Dollar surge will not stop America feeling the effects of a global crunch
By Ambrose Evans-Pritchard
Two alerts landed on my desk this weekend from the elite markets team at Goldman Sachs. One was entitled "The Dollar Has Bottomed!". Those betting on an imminent disintegration of American economic and political power may have to wait another cycle. Rival hegemons are falling like ninepins.
The US dollar index hit an all-time low in March. It crept slowly upwards in the early summer before smashing through layers of resistance over the past month.
The surge against sterling, the euro, the Swiss franc and the Australian dollar is one of the most spectacular currency shifts in half a century. "Something fundamental has changed," said the bank. Indeed.

US industry is now super-competitive, if small. Mid East funds are drawing up shopping lists of Wall Street takeover targets. Airbus and Volkswagen are shifting plant to America to escape crushing labour costs.
US exports have risen 22pc over the past year, outstripping Chinese growth. The US non-oil trade deficit has shrunk by two fifths since 2002. It is now running at $300bn a year. This is 2.1pc of GDP.
The other note advised clients to "Take Profit on Globalization Basket", especially on Eastern Europe currencies. Goldman Sachs has quietly dropped its talk of $200 oil. Even Russia's petro-rouble is now deemed suspect.
The twin missives more or less sum up the dramatic change in mood sweeping financial markets since it became evident that the entire bloc of rich OECD countries has succumbed to the delayed effects of the credit crisis.
Japan contracted by 0.6pc in the second quarter, Germany by 0.5pc, France and Italy by 0.3pc. Spain recalled the cabinet last week for an emergency summit. New Zealand and Denmark are in recession. Iceland contracted at a catastrophic 3.7pc in the second quarter.
"The whole decoupling thesis has started to come apart at the seams," said David Bloom, currency chief at HSBC. "Canada is frozen over. We have Arctic conditions in Sweden, and the UK is falling off the white cliffs of Dover."
The UK economy is not my brief, but I see that hedge funds are circulating a report from the US guru Jeremy Grantham predicting a very bad end to Gordon Brown's debt experiment.
"The UK housing event is probably second only to the Japanese 1990 land bubble in the Real Estate Bubble Hall of Fame. UK house prices could easily decline 50pc from the peak, and at that lower level they would still be higher than they were in 1997 as a multiple of income," he said.
"If prices go all the way back to trend, and history says that is extremely likely, then the UK financial system will need some serious bail-outs and the global ripples will be substantial."
For months the exchange markets ignored this impending train crash, just as they ignored the property bust in Europe's Latin Bloc, or the little detail that UBS alone had just lost the equivalent of 8pc of Switzerland's GDP. All they cared about in the currency pits was the interest rate gap: US low, Europe high.
Now the paradigm has flipped. The Fed may have been right after all to slash rates to 2pc. The European Central Bank may have panicked by tightening in July. Note that the elder Swiss National Bank did not do anything so rash.
Bulls now believe America is turning the corner. Financial stocks are up 20pc since early July. Some "monoline" bond insurers have risen 1,200pc in a month as fears of Götterdämmerung give way to sheer intoxicating relief, and a "short-squeeze". Such are bear-trap rallies.
Regrettably, I remain beset by gloom. The US fiscal stimulus package that kept spending afloat in the second quarter is running out fast. There is nothing yet to replace it. The export boom cannot keep adding juice as the global crunch hits. My fear is that the US will tip into a second, deeper leg of the downturn, setting off a wave of savage job cuts. This will start to feel more like a real depression.
The futures market is pricing a 33pc fall in US house prices from peak to trough, based on the Case-Shiller index. Banks have not come close to writing off implied losses on this scale.
Daniel Alpert from Westwood Capital predicts that a mere 28pc fall would alone lead to a $5.4 trillion haircut in US household wealth, and leave lenders nursing $1.25 trillion in losses. So far they have confessed to less than $500bn.
Meredith Whitney, the Oppenheimer's bank Cassandra, predicts a gruesome 40pc fall in prices. If so, expect prime borrowers facing negative equity to start throwing in the towel en masse. "I do not think we are near the end of writedowns. I continue to see capital levels going lower, and stocks going lower," she said.
So no, this painful ordeal is far from over. We are not witnessing a dollar rally so much as a collapse in European and commodity currencies. The race to the bottom has begun in earnest.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/18/ccview118.xml

Depression survivors: 'We lived the hard way' By MARIANN MARTIN mmartin10@jacksonsun.com • August 17, 2008
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Nell Daniel-Miles can still see that penny on the street, a copper disc of untold riches for a child growing up in the Great Depression. "It was the first penny I ever had," Daniel-Miles said. "And I grabbed it up and ran down the street to the store, squeezing it in my hand. "Once I got to the store, I just stared at the different kinds of candy behind the counter. Because I wanted the candy, but I hated to turn loose of that penny." Daniel-Miles is among a waning number of West Tennesseans who remember what it was like to grow up in the Great Depression, which began with the crash of the stock market in 1929 and continued until the beginning of World War II. And as people today talk about high fuel prices, rising food costs, unemployment, economic downturns and recessions, Daniel-Miles and other children of the Depression say things are not nearly as bad as they were when they were growing up. "You hear all these highfalutin people on TV talking about a recession - they don't know what a recession is," said Daniel-Miles, who was 13 when the stock market crashed. "We didn't have anything back in those days, but we didn't think about it because no one else had anything."
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Flawed comparison At least some economists agree with Daniel-Miles. According to Parker Cashdollar, a professor of economics at the University of Tennessee Martin, the definition of a recession is two consecutive quarters of declining gross domestic productivity. "We have actually had growth in the last two quarters," Cashdollar said. "That doesn't mean that there aren't problems out there with the price of energy, the housing crisis and the unemployment rate. "But it isn't even comparable to the Great Depression, especially when you look at the unemployment rate. Most of the 1930s was just really bad." West Tennesseans who lived through the Great Depression agree the world is a different place than it was in the 1930s.
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'Nothing to lose' Nell Daniel-Miles, now 92, knows what it was like to grow up poor during the Depression, but she does not remember those days as being terrible. "We had everything but money," said Daniel-Miles, who now lives at St. Mary's Manor in Jackson. "But my parents didn't lose any money because they didn't have nothing to lose." She grew up in Jackson, living on Lexington Street with her parents and a brother and sister. Her father worked at Southern Engine Boiler Works on Royal Street, but the company went out of business soon after the Depression started. After that, he worked as a painter and paper hanger, Daniel-Miles said. "We never went hungry, even if we just had potatoes and beans to eat," she said. "Since we lived in Jackson, we couldn't grow anything, but had to buy everything we ate." Daniel-Miles said she remembers her dad walking eight blocks to buy coal for his family. He would pay 35 cents for a bag and carry it home on his back so the family could stay warm during the winter. "People don't believe how hard it was," Daniel-Miles said. "But we were loved and protected." Her mother sewed all their clothes from clothes the neighborhood children had outgrown, she said. "A lot of people talk about sewing clothes from fertilizer sacks, but we didn't live on a farm, so we didn't even have those," Daniel-Miles said. Her brother had to quit school to go to work, but she was able to graduate. They ate biscuits or peanut butter and crackers for lunch. If a child was lucky enough to bring a dill pickle to school, the students passed it around and everyone took a bite. "We didn't have any toys, but we made our own fun," Daniel-Miles said. "We used tops off fruit jars to make mud pies and played hide and seek and kick the can." Daniel-Miles also remembers listening to President Franklin D. Roosevelt give his fireside chats on the family's little Sears radio. "I will never forget the name of his dog, Fala," she said. "And he would say, 'All we have to fear is fear itself.'" In 1936 Daniel-Miles went to work at Woolworth's, where she worked nine- or 10-hour days, six days a week. She earned $4 a week, which was a lot of money back then, she said. "Even a dime was a whole lot of money," Daniel-Miles said. "I still pick up every penny I see because if you have 10 pennies, you have a dime." Daniel-Miles married Ernest Daniel in 1938, and they moved into two rooms on Lafayette Street. "We didn't have anything but a two-eyed burner and some pots and pans," she said. "That is what is wrong with people today - they want to go right to the top and buy these expensive homes. No wonder they lose them."
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Sharecropper's son William Smith lives in Beech Bluff with his four dogs and one cat. He is 90 years old and still grows a garden every year and takes care of his yard. And on most summer afternoons, he can be found sitting on a swing in the back yard, with a fan blowing over him. "I don't like being inside if I don't have to," Smith said. "We grew up without air conditioning, and I don't mind the sun." He grew up in Luray, and his family moved from one farm to another during his childhood, sharecropping for various farmers, he said. "We lived the hard way," Smith said. "We did all the work while the farmer sat under the shade tree. And then we gave him half the money for the crops. "But I thought those were some wonderful times, and I wouldn't mind going through them again. We didn't know there was a depression because we didn't have any money to begin with." Smith said his family always had enough to eat. They grew their own fruits and vegetables and hunted and fished. "We bought sugar and flour and coffee from the store, but this was pretty much all," he said. "We even raised our own corn and ground it for cornmeal." They hunted and ate rabbits, squirrels, opossums and raccoons, Smith said. They also picked up chestnuts and hickory nuts in the fall. "Even if we didn't have anything else to eat in the winter, we always had nuts and parched corn," Smith said. His mother sewed clothes for the whole family, he said. Most of them were made from flour sacks and fertilizer sacks. "People think they have these fancy T-shirts nowadays, but they didn't have nothing on us," Smith joked. "Our shirts would say Tennessee Rose or Daybreak Fertilizer with a picture of a rooster crowing on the back." One pair of shoes would last them the whole year, because they would go barefoot most of the time, even when there was frost on the ground, he said. Smith started working in the corn and cotton fields when he was 7 and "big enough to reach the plow handle," he said. His brothers and sisters would race to see who could pick the most cotton in a day. "We got in the field by the time we could see and stayed there until dark," Smith said. "I remember striking matches to look at the scales to see how much cotton we picked. "The reason I know work don't kill people is because if it did, I'd have been dead a long time ago." Smith did go to school but only when his dad didn't need him in the fields, he said. He repeated the third grade for seven years because he attended so infrequently. Finally, when he was 19, he quit going to school. "I knew the third-grade books pretty well by that time, but never could make it all the way through," he said. "If I had got to school more, I would probably have been president or something." He said there were no local doctors in those days and most people were healthy. He broke his arm three times as a child, but his grandmother set it each time. "It was as good as new," he said. Even with all the work, Smith said, they had time to play in the gullies on the farm and make wagons from old boards and trees. His brother loved to play with June bugs and would tie several of them on strings and let them fly around his head, Smith said. "He would have five or six at a time, but I never played with them that much," he said. Christmas gifts were usually a stick of candy, an apple and an orange, Smith said. But he said he doesn't remember complaining about the lack of toys or gifts. "No one else had anything, either," he said. "If we had it, we had it, but if we didn't, we didn't. And nobody threw a fit about it."
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Confusing farm policy Fred Robertson grew up on a farm in Enville and was 18 when the Great Depression started in 1929. "Even if we didn't have anything, we always saw people who were poorer than we were," said Robertson, who lived with his mother and sister. "But people that worked were able to get by. "There was no such thing as welfare, and neighbors helped each other out." If someone got sick, the women in the community would take turns spending the night and bringing food, Robertson said. Even though some people blamed Herbert Hoover for the Depression, Robertson said he wasn't sure it was Hoover's fault. But he did vote for Roosevelt when he ran for president. "I've been sorry ever since," he said. "If you look back over his record, he really didn't do that much to help America, and he brought in this whole welfare mess." Robertson said he remembers when the New Deal began to be implemented. That year, the government offered to pay $12 an acre if a farmer plowed under half of his cotton crop. "I had worked really hard that spring and planted 12 acres of cotton," Robertson said. "That was a lot of cotton for one man to take care of." So he decided to plow up six acres of his cotton, and the government paid him $72 for it. That fall he picked two bales of cotton from the other six acres, he said. He took it to the gin and was paid $68 for the cotton. "I got more out of what"
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Feeding big families Mary Kathryne Winn was born in Savannah in 1920, the youngest of 11 children. Her father was a self-educated teacher, and her mother worked at the post office in Savannah, Winn said. "We had a big family, so we didn't have a lot of extras," she said, speaking in a phone interview from her home in Memphis, where she now lives. Winn said she remembers playing dress-up with her brothers and sisters while she was growing up because they didn't have many toys. "We had a room that we used for our pretend games," she said. "We would pretend to be movie stars and act out movies." Winn said they lived close to the Tennessee River, and she and her friends would go down to watch the steam boats come in at the landing. She also would work in their large garden. "As the youngest, I probably didn't have to do as much," Winn admitted. "My older brothers and sisters did a lot of the work I plowed up than what I gathered," Robertson said. "The government has confused me ever since then."
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Crash dashed dreams John Graham was only 3 years old when the stock market crashed, but the disaster that his family experienced changed the course of their lives, he said. His family was living in Birmingham, Ala., and his father had just invested in a laundry business. But in 1933, the banks closed, taking with them every penny his daddy had in the business. "He didn't own his house, and all his money was in the business," Graham said. "So he went down to the bank and gave them the key to his laundry business. Then he loaded the family up and went back to Iuka, Miss." The Grahams lived there until 1937, as his dad tried to find work as a salesman. But the family never went hungry because they had a large garden, Graham said. "You didn't think about being poor, because everyone else was poor," he said. Graham said he still remembers when his dad strapped him and one of his playmates onto the plow and together they plowed the garden. Graham also would help hoe and do other chores in the garden. "I hated picking bugs off the beans and sweet potatoes," he said, shuddering at the memory. "You had to shake them into this can and let them die." In 1937, Graham's father got a job in Jackson as a delivery man for Tom's Toasted Peanut Co. He moved the family to Jackson in 1938, and conditions improved slightly for the family, Graham said. But his parents always worried about saving money and insisted on paying cash for things they bought. "It becomes instilled in you," Graham said. "You don't spend more than you have."

Armed 85-year-old woman makes intruder call cops August 19, 2008 - 11:07am POINT MARION, Pa. (AP) - An 85-year-old woman boldly went for her gun and busted a would-be burglar inside her home, then forced him to call police while she kept him in her sights, police said. "I just walked right on past him to the bedroom and got my gun," Leda Smith said. Smith heard someone break into her home Monday afternoon and grabbed the .22-caliber revolver she had been keeping by her bed since a neighbor's home was burglarized a few weeks ago. "I said 'What are you doing in my house?' He just kept saying he didn't do it," Smith said. After the 17-year-old boy called 911, Smith kept holding the gun on him until state police arrived at her home in Springhill Township, about 45 miles south of Pittsburgh. The boy will be charged with attempted burglary and related offenses in juvenile court, Trooper Christian Lieberum said. He was not identified because of his age. "It was exciting," Smith said. "I just hope I broke up the (burglary) ring because they have been hitting a lot of places around here." http://wtop.com/?nid=456&sid=1462598