global depression?

[stephendare]

LONDON — Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

U.S. markets were closed for Martin Luther King Jr. Day, but the downbeat mood from last week's market declines there circled through Europe, Asia and the Americas.

Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."

On Monday, Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

In Canada, the S&P/TSX composite index on the Toronto Stock Exchange fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of Sao Paulo's Bovespa exchange, and Argentina's benchmark Merval index fell 6.3 percent to close under 1,900 for the first time since August 2006.

"We've taken our lead from the Asian markets who have not been impressed by the U.S. There's debate if there's going to be a recession in the U.S. I don't think there's much chance of that though," said Richard Hunter, an analyst at Hargreaves Lansdown Stockbrokers Ltd. in London.

Concerns about the outlook for the U.S. economy, a major export market for Asian companies, have sent the region's markets sliding in 2008. Just last Wednesday, the Hang Seng index sank 5.4 percent.

Japan's benchmark Nikkei 225 index slid 3.9 percent to close at 13,325.94 points, its lowest close in more than two years. China's Shanghai Composite index plunged 5.1 percent, partly on worries about mainland Chinese banks' exposure to risky U.S. mortgage investments.

"People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world," said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

Cohen said there may be "still some wariness" about politicians being able to come up with a compromise and act sufficiently quickly on a stimulus package. "I think the impact would be marginal anyway," he said.

Investors took cues from the negative reaction to the president's plan on Wall Street on Friday, when the Dow Jones industrial average slid 0.5 percent to 12,099.30, bringing its loss for the year so far to nearly 9 percent.

Traders also have shrugged off assurances from Federal Reserve Chairman Ben Bernanke that the U.S. central bank is ready to act aggressively _ which means a likely big interest rate cut later this month _ to help the sagging economy.

Some analysts predict that Asia won't suffer dramatically from a U.S. recession because increased trade and investment within Asia has made the region less reliant on the United States than in the past. Excluding Japan, 43 percent of Asia's exports go to other nations in the region, Lehman Brothers calculates, up from 37 percent in 1995.

But on Monday, uncertainty and pessimism reigned.

In Tokyo trading, exporters got hit hard, partly because of the yen's recent strength against the dollar. Toyota Motor Corp. lost 3.3 percent and Honda Motor Co. sank 3.4 percent.

Shares of Bank of China dropped 6.4 percent in Hong Kong after the South China Morning Post newspaper reported that the bank is expected to announce a "significant write-down" in U.S. subprime mortgage securities, citing unidentified sources. In Shanghai, the bank's stock declined 4.1 percent.

India's benchmark Sensex index fell 1,353 points, or 7.4 percent _ its second-biggest percentage drop ever _ to 17,605.35 points. At one point, it was down nearly 11 percent.

The decline hit companies across the board, with power utility Reliance Energy Ltd. falling 16.4 percent. Major software company Tata Consultancy Services Ltd. slid 7.6 percent

"A gloomy U.S. climate has affected the global markets. Even if those markets recover, it will take sometime for the recovery to reach India because today's fall has been so drastic," said Jayant Pai, of the Mumbai investment company IL&FS Ltd.

Still, Pai and others suggested that the declines could lead to a buying opportunity.

"The sell-off today takes us close to the bottom," she said.

Since the start of the year, Japan's Nikkei index has declined 13 percent, while Hong Kong's blue-chip index is down more than 14 percent. Even China's Shanghai index _ which nearly doubled last year _ has fallen 6.6 percent.

[gatorback]

NYSE futures were down 500 points since the US market was closed to honor MLK Jr.; however, they doubt the open on Tuesday will be so terrible.  We'll see.

[RiversideGator]

A few bad days or even a bear market does not a "global depression" make.  I predict that the cheerleaders for economic collapse will be disappointed this time too.

[downtownparks]

I think that we are due for a market correction. Its not so much that we are in a bubble, but there are a lot of extenuating circumstances, value of the dollar, cost of oil, housing market problems, mortgage write offs.

I see us entering a recession, but I dont know how historically note worthy it will be. Hopefully it wont be. I was in Telecom (CLECs to be specific) during the last one (2000/2001), and went through two lay-offs in a year.

[stephendare]

River, I hate to say this but your predictions are beginning to scare the holy hell out of me.

So far, your record of prognostication includes Alberto Gonzalez not being fired, No evidence of global warming, a strong and vital Republican party with no internal theocratic driven fissures, and a prediction that traditional conservatives were firmly in control of our party.

The very fact that you are predicting a mild recession has just added a heavy new burden onto my fears for the futures.

(lol, my friend)

[JeffreyS]

I think everyone should buy themselves something pretty with our stimulus money.  That way it won't hurt the economy too much when I put mine in savings. 

[second_pancake]

SD:  You crack me up

Economists are saying even though we're not in a technical recession right now, the way consumers are spending (lack of spending) have all the indicies of a recession.

I don't know what stores looked like nationally, but at Christmas, the stores in Jacksonville were dead compared to what they were last year.  Even today, the malls aren't as crowded, department stores sales are down and there is what seems to be an overly cautious approach to spending money.  Now, all of this could be because of the talk about recession and so everyone is clenching their butt-cheeks, but I know here in town, many of our residents were employeed with the same companies that have reported record losses and subsequently laid-off much of their staff.

[Lunican]

Fed slashes rates to 3.5%

Citing weakening economic outlook, Federal Reserve makes biggest cut in nearly 24 years - three quarters of a point.

January 22 2008: 9:11 AM EST

NEW YORK (CNNMoney.com) -- The Federal Reserve slashed two key interest rates by three-quarters of a percentage point Tuesday following an unscheduled meeting, citing continued concerns about a weakening economy and turmoil in the financial markets.

The Fed lowered its federal funds rate, which impacts how much consumers pay on credit card debt, home equity lines of credit and auto loans, from 4.25 percent to 3.5 percent. The Fed also lowered its discount rate, which is what it costs banks to borrow directly from the central bank, by three-quarters of a point, to 4 percent.

This was the biggest rate cut by the Fed since October 1984.

Full Article: http://money.cnn.com/2008/01/22/news/economy/fed_rates/index.htm?eref=rss_topstories

[stephendare]

to all appearances, this one is going to suck.

[second_pancake]

Someone at work just told me about that rate cut.  Well, looks like learning how to be self-sufficient is going to pay off.  Anyone want to barter?  I can make you some pants out of plastic grocery bags for a new bike chain

[stephendare]

http://www.metrojacksonville.com/forum/index.php/topic,1236.msg8516.html#msg8516
November 26th, 2007

BTW, I have heard that "house of cards" nonsense about our financial system and real estate speculators for many years and it is just that - nonsense.  Of course there is an element of unreality in our economic system in that we are basically trading around pieces of paper (literally or digitally) in exchange for goods and services.  This is fundamentally the same ancient concept as gold as a currency though except that the paper has no intrinsic value except for the backing of the government and the people.  However, the system works because everyone abides by it.

As for the dollar, look for it to come back soon.  It isnt a trash currency and these things go through cycles.  Also, for many years the dollar was unusually valuable due to our preeminent position at the end of WWII so it is natural to see some devaluation.  As for our public debt, it is actually better than many other highly industrialized nations like Britain and Japan in relative terms.  And with inflation, it is rising a bit but it is still historically low.  And, a healthy economy needs modest inflation to provide a moving target for growth and to inject money into the system.  Deflation and difficult credit is a far more dangerous problem and was seen in the US during the Great Depression and in Japan during their 1990s depression.  Dont believe this Paul nonsense - he simply trades in scary figures which seem scary until you actually do some research and become more economically aware.

In any event, the long and the short of it is Paul is basically a nice guy but an economic ignoramus and has zero chance of winning any primaries.

this is actually a great thread, btw---from november
http://www.metrojacksonville.com/forum/index.php/topic,1236.0.html

[midnightblackrx]

The NYT Headlines tomorrow...
DISMAL ECONOMIC OUTLOOK (YIPPEE)

[stephendare]

The NYT Headlines tomorrow...
DISMAL ECONOMIC OUTLOOK (YIPPEE)

it amazes me that with the economy literally crashing down around our ankles, that the people who voted this group of crooks and criminals into office, protected them from all oversight, angrily denounced all critics of the regime and TOTALLY IGNORED ALL WARNINGS ABOUT THE HOLLOWING OUT OF THE AMERICAN ECONOMY in favor of coming up with childish rhymes about free markets, traitors, and liberal pussies, are STILL unable to take responsibility for the mess they have created.

Are you kidding?

The fiscal 'conservatives' that were being defended on these pages for the past years drove this country into a ditch and they broke the damned economy with their reckless spending to create a bigger better fascist state, and the only comeback to the oft predicted outcome is to pretend that somehow the new york times is gleeful for the disaster?

what about your pals at Halliburton, enron, and KBR?

oooh....sorry.

Halliburton/KBR  took all the money and moved to Dubai, and the Enron guy mysteriously 'died' and was buried in a closed casket.

I bet they are even smugger than the supposed NYTimes smugness......Id bet you a dollar, but it wouldnt be worth a dime in three months.

But Bernanke is setting the stage for an even bigger recession down the road. Just as the ultra-low rates of the early 2000s created many of the problems we're experiencing today, pumping money into the system would probably stoke inflation, forcing the Fed to hike rates sharply in the near future. "It's better to take a small recession and kill inflation immediately instead of facing high inflation and a really big recession later," says Carnegie Mellon economist Allan Meltzer.

Meltzer, who is finishing the second volume of his history of the Federal Reserve, warns that Bernanke is risking a disastrous replay of the 1970s, when high oil prices fueled double-digit inflation. Every time the Fed started to tighten and unemployment jumped, chairmen G. William Miller and Arthur Burns lost their nerve. They lowered rates to boost job growth, and inflation inevitably revived, causing a vicious price spiral. The Fed let the disease rage for so long that it took draconian action by chairman Paul Volcker in the early 1980s to finally defeat inflation. The price was a deep recession, with unemployment hitting 11% in 1982. "The mentality is the same as in the 1970s," says Meltzer. "'As soon as we get rid of the risk of recession, we'll do something about inflation.' But that comes too late."

Indeed, while the economy is sending mixed messages about growth, the signs of increasing inflation are flashing bright red. For 2007 the consumer price index rose 4.1%, the biggest annual increase in 17 years. Gold, historically a reliable harbinger of inflation, set an all-time high of more than $900 an ounce. The dollar is languishing at a record low against the euro and a weighted basket of international currencies. "Flooding the market with liquidity is a disaster for the purchasing power of the dollar," says David Gitlitz, chief economist for Trend Macrolytics.

[stephendare]

River, here we go....of the same opinion, I would suspect.

Now that the Dems and Congress are involved, do you still think its going to be a 'recession"?

[RiversideGator]

River, I hate to say this but your predictions are beginning to scare the holy hell out of me.

So far, your record of prognostication includes Alberto Gonzalez not being fired, No evidence of global warming, a strong and vital Republican party with no internal theocratic driven fissures, and a prediction that traditional conservatives were firmly in control of our party.

The very fact that you are predicting a mild recession has just added a heavy new burden onto my fears for the futures.

(lol, my friend)

Interesting made up strawman arguments.  I do not believe the sky is falling, contrary to what permabears like you think.  I think this is a credit correction which happens every 10 years or so in some form.  This is also known as the business cycle, a product of the free market.  Try reading Adam Smith for starters.