Eeyore's News and View

Police agencies fear more crime in financial crisis
By Kevin Johnson, USA TODAY
The collapse of U.S. financial markets is forcing deep cuts in local police agencies and stoking fears among police chiefs that mass home foreclosures are bringing more crime to suburbs.
Problems created by the financial meltdown are starting to touch everything from police response times to unsolved crimes.
"As we see significant reductions, we'll be seeing increased response times, fewer cases solved and reduced services for victims of crime," says Prince William County, Va., Police Chief Charlie Deane. His $73 million budget could drop up to 30% next year because of declining property tax revenues.
Blocks of homes vacant from foreclosures are becoming magnets nationwide for gang members, drug users, prostitutes and thieves, who steal appliances and fixtures, Deane and other officers say.
At the same time, police agencies are dramatically reducing their forces as local governments struggle to allocate shrinking revenue from property and sales taxes to fund basic services.

"In this crisis, there are no good answers," says Sacramento Police Chief Rick Braziel, who is slashing 200 positions and may need to cut more.
In a survey of 180 police chiefs released last week by the Police Executive Research Forum, 45% said the economy had affected their agency's "ability to reduce crime."
Three-quarters of those polled by the law enforcement advisory group in late July cited a recent rise in at least one category of property crimes. Nearly 40% said the economic slowdown had resulted in decreased funding.
Cook County, Ill., Sheriff Thomas Dart has cut 200 jobs in two years because of falling revenues.
Last week, he declared a moratorium on evictions from homes because many "innocent" renters were getting tossed out after owner-landlords defaulted on mortgage payments.
The hundreds of vacant homes are expanding a blighted zone from traditionally troubled inner-city areas to wealthy suburbs northwest of Chicago.
Boston Police Commissioner Ed Davis says falling revenues have moved a plan to install 36 surveillance cameras in high-crime zones "off the table."
"We see this as just the first in a long series of reductions," Davis says. "It's hard to say how this is all gonna shake out. This is a time for real concern."
In the shadow of Palm Springs, Calif., Indio Police Chief Brad Ramos says Indio passed a law in April forcing owners of dozens of vacant homes to register the properties with the city. It holds them responsible for the upkeep of their properties. "Crime and the economy go hand in hand," he says.
Yet David Muhlhausen, a crime analyst at the conservative Heritage Foundation, says the relationship between crime and the economy "isn't always clear." During the Great Depression, there was no crime surge. "Crime is a function of opportunity," he says.
http://www.usatoday.com/news/nation/2008-10-16-crime-economy_N.htm?loc=interstitialskip

The Prep Talk today is in line with the first article. If you are living in an Urban Area and you plan on sticking around the house if things turn bad. What i would do is look at what i could do around the house to make it more secure. This will start a 3 part series about surviving in the city during hard times. Not sure who the author is, it was anonymous.

INTRODUCTION

  While we all want to do our best to prepare for a coming crisis, and many

of us realize the city is perhaps the worst place to live, very few people

are really prepared to pack up the old Winnebago and head for the hills.

Most Americans, whether they're aware or not, are going to stay in the

cities.

  This is not a hasty decision for most people. Most of us depend on the

city for our livelihood, and we can be better prepared by continuing to live

in the city, earn a good income, and make preparations for exiting the city

at the appropriate time or by staying in the city and living off existing

supplies.

  This special report explains some of the most critical dangers of living

in a city and presents some solutions to surviving them. If you are one of

the people who has decided to stay in the city, you'll benefit greatly from

this information.

  CITIES ARE ARTIFICIAL

  Every city is an artificial construct. Cities formed as people came

together to conduct business, participate in social interaction, and benefit

from efficiencies in public services (such as schools, sewers, water, etc.)

and a common defense. Yet cities cannot survive alone. They need resources

from the country; most notably, food, water and electricity. While

electricity and water can sometimes be created or found within city limits,

the acreage requirements of food dictate that no city could possibly feed

its own people.

  Read that last phrase carefully: No city can feed its own people. Not one.

Cities are, by their very nature, dependent on the importation of food. The

advent of just-in-time delivery systems to our grocery stores means that

most cities would run out of food within a week if supplies were for some

reason disrupted.

  Remember, cities are not self-sufficient. Although they may seem to be in

2005, they have for a long time been entirely dependent on the American

farmer for their support, something almost all Americans take for granted

(except the farmer, of course.)

  RISKS IN THE CITY

  The city presents some serious risks during a crisis. The four most

serious ones are:

  1. the collapse of social order (riots),

  2. the failure of the water treatment and delivery systems,

  3. the depletion of food supplies and

  4. the failure of the power grid.

  While not every situation will appear in every city, every situation will

most certainly appear in some cities. Will that include yours? We'll tackle

these one at a time:

  1. The Collapse of Social Order

  "Social order" is a delicate thing, and it exists as a psychological

barrier that could easily collapse under the right conditions. We all saw

this during the L. A. Riots following the Rodney King trial verdict as

citizens of L. A. set fire to their own town, yanked people from vehicles

and beat them literally to death, and even fired guns at firemen attempting

to save their buildings! More recently we were all witness to the looting,

violence and total breakdown of society following Hurricane Katrina in New

Orleans.

  What allowed this to happen? Simple: the simultaneous melting away of the

psychological barrier of "order." Once people realized 911 couldn't handle

the load, or was offline, that the local police were helpless or had simply

abandoned their posts, "Law and Order" ceased to exist in their minds. They

then conducted their lives in the way they always wanted to, but couldn't

because of the police. That is, they ran out to the local stores and just

took whatever they wanted (looting). They took our their racial frustration

on innocent victims who happened to be driving through the area, and they

let loose on a path of destruction that only stopped when men with rifles

(the National Guard) were called in to settle things down. In other words,

only the threat of immediate death stopped the looting and violence. Rifles

work wonders.

  Imagine store owners lying prone on the roofs of their stores with

AK-47's, firing at anyone who approached. This is exactly what happened in

Los Angeles. But worse, imagine the lawless horde firing at the rescue

copters trying to bring in supplies to the desperate masses.

  The National Guard eventually got things under control. This event was

isolated, however, to one city. Imagine a hundred cities experiencing the

same thing. Will the National Guard be able to handle the load? Not likely.

What about local police? They aren't fools; if things look bad enough, they'

ll grab their families and head for the hills, just like they did in New

Orleans. No pension is worth getting killed for. A few U. S. cities could be

transformed into literal war zones overnight. It would require all-out

martial law and military force to have any chance whatsoever of bringing

order to these streets. And the reality is that there are not enough

military in the USA to secure all of the cities if this happens.

  This collapse of social order is perhaps the greatest risk of staying in

the city during a crisis. What, exactly, would cause this collapse of social

order? Lack of three things: food, water, and money. When people run out of

food, some will begin ransacking their neighborhood, searching for something

to eat. (Remember that in a city, a "neighbor" does not mean the same thing

as a "neighbor" in the country. They are not necessarily your friends.) It

won't take long, then, for violence to take over in some cities. While

certain regions will certainly manage to keep things under control and

people will form lines at the local (depleted) Red Cross shelter, other

cities will see an explosion of violence. Imagine the gang-infested regions

of L. A., Chicago, New York, St. Louis & New Orleans. Do you think those

people are going to stand in line and wait? They already have guns; now they

finally get to use them. Pent-up racial tensions & hostilities will simply

serve as justification for shooting people of the same or other color in

order to get their food.

  Even if the food somehow gets into the cities, lack of money (due to the

government not sending out checks) could cause the same thing. Eventually,

lack of money results in looting and mass theft. As the stealing balloons,

it also results in a collapse of social order. Water; the same thing (but

faster). The collapse of social order is also very dangerous because it

doesn't require any "actual" collapse of the power grid, telecommunications,

transportation or banking. Social order is a psychological artifact. It is a

frame of mind, and any global panic can quickly remove the mental barrier

that right now keeps people basically "lawful."

  THE FAILURE OF WATER TREATMENT AND DELIVERY SYSTEMS

  Will the water treatment facilities fail during a crisis? Many will. Some

won't. The problem lies in figuring out whether yours will. Certainly, they

depend on electricity, and testing conducted on some plants has already

revealed weaknesses in the system.

  In one such test, the water treatment plant released a fatal dose of

fluoride into the water system when tested. The computers thought they were

99 years behind in releasing minute doses of fluoride, so they made up the

difference. If you happened to be downstream, drinking that water, you were

dead. Fluoride, no matter what misinformed dentists tell you, is actually a

fatal poison. A major crisis likely to demonstrate this fact in more than

one city.

  The most important question here, though, is about what will happen when

the water stops flowing (or if it is flowing, but it's not drinkable). As

you are probably aware, while people can live without food for long periods

of time (2-3 weeks), water is needed on a daily basis. You can go 2-3 days

without it, at most, but beyond that, you'll quickly turn to dust.

  That means people will do anything to get water, because to not have it

means death. And guess where it's going to be the most difficult to actually

get water? You guessed it: in the cities. During the first day of the water

crisis, many people still won't figure out what's going on. They'll figure

it's a temporary breakage of a water main and the government will get it

fixed within hours. As those hours stretch into the next day, these people

will get very worried.

  By the second day, more and more people will realize the water isn't

coming. At that point, you could easily see a breakdown of social order, as

described in the previous section (as you can see, these things all tend to

cause each other.). People will begin their "search for water," and the

first place they're likely to go is where they always go for liquids: the

grocery store, the local Wal-Mart, the 7-11. The shelves will be cleaned out

rather quickly.

  Beyond that (because those liquids aren't going to last long), you're

going to see people engaged in a mass-exodus from the cities. They'll take

the gas they have left in their tanks and they'll leave the city in search

of water. Some will go to "Grandma's house" out in the country where they

might at least find a pond or stream to drink from. Others will simply go on

an expanded looting mission, stopping at any house they see and asking the

residents (with a gun in their face, likely) if they have any water to

"donate."

  As a result of all this, if water stops flowing, here are the events you

can expect to see in some of the worse-off cities:

  * Looting of all the grocery stores by the second or third day (remember

New Orleans?)

  * Minor outbreaks of violence during the looting. Shop owners, for

example, may attempt to defend their shops with firearms (ala L. A. Riots)

  * Mass exodus of residents from the city in search of water

  * Ransacking of any houses or farms within a gas-tank radius of the city,

presumably by desperate people with guns

  * Mass traffic jams on the outbound highways as people run out of gas and

abandon their vehicles (if bad enough, this could actually block the

highways and trap people in the cities) (Remember Hurricane Rita?)

  * Mass outbreak of water-borne diseases as people use streams and rivers

as both a water fountain and a bathroom. People crapping upstream are going

to infect the people drinking downstream. Very few have any kind of water

filtration device. That last point is really critical. Once the water flow

stops, disease is going to strike.

  THE DEPLETION OF FOOD SUPPLIES

  The food supplies will likely dwindle quickly as we approach a possible

crisis due to people stocking up just in case. Once the crisis actually

hits, expect to see breakdowns in the transportation sector that will result

in major delays in food delivery. This means food may arrive in sporadic

fashion in some cities (if at all).

  Once this happens, food suddenly becomes really valuable to people (even

though they take it for granted today). And that means any small shipment of

food that arrives will be quickly grabbed and eaten or stored. It only takes

one week without food to remind people how much they actually need it, so

expect the atmosphere to be that of a "near panic" if food is delayed by as

little as three days. The level of panic will vary from city to city. Some

cities or towns may experience very little difficulty receiving food. Others

may face near-starvation circumstances.

  Remember, the cities depend entirely on food shipped in from the farms and

food processing companies. Also, note that if there's a water problem as

mentioned in the previous section, and the mass exodus begins, the highways

may be jammed up at critical locations, causing gridlock for the trucking

industry. If we're lucky, some trucks will continue to roll. If we're not,

assume that nothing gets through.

  A shortage of food ultimately results in the same behavior as a shortage

of water. First, people eat what's in the pantry, then they loot the grocery

stores. After that, with all local supplies depleted and no hope on the

horizon, they leave the city and start ransacking nearby homes. Some will

hunt in nearby forests, but most city-dwellers don't know how to hunt. In

any case, anyone with the means to leave the city will likely do so soon

after their food shortage begins.

We will cover the last two in the next two weeks.

This is a big deal around the Country right now. Around here they are talking about only having 2 or 3 unpaid days off.
Chicago mayor to shut down government for six days
CHICAGO (Reuters) - Facing a huge hole in Chicago's current and upcoming budgets, Mayor Richard Daley announced on Tuesday a plan to partially shut down city government for six days.
Along with several other measures, the mayor's plan was aimed at saving $62 million for the city's corporate or operating fund, which currently faces a $469 million shortfall.
Under the plan, city employees, with the exception of mostly public safety workers, would not work and would not be paid for the day after Thanksgiving or for Christmas Eve and New Year's Eve this year and in 2009.
Daley also said the fiscal 2009 budget he will unveil on Wednesday will eliminate 1,346 currently vacant positions and will include various cost-cutting or revenue-raising measures.
"I know that no one will be completely satisfied with our recommendations," the mayor said in a statement. "But, if we work together and responsibly cut spending this year, we'll be taking an important step toward addressing the financial challenges we'll still face in the years ahead."
On Friday, the mayor announced the consolidation of several city departments in a move that will cut almost 240 jobs and save Chicago about $5 million a year.
http://www.reuters.com/article/domesticNews/idUSTRE49D7W820081014?feedType=RSS&feedName=domesticNews&rpc=22&sp=true

The Founders' Amazing Monetary System Would Solve Today's Monetary Crisis
The American Founding Fathers originally intended a monetary system quite different from the one we have now. In fact, they had hoped to prevent many of the fiscal and economic problems with which our present monetary system is afflicted. Their system relied on four major principles.
The people's representatives in congress must develop and carefully control the money system and make sure the amount of money remains stable. That's why the Constitution gives this power exclusively to Congress in Article I, Section 8.
To be honest, a medium of exchange must have “intrinsic” value or in other words it must have value in and of itself. The Founders knew only money based on gold and silver would provide this value.
There must be no fractional reserve banking. As Jefferson said: “No one has a natural right to the trade of a money lender but he who has the money to lend.”
In order to prevent undue pressure on the demand for money and to make sure federal officials did not have so much power they could be “bought off”, the Founders clearly said that money from the federal treasury can be spent only for the 20 powers listed in Article I, Section 8, and then only if such expenditures were for the “general welfare” or in other words if such expenditures benefited the whole nation and not specific groups, locations, or businesses.
Let's look at what happened to each of these founding principles.
The Big Bankers Take Control of United States Monetary System
With the adoption of the Constitution, Jefferson hoped the nation would go back to pre-revolution days with government issuing its money based on a precious metal standard. The treasury could then set up branches for loaning money and all payments of interest would go to the general funds of the nation, thereby greatly reducing the required taxes.
The first of Jefferson's hopes was realized when the gold and silver standard was explicitly written into the Constitution. However, his second hope was shattered when Alexander Hamilton was appointed Secretary of the Treasury and came up with a plan to monetize the nation's mammoth war debt by issuing bonds and selling them to private banks. He also urged the President and Congress to allow these bankers to temporarily (for twenty years) establish a private bank in the name of the United States and be responsible for issuing money , controlling the amount, fixing its value, and financing the United States government. It was this last factor which appealed to President Washington.
There was, of course, no Constitutional authority to have the federal government set up such a bank, but Hamilton persuasively argued a theory of "implied powers" which has seriously damaged the whole concept of "limited" government ever since. Although the argument was sufficiently strong to impress Congress, Washington was uncomfortable with it. In fact, he was actually contemplating a veto of the banking act when Hamilton drew him aside and filled his mind with such glowing promises of stability and prosperity under this "temporary" expediency, that Washington finally overrode his professional instinct as one of America's most successful farmers and signed the bill. Jefferson later accused Hamilton of complicating the whole scheme with such elaborate trappings that it had confused the President. It turned out that Washington's original instinctive anxieties concerning the dangers of the bill were fully justified.
Over the decades since then and through a series of man-made boom and bust cycles, the powerful banking lobby, with the behind-the-scenes pressure from Wall Street, has persuaded Congress to give them permanent authority over our money and credit in violation of the Constitution and the express will of the people. This power was permanently consolidated in 1913 into the misnamed Federal Reserve System, which is neither “federal” nor “reserve.” Time and time again the big bankers who privately control the Federal Reserve have shown elected officials in Washington that indeed they are the ones that have the real power in our land.
The very basis which gives money its value is destroyed
Anything of value requires the input of labor. If it requires little or no labor, the item becomes worthless. Historically, gold and silver have always been in demand and have always required labor to accumulate, therefore giving sustainable value. Because of its universal demand it is a perfect medium of exchange.
As do-good politicians desired to expend large sums of money for programs not authorized in the Constitution, they ran up against a major problem. If a program would cost, say $100 million of new money, then that much gold and silver would have to be deposited to back up the new money. This requirement provided a real restraint and roadblock to huge give-away programs, such as FDR's New Deal. So what did he do? In 1933, he signed an executive order taking the backing of gold from our dollars! LBJ did the same thing to fund his Great Society in 1964 and took the redeemability of silver off of our dollars. Now, not having to put up the gold and silver, the politicians could merely crank up the printing presses and distribute money at will. This, of course, came with the reminder to the welfare recipients to remember these politicians at the next election.
The Origin of Fractional Reserve Banking or Making Money out of Nothing
Dr. W. Cleon Skousen explains how banks came to "make money out of nothing" and how they hooked the United States Government into the deal:
“We call this magic formula ‘fractional banking' or ‘reserve banking.' Here is how it all began and how it works.
“Several hundred years ago the goldsmiths of Europe were under the necessity of building substantial vaults for their precious metals. As one might have expected, it wasn't long before many others asked to leave their gold in these vaults for safekeeping. The goldsmiths consented and gave each depositor a certificate which could be used to reclaim the precious metal at any time. These certificates were therefore considered ‘as good as gold' and soon circulated in business channels as though they were gold.
“In fact, they were so much more convenient to handle than gold that very few depositors ever went back to the goldsmiths except to make more deposits.
“In very short order it became entirely apparent to the goldsmiths that since only a small percentage of the depositors came back for their gold, the goldsmiths only had to keep enough on hand as a ‘reserve' to satisfy those who did come back. Realizing this, the goldsmiths decided they could safely issue considerably more gold certificates than the amount of gold ‘on deposit.' By this set of fortuitous circumstances they had discovered how a shrewd goldsmith could issue certificates on gold he didn't have and thus become super rich by ‘making money out of nothing.' Furthermore, these spurious certificates could be used to buy up all kinds of tangible property or they could be loaned out on interest. Here indeed was the royal road to wealth.
“Of course, it was important to keep a good "reserve" for those who did want to cash in their certificates, but this ordinarily involved only a fraction of the certificates in circulation. Thus ‘fractional banking' was born.
Fractional Bankers Do Something Ordinary People Cannot Do
“It will be immediately realized that ‘making money out of nothing' is selling something the money managers don't really have.
“We know it is considered criminal fraud if a person sells a house he doesn't own. The same thing is true if he sells something which doesn't exist and never will exist. Then how do the bankers get away with it? The answer is rather amazing.
“Apparently the bankers saw the danger of their position and decided to protect themselves by getting the government in on the deal. They reasoned that the government certainly wouldn't prosecute the bankers if the government itself were getting a significant benefit from the operation. So this is what the bankers set out to achieve, first in Europe and more recently in the United States.
“The trick was to create a privately owned bank for the whole country. By cutting the government in on the benefits, it became feasible to call the bank by a name which implied that it was an official branch of the government. This is precisely what William Paterson did when he set up the Bank of England. Similar banks soon appeared in every nation in Europe.
“Each of these central banks became the most powerful influence in its particular country, both economically and politically. It became the manager of money and credit for the nation. It handled major investments in agriculture, industry, homes, and factories. Best of all, it loaned money to the government, especially in times of an emergency such as a war.
“The governors of these banks soon found themselves in the position of managing the affairs of government as well as the economy.
Central Banks Suffer from Two Temptations
“The record shows that when the managers of a central bank in any particular country are looking around for ways and means to accumulate more wealth, they are often tempted by two things which are inherently evil and totally destructive to the foundation of civilized countries. One is to encourage an involvement in war so the nation will be forced to borrow heavily. Bonds (which are really government IOUs paying substantial interest to the lenders) are considered to be a most valuable form of collateral assets in a central bank.
“The other temptation is to promote a cycle of ‘boom and bust' economics. This simply consists of starting a boom with generous loans at low interest and easy credit and after a few years suddenly raising the interest rates, calling in loans, and bankrupting homeowners, industries, farmers, and millions of people who had trusted the bank to continue its policies.
“Some economists, including Karl Marx, have tried to maintain that these boom-and-bust cycles are an inescapable characteristic of a free-market economy. The truth of the matter is that these so-called boom-and-bust cycles are primarily a phenomenon of manipulated economics, engineered by men who find themselves in an extremely powerful position to control money and credit but seem to lack the moral integrity to resist the opportunity of fleecing the common people who have genuinely trusted them.”
The Founders' Answer to the Wall Street Mess
First of all, the people must recognize the current “crisis” is man-made and the market is trying to adjust to unnatural tampering of it by scheming financiers and politicians.
Secondly, it will do no good to put more band-aids on the boiler in the form of more debt brought about by the issuance of worthless money and credit created out of nothing. Eventually this inflated monetary bubble is going to burst unless it is gradually deflated by making basic changes to our system to restore sanity and honesty.
Thirdly, Americans must be aware that this is another attempt to further consolidate economic power. Politicians say that the credit markets are drying up, and yet the largest banks like Bank of America and J P Morgan Chase seem to have the money necessary to buyout the failing companies and banks. We seem to be fast approaching the predicted time when no one will be able to buy or sell without obeying the demands of those who have consolidated enormous economic power over us.
Fourthly, by their own admission, most politicians in Washington do not have answers to this current situation. It is definitely time, with an election coming soon, to make wholesale changes in public officials who really know the Founders proven, workable solutions and have the courage to implement them.
It is interesting that CNN, in a recent attempt to find answers, turned to a congressman who does know the answers to the current crisis. Here is what Congressman Ron Paul told CNN when asked his opinion about the proposed $700 billion bailout:
“Well, I think that's a mistake because we don't have the money. But that doesn't mean you have to do nothing. I mean, we could reform the system. We could return to sound money. We could balance our budget. We could change our foreign policy. We could take care of our people at home. We could lower taxes. There are a lot of things that we can do. But the worst thing that we can do is perpetuate the bad policies that gave us this trouble in the first place, and that is that we no longer, over the last quite a few decades, believed in free-market capitalism. Capital is supposed to come from savings. We're supposed to work hard and save.
“As a matter of fact, the Chinese work hard, right now, and they save, and they're buying up the world. But we borrow and spend and consume, and now it's caught up to us and it's undermining our whole system. ... So this $700 billion is not going to do it.
“… this plan does not help Main Street. This is Wall Street in big trouble and sucking in Main Street, now, and dumping all the bills on Main Street. ... And you can't solve the problem of inflation, which is the creation of money and credit out of thin air, by more money and credit out of thin air, and not changing policy. We have to change basic policy….
"Yes, it would be painful, but it wouldn't last so long. What they're doing now, they're propping up a failed system so the agony lasts longer. They're doing exactly what we did in the Depression…. So, yes, there are going to be losses, but everybody lived beyond their means when the prices of houses were going up. Nobody cared about it. They kept borrowing against it. Oh, yes, that was fine and dandy. Everybody was making money, and homeowners kept borrowing and living beyond their means. Now they have to live beneath their means….
"What the government is doing now -- and this new program is trying to prop up prices. You want the price structure to adjust. You want the price of houses to go down. You don't want to fix the price of housing. You can't price-fix. We've had too much of that. We need a market economy. We need to believe in ourselves. We need to believe and understand how the economy got us -- how the government got us into this mess. And believe me, it wouldn't be that tough. It would be a bad year. But, this way, it's going to be a bad decade."
Sincerely,
Earl Taylor, Jr.
P.S. Read Dr. Skousen's complete report on "The Urgent Need for a Comprehensive Monetary Reform".
http://www.nccs.net/newsletter/oct08nl_print.html

Markets feel the chill from China
Share prices tumble amid fears that downturn is spreading east
By Sarah ArnottThursday, 16 October 2008
Stock markets around the world suffered another day of huge losses yesterday as fears of the global recession spreading to China prompted a renewed bout of negative sentiment.
The FTSE 100 index of leading UK companies lost more than 7 per cent and the Dow Jones Industrial Average in the US was down by almost 6 per cent by mid-afternoon. The gloom in credit crunch-hit Western economies deepened with UK unemployment figures showing a 164,000 rise in the three months to August, and US reports of the biggest monthly fall in retail sales for more than three years.
The sell-off overshadowed Gordon Brown's attempts to convene a global summit to tackle the economic crisis. There were also renewed concerns for the financial health of local authorities in Britain who have been hit by the collapse of banks in Iceland
The sell-off was prompted in part by warnings that China's economy, which has been expanding at breakneck speed for years, would "pause for breath". Guy Elliott, the finance director of Rio Tinto, the mining giant, said: "We are confident about the future in China, but at the moment there is a deceleration of demand that won't pick up again until next year."
His comments caused panic in the commodity markets. The oil price dropped by 5 per cent to a 13-month low, and copper, aluminium and nickel all slumped. Only gold, seen as a safe haven in troubled times, stayed stable.
Economists are already cutting forecasts for China. The International Monetary Fund (IMF) last week predicted growth of 9.7 per cent this year and 9.3 per cent in 2009. The danger is that the health of China's economy is hard to measure, and Beijing's economic policy even harder to predict.
And just as its semi-command economy was central to the cheap-credit era that is now causing such a hangover in Western economies, so its response to the aftermath is the key to the world's recovery, said Diana Choyleva, a director at Lombard Street Research, a think-tank. "The combination of macroeconomic data and anecdotal evidence, such at that from Rio Tinto, gives an ambiguous message because GDP data for the first two quarters of the year do not show anything yet," she said. "But China has to have a slowdown and what is important is how Chinese policymakers respond."
Mining stocks, which have been boosted by China's rampant demand for commodities, were hit particularly hard. Concerns about weakening demand from the global powerhouse wiped 16.6 per cent off Rio Tinto's value by the end of the day – and 19.6 per cent and 22.27 per cent were knocked off the value of Xstrata and Kazakhmys respectively.
China's economic growth – which ran at 11.7 per cent last year – is a key factor in the high oil and commodity prices causing extra problems for developed economies wrestling with toxic combination of the credit crisis and slowing consumer spending. But if China follows the West into recession, the effect could be even more severe.
But it is too early to tell to what extent the West's recession will infect China, and even at about 9 per cent, the economy is still growing fast. Robin Geffen, the manager of the Neptune China Fund, says the impact of developed economies' demand is overplayed. "Not only is the rest of Asia geared towards China but it has very fast-growing domestic consumption as a percentage of GDP and a massive infrastructure spend," he said.
The Chinese government has been deliberately slowing growth through tight economic policies for the past 12 months to cool off an otherwise overheating economy. Loosening monetary policy would have real effect, as would using some of the vast reserves of cash.
"Monetary policy in particular has been quite tight recently – such as not allowing the money supply to grow anywhere near as fast as industrial output and leaning on the banks to control lending," said Ian Beattie, the manager of New Star's Asia Pacific Fund. "There is a lot of firepower in both monetary and fiscal policy."
http://www.independent.co.uk/news/business/news/markets-feel-the-chill-from-china-962706.html


Solvency Attained, But at a Huge Price

The United States and other major economies have rescued the financial sector. The threat of imminent bank failures across the industrialized countries has all but ended at this juncture. That's good news for global investors, depositors, businesses and individuals alike following weeks of financial market turmoil that culminated into a global stock market crash last week.
But just how the government and the private sector will mesh is another story.
The United States and the United Kingdom are now the most aggressive lenders and owners of their domestic banking systems. And how they direct and manage these companies will dictate not only the fortunes of shareholders, but the future of global investing.
I've got a bad feeling about government in the private sector; so the sooner the government finishes its job stabilizing and recapitalizing the banking sector, the better.
For now, we're stuck with a financial services sector that largely falls directly under government control for the first time since the Great Depression.
Debt ratios will now skyrocket everywhere, as every country - including Germany - opens their purse strings in a huge way to accommodate bank liquidity and lending. We will have a different financial marketplace going forward with far more government regulation and control. I'm sure George Orwell, author of 1984, is spinning in his grave right now.
One thing is for sure: Global long-term interest rates - especially American bond yields - are going to rise significantly over the next three to five years. In addition to death and taxes, I'd bet higher long-term rates are almost a 100% guarantee in this life after the tidal wave of government guarantees and bailouts of the financial sector.
Funding costs will surge for the Treasury and I've got to believe the Chinese, Japanese and other big holders of Treasury paper will want higher interest rates to compensate for holding heavily indebted U.S. paper. Though the Fed can manipulate the short-end of the market, it can't control the long end. And that's where investors can look to make money as long-term interest rates eventually rise once deflation is finally quashed.
The systemic risk to the financial system is now behind us. That's the good news. The bad news is that consumers and companies along with the rest of the real economy will continue to feel strained by tepid economic conditions, still weak interbank lending and lousy corporate earnings for at least the next six months.
ERIC ROSEMAN, Investment Director
http://www.sovereignsociety.com/2008Archives2ndHalf/101608SolvencyAttainedButataHugePrice/tabid/4755/Default.aspx

Stock Market Crash Alert!
I have been surprised so far at how orderly the market has been, despite the heavy l losses. Just as it seemed that the market would roll over into “the big one,” it would rally back from the brink. Tonight I was reminded of an interview I had with Andrew Smithers in 2005 and the article I had written about it. I did a follow-up article again in 2006. I had identified the problem correctly, but was too early. The original link to an article that was published in Barron's has been turned off, but here is another link that quotes the original article verbatim.
On September 18th , I was very fearful of a meltdown during options expiration week. Again, we were pulled from the brink. This week, options expiration week, has no such outcome available. The rally was too small and too early. The SPX must be at 1200 by Thursday afternoon to mitigate the exposure to the options chain . I believe that the options sellers got a whiff of fear last week and, with the help of the PPT, staged a rally in which they could recapitalize their book by buying calls for pennies and selling them into the rally. Now that they are recapitalized, they can buy back the put contracts or Gamma Hedge by selling the SPX short to reduce their exposure to the massive overhang of put liabilities. Wall Street will win this one again. Investors will lose, big time.
I believe that this decline will be an unmitigated disaster. Remember, there are no supports for the SPX until 763. That is a decline of 27% from Tuesday's top. Considering that, as of the end of September, the total margin outstanding on the NYSE was still $290 billion (more than the $270 billion of margin outstanding in early 2000), there are more accelerants for this conflagration than at any other time in history. It is doubtful that even the 2002 low can hold.
In addition, the BKX has a Head & Shoulders pattern that calls for a 63% decline from Tuesday's close. What the chart is telling me is that the 3 rd wave, which will fulfill the H&S pattern, is yet to happen in the BKX. I had done a television program in July in which I suggested that the BKX would decline to single digits. Back then I wondered if I was crazy and whether my model was faulty. That outcome is now certain by the end of the year.
My prayers are that every one of you receiving this will do the right thing with this information.
http://www.marketoracle.co.uk/Article6808.html