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The fact that the most likely scenario in the global economy in 2008 is one of a negative global demand shock is the one that is priced by bond markets: if investors were really worried about a rise in US and global inflation – or about true stagflationary shocks – the yield on long term government bonds would have not fallen as sharply as it has since last summer. With US 10 year Treasury yield now well below 4% and sharply falling in the last few weeks it is hard to see a bond market that is worried about global...

RAY SUAREZ: Finally tonight, we return to a subject on many minds these days: the financial crisis. Our economics correspondent, Paul Solman, checked back in with one particularly prominent voice in the investment world and his colleague, who guided his thinking. Here is the pair's sobering conversation on what may lie ahead. PAUL SOLMAN, NewsHour Economics Correspondent: One of the world's hottest investment advisers these days, Nassim Nicholas Taleb, author of "The Black Swan," who's been warning of a crash for years, betting on one, and winning big. He's been ubiquitous in the financial media of late, from cable TV's...

As soon as the federal government announced its trillion-dollar bailout (for starters) of Wall Street plutocrats, defenders of the bailout pulled out what they apparently believed was their secret weapon: the myth of Alexander Hamilton as the alleged inventor of American capitalism. Hamilton, they said, would approve of the bailout. Case closed. How could anyone dispute "the architect of the American economy"? Forbes.com immediately published an article entitled "Alexander Hamilton versus Ron Paul" to make the point that libertarian critiques of the bailout should be dismissed, since Hamilton was such a great statesman compared to Congressman Paul and his supporters....

or those who still care or remember, I was writing repeatedly in the late spring and early summer about the vicious impacts of the Crack Up Boom (CUB) Bubble on Joe Ultra Light Sixpack. It was my contention that the CUB would reach an unsustainable point, and then crash and burn. However now that it has burned, there are several positive impacts from this in the long term. First, the “take these dice from my cold dead hands” Berserkers are dead and buried. This would include hedge funds, reckless lenders and associated Pig Men. The policy makers responsible will be...

After pointing a gun to the head of Congress, threatening a financial meltdown in case his plan was not approved, Treasury Secretary Hank Paulson has finally arrived at the only logical conclusion: his plan will not work. Desperate for a Plan B, Paulson is slowly warming to the suggestion of many economists: inject some equity into the banking system. Unfortunately, it is too little and too late. The confidence crisis currently affecting the financial system is so severe that only a massive infusion of equity capital can reassure the market that the major banks will not fail, recreating the confidence...

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oping There's Hope: This is the first all-encompassing global dislocation of contemporary finance, impacting virtually all economies, markets and asset classes. The media is now all over the “Wall Street” and “banking” crisis. I am of the view, however, that the collapse of the hedge fund industry has moved to the forefront – that it is now at the epicenter of global market upheaval. To watch silver lose more than 20% of its value today in intraday trading; to see the collapse in energy prices; to see the entire commodities complex absolutely routed; to view global currency markets in complete...

Some selected excerpts from the article... "This is what a credit crisis looks like. It’s not like a stock market crisis, where the scary plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see. It’s banks refusing to lend to other banks — even though that is one of the most essential functions of the banking system. It’s a loss of confidence in seemingly healthy institutions like Morgan Stanley and Goldman — both of which reported profits even as the pressure was mounting. It is panicked hedge funds pulling out cash....

Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster. As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help. The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr....

Human suffering became a reality for millions of Americans as the depression continued. Many died of disease resulting from malnutrition. Thousands lost their home because they could not pay the mortgage. In 1932,at least 25,000 families,and more than 200,000 young people wandered through the country seeking food,clothing,shelter,and a job. Many of the young people traveled in freight trains,and lived near train yards called hobo jungles. The homeless,jobless travelers obtained food from welfare agencies,or religious missions in town along the way. Most of their meals consisted of soup,beans,or stew and had very little nourishment. The travelers begged for food,or stole it...

We are in the midst of the worst financial turmoil since the Great Depression. Absent bold action, matters could well get worse. Neither the markets nor the ordinary diet of regulatory orders, bank examinations, rating downgrades and investigations can do the job. Extraordinary emergency actions by the Federal Reserve and the Treasury to date, while necessary, are also insufficient to resolve the crisis. Fannie Mae and Freddie Mac, the giants in the mortgage market, are overextended and now under new government protection. They are not in sufficiently robust shape to meet all the market's needs. The fact is that the...

The Uppers: The U.S. Bubble economy has burst. I sympathize with those that would argue this is old news. But the probabilities are now high that GDP turns decisively negative during the second half - if it hasn't already. Instead of the year-long Credit crisis showing signs of improvement or even stabilization, a further tightening of Credit Availability is taking hold broadly throughout the economy. The so-called "subprime" crisis has, of late, invaded "prime" and "conventional" mortgages. This is a major additional blow for home prices and the economic support provided from built-up home equity. The securitization markets remain in...

Set against the magnitude of credit cycle issues of the moment that indeed have very meaningful implications for what will be the reality of domestic economic outcomes ahead, questions have arisen as to whether we are now facing a relatively run of the mill bear market for equities or perhaps a bear of generational proportion. The thought has clearly made the rounds that the US equity bear market started in early 2000 was simply interrupted to the downside in 2002/2003 by incredible domestic monetary and credit cycle stimulus, as was truly exemplified by the literal generational bubble that was blown...

For a second straight month, CA lenders took back over $10 billion ($10.2 billion) in properties from the foreclosure auctions throughout the state. Last month banks took back $10.4 billion. If the banks are lucky and sell the properties for 60 cents of the NEW appraised value, which could be as little as 30-40% of the value at the time they initially lent on the property, then this could represent another $6 billion+ in losses for the nations largest lenders in one state for one month. In case you were wondering, CA represents roughly 30% of the total foreclosure count...

Study Finds An Increasing Number Of Americans Are Using Retirement Funds For Emergencies Americans are raiding their already fragile retirement piggy banks to weather financial hardships such as unemployment, medical emergencies and buying a home. And they're doing it even though borrowing a modest $5,000 can dramatically erode savings over time, according to a study released Wednesday by the Center for American Progress. The study found workers in 2004 had $31 billion in outstanding 401(k) loans, a fivefold increase from $6 billion in 1989. Between 1998 and 2004, an average of 12 percent of families with 401(k) plans borrowed from...

RGE Monitor MEDIA ALERT: Nouriel Roubini predicts the worst financial crisis since the Great Depression and the worst U.S. Recession in the last few decades. New York, July 15, 2008- In a series of recent writings on the RGE Monitor Nouriel Roubini - Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions: This is by far the worst financial crisis...

Housing Bubble Correction Update: Fasten your seat belts, here comes the jobs crash The housing market has fallen hard but it's not time to buy, no matter what you hear. Depending on where you live it's time to decide if you can afford not to sell before prices go lower, or grin and bear it. The choice depends on your likely future employment prospects and where you live. In our first major update in our series of housing bubble forecasts since 2006 that began with our August 2002 Yes, it's a housing bubble analysis, we delve into the next phase...

Ever since the government bailout of Chrysler in 1979-80, this country has been on a course of raising the safety net so that the market’s discipline, in a capitalistic economic system, has been truncated. We have witnessed a growing level of decisions that are based upon expediency rather than sound long-term decision making. Each time these expedient decisions are made, the level of risk within the U.S. economy has been increased. The market’s discipline is not allowed to work for fear of the potential economic fallout. In light of the above comments, the partners of FPA came to a unanimous...

If your diet consists entirely of bacon, you probably haven’t noticed that food prices in the United States are rising. Practically everything else is going up, and the respite for lovers of pork bellies is temporary. Last week, the American Farm Bureau Federation, an organization of farmers and ranchers, announced the results of its quarterly Marketbasket Survey, and the outlook for producers and consumers is not great. Every quarter since 1989, the federation has conducted an informal survey to determine the price of a basket of 16 basic food items an average American would purchase at a local grocery store....

Fear is the culprit So why hasn't the cure worked? The problem is that vital markets that most people never see - the constant borrowing and lending and trading among huge institutions - have been paralyzed by losses, fear, and uncertainty. And you can't get rid of losses, fear, and uncertainty by cutting rates. Giant institutions are, to use the technical term, scared to death. They've had to come back time after time and report additional losses on their securities holdings after telling the market that they had cleaned everything up. It's whack-a-mole finance - the problems keep appearing in...