,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``We may be entering a deep recession.''

To contact the reporters on this story: Rich Miller in Washington rmiller28@bloomberg.net Shobhana Chandra in Washington schandra1@bloomberg.net

Former IMF economist warns of global recession
Hindustan Times - ‎ 11 hours ago ‎
Vancouve... Simon Johnson, the former chief economist of the International Monetary Fund, warned of a global recession as a result of the devastating financial crisis ... Alerts to risk of a deep and prolonged recession in US Granma International US likely headed for a deep, prolonged recession, IMF warns Ottawa Citizen

Depression of 2008</h2> Times Online - ‎ 1 hour ago ‎
Canoe.ca The number of new mortgages being granted has dropped by 70% over a year, bigger than the cumulative four-year fall in the housing recession of the early ... Bernanke: Fed to use all powers to ease credit crunch MarketWatch Does the US face Great Depression II? Hindu

A depression: Could a third of Americans be right?
Christian Science Monitor - ‎ Oct 1, 2008 ‎ By Mark Trumbull | 10.01.08 The ongoing credit crisis raised fresh worries about an old problem – a 1930s kind of problem. Most forecasters say an economic ...

Echoes of the Depression
1929 and all that

Oct 2nd 2008
From The Economist print edition
How today's financial crisis resembles the one that happened three-quarters of a century ago, and how it does not

EASY credit, some say, was one problem. It was amplified by newfangled, flighty financial techniques, notably buying assets with borrowed money and watching leverage work its arithmetical magic. And underneath it all was a breezy, unthinking optimism, that prices could only ever go up. This was a perfect recipe for a runaway boom—and for a ruinous bust.

Substitute "houses" for "assets" in the paragraph above, and you might be reading a rough description of the blowing-up and bursting of America's property bubble. Insert "shares", and you might be back in the late 1920s. Whereas the fancy financial ideas of the 2000s comprised securitisation, credit-default swaps, collateralised-debt obligations and all their weird cousins, the innovation of choice before the crash of 1929 was the investment trust, a company whose purpose was to speculate in other companies' shares, using the wonders of leverage to multiply the returns (and, in the end, the losses).

In strange territory almost any map will do, no matter how incomplete or out of date. In trying to pick a way through today's financial crisis, there are plenty to pore over. Among them is one drawn in Sweden in the early 1990s, another from Japan in the same decade and an American one from a few years before that. By far the scariest, though, is that sketched in the years beginning in 1929. Frequent reference is made to it (see chart).

But the map of the Depression provides only an incomplete guide to how the American economy got to where it is now. The parallels between the speculative mania that ended in October 1929 and the housing bubble are seductive but misleading. Today's banking and credit-market crisis, and all the damage it may do to the real economy, can be traced to the property boom and subprime bust. In fact, although scholars still rake over the causes of the Depression, few think the 1929 crash contributed much. An economic slowdown was already under way before the stockmarket collapsed. And although loose monetary policy helped pump up the recent property bubble, there is much more debate about its contribution to the 1920s boom.

Where study of the Depression is more helpful, though, is in steering clear of deeper trouble. In the early 1930s deficit finance was a heresy: in 1931, as bank runs were wrecking America's financial system, President Hoover wanted to balance the federal budget, which in those pre-New Deal days was small beer anyway. (He failed.) Monetary policy was also too tight—the main reason, argued Milton Friedman and Anna Schwartz in a brick of a book 45 years ago, why downturn became Depression.


It is no bad thing, then, that as an academic Ben Bernanke studied the Depression in earnest—looking in particular at how an impaired banking system had made the slump longer and deeper. At a conference in 2002, to honour Friedman on his 90th birthday, the chairman of the Federal Reserve (then a governor) addressed him and his co-author. "Regarding the Great Depression," Mr Bernanke said. "You're right. We did it. We're very sorry. But thanks to you, we won't do it again."

A less obvious lesson is that early in the Depression it was not clear how bad things were going to get—or, given the paucity of economic data, even how bad they were. A year after the crash, many Americans thought that they were in the midst of a usual, if painful, downturn—not as bad, surely, as 1921, when the economy contracted by a quarter in a single year. Indeed, rural areas, home to 44% of Americans in 1930, had long been in bad shape: farming had been in a slump since the early 1920s.

But worse was to come. A wave of bank failures broke late in 1930. Another lot followed in 1931: a run on Creditanstalt, an Austrian bank, set off a chain of events that took Britain off the gold standard and raised fears that America might follow. Foreigners and domestic depositors alike demanded gold from American banks. Nor was that the last downward turn. Compare then and now: a year after the credit crisis began last August, America's economy seemed to be standing up well. Today it looks much less secure.

The map's political features also bear examination. Gaps are dangerous—especially between presidencies. Between Franklin Roosevelt's first election victory in November 1932 and his inauguration in March 1933 America's economy spiralled even further down. In February another rash of bank failures broke out. The crisis ended—and the bottom of the slump was reached—only with a federal bank holiday, declared by Roosevelt within days of taking office. Hank Paulson, treasury secretary in 2008, thinks the financial system cannot wait until 2009 for a rescue plan.

The Depression also acts as a warning of the pitfalls of congressional politics. The Bush administration found out all about those this week. There were echoes, perhaps, of 1930. That year yielded the Smoot-Hawley tariff act, the product of a special session of Congress called by Hoover to address the economic troubles. The tariff helped give the world economy a downward shove. A thousand economists wrote to oppose it. (Hoover disliked it too, but chose not to veto it.)

Is 2008 a repeat of 1929 or 1930? Look not at the road ahead but the immediate surroundings, and the question seems absurd. America's economy may be just entering recession; between 1929 and 1933 it shrank by more than a quarter. Some economists fear that unemployment, now a touch over 6%, might reach 10%; in 1933 it was about 25%, and many of those in work were on short time and short pay. Americans are not banging at the doors of banks demanding their money, nor queuing around the block for soup and bread. America is not yet a land of Hoovervilles—or Bushvilles—inhabited by those turfed out of jobs and homes. Nor should it be allowed to become one.

http://www.usatoday.com/money/economy/2008...n-lessons_N.htm
Depression offers lessons for financial crisisBy Adam Geller, AP National Writer They are the stories we heard from our grandparents, the pictures we studied in history books — bread lines stretching around street corners, shantytowns sheltering the unemployed, small-town banks with darkened windows.Today's financial crisis is hardly that grim, though it does share some similarities with the economic collapse of the 1930s — both were preceded by a housing boom, a long period of cheap credit and a falling stock market. But those same similarities may offer some reassurance.

What was then economic calamity is today a history lesson. This time, America has been through it before, and there's a guide, at least for mistakes to be avoided as the nation's leaders try to prevent another catastrophe.

Economists have spent decades dissecting the Great Depression. Their findings demonstrate the crippling effect fear has on economic decisions, the tremendous cost of not acting quickly and the risk of damaging the larger economy in efforts to make individuals pay for financially irresponsible investments.

"The number of people with personal memory of the Great Depression is fast shrinking with the years," one noted expert said in 2004 in a speech at Washington and Lee University. "However, although the Depression was long ago ... its influence is still very much with us."

FIND MORE STORIES IN: United States | Washington | Florida | Federal Reserve | Dow Jones | Great Depression | University of Chicago | Princeton University | Ben Bernanke | Hoover | Roosevelt | Lee University That expert was Ben Bernanke, a former Princeton University professor and an expert on causes of the Depression. He's now the chairman of the Federal Reserve.

Today economists partly blame the Fed for the Depression because it raised interest rates even as the economy was slowing in the late 1920s. Then when banks began to fail, it took a hands-off approach.

But if those policymakers were able to speak up now, they could offer at least one defense of their actions: How were they supposed to know?

"In the Great Depression, what the Fed did at the beginning was to tighten interest rates. It took a long time to essentially recognize the magnitude of the problem, but of course it was a problem we had not had before," said Robert Aliber, a University of Chicago professor emeritus who's written on financial panics.

Today's policymakers and lawmakers know better, or at least they should. They've had the benefit of studying not just the Great Depression, but numerous other financial crises, both in the U.S. and abroad.

They also have tighter regulation of financial markets, bank deposit insurance and other policies that were adopted to prevent history from repeating itself.

The current panic has pushed the economy to the edge of a cliff. In the Depression, it plunged off.

During the 1920s, stock prices had more than quadrupled. But on Oct. 28, 1929, the Dow Jones average fell 13% in a single day, another 12% the next and 10% more a few days later.

Stocks bottomed out in 1932 — down 80% from the peak.

Millions of people lost their jobs, with unemployment reaching 25% in 1933.

The banking system went into convulsions. About 9,000 banks failed in panics between 1930 and 1933, and hundreds of others were closed by the Roosevelt administration in the first days of its term.

The nation's economic output plunged by a third.

The underlying causes were different than today's crisis, but the two time periods share important similarities.

America in the 1920s was swept up in a boom. In some respects, it was a bubble, one that was bound to pop.

The bubble was clearly evident in real estate, most notably in Florida. It was cheap to borrow, and investors plowed money that wasn't theirs into new cities fashioned out of swamps, hoping to take advantage of sharply rising housing prices. When land values began to fall, they couldn't make payments, squeezing banks.

Fed policymakers viewed the soaring stock prices of the 1920s as fueled by immoral speculation. They responded by raising interest rates in an effort to restrict the supply of cheap cash.

The Great Depression also was characterized by a growing sense of mistrust and fear among major players in the economy — another phenomena increasingly seen today.

Consumers and businesses who had relied on cheap credit were struggling. The prices of the goods they made and sold were dropping, and many began to default on their loans. Scores of banks went bust.

At that point, the 30-year home loan had not been developed. Most people had loans they needed to renew every five years. But with some banks out of business, they had nowhere to go. Banks still afloat called in loans to protect themselves. But that just made the situation worse, as the economy began to freeze up.

As the problems grew worse, policymakers were trapped by their own "liquidationist" viewpoint.

Andrew Mellon, treasury secretary during the Hoover administration, advocated allowing the free market to punish reckless investors. To cure excesses of easy credit, he said, "the rottenness should be purged out of the system."

In trying to make sure that people paid for their mistakes, the Fed allowed the financial system to deteriorate. The belief that government should keep its hand out of the market has been echoed this week in Washington.

"When you hear what people in the House of Representative are saying, it sounds to me like a voice of the past," said Elmus Wicker, a retired Indiana University professor and expert on banking panics of the Great Depression. "All of those people ... saying it's better to do nothing sounds to me exactly like Herbert Hoover."

Today's economy "is much more developed then we were then. We are many times richer. We have a very good safety net in place. They had none," said Michael Bordo, a professor of economics at Rutgers University who's an expert in financial crises.

There's a danger in citing the Great Depression now because you don't want to scare people, Bordo said. The current crisis is probably more comparable to what happened in Japan in the 1990s, when a huge real estate bubble burst, and it took a decade of economic stagnation for the government to address the problem.

History hasn't been kind to Herbert Hoover, who is often derided for failing to act as the Depression began. In fact, Hoover did take action. He just didn't take strong enough action or do so quickly enough.

The Bush administration and Bernanke have taken some heat in the past year for reacting to events, rather than moving to prevent problems. Their actions included the brokering of a deal to shoulder much of the burden for the collapse of Bear Stearns this past spring, but only after the firm had fallen apart.

"As the bits and pieces of the system have begun to fail, it's clear that the Treasury and the Fed have not engaged in any scenario playing. They had not asked the question: What are we going to do if? They waited until the event occurred and then they thought about it," Aliber said.

But that changed two weeks ago with the government's decision to bail out insurance giant American International Group, demonstrating a determination to get in front of problems, economists said.

"We are not about to repeat the mistakes of the Great Depression," said Peter Temin, an economic historian at the Massachusetts Institute of Technology.

The past also reminds us of a time when worries about banks rattled deposit holders. Within days of being sworn in as president in early 1933, Franklin D. Roosevelt responded by ordering a bank holiday. Every bank was closed for a week, and an army of examiners was dispatched to scrutinize their books.

One of every six banks never reopened. But the clean bill of health awarded to the many others helped restore confidence in banks.

Economists still debate just what steps ended the Depression, and whether it was Roosevelt's New Deal policies or World War II spending that revived the economy.

The controversial plan debated this week in Congress follows a similar principle: trying to assure the solvency of Wall Street firms by taking all the toxic debt off of their books.

"The solvency problem drives the fear, and the fear leads to the seizing up," Bordo said.

Critics attacked the plan pushed by President Bush, arguing that it would unfairly reward Wall Street companies largely responsible for the current mess.

"The problem is because the financial system is the lifeblood of the whole economy, and if the financial system is paralyzed, then everybody is paralyzed," Bordo said. "That's the reason we have to treat them differently."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Get in Survival Mode for Looming RecessionTheStreet.com - ‎ Oct 3, 2008 ‎
Federal Reserve Chairman Ben Bernanke has warned Congress about a recession if the government doesn't intervene. But what's in a name? The economy keeps ... MARKET SNAPSHOT: US Stocks Seek Credit Market, Economic Relief CNNMoney.com Stocks Fall Sharply On Economic Data, Deep Credit Freeze Investor's Business Daily

That should be a bumper sticker.

The right kind of inflation could save us from a depression. Raise the minimun wage to $10. effective
immediately. This would push all working people's wages up. Print more money to keep the supply up. Consummer spending would expand the economy. Prices would go up, including the value of
houses.

You'd have to enforce illegal labor laws much better than we have been enforcing them.

That would be a problem. It is the kind of problem that could be solved if the people running the government wants to solve it. And wouldn't that be great? Solve the so-called immigration problem
at the same time--and preventing thousands from dying that otherwise will, each year.

Before we could get the government to want to solve it, we need to get the average citizen to agree on how to solve it.

This wasn't a planned wedge issue used to win elections. This is a true wedge issue, a natural bi-product of failed policy. It cuts across party lines. Most politicians on either side do not want to touch it. I'm surprised my local congressman does.

Are you talking about the immigration problem or the economic melt down problem?

September US Payrolls Fall
BusinessWeek - ‎ Oct 3, 2008 ‎ by Michael Englund The data pointing toward a US recession have been accumulating steadily over the past few weeks, and the release of the dismal September

Bailout bill gives Fed new tool to boost liquidity
Reuters - ‎ Oct 3, 2008 ‎ By Mark Felsenthal - Analysis WASHINGTON (Reuters) - The US Federal Reserve gained a key tactical tool from the $700 billion financial rescue package signed

UBS sees deeper, longer US recession on credit woe
Reuters - ‎ Oct 3, 2008 ‎ NEW YORK, Oct 3 (Reuters) - UBS sees a deeper and longer US recession than it had earlier predicted, due to further deterioration in the credit market and ...

Credit derivatives market faces $500bn mortgage settling test

• FT ($)
• 10/05/2008 12:29 PM

End of an Era on Wall Street: Goodbye to All That

• NY Times
• 10/04/2008 04:07 PM

Smaller Hedge Funds Struggle As Money Pipeline Dries Up

• WSJ ($)
• 10/04/2008 12:39 PM

Familiar Abuses Seen in Latest Finance Crisis

• WSJ ($)
• 10/04/2008 12:38 PM

Frank Words from a Battered Hedge Fund Manager

• NY Times
• 10/04/2008 06:55 AM

Treasury to Hire Asset Management Firms to Jumpstart Rescue

• Bloomberg
• 10/04/2008 12:54 PM

Anxiety on Economy Wins Out

• NY Times
• Nocera
• 10/04/2008 06:46 AM

For Treasury Dept., Now Comes Hard Part of Bailout

• NY Times
• 10/04/2008 06:46 AM

Funds dry up in Golden State

• FT
• 10/05/2008 04:23 PM

G-7 may consider coordinated rate cuts

• IHT
• 10/05/2008 06:16 AM

Mass. may seek a US loan as credit markets dry up

• Boston Globe
• 10/04/2008 04:27 PM

California officials hope for easing of credit crunch

• LA Times
• 10/04/2008 12:43 PM

Historic Bailout Passes As Economy Slips Further

• WSJ ($)
• 10/04/2008 12:35 PM

Paulson Moves On to Nuts and Bolts of Rescue

• Washington Post
• 10/04/2008 06:54 AM

California Hopes Washington Brings Credit Relief

• WSJ ($)
• 10/04/2008 06:47 AM

Sinking feeling as fall in US jobs spreads

• FT
• 10/05/2008 04:23 PM

Why This 'Credit Crisis' Hits Everyone

• WSJ ($)
• 10/05/2008 06:15 AM

September U.S. Payrolls Fall as Economy Worsens

• Business Week
• 10/04/2008 07:03 AM

L.A. could face $400-million budget deficit

• LA Times
• 10/04/2008 07:05 AM

AnalysisEconomistOct 05, 2008Monetary Policy and the Credit Crunch: Unintended ConsequencesAnalysisFinancial TimesWolfgang MünchauOct 05, 2008The case for a European rescue plan

Fannie Mae and the Financial Crisis

U.S. EconoMonitor Mark Thoma, October 05, 2008

Feldstein: Problems Run Deeper than Wall Street

U.S. EconoMonitor Yves Smith, October 05, 2008

The illegal immigration problem in conjunction with the illegal employment problem that I mentioned.

It's important to specify and make the distinction between illegal and legal immigration. We don't have a legal immigration problem. Lack of people willing to migrate here would be an example of a legal immigration problem.

I understand. Maybe Obama will appoint Robert Reich secretary of labor and an honest Attorney General.

The U.S. & The New Financial World - Zachary Karabell, Wall Street Journal
How Will We Know If the Bailout Succeeds? - Robert Litan, The Atlantic
Will the Government's Rescue Plan Work? - Michael Spence, Forbes
Is This a Replay of 1929? - Robert Samuelson, Washington Post
The Next Crisis: The Economy - Bill Fleckenstein, MSNMoney
SARS Response Offers Credit Panic Lesson - Kevin Hassett, Bloomberg

Government Equity in Private Companies: Bad Idea - Becker-Posner Blog
Global Liquidity Crisis: What Now? - P. du Plessis, Postcards from Cape Town
What Caused the Financial Crisis? - Mark Thoma, Economist's View
The Mad Legal Dash for Wachovia - Steven Davidoff, Deal Professor
Will Paulson’s Two Plans Unplug the ‘Liquidity Trap'? - Economix
Fannie Mae and the Financial Crisis - Barry Ritholtz, Big Picture

Economists getting gloomier about outlook
MSNBC - USA
Amid the worst credit panic since the Great Depression, the rulebook for giving guidance to their companies and clients is pretty much out the window. ...
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Mainichi Daily News - Japan
However, it is beneficial to remember lessons learned from the Great Depression: the government made a mistake when it implemented protectionism measures ...
See all stories on this topic Lessons of the Depression from Mainers who endured it
MaineToday.com - Portland,ME,USA
"Hopefully, what we learned then will prevent another economic depression. We had nothing then that we have today for safeguards. I don't think we can avoid ...
See all stories on this topic Economic focus will shift to evidence of damage
Vancouver Sun - British Columbia, Canada
If so, analysts will shift their focus back to the still deteriorating economic situation in the US, as well as to how much that has spilled over into the ...
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Globe and Mail - Canada
Mr. Harper's contention that Canada remains a relative oasis amid the worst financial storm since the Great Depression has merit. ...
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Standard Freeholder - Cornwall,Ontario,Canada
The fact is that Harper has downplayed the economy, and as a sitting prime minister, is ingenuous in his refusal to initiate and talk about an economic plan ...
See all stories on this topic The Deepening Economic Depression
The Market Oracle - London,UK
I be