G.O.O.D

Source: Bloomberg.com

California, the world’s eighth-largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

In a letter to legislative leaders Dec. 1, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may run out of cash by March, state officials say.

Governor Arnold Schwarzenegger warned that the state may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

California is reeling more than any other state from budget woes that pushed the nation’s governors to seek help from Congress. States say federal money is needed to ease the pain from spending cuts and tax increases that would be a further blow to an economy in the throes of a recession.

The warrants would be given to landscapers, carpet cleaners, construction firms, food-service companies and other state vendors. They would pay an interest rate of as much as 5 percent, based on state law. California last issued the IOUs in 1992 when lawmakers and then-Governor Pete Wilson deadlocked on a budget for 61 days past the start of the fiscal year.

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Source: Bloomberg.com

Recession Officially Here

The U.S. economy, now officially in recession, may be in the midst of the longest slump in the post- World War II era as job losses mount and credit dries up.

The economic slump began in December 2007 when payrolls reached a peak, the business cycle dating committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts, said yesterday. The last time the U.S. was in a recession was from March through November 2001, according to NBER.

“We’re going on 12 months already, and we’re just getting started,” said Stephen Stanley, chief U.S. economist at RBS Greenwich Capital in Greenwich, Connecticut. “We’re looking at some pretty severe numbers for the fourth quarter, and the first quarter of 2009 will be pretty bad as well. The economy isn’t going to turn around definitively until the credit markets unclog.”

The NBER designation means the U.S. was the first country to have slipped into a contraction. While definitions differ, the economies of both the euro area and Japan fell into a slump in the second quarter of this year, making it the first simultaneous recession in the three regions in the postwar era.

The longest economic slumps since 1945 were the 16-month downturns that ended in March 1975 and November 1982. The Great Depression lasted 43 months, from August 1929 to March 1933.

“This may be referred to as the Great Recession,” because of its length, said Norbert Ore, chairman of the Institute for Supply Management’s factory survey. “It looked like we were headed for a shallow recession earlier in the year because of higher energy prices. With the meltdown in the financial sector, it has become something more serious.”

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Perhaps a glimpse of things to come…

Source: inthenews.co.uk

Protesters in Iceland have clashed with police during a demonstration against the country’s economic woes.

Over the past year Iceland’s currency, the Krona, has fallen by 50 per cent as the Scandinavian country nationalised its three biggest banks to prevent their collapse.

It has also received emergency loans from the International Monetary Fund (IMF) and its neighbours to help it deal with the financial turmoil.

Hundreds of protesters gathered outside parliament on Saturday demanding government resignations over the worsening economic climate.

A small group then broke off and headed towards the city’s main police station to call for the release of a man who had been detained after failing to pay a fine over previous protests.

Police used pepper spray as the group tried to storm the building and managed to bring the crowd under control. The detained man was later released.

Iceland was the first country to seek financial assistance from the IMF as the turmoil in the credit markets in October made trading conditions difficult for the country’s biggest financial institutions.

The UK government used anti-terror legislation to freeze money deposited by UK savers in Icelandic banks in order to ensure that their money was protected.

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Spending on durable goods like new cars and home appliances requires, for most sheeple, a little something called credit!

Source:  Yahoo! Finance

Commerce Secretary Carlos Gutierrez told Bloomberg TV that the economy was going through a tough time, adding that “We are going to have a couple of difficult quarters.”

The White House blamed the poor third quarter numbers on the credit crisis.

“There’s no question the financial crisis was a major shock to the economy, and that’s being reflected in the economic data. We believe a big reason for this was the freezing in credit markets this Fall,” said White House spokesman Tony Fratto.

“That’s why we’ve been so focused on unfreezing our credit markets and stabilizing our financial system.”

Continuing job losses, a severe credit crunch, falling home prices and a wobbling stock market have put consumers under severe stress. Analysts reckon the Fed could trim the fed funds target rate by another 50 basis points to 0.50 percent next month.

Consumer spending that fuels two-thirds of U.S. economic activity fell at a 3.7 percent rate in the third quarter rather than 3.1 percent as previously estimated, the sharpest rate of decline since the second quarter of 1980.

Spending on durable goods like new cars and home appliances that are intended to last three years or more plummeted at a 15.2 percent rate instead of 14.1 percent as previously estimated, the steepest fall since the start of 1987.

The revised GDP report offered a first look at corporate profits during the third quarter. They dropped at a 0.4 percent rate after falling 5.4 percent in the second quarter, the department said.

Business investment fell at a revised 1.5 percent rate in the third quarter rather than 1 percent as previously estimated. It was the first reduction in business investment since the end of 2006 and signals that companies are wary about prospects for future sales.

Pointing to the deteriorating economic climate, prices of U.S. single-family homes in September plunged a record 17.4 percent from a year earlier, the Standard & Poor’s/Case-Shiller Home Price Indices showed.

In yet another sign of the times, the largest U.S. homebuilder D.R. Horton posted a fourth-quarter loss of $799.9 million, or $2.53 per share, compared with a loss of $50.1 million, or 16 cents per share, a year ago.

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