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Previous months - Mar to Aug 2009

Despite signs that the financial system has stabilized, banks remain threatened by billions of dollars of bad loans on their balance sheets, and more could fail if the economy worsens, a congressional watchdog reports.

In its latest assessment of the $700 billion financial system bailout, the Congressional Oversight Panel warns that banks still hold many risky loans of uncertain value. If unemployment rises sharply or the commercial real estate market collapses - as many economists fear - the banking system could again lose its footing, the panel says in a report to be released Tuesday.

"The financial system (remains) vulnerable to the crisis conditions that (the bailout) was meant to fix," the panel wrote in a draft copy of Tuesday's report.

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The report says many of the Obama administration's financial stability efforts are working - including infusions of new capital for banks, heightened scrutiny of capital ratios, "stress-testing" of large financial firms. It also pointed to a public-private investment plan designed to buy up bad assets that has yet to get off the ground.

Bubanks still holding the assets at the heart of the crisis, they remain vulnerable, the panel says.

	DEFICIT SOARS The federal budget has gone from surplus to deficit during the past decade. Fiscal year Surplus or deficit 2000 +$236 billion 2001 +$128 billion 2002 -$158 billion 2003 -$378 billion 2004 -$413 billion 2005 -$318 billion 2006 -$248 billion 2007 -$161 billion 2008 -$459 billion 2009* -$1,841 billion * Estimate Source: White House

	QUADROGOVERNANCE   DEFICIT TO QUADRUPLE   Projected 2009   fiscal year deficit    $1.8 trillion   2008 Deficit was only    $455 billion   a record at that time.   Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO). Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July. Falling tax receipts and increased spending on bailouts for auto companies and the financial sector and for the economic stimulus package added to the deficit, according to CBO. Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008. The bailout money for banks, Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent. Tax revenue for the first three quarters of 2009 has fallen by approximately $350 billion, or 17 percent compared to the same period last year, due mostly to the effects of the recession on payroll, income and corporate taxes. A third of the decline is due to tax breaks in the stimulus, including the middle-class tax cut that President Obama campaigned on during last year's election. The independent budget scorekeeper has projected the deficit to reach $1.8 trillion by the end of the fiscal year, Sept. 30. The deficit in 2008 reached $455 billion, which was a record at the time.   Consumer Bankruptcies May Hit $1.4 Million  Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get...More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008...The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351...Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,... The worst U.S. recession since the Great Depression will probably end in the third quarter,  but uncertainty exists over the speed and duration of the economic recovery, according to the most recent survey of private economists. The Blue Chip Economic Indicators survey of private economists released on Monday showed about 90 percent of the respondents surveyed believe the economic downturn will be declared to have ended this quarter. This upbeat assessment followed recent government data showing gross domestic product (GDP) contracted at a shallow 1.0 percent rate in the second quarter after sinking 6.4 percent in the January-March quarter. Recent data, including housing and key labor market indicators, have suggested a bottoming in the recession and the economy close to turning the corner AGGRESSIVE stimulus spending by  governments helped the world avoid a second Great Depression, but full economic recovery will take two years or more, Nobel Prize-winning economist Paul Krugman said... He added that the worst of the global crisis was over, with economic and exports growth showing signs of stabilisation. Still, recovery is likely to be 'disappointing' as government spending is not sustainable in the long run and the unemployment rate is still lagging behind, he told a two-day World Capital Markets Symposium on Monday in Kuala Lumpur. There is not likely to be any 'Phoenix-like' recovery, such as in the 1997-98 Asian financial crisis when economies expanded dramatically, led by a sharp rebound in exports, he said. 'We have managed to avoid a second Great Depression...but full recovery is at least two years and probably more,' Mr Krugman said. Asia is likely to see a faster rebound than the United States and Europe, partly driven by recovery in manufacturing exports, he added.

NEW YORK TIMES >>> History books may conclude that the financial crisis of 2008 turned out to be far less bad than it could have been and that Washington deserved much of the credit. The Labor Department announced Friday that the economy lost fewer jobs in July than in any month since before Lehman Brothers collapsed last fall. Credit markets no longer look anything like they did after Lehmans collapse and are in considerably better shape than just a few months ago. Stocks are up almost 50 percent from their March low. Its over, the economists at Barclays Capital declared Friday, referring to the Great Recession. The news has been good enough that the Obama administration spent Friday trumpeting its record. More telling, however, is the fact that even Nouriel Roubini, the prophetically pessimistic economist who saw the crisis coming (and doesnt think the recession has yet ended), is now praising policy makers. He recently urged that Mr. Bernanke be reappointed as Federal Reserve chairman, saying he helped avert a near depression that seemed highly likely after the financial collapse last fall.

MARKET INDICATORS RISE >>> The Dow Jones Industrial Average and the Dow Jones Transportation Average rose to their highest levels of the year, a bullish sign for the U.S. stock market among traders who use charts to make forecasts. Any time the two averages go into new-high territory, its bullish, said Richard Russell, the 85-year-old publisher of Dow Theory Letters in La Jolla, California. It says, If youre in the market, youre in the right place....The Standard & Poors 500 Index, a broader benchmark for U.S. equities, also rose to a 2009 high...Dow Theory, developed by Wall Street Journal co-founder Charles Dow in 1884, holds that moves by the industrial average must be confirmed by the transportation average in order to be sustained...The most recent signal given by Dow Theory occurred on July 23 when the industrial average first exceeded its January high and the transportation average broke above its highest levels of May and June, Russell said.Todays development tells us the secondary trend is up, Russell said...

BUDGET DEFICIT RISES >>> The US budget deficit reached 1.3 trillion dollars for the current fiscal year in July, official data showed, news set to fuel opposition to US President Barack Obama's ambitious health care and climate change proposals. The deficit for the first 10 months of fiscal year 2009, which began October 1, reached 1.3 trillion dollars, close to 880 billion dollars greater than the deficit recorded through July 2008, said the US Congressional Budget Office (CBO).

	For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available. It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent. Food stamp enrollment is highest during times of economic stress. The U.S. unemployment rate of 9.5 percent is the highest in 26 years. Average benefit was $133.65 in May per person. The economic stimulus package enacted earlier this year included a temporary increase in food stamp benefits of $80 a month for a family of four...CLICK ON STAMPS TO READ MORE Government Mortgage Program Gets Report Card The government’s refinancing and loan modification program is on track to offer assistance to up to three to four million homeowners over the next three years, according to a Treasury Department report released Tuesday. The report offered the first glimpse of how the Making Home Affordable Program has made headway in helping troubled homeowners over the last few months. More than 235,000 loan modifications and claims are now underway. The Obama administration has said the program aims to help 500,000 borrowers by Nov. 1. CLICK HERE TO READ MORE Extra £50bn pumped into economy The Bank of England's rate setters have decided to pump another £50bn of new money into the economy in their programme of quantitative easing. It will take their total spending to £175bn, unexpectedly going over the £150bn set aside by the chancellor. In a statement, they said that the UK recession "appears to have been deeper than previously thought" CLICK HERE TO READ MORE  BRAZIL Economic Growth and Recovery Exame magazine (one Brazil´s main business publications) has published a cover story about the recent facts showing that the crisis in Brazil was short, and seems to be over. The key word here is “facts”.  We are not talking about predictions from the same analysts who failed to see the turmoil faced by the world after mid-2008.  Various key indicators confirm that economic activity and job creation have already undertaken a recovery process.  While most of the world´s economies struggle to get out of the hole, Brazilian economy is again growing. Some cases have become symbolic.  Let´s take General Motors.  While in the United States the car manufacturer is facing all kinds of problems, and selling part of their Europe assets, in Brazil a R$ 2 billion investment plan is in place to expand production.  The Brazilian auto industry expects to sell 3 million units in 2009, a historic record in a years in which everyone expected the worst. A recessionary scenario seemed realistic for 6 months, with reduction of the GDP, absence of credit, lack of confidence, production interruption and slowing of sales.  This reality is now only seen in the rearview mirror. Brazil is, in fact, experiencing the next phase:  recovery. Employment is also entering a considerable recovery process, after predictions pictured a dark.  300,000 new jobs were created on the first 6 months of 2009, in the economy as a whole. In the end of last year 800,000 jobs were lost in the country, but in 2009 a positive balance of 600,000 is expected (an exception amongst the world´s 20 largest economies). It is interesting to note that a country that has always been hardly hit by the world´s economic turmoils, this time is keeping its head out of the water based mostly on internal demand.  Consumers have not lost their appetite, even with reduction of credit. During the last few weeks, Exame conducted a research with 360 companies in Brazil, which gives us a vision on the current business and economic climate.   Following are some noteworthy facts: most companies expect considerable growth in Brazil´s GDP in 2009 (54% expect 1% to 3% growth) 48% say the effects of the crisis has diminished in their industry only 17% do not expect growth in their companies 76% believe growth will be supported mostly or solely by the domestic market 70% are maintaining investments planned before the crisis overall sales are higher than 1 year ago cement sales grew 17% since February vehicles, computers and household appliances are showing strong indications of growth consumer credit and real estate also show moderate recovery rates general industrial production and credit for companies are showing a slower recovery rate. 96% expect to keep current staffing or hire more people

¿Son racionales los mercados? La actual crisis económica no se limita a una cuestión de estadísticas, ni se reduce al devastador impacto social del desempleo y la incertidumbre. Con la debacle mundial, hizo agua una particular visión del mundo que pareció dominante e irreversible con la caída del muro de Berlín. Esta visión se cristalizó en algunas frases famosas como el "fin de la historia" de Francis Fukuyama, "la sociedad no existe" de la primer ministra británica Margaret Thatcher o los 10 mandamientos del consenso de Washington que impulsaban la liberalización-desregulación-privatización global. El nuevo dogma tras la derrota del comunismo era todo el poder al sector privado, el mercado como medida de racionalidad económica y utopía, y el individualismo más descarnado como principio ético ordenador. Con la debacle económica esta visión del mundo también entró en crisis. BBC mundo identificó cinco consecuencias filosóficas. >>> Filosofía política-económica >>> Crisis del racionalismo de mercado >>> Consecuencia Axiológica: teoría de los valores >>> Azar, causalidad, incertidumbre >>> Consecuencia ontológica

En el mundo hay crisis visibles e invisibles. La crisis financiera está en los radares de los medios y en la atención permanente de los gobiernos. La de la pobreza o el desempleo sólo aparece en las páginas de temas sociales. En algunos casos la visibilidad de una noticia - paraísos fiscales o activos tóxicos - esconde una esencial invisibilidad con una técnica similar a la que usó Edgar Allan Poe en su célebre cuento "La carta robada": la mejor manera de esconder una carta comprometedora es dejarla a la vista. BBC mundo identificó cinco crisis que están y no se ven. >>> Crisis invisible del desempleo >>> Crisis invisible de la pobreza >>> Crisis invisible del hambre >>> Crisis invisible de los activos tóxicos >>> Crisis invisible de los paraísos fiscales

	US State and Local Government Financal Crisis Now Critical A recent report by the National Conference of State Legislatures tallied a total state shortfall of $113.2 billion in FY09 and a gap of $142.6 billion in FY10.   Sixteen states, including Georgia, have unemployment rates over 10%.  Georgia is one of 18 states facing a budget gap of 20% or more of its current budget.   These changes cannot help but affect education.  Utah has enacted a shorter school year and legislators reduced funding for education by 13% (although part of this cut has been “backfilled” with stimulus).  North Carolina cut state employee salaries, including teachers, by .5% giving them 10 hours of furlough “leave.”  Also, according to their Legislative Budget Office, teachers will not receive step increases in FY10.  California has laid off 27,000 teachers.  Nevada cut K-12 teachers salaries by 4%.  New Mexico has cut all state employee pay, including teachers, by 1.5%, but will put the funds back as an increased contribution to employee pensions. CALIFORNIA SOLUTION:  LEGALZE AND TAX MARIJUANA According to one poll, 56 percent of California voters say marijuana should be legalized and taxed.   As many see it, marijuana is already virtually legal in California where state law allows it for medical use....Bernard Melekian of the California Police Chiefs Association says "98 percent of the people who are acquiring marijuana at these dispensaries do not appear to have the conditions for which the law was intended to apply."   Users in Oakland now pay a special city tax on medical marijuana - a first in the state, but maybe not the last. Marijuana tax promoters say a lot of potential revenue is just going up in smoke.   There is talk in California of what you could call a radical idea for the cash-poor state to raise money. It's controversial, but proponents say the plan could smoke out more than a billion dollars for the state... It's estimated that $14 billion worth of marijuana is sold illegally in the state. Making it legal and taxing it at $50 dollars an ounce would bring in approximately $1.4 billion a year. CLCK HERE TO READ MORE ON ABC's "MARIJUUANA NATION" SITE Alabama's Jefferson County makes massive job cuts Guard troops may be needed Alabama's debt-ridden Jefferson County laid off about two-thirds of its 3,600 employees on Monday because of plummeting revenues, a move that will sharply curtail services in areas ranging from roads to courthouses. The cuts are just the latest blow to Jefferson, whose population of 660,000 includes Birmingham, the state's largest city and its economic powerhouse. They come after the county racked up around $4 billion in debt by using exotic financial instruments to fund a revamp of its sewer system. The work-force cuts will hit the roads and transportation, revenue and security departments, and reductions will also affect the courthouse and information technology department as well as laborers paid on an hourly basis, according to a senior county official... Circuit Judge Joseph L. Boohaker ruled that leaders in Jefferson County — now trying to head off a municipalbankruptcy filing of historic proportions — could go ahead with plans to slash $4.1 million from the budget of Sheriff Mike Hale, who had filed a lawsuit that temporarily blocked spending cuts for his office. About 1,000 county workers already are on unpaid leave because courts threw out a key county tax, and Hale has warned that reductions to his budget would mean fewer patrols by deputies and decreased courthouse security. A spokesman for Hale, Randy Christian, said the sheriff told Gov. Bob Riley after the ruling that state assistance may be needed to perform basic law enforcement tasks once the department's current funding is exhausted in early September. "We will certainly be looking at calling in the National Guard," said Christian.   READ MORE

IFAC wants globalised standards and no political interference in standard-setting process The professions global representative is calling on the leaders of the G20 to adopt uniform accounting, auditing, and auditor independence standards to improve transparency and the ability of capital markets to work globally. The International Federation of Accountants wants the 20 most powerful industrial nations to use next months meeting in Pittsburg to encourage adoption of global standards and improve transparency in light of unprecedented takeovers, lending, guarantees, and bailouts of major market institutions, banks and companies. In a letter to the G20, IFAC also demanded steps be taken to ensure that the International Accounting Standards Board can act without political interference. The G20 leaders must act quickly to build a reformed international financial system, said IFAC chief executive, Ian Ball. While some nations appear to be moving toward recovery from the financial crisis, underlying problems of accountability and transparency remain. We believe that the adoption of international standards can help to address these issues and play an essential role in resolving the current crisis.

	Still Not the Great Depression II Donald Marron says... it’s the worst downturn since World War II. But it still pales in comparison to the horror of the Great Depression. Since we received fresh data on Friday, it seems like an auspicious time to present a new version of my chart making this point: The green bar is the current recession. Most forecasters expect the economy to grow, albeit tepidly, in coming quarters. If they are right, the estimated peak-to-trough GDP decline in this downturn is 3.9%. ...The chart has three main messages: The current downturn is the worst since World War II (the green bar is larger than each of the four blue bars). The current downturn is a far cry from the Great Depression (the green bar is much smaller than the red bar). You would have to assume enormous further GDP declines to get anywhere near the stunning 26.7% peak-to-trough decline in GDP during the Depression. The economy contracted sharply (12.7%, the orange bar) after World War II. That’s why, from a GDP perspective, the current downturn is the worst since World War II (defined for these purposes as stretching to 1947), not the worst since the Great Depression. SEE FULL ARTICLE ON DONALD MARRON'S WEBSITE BY CLICKING ON GLASSES Warning: Oil supplies are running out fast    Catastrophic shortfalls threaten economic recovery, says world's top energy economist   The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned. Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.  In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated. SEE FULL ARTICLE - CLICK ON GLASSES NATIONAL INFLATION ASSOCIATION   Washington is Clueless About Inflation It's unfortunate that nobody in Washington understands what the true definition of inflation is. Inflation is the expansion of money supply from the printing of money, low reserve requirements, and the Federal Reserve's open market operations. The hyperinflation in Germany in the 1920's as well as in Zimbabwe today was caused by the government running their printing presses non-stop, exactly like the U.S. is doing right now. It just so happens that our massive printing of U.S. dollars has come at the same time as the biggest bursting of any bubble in world history. Therefore, nobody will see inflation in the form of rising prices until excess inventories are done being worked off. Eventually there will be too many dollars chasing too few goods. Remember, none of the stimulus dollars are being spent for the increased production of goods. Manufacturing jobs are way down and the only area of rising employment is non-productive government jobs. The U.S. government wants inflation because inflation benefits debtors and harms creditors, with the U.S. being the largest debtor nation in the world. If the U.S. wants price inflation and the Federal Reserve takes every step in their power to create it, like they are doing today, eventually price inflation will arrive but won't be possible to control. TO READ MORE ON NIA WEBSITE: SEE MORE VIDEOS FROM THE NATIONAL INFLATION ASSOCIATION: SEE MORE NIA VIDEOS SEE MORE NIA VIDEOS

Last winter, Americans were taking a crash course in the history of the Great Depression, with magazines, newspapers and television giving us a stream of stories and information about the calamities of the 1930s. But in the last few months, that talk has mostly stopped. In May, the Timess Freakonomics blog discussed the reasons why in This Is Not Another Great Depression. With the news on Friday that the gross domestic product decline leveled off substantially from April through June, as well as other positive indicators in recent weeks, there is even hope that the economy will right itself in the second half of 2009.

	Poised for a Rebound The good-bad news in second-quarter GDP. The bad news in yesterdays second-quarter GDP is that the recession was even deeper than previously thought. Or should we say that is the good-bad news. Because that pain is now largely past, the very steepness of the decline means that the economy is now poised for a sharper rebound, or at least it should be if the history of recessions is any guide. The economy contracted by only 1% at an annual rate in the quarter, but the Bureau of Economic Analysis report was even more interesting for its growth revisions in previous quarters. Last years third quarter was revised downward by a remarkable 2.2-percentage points, to a negative 2.7% rate...The encouraging news is that the Adam Smith washout of recent months has now set the economy up for a comeback. The need to rebuild inventories of everything from cars to furniture will by itself help to lift GDP for the rest of 2009. The housing market looks to be bottoming, which means residential construction will also make a contribution to growth. Net exports (less imports) added some 1.4-percentage points to GDP in the second quarter and should also provide a lift the rest of the year...With a recovery on the way, the real question is whether weve laid the groundwork for such a durable expansion. Having been down so long, the economy should be in for a nice, long ride up. Even the Great Depression was followed by a notable rebounduntil the bill for its government excesses came due in the mid- and later 1930s. In this recession, Washington has reflated the economy with record spending and monetary easing that couldnt help but spur some recovery. The issue is what happens when the price of that reflation comes due in higher taxes and higher interest rates Ackermann Says Bad Loans Are ‘Next Wave’ of Crisis  Rising delinquencies among consumer and corporate borrowers are the next wave of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann. This crisis has consisted of a series of earthquakes, with changing epicenters, Ackermann said late yesterday at an event in Zurich. Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this. Deutsche Bank, Germanys biggest lender, said this week it set aside 1 billion euros ($1.4 billion) for risky loans in the second quarter. The seven-fold increase in provisions and below- forecast revenue from trading sent the Frankfurt-based banks shares to the biggest decline in four months on July 28... US slump is almost over, IMF predicts The US is on the brink of emerging from its 18-month-long recession according to the International Monetary Fund, as official figures showed the American economy contracted by just 1pc in the second quarter of the year. The Fund, publishing its annual report on the US economy on the same day official figures showed that the American recession was far deeper than first thought, believes that the sharp contraction "seems to be ending" but that recovery will be slow. Its timing coincided with the release by the US Commerce Department of much-awaited second-quarter gross domestic product (GDP) figures, showing a marked decrease in the rate of economic slowdown, with the US economy contracting at an annualised 1pc rate in the three months to June. IMF ISSUES ANALYSIS OF US ECONOMY Executive Directors noted that the U.S. financial and economic crisis has had severe domestic as well as international repercussions on financial stability and growth. Directors commended the authorities forceful and internationally coordinated actions to stabilize and repair the financial sector, bolster domestic demand, and address international spillovers. As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened. Nevertheless, with financial strains still elevated, the recovery is likely to be gradual, and risks are tilted to the downside. In addition, potential growth could remain well below past trends for a considerable period. Nevertheless, the long-term growth effects expected from structural policies now being implemented were also noted, and a few Directors expected the crisis to have little lasting effect on potential growth, given the flexibility of the economy. EXECUTIVE SUMMARY OF STAFF ANALYSIS •   Focus: Economic and financial stabilization; developing exit strategies to eventually unwind extraordinary policy support; and dealing with the long-term legacies of the crisis (weak financial supervision and regulation, massive fiscal imbalances, and damaged household balance sheets). •   Assessment: Considerable progress has been made toward stabilizing the financial system, though significant strains remain. The sharp contraction in economic activity is ending, aided by substantial macroeconomic stimulus. However, the recovery is likely to be gradual, and downside risks prevail. •   Policy advice: o   Stabilization: the priority is fully healing the financial system. Vigilance is warranted in light of remaining downside risks. Macroeconomic policies can respond further if risks materialize. o   Exiting extraordinary support: key elements include developing strategies to withdraw public support from the financial system, and to shrink the Fed’s balance sheet, to position it to pull back on monetary stimulus when a sustainable recovery is underway. Smooth communication will be key to set market expectations. o   Long-term legacies: broad and thorough reforms to financial regulation are needed to deal with the shortcomings exposed by the crisis. Substantial fiscal adjustment will be needed to stabilize public debt, along with measures to contain health care costs. Household balancesheet adjustment will likely weigh on growth over the medium term while narrowing the external imbalance, with global implications.  Click here to read the detailed staff analysis, 62 pp. in PDF . Regulators on Friday shut down banks in Florida, New Jersey, Ohio, Oklahoma and Illinois, boosting to 69 the number of federally insured banks to fail this year amid the pressures of the weak economy and mounting loan defaults. THE BAD NEWS... The U.S. economy has now contracted four quarters in a row, the worst streak since the Great Depression GDP has contracted 3.9% in the last year, the worst fall since at least 1947, when the Commerce Department started keeping track First quarter GDP was revised down heavily, from a 5.5% to 6.4% — the biggest quarterly GDP drop in almost 30 years The Commerce Department revised 2008 down too, from a 0.4% annual contraction to a 1% decline Consumer spending, 70% of U.S. GDP, contracted 1.2%. The retrenchment was largely replaced by government spending, up 10.9% Employment compensation rose by just 1.8% over the last 12 months, the slowest rate on books that go back to 1982.

Diez meses después de que el colapso de la bolsa congeló los mercados y profundizó la recesión, muchas compañías, pese a que siguen atribuladas, ven señales de haber tocado fondo y se muestran más optimistas sobre un repunte antes de fin de año. Varias grandes empresas reportaron ayer resultados considerablemente menos sombríos en el segundo trimestre en comparación con los dos períodos previos. Las ganancias se adecuaron o superaron las proyecciones de Wall Street, aunque siguen muy por debajo de las cifras de hace un año. Gran parte de esa fortaleza provino de agresivos recortes de empleos. Las empresas globales también ven un aumento de la demanda en algunos mercados internacionales, especialmente en Asia, a pesar de que sigue siendo baja en el ámbito local. La economía de Estados Unidos "ha encontrado el fondo, pero tardará en recuperarse", señaló el presidente ejecutivo del gigante de químicos Dow Chemical Co., Andrew Liveris, en una conferencia telefónica con accionistas el jueves. Dow registró una pérdida de US$344 millones, pero indicó que, en general, la demanda de sus productos está en alza.

CAIDA RECORD DE LA LIBOR INDICA MEJORIA DEL MERCADO CREDITICIO >>> Un apetito voraz de los inversionistas por deuda a corto plazo emitida por bancos de Estados Unidos y Europa, y la caída en la tasa interbancaria de Londres, o Libor, indican que los mercados de crédito para los bancos han mejorado. No obstante, aún hay mucho pendiente. Los bancos usan el efectivo fresco para pagar deudas, o simplemente lo guardan. La acumulación de ese efectivo, sin embargo, puede obstaculizar los esfuerzos de los reguladores para que los fondos circulen hacia los prestatarios y los bancos que más lo necesitan. En los últimos meses, la Libor ha caído de forma drástica, a medida que los inversionistas recuperan la confianza en el sistema financiero. El jueves, la Libor en dólares a tres meses se ubicaba en su nivel más bajo del que se tenga registro: 0,48313%, frente a 4,8175% durante el pico de la crisis en octubre.

$33 MILES DE MILLONES EN BONIFICACIONES PAGADOS POR BANCOS RESCATADOS >>> Varios de los bancos que fueron más golpeados por el declive económico y aquellos que recibieron la mayor parte de la ayuda del gobierno estadounidense entregaron grandes bonificaciones a cientos de empleados el año pasado, según el fiscal general de Nueva York, Andrew Cuomo. Muchos de los bancos que tomaron dinero del Programa de Alivio de Activos en Problemas (TARP) han dicho durante todo este tiempo que desean devolver el dinero tan pronto como sea posible, principalmente por las restricciones puestas a las remuneraciones que fueron impuestas como condición para entregar los fondos. Muchos de los bancos ya han devuelto el dinero, pero algunos como Bank of America Corp. y Citigroup Inc. no lo han hecho. Cuomo dice que su oficina ha estado investigando las remuneraciones en muchos de los bancos, incluyendo los nueve bancos que inicialmente recibieron fondos del TARP a lo largo de los últimos nueve meses. El estudio se refiere a las bonificaciones para 2008, las cuales habrían sido pagadas antes que cualquiera de los bancos hubiera devuelto el dinero del rescate. "En muchos bancos... la remuneración y los beneficios se incrementaron constantemente durante los años de auge entre 2003 y 2006", dijo la oficina de Cuomo. "Sin embargo, cuando la crisis subprime emergió en 2007, seguida por la recesión actual, la remuneración y los beneficios se mantuvieron a esos niveles, pese a que el desempeño de los bancos se fue a pique". (VER MAS DETALLES EN INGLES MAS ABAJO.

The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed. The worlds largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said today in Washington. The current downturn beginning in 2008 is more pronounced, Steven Landefeld, director of the Commerce Departments Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said. The updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated. Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last years fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.

ECONOMY DECLINE SLOWING >>> The U.S. economy contracted much more slowly in the second quarter than during the previous six months, signaling that the longest postwar recession may soon be ending. The economic recovery could begin during the current quarter, some analysts have predicted. The economy shrank at a 1 percent annual rate in the April-June period, the Commerce Department reported Friday. It was the fourth consecutive quarter the U.S. economy has declined.

	Last week, President Obama stated his willingness to consider a commission to address our federal fiscal crisis. In an interview with The Washington Post's Fred Hiatt, the President noted such a commission may be the most realistic way to begin putting our nation's financial house in order, adding that "everything is going to have to be on the table" for true fiscal reform. In response, Dave Walker, Peter G. Peterson Foundation President & CEO, released the following statement: "I was pleased to read Fred Hiatt's interview of President Obama published in the July 22nd edition of the Washington Post. During the interview, the President stated his willingness to consider a fiscal commission where 'everything is going to have to be on the table,' noting it may be the most realistic way to begin putting our nation's financial house in order. "As I have stated for several years, tough choices must be made in connection with federal budget controls, entitlement reforms, spending constraints and revenue increases. A properly structured and nonpartisan commission would engage the American people about the true financial condition of our country and the need for a range of comprehensive reforms. This commission can lay the groundwork for the ‘grand bargain’ President Obama has said he wants to achieve during his presidency. "I applaud the President’s recognition that a fiscal commission may be the most productive way to address the serious financial challenges threatening America's future. Such a commission should include appropriate members of Congress and the Administration as well as several capable and credible non-governmental experts. After engaging the public and key stakeholders in new and unprecedented ways, it should make a range of recommendations that would be guaranteed a vote by the Congress. Ultimately, this extraordinary process can help us avert a much bigger potential economic crisis and ensure that our collective future is better than our past." Dave Walker President & CEO Peter G. Peterson Foundation

	The Recession is Over Now what we need is a  new kind of recovery.   The Great Recession, which rolled over our financial lives like one of P.J. Keating's giant pavers, is most likely over. Home sales, while still far below the levels of a year ago, have risen for three straight months—a first since 2004. The stock market has rallied 44 percent since March, thanks to renewed optimism and improving earnings from big companies like Goldman Sachs and Apple. In June, seven of the 10 indicators in the Conference Board Leading Economic Index pointed upward, including manufacturing hours worked and unemployment claims. Macroeconomic Advisers, the St. Louis–based consulting firm, says the economy is expanding at a 2.5 percent annual rate in the current quarter. Economic activity "will increase slightly over the remainder of 2009," Federal Reserve chairman Ben Bernanke told Congress. READ FULL NEWSWEEK ARTICLE PRESIDENT OBAMA REACTS: ...the latest cover of Newsweek says, quote, "The Recession is Over." Now, I bet you found this news a little startling. I know I did, because obviously people are going through a tough time all across the country. What is true is, is that the economy has stopped going through the freefall that we saw at the beginning of the year. The market is up. The financial system is no longer on the verge of collapse. We got news yesterday that, for the first time in three years, housing prices had actually gone up. When I took office, we were losing jobs at nearly double the rate that we're losing them now. So we may be seeing the beginning of the end of the recession. But, as I said before, that's little comfort to the folks who've lost their jobs and haven't found another one.

LO PEOR YA PASO? >>> El ex secretario de Estado de Economía y socio responsable de servicios financieros de la consultora PriceWaterHouseCoopers, Luis de Guindos, aseguró hoy que pese a que la actual crisis es la más intensa que se recuerda desde la Gran Depresión, lo peor ya ha pasado. Si bien, advirtió de que ahora hay que afrontar "la parte más difícil", volver a recuperar los anteriores niveles de crecimiento.

FIXING THE FLAWS >>> Treasury Secretary Timothy Geithner told Congress that the administration planned to fix the basic regulatory flaws that it thinks caused the financial crisis by instituting more regulations and creating a new regulatory agency to oversee all financial products. Geithner, testifying before the House Financial Services Committee on Friday, told lawmakers that Obamas proposal would address the core causes of the nations financial collapse as well as any problems in the future. The presidents plan focuses on the essential reforms, Geithner said. It addresses the core causes of the economic crisis. It addresses the areas critical to confronting future vulnerabilities. And, in pursuing what amounts to the most extensive overhaul of our financial regulatory regime in decades, it makes clear to the American people that their government, at an early stage in this administration, is intent on fixing the basic regulatory flaws that caused extensive damage to businesses and families, he added.

The global economic crisis could have a "disastrous" impact on health and school projects in the developing world unless rich nations spend a tiny fraction of stimulus measures to help the poor, a World Bank official said. Marwan Muasher, the World Bank's senior vice president for external affairs, said that although there were some signs in global markets the economic meltdown might be bottoming out poor nations were now starting to feel the worst of the crisis. "Poor countries have been hit hard by a crisis that is not of their making and they don't have the fiscal space to deal with it because it comes hard on the heels of a severe food and energy crisis," he told Reuters in an interview on Tuesday. Muasher said the crisis had pushed 90 million more people into poverty worldwide, most of them in the developing world, and that 30 million jobs had been lost. "This is a global crisis and it requires global solutions but many African countries and many low-income countries feel they have been left out of the equation. The social aspect of the crisis has been largely ignored."

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government's burgeoning budget deficit. It was the second lackluster showing in as many days, convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke...Under the weight of the ballooning deficit, the government has raised auction volumes and analysts now wonder whether the strain on the market is showing

Citigroup and Merrill Lynch, which lost $55bn in 2008, between them paid 1,400 employees bonuses of $1m or more each, according to a New York state report, released on Thursday, on banks propped up with taxpayer funds. The study, compiled by Andrew Cuomo, New York attorney-general, showed that JPMorgan Chase and Goldman Sachs, which both finished in the black last year, paid the most million-dollar bonuses - 1,626 and 953, respectively. However, the totals at a profitable bank such as Goldman were nearly matched by two of the years biggest losers on Wall Street. Citi, which suffered a $27.7bn loss, paid million-dollar bonuses to 738 employees. Merrill, which lost $27.6bn, paid 696 bonuses of $1m or more. There is no clear rhyme or reason to the way banks compensate and reward their employees, Mr Cuomo said. Compensation for bank employees has become unmoored from the banks financial performance.

READ THE FULL CUOMO REPORT ON BONUSES TITLED: NO RHYME OR REASON: The "Heads I Win, Tails You Lose" Bank Bonus Culture (22pp in PDF)

AMERICA LATINA UN EJEMPLO EN MEDIO DE LA CRISIS >>> Según varios especialistas, América Latina puede ser una de las regiones del mundo que primero salga de la crisis económica mundial, porque tiene entidades financieras fuertemente capitalizadas. A diferencia de Estados Unidos y Europa en América Latina no existe el problema de los activos tóxicos ni las deudas hipotecarias por la burbuja inmobiliaria. Sin embargo los países de la región enfrenta los excesivos gastos en los que incurren los gobiernos. Ricardo Marino, presidente de la Federación de Bancos Latinoamericanos (Felaban), afirmó que América Latina será una de las primeras regiones del mundo en participar de ese ciclo de recuperación, durante un encuentro económico organizado por la Secretaría General Iberoamericana y el Programa de Naciones Unidas para el Desarrollo, en Madrid, España. Marino también recordó como muchos bancos estarán mejor capacitados para afrontar la crisis debido a la experiencia de los 80s donde varios países de la región experimentaron la crisis en hipotecas por la burbuja en los mercados de finca raíz. La crisis ha puesto fin a los seis mejores años de las últimas cuatro décadas en América Latina, dijo el ex presidente chileno Ricardo Lagos, en la reunión de ex presidentes de países de América Latina realizada en Santiago, Chile.

ENTREVISTA A ROUBINI >>> Felipe Larraín entrevista a Nouriel Roubini, el gurú de la crisis financiera...Nouriel Roubini: Puedo ver la luz al final del túnel... con muchos pestañeos, pero puedo verla. La semana pasada, el economista chileno y el reputado analista internacional coincidieron en una conferencia en Cuzco. Ambos se conocen desde que estuvieron en Harvard. Reacio a dar entrevistas, Roubini accedió a conversar con Larraín sobre el devenir de la crisis, la situación de Estados Unidos y la economía chilena. Éstas son las predicciones de quien hoy es conocido como "el oráculo de los mercados". El economista de la Universidad Católica, Felipe Larraín, mantiene una amistad con Roubini, desde los años en que ambos estudiaban en Harvard. Nouriel Roubini predijo en 2006 que vendría una crisis económica. Hoy es considerado el economista del momento

WALL STREET BATE RECORDS MIENTRAS LA ECONOMIA USA COLAPSA >>> La fórmula de la esquizofrenia capitalista podría definirse así: Mediante el "rescate financiero", Wall Street y las bolsas mundiales reciclan una nueva "burbuja" ganancial, no ya con dinero especulativo proveniente del sector privado, sino con fondos públicos (de los impuestos pagados por toda la sociedad) puestos compulsivamente al servicio de un nuevo ciclo de rentabilidad capitalista al margen de una ascendente crisis de la economía real que marcha por vía paralela. Simultáneamente, la economía real del Imperio y de las potencias centrales estallan, colapsan en todas sus variables, y una crisis social, todavía de efectos imprevisibles, asoma de la mano de los despidos masivos en Europa y EEUU.

DEMANDABN TRANSPARENCIA POR PARTE DE NUEVA COMISION >>> La comisión creada por el Congreso de Estados Unidos para investigar el derrumbe financiero de este país debe poner los intereses ciudadanos por encima de lealtades políticas, profesionales e ideológicas, demanda hoy The New York Times. Según un editorial del rotativo, los 10 hombres y mujeres (seis demócratas y cuatro republicanos) integrantes del panel indagador fueron elegidos con el fin de ejecutar un servicio a los norteamericanos, crucial para la recuperación de la confianza en el gobierno. Sus hallazgos también servirán para actualizar a la nación de los esfuerzos reguladores encaminados a superar la crisis, precisa. De acuerdo con el influyente diario, algunos de los miembros del grupo formado por el Capitolio tienen lazos partidistas, de negocios y hasta pasadas experiencias gubernamentales que urge dejar a un lado durante el proceso.

US ECONOMY BEGINS TO "STABILIZE" >>> BUT US retail spending remains weak according to the Federal Reserve's influential Beige Book. The economy "continued to be weak going into the summer", the report said, highlighting sluggish retail activity and weak labour markets. But the pace of decline moderated over the last month, it added. The report failed to lift stock markets after earlier figures showed an unexpected fall in orders for US manufactured goods. "Most districts indicated that the pace of decline has moderated since the last report or that activity has begun to stabilise, albeit at a low level," the report said. Most districts indicated that labour markets remained "extremely soft", with wages being frozen or cut, it added. The report also highlighted the fact there had been no improvement in bank lending. This is despite massive injections of cash into the financial system by the US government. On a more positive note, it reported that a number of districts had seen signs of improvement in the residential property market. Earlier on Wednesday, official figures showed that orders for durable goods from US factories fell by 2.5%, a much bigger fall than had been expected.

GAO SAYS US POSTAL SERVICE IS HIGH RISK >>> The Government Accountability Office on Tuesday added the financially ravaged U.S. Postal Service to its list of federal agencies and programs at high risk of waste, fraud and abuse. In making the late addition to its biennial accounting of troubled agencies and programs -- GAO released its 2009 report in January -- the watchdog suggested that USPS has failed to cut costs quickly enough to offset unprecedented declines in mail volume and plummeting annual revenue. "There are serious and significant structural financial challenges currently facing the Postal Service," said acting Comptroller General Gene L. Dodaro. "New technology is profoundly affecting services in both the private and public sectors, including traditional mail delivery. Compounded by the current recession, the volume of mail being sent is dropping substantially, leading to a sizable decline in revenue. At the same time, the Postal Service faces significant infrastructure and personnel costs."

	"...we are concerned about the security of the Chinese assets..." U.S. briefers said the president's team told the Chinese that the United States was committed to making sure the economic and monetary stimulus being used to fight the recession did not fuel inflation. U.S. officials told reporters that the U.S. side stressed to the Chinese that the United States has a plan to bring the deficit down once the economic crisis has been resolved. They said Bernanke discussed the Fed's exit strategy from the central bank's current period of extraordinary monetary easing, emphasizing that the Fed was being careful to guard against future inflation. The Chinese, who have the largest foreign holdings of U.S. Treasury debt at $801.5 billion, have been expressing worries that soaring deficits could spark inflation or a sudden drop in the value of the dollar, thus jeopardizing their investments. Chinese officials said those concerns were raised during Monday's talks. "We sincerely hope the U.S. fiscal deficit will be reduced, year after year," Assistant Finance Minister Zhu Guangyao told reporters after the Monday talks had ended. "The Chinese government is a responsible government and first and foremost our responsibility is the Chinese people, so of course we are concerned about the security of the Chinese assets," Zhu said, speaking through an interpreter. The discussions on America's deficits and China's role in financing them highlighted the growing economic importance of China, now the world's third largest economy... READ FULL ARTICLE "There were several times that I met with the SEC and thought 'they got me,'" Bernard Madoff   FLASH:  A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing theFederal Reserve and making the results available to the public.__   Bernanke Live: Fed Chairman Defends Actions, Opposes Audit Bernanke expressed particular opposition to a proposal in Congress for the Government Accounting Office to be able to "audit" the Fed's interest rate decisions.  "I don't think that's consistent with independence. I don't think the American people want Congress running monetary policy. That's exactly what (the bill) would do," he said.     "The problem we have is that in a financial crisis, if you let the big firms collapse in a disorderly way, it will bring down the whole system," Bernanke said. "I was not going to be the Federal Reserve chairman who presided over the second Great Depression."...The Fed chief took questions on a range of issues over the course of the town-hall style event, including the toughest moments of the financial crisis in the fall of 2008, missed steps in the subprime mortgage crisis, the impact of the stimulus and TARP programs, and the Fed's independence in establishing monetary policy. The Fed chief also predicted that unemployment will continue to rise in the next few months. In response to a question on consumer protections, Bernanke acknowledged that he believed the Fed was "late in addressing the subprime lending problem." STREAMING VIDEO OF FULL PROGRAM

	Andrew Hall, the head of Citigroup's (C) Phibro energy trading unit, wants the company to honor a previously-agreed upon compensation package that could pay him $100 million for his work in 2008, the Wall Street Journal reports. If the estimate is correct, it would harken back to the halcyon days of 2007 and then some, when even Goldman Sachs (GS) CEO Lloyd Blankfein received just $70 million for steering his firm to more than $11 billion in profits. One important difference in such comparisons, of course, is that Goldman Sachs has repaid its government capital and is turning in profits, while Citigroup as a whole has lost tens of billions of dollars and is now a ward of (and 34 percent owned by) the U.S. government. The incident raises a host of questions about contract law and the increasingly messy interactions between politics and private business...the inescapable reality is that more situations like this will arise as Wall Street's bonus-happy culture clashes with the need of politicians to win points grandstanding against such practices... DEPRESIONOMICS IN THE FAMILY DIVORCE DECREASING *** ADULTERY INCREASING While accepted wisdom holds that adversity can bring people closer together, the recent recession has shown that, in reality, the opposite may well be the case. With finances getting stretched thin and economic pressures driving wedges between many couples, adultery seems to be be emerging as a coping strategy for many unhappy marrieds...according to some sources, the divorce rate has reached a forty-year low...(BUT)...With mistresses and prostitutes becoming a recessionary casualty, would-be cheaters may be redirecting their impulses into other channels, notably adultery between married partners. IS THE RECESSION OVER? IS THE RECESSION OVER? >>> Not bloody likely. First of all, calling the current economic contraction a recession is like calling Bubonic Plague a slight illness. We are clearly in the worst economic contraction since the Great Depression. Secondly, the official organization that dates recessions -- the National Bureau of Economic Research (NBER) -- defines the current recession based primarily on job losses -- not two consecutive quarters of GDP contraction. And by that measure the NBER judged that the recession began in December 2007. With about 6.5 million jobs lost since then and another 546,000 initial jobless claims in the most recent July week for which statistics are available, it is difficult to see how anyone could make the claim that the recession is over. To be fair, that number is down from previous months but it still suggests a substantial number of lost jobs. But despite the lack of compelling evidence to bolster its case, Newsweek is declaring that the recession is over. It looks like Newsweek's 'evidence' hinges on its analysis of the $787 billion stimulus package. It presents White House numbers claiming that 1.5 million jobs will be 'saved or created' by the fourth quarter of 2009 and another 3.5 million by the fourth quarter of 2010. But the White House suggests that only 10 percent of those stimulus jobs will be saved or created this year. There is a significant amount of approximation in the employment statistics so it is difficult to assess the 3.5 million jobs that the White House expects will be saved or created. I doubt that the official employment statistics count the number of jobs saved. But the official employment numbers do include estimates for the number of jobs created by something called a birth-death model -- which added 800,000 jobs to the official employment statistics due to the creation of jobs from small businesses that it assumed were born in the last year. Considering venture capital's recent nuclear winter, it may be that those 800,000 assumed jobs don't really exist at all. The key to getting out of the recession is to revive consumer demand in the short-run and to create new corporate demand in the long-run so that the economy is not so dependent on over-leveraged consumers to buy more stuff that they could not afford -- given their contracting incomes -- without the debt. If consumer demand rises -- as the unemployed get jobs -- this would boost GDP growth... "...once the recovery began – in different calendar years in different countries – the average rate of growth was strong. GDP growth in the first year after the Great Depression averaged 4.7 per cent, followed by 4.6 per cent in the second and third years... The fall in output in the current recession has been sharp. In the US, for example, gross domestic product fell at an annual rate of just above 6 per cent in the two most recent quarters. In Japan, GDP is down by nearly 9 per cent on its 2008 first-quarter peak. The latest UK data suggest output is nearly 6 per cent lower than a year ago, the sharpest fall since 1931. The conventional wisdom is that the steepness of the fall means the recession will be long, and that the recovery when it happens will be anaemic. In the UK, for example, the National Institute of Economic and Social Research argued last week that GDP per head would take five years to get back to pre-recession levels. This was despite an earlier declaration by the think-tank that the UK has been moving out of recession since output reached a trough in March. The UK government projects a fall in GDP of 3.5 per cent for 2009, followed by a rise of 1.25 per cent in 2010 and a 3.5 per cent upswing in 2011. But these official forecasts have been widely criticised as too optimistic. In the US, the consensus among forecasters is that growth at or near trend will not resume until the second half of 2010 and that the 2008 second-quarter peak level will not be regained until the first half of 2011. As late as the autumn of 2008, economic forecasters in general were far too optimistic about 2009. Are these same forecasters now too pessimistic about recovery? The historical evidence reveals a typical pattern of recession and recovery that suggests this may be so. Very few recessions last longer than two years. And most recoveries, once they start, are strong. Since the late 19th century, there have been 255 recessions in western economies. Of these, 164 have lasted just one year and only 32 have lasted for more than two years. In other words, two-thirds of recessions last a single year, and only one in eight lasts more than two years. If we strip out the peculiar circumstances at the end of the two world wars, 70 per cent of all recessions last just one year. The pattern of duration is virtually identical regardless of the size of the initial shock. Even when the initial fall in output has been more than 6 per cent, 70 per cent of recessions have lasted just one year. Even in the 11 examples where the initial fall in GDP was more than 8 per cent in a year, eight recessions only lasted that single year. This does not of course guarantee that the current recessions in western economies will be short-lived, but, equally, the speed of the fall does not imply they will be long.

DEFENSA DE LA FED >>> La tasa de desempleo de Estados Unidos se mantendrá alta incluso una vez que el país salga de la recesión en algún momento de los próximos meses, dijo el domingo el presidente de la Reserva Federal estadounidense, Ben Bernanke. En la grabación del especial "Bernanke on the Record" que la cadena de televisión PBS emitirá esta semana, Bernanke defendió las acciones agresivas, incluso poco ortodoxas, tomadas por la Fed durante la larga recesión y la profunda crisis financiera.

MAS AHORRO$? - Bernanke asegura que la crisis financiera enseñará a la gente a ahorrar más >>> reconoció que fueron muchos los factores que se combinaron para crear la peor crisis financiera desde la Gran Depresión y "posiblemente incluida la Gran Depresión". Pero, indicó que el aspecto positivo es que "la gente, que vio lo ocurrido con sus planes de ahorro para la jubilación, ha empezado a ahorrar más". "La gente está adoptando buenos hábitos, de forma que no solo retornaremos a la prosperidad, sino que la economía será más fuerte que antes de que todo esto empezara"

WHERE THE CRISIS CAME FROM >>> Over the past three decades, there has been a sea change in the way that credit is extended in America, creating the problems -- and the need for reforms -- that we face today. At the heart of the financial crisis lie the complex, opaque derivative securities created not by traditional Main Street banks but by Wall Street, and with the passive complicity of regulators. Wall Street created, originated and sold an alphabet soup of derivative securities, and it was such synthetic instruments -- not traditional mortgage loans, small-business loans or other standard lending originated by banks -- that unleashed a flood of credit, created a vast excess of housing, weakened the capital structure of the banking industry and undermined popular confidence in banks. In previous generations, home buyers obtained mortgages and other loans from local, or Main Street, banks, which typically held those loans until they were fully repaid -- and therefore had an interest in making loans that borrowers could afford. But then Wall Street started slicing, dicing and packaging mortgages into bundles that served as the basis for bonds sold in the securities markets. Traditional bank deposits were no longer the primary funding source for credit. Instead, loans were being financed by the capital markets and packaged and sold by Wall Street. Mortgages were originated by one firm, packaged by another, sold by a third and serviced by yet another -- but none of them worried about whether the mortgages would be repaid, because they didn't hold the loans on their books.

	Leading Indicators Are Signaling the Recession’s End THE American recession appears to be nearing an end, but only after it has become the deepest downturn in more than half a century. The index of leading indicators, which signals turning points in the economy, is rising at a rate that has accurately indicated the end of every recession since the index began to be compiled in 1959. The index was reported this week to have risen for the third consecutive month in June, and to have risen at a 12.8 percent annual rate over those three months. Such a rise, pointed out Harm Bandholz, an economist with UniCredit Group, has always marked the end of the contraction. Mr. Bandholz said he expected that the National Bureau of Economic Research, the official arbiter of American economic cycles, would eventually conclude that the recession bottomed out in August or September of this year. If that proves to be accurate, the recession that began in December 2007 will have lasted 21 or 22 months, making it the longest downturn since the Great Depression. Recession could well prove to be a double dip Dave Mohr Published:Jul 25, 2009 The world economy is in its worst recession since the early ’80s. During the second half of 2008 world credit markets froze and international trade suffered a sudden 20% decline. The slump in world trade resulted in a sharp fall in exports in the major and emerging markets, confirming that the world economy is more interlinked than ever through trade and capital flows. In recent months credit markets have started to thaw. As credit flows normalised, so bank and corporate bond spreads narrowed sharply from historic highs. Many economic indicators are starting to show signs of recovery. Government and central bank policies restored some investor confidence in financial markets and equity prices recovered ground as fears of a ’30s-style depression receded. Although government and central bank policies appear to be gaining traction, we believe there are longer-term costs to these policies. Extremely low interest rates are not sustainable over the long term and as economic activity revives, interest rates need to rise. CLICK TO READ FULL ARTICLE IFAC Launches Financial Crisis Resource Center IFAC has launched a resource center to help professional accountants address issues related to the global financial crisis. The center (http://www.ifac.org/financial-crisis/) serves as an international clearinghouse of programs, articles, speeches, and other initiatives undertaken by IFAC, its independent standard-setting boards, members and associates, as well as other organizations that are relevant to professional accountants. To assist professional accountants in addressing issues related to the global financial crisis, IFAC and the International Auditing and Assurance Standards Board (IAASB) have focused on three activities: + To increase awareness among preparers and auditors of existing and newly developed guidance that can assist them in reporting on financial instruments; + To encourage further convergence in reporting standards on financial instruments, while at the same time strongly supporting (the continuation of) fair value accounting since reducing transparency is not in the interests of investors; and + To participate in and promote discussions of best practice with respect to the audits of financial institutions and other organizations that are affected by the current crisis.

	HEADLINES  <<<< >>>>  TITULARES Unemployment tops 10 percent in 16 states in June ROUBINI: ...there is light at the end of the tunnel for the U.S. and the global economy. But as I have consistently argued, the recession will continue through the end of the year, and the recovery will be weak and at risk of a double-dip, as the challenge of getting right the timing and size of the exit strategy for monetary and fiscal policy easing will be daunting. Each bubble has to be bigger than the last one Summers Says Stimulus Plan on Track Despite Job Losses . Michigan Jobless Rate Tops 15%, California Sees Record Level, Georgia, Nevada, Rhode Island, South Carolina, Florida and Delaware all reached their highest level of joblessness since records began in 1976. Will CIT's failure relight the financial crisis?...On July 15, one of the nation's largest lenders to small businesses, CIT, said the government was unlikely to save it from bankruptcy..."A CIT failure will mean to Main Street what Lehman Brothers meant to Wall Street," The next economic crisis . GEITHNER: Salida de crisis pasa por refundar sistema financiero...es necesaria la cooperación entre todos los países...la economía está mejor que al inicio de 2009 y que las medidas a nivel internacional comienzan a funcionar... Las medidas que evitaron el Apocalipsis financiero Desempleo supera 10% en 16 estados de EEUU DURANGO, MEXICO: Recesión económica azota a las familias...Las difíciles condiciones de vida de las familias de Nombre de Dios tienen como origen la crisis económica que azota a la ciudadanía, la cual se refleja en el desempleo.

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	WE ARE NOW IN THE EARLY STAGES OF A DEPRESSION  The economic indicators we follow to track real economic activity are all signaling a slowdown of massive proportions. You wouldn’t know it reading the mainstream papers of course – they all focus on the relative decline in the slowdown’s intensity. Reading about the slowdown ‘slowing down’ is not the same as growth however, and does not warrant excitement in our opinion. We find the similarity between the 2008 economic collapse and the 1929 economic collapse disturbing. Don’t get sucked in… the real economy is still struggling and the market has yet to reflect this. In 1932, the Dow Jones Industrial Average bottomed 90% below the September 1929 peak. The S&P 500 Index peaked in October 2007 at 1,576, and from our brief analysis above we can easily calculate a drop in the S&P 500 of as much as 88% from that peak using our ‘double trouble’ scenario. At the very least, under all of our scenarios it appears that the S&P 500 Index will test the March 2009 low of 666. Judging by the continued declines we are seeing in the real economy, we expect that test to happen sooner rather than later. In our view, the only thing propping this market up is investor sentiment. Earnings have not improved. US industry used only 68.3% of available capacity in May 2009, according to a monthly report from the Federal Reserve.1 That represents almost one third of all US industrial capacity sitting idle. Prior to the current recession, the lowest rate recorded since the Fed started this series of records in 1967 was 70.9% in December 1982.  The US government has spent $2.67 trillion thus far in fiscal 2009, but has only collected $1.59 trillion. The US government collected $685.5 billion in individual income taxes so far this year, a 22% drop from the $877.8 billion the government took in during the first nine months of 2008. US corporate income taxes plunged 57% to $101.9 billion in 2009, down from $236.5 billion in the first nine months of fiscal year 2008. 4 million Americans have been looking for work for more than 26 weeks, representing 29% of the unemployed – the most since records began in 1948. During the last 30 years, Americans who lost their jobs took an average 15.8 weeks to find new positions. In June 2009, the average duration of unemployment was 24.5 weeks, the longest since records began in 1948. The number of people collecting unemployment benefits reached a record 6.88 million in the week ended June 27, 2009. Approximately six people are seeking work for every job opening, the most since the government began keeping such records in 2000. A year ago, the ratio was a little more than two-to-one... Sprott Asset Management READ THE FULL ANALYSIS - 7 pages in pdf Are We in the Early Stages of a Economic Depression? A Comment on the above analysis I do not disagree...The risks in our economy remain exceptionally high. The stock market is in the process of defining winners and losers but overall is being supported by massive liquidity injected into the overall economy by Uncle Sam (Fed and Treasury). What may cause the next leg down in the economy? Commercial real estate defaults which will impact a large number of banks (community, regional, and money center) and insurance companies. Recession? Depression? Let’s just say by either definition, we have a long way to go. READ THE FULL COMMENT

	Fiscal ruin of the Western world beckons For a glimpse of what awaits Britain, Europe, and America as budget deficits spiral to war-time levels, look at what is happening to the Irish welfare state. Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough... The Fed's doctrine – New Keynesian Synthesis – has let it down time and again in this long saga, and there is scant evidence that Fed officials recognise the fact. As for the European Central Bank, it has let private loan growth contract this summer. The imperative for the debt-bloated West is to cut spending systematically for year after year, off-setting the deflationary effect with monetary stimulus. This is the only mix that can save us. READ FULL ARTICLE . DEAD UNBURIED DUE TO CRISIS >>> The poor economy is taking a toll even on the dead, with an increasing number of bodies in Los Angeles County going unclaimed by families who cannot afford to bury or cremate their loved ones. . CALIFORNIA BUDGET CRISIS CUT >>> 27,000 prison inmates to be FREED out of total 168,000 inmate population Bernanke afirmó que el plan anticrisis no provocará inflación en EE.UU. El presidente de la Fed aseguró que la entidad posee "numerosas herramientas eficaces para ajustar la política monetaria" cuando la economía retome la senda del crecimiento; advirtió que se mantendrá el desempleo El presidente de la Reserva federal de Estados Unidos, Ben Bernanke, aseguró hoy que la entidad tiene "numerosas herramientas" para evitar que las enormes sumas inyectadas en la economía desde que se desató la crisis financiera disparen la inflación cuando el país regrese a la senda del crecimiento. "Globalmente, la Reserva federal tiene numerosas herramientas eficaces para ajustar la política monetaria cuando las perspectivas económicas nos lo exijan" . Ben Bernanke, capitán de la Reserva Federal de Estados Unidos, evitó que la economía de su país cayera en lo que él llama "La Segunda Depresión". Ahora, intenta defender a la propia Fed. Mientras hoy Bernanke ofrece, por segundo día consecutivo, su testimonio sobre la economía ante el Congreso de EE.UU., el banco central se defiende de diversos ataques provenientes de críticos que quieren limitar su poder y autonomía. Uno de ellos es Ron Paul, un congresista republicano de Texas que aboga por la abolición total del banco central. Paul persuadió a casi dos tercios de la Cámara de Representantes para que coauspiciaran un proyecto de ley que exige auditorías del congreso sobre la Fed mucho más profundas. Las auditorías mostrarán "que es la Fed la que ha causado todo este daño" a la economía, dice Paul. El presidente Barack Obama propone otorgarle a la Fed algunos nuevos poderes para supervisar instituciones financieras, aunque también quiere limitar su autoridad para conceder préstamos de emergencia como los que usaron para rescatar a la aseguradora American International Group Inc. y la firma de valores Bear Stearns. Mientras tanto, la Fed está bajo presión para modificar su estructura en medio de inquietudes de que la influencia que los ejecutivos de la banca tienen sobre sus acciones es demasiado grande. Muchos críticos de la Fed la culpan por la crisis. Dicen que fracasó como regulador bancario y que alimentó una burbuja al mantener las tasas de interés demasiado bajas por años.

Suspicious activity reports (SARs) climbed at double-digit rates in the seven categories relating specifically to fraud in 2008, according to The SAR Activity ReviewBy the Numbers, Issue 12. The semiannual report by the Financial Crimes Enforcement Network (FinCEN) includes SAR filings through Dec. 31, 2008. Check fraud (17% year-to-year increase), mortgage loan fraud (23%), consumer loan fraud (34%), wire transfer fraud (58%), commercial loan fraud (14%), credit card fraud (22%) and debit card fraud (10.5%) all saw substantial increases. In a press release, FinCEN said SARs in the fraud categories may be reported in association with other suspected crimes, or a SAR may indicate several types of suspected fraud being committed by the same suspect. FinCEN noted that 35% of identity theft SARs filed by depository institutions were listed in combination with credit card fraud and/or one or more other violations such as check fraud or consumer loan fraud. SARs in all categories increased 3% in 2008.

	Watchdog: Financial Bailout Support Could Reach $23.7 Trillion that is $ 23,700,000,000,000.00   (NOTE: By comparison the estimated population of fish in the oceans is 3,500,000,000,000 or 3.5 trillion... the estimated number of humans on Earth is 6,760,000,000 or 6.76 billion... and the estimated number of ants is 200,000,000,000,000 or 200 trillion   thus $23.7 Trillion = $3,506 per human being or $ 6.77 per fish or 12 ¢ per ant)   The total price tag for federal support stemming from the financial crisis could reach $23.7 trillion in the long run, the government's top bailout watchdog says in a new report to Congress.  Neil Barofsky, the inspector general for the Troubled Asset Relief Program, plans to deliver his report Tuesday to the House Oversight and Government Reform Committee.  The $23.7 trillion figure is admittedly a high-ball number and reflects the total potential gross exposure, but Barofsky in his prepared testimony notes that the TARP -- which started as a $700 billion bailout -- has expanded well beyond that.  "TARP has evolved into a program of unprecedented scope, scale and complexity. Moreover, TARP does not function in a vacuum but is rather part of the broader government efforts to stabilize the financial system," the report says.  "The total potential federal government support could reach up to $23.7 trillion," the report estimates, factoring in commitments from "dozens of programs" implemented throughout the federal government since 2007 CLICK HERE TO READ FULL ARTICLE CLICK HERE TO READ SPECIAL INSPECTOR GENERAL'S STATEMENT TO CONGRESS   "A trillion here, a trillion there will get things stabilized"  Gary Schilling   I think that what the government has done so far, despite the trillions of dollars, is questionable. People are miserable. They are saving all their cash, their social-security checks, and many people are still in big trouble. Modifications of troubled mortgages are proceeding slowly, and those that are modified are proving to be serial defaulters. More than 50 percent are behind in payments. What people need is a consumer subsidy to help them handle their mortgages. The government gave trillions of dollars for bailout programs -- now it should give another trillion to consumers. A trillion here, a trillion there will get things stabilized...   Of $3.1 trillion in total commercial real estate debt, banks and thrifts hold $1.7 trillion in mortgages. Another $700 billion is securitized, and the delinquency rate more than tripled in six months, to 2.7 percent in May, the highest in a decade. Default rates are expected to hit 30 percent or more, and loss rates could reach 13 percent...   The estimates are that $155 billion in securitizations are coming due by 2012, and two-thirds won't qualify for refinancing as prices drop 35 percent to 45 percent from their 2007 peaks. Meanwhile, $525 billion of commercial mortgages held by banks and thrifts will come due by 2012. About 50 percent won't qualify for refinancing because they exceed 90 percent of the underlying property value. Lenders prefer loans of no more than 65 percent...   I have been saying it will go for a second stimulus package. The first one was for education, health and the environment, and was intended to put people to work. There is a lot of resistance to another package, though, and further increases to the deficit. Our estimate is that $200 billion went to stimulus for infrastructure, unemployment and tax cuts, and the rest was for social agenda: education, health and environment...   It will extend into early 2010. Only by then is enough fiscal stimulus likely to be pumped out to stabilize consumer retrenchment. By then, enough excess house inventories may be absorbed to moderate the downward pressure on prices. By then, most of the global financial woes should be at least stabilized. Nevertheless, a weak recovery is likely to follow, one so tepid and with such high unemployment that you may not know it has arrived.   READ FULL SCHILLING INTERVIEW   Is securitization like a financial terrorist attack?     A recent editorial in the Wall Street Journal makes it clear that securitization -- the packaging of thousands of loans into securities -- has all the features of a successful terrorist attack. How so? It entered the financial system without attracting any negative notice at all, found its way into the heart of the global financial markets and, once ensconced there, proceeded to destroy the system (and is continuing to do so now). In fact, securitization is proving to be more costly from a financial standpoint than everything that al Qaeda has cooked up against us. So far, the financial rescue has cost $12.8 trillion and that figure could reach as high as $23.7 trillion. The wars in Iraq and Afghanistan cost only $3 trillion at most. (To be fair, though, securitization has taken a far smaller human toll than al Qaeda.) Why do I blame securitization for our current financial calamity? Remember toxic waste? That's the $13 trillion worth of residential mortgage-backed securities (MBS) -- bundles of mortgages sliced by level of risk -- and collateralized debt obligations (CDOs) -- mixed bundles of commercial mortgages, auto loans, student loans, credit card receivables, small business loans, and corporate loans sorted by risk level -- residing on the books of financial institutions around the globe. Securitization is not the sole problem -- it is the fact that some financial institutions (FIs) leveraged up their balance sheets 50:1 to buy the toxic waste. And they bought it because they believed that in a low-interest-rate environment, they thought they were getting a safe, higher-yielding investment... READ FULL ARTICLE

Economic indicators up more than expected in June

More plans to build homes, higher stock prices and fewer people filing first-time claims for jobless aid sent a private-sector forecast of U.S. economic activity higher than expected in June. It was the third straight monthly increase for the New York-based Conference Board's index of leading economic indicators, and another sign pointing toward the recession ending later this year...The group also said activity in the six-month period through June rose 2 percent, with an annual growth rate of 4.1 percent. That's the strongest rate since the first quarter of 2006...If these conditions continue, "expect a slow recovery this autumn," said Conference Board economist Ken Goldstein.

WHITE HOUSE CLAIMS SUCESS, FEWER GOOGLE SEARCHES FOR "DEPRESSION" >>> Of all the statistics pouring into the White House every day, top economic adviser Larry Summers highlighted one Friday to make his case that the economic free-fall has ended. The number of people searching for the term economic depression on Google is down to normal levels, Summers said. Searches for the term were up four-fold when the recession deepened in the earlier part of the year, and the recent shift goes to show consumer confidence is higher, Summers told the Peterson Institute for International Economics.

VP Joe Biden: ‘We Have to Go Spend Money to Keep From Going Bankrupt’

Vice President Joe Biden (Photo by Penny Starr/CNSNews.com)

Vice President Joe Biden told people attending an AARP town hall meeting that unless the Democrat-supported health care plan becomes law the nation will go bankrupt and that the only way to avoid that fate is for the government to spend more money... the president knows, and I know, that the status quo is simply not acceptable,” Biden said...“It’s totally unacceptable. And it’s completely unsustainable. Even if we wanted to keep it the way we have it now. It can’t do it financially.”
 
“We’re going to go bankrupt as a nation,” Biden said.
 
“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

CLICK HERE TO READ FULL ARTICLE

RISING UNEMPLOYMENT ACCELERATES FORECLOSURE CRISIS >>> Relentlessly rising unemployment is triggering more home foreclosures, threatening the Obama administration's efforts to end the housing crisis and diminishing hopes the economy will rebound with vigor. In past recessions, the housing industry helped get the economy back on track. Home builders ramped up production, expecting buyers to take advantage of lower prices and jump into the market. But not this time. These days, homeowners who got fixed-rate prime mortgages because they had good credit can't make their payments because they're out of work. That means even more foreclosures and further declines in home values. The initial surge in foreclosures in 2007 and 2008 was tied to subprime mortgages issued during the housing boom to people with shaky credit. That crisis has ebbed, but it has been replaced by more traditional foreclosures tied to the recession. Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982. But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn't a drag on the economy, and when the recession ended, the boom was explosive. No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.

GOOD NEWS! SPENDING ON FOOD REACHES HISTORICAL LOW IT HAS ONLY BEEN IN THE LAST 8 YEARS THAT THE % OF INCOME SPENT BY AMERICANS HAS BEEN IN SINGLE DIGITS...before the year 2000 it was over 10% and until the 1950's it was over 20%.

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