We have been playing with film again some...

From a trip to Colorado a few years back:

Castlewood Canyon State Park

AP
Somber Fed Says Economy Has Lost Punch
Wednesday January 16, 5:33 pm ET
By Jeannine Aversa, AP Economics Writer Federal Reserve Says US Economy Has Lost Momentum; Recession Fears Persist

WASHINGTON (AP) -- Retailers, home builders and many manufacturers should brace for even more rough times ahead, a somber Federal Reserve suggested Wednesday amid growing fears that the U.S. might be sliding into recession.

The Fed's snapshot of business conditions showed a national economy losing momentum heading into the new year and a future riddled with uncertainty. The persistent housing slump and harder-to-get credit are making people and businesses ever more cautious, it said.

Separately on Wednesday, more big banks reported losses and said people were having trouble making payments for everything from credit cards to cars. Stocks were mostly down for the day, the Dow Jones industrial average declining 34.95 points, or 0.28 percent.

The Fed report was the unwelcome icing on a recent batch of economic indicators -- ranging from a plunge in retail sales to a big jump in unemployment -- raising concern that the country is heading for its first recession since 2001.

At the beginning of last year, many economists put the chance of a recession at less than 1-in-3; now an increasing number say 50-50 or even worse. Goldman Sachs, the biggest investment bank on Wall Street, thinks a recession is inevitable this year.

The Fed report said the economy did grow during the survey period -- from the middle of November through December -- but more slowly than during the late fall. Credit problems intensified in December as did troubles in the housing market. That threw Wall Street into new turbulence.

The economy probably grew at a feeble pace of about 1.5 percent or less in the final three months of last year and will stay weak in the first quarter of this year as consumers -- major shapers of the nation's economic health -- tighten their belts.

After retailers suffered their worst sales season in five years in 2007, "the outlook for 2008 among retail merchants was cautious," the Fed said in its report. And the outlook for housing remains gloomy: "weak during the first part of 2008."

Fallout from a meltdown in risky "subprime" mortgages continued to sock financial institutions. JPMorgan Chase & Co. and Wells Fargo Inc. both reported Wednesday that their earnings fell -- raising fresh fears of a widespread lending crisis.

Federal Reserve Chairman Ben Bernanke, in a speech last week, pledged to aggressively cut a key interest rate as needed to try to prevent all these problems from plunging the economy into a major recession. That may well mean a bold half-point cut at the end of a two-day meeting on Jan. 30. The Fed started cutting rates in September, but some critics on Wall Street and elsewhere say Bernanke should have acted sooner and more forcefully.

"Clearly there is a high level of caution," said Ken Mayland, president of ClearView Economics. "Everyone's guard is up to protect and insulate one's businesses from the high degree of sluggishness that is expected to prevail in the months ahead."

With voters expressing angst over the economy, the White House and the Democrat-controlled Congress are exploring ways -- including the possibility of temporary tax rebates -- to get money quickly into the hands of consumers and help stimulate spending. Presidential contenders also are floating their own ideas for rescue packages.

The chairman of Congress' Joint Economic Committee said he had spoken Monday with Bernanke and found him "generally supportive" of lawmakers and Bush approving a stimulus bill.

Bernanke, who hasn't supported any specific plan, testifies before the House Budget Committee Thursday.

The recent leap in the nation's unemployment rate, from 4.7 percent in November to 5 percent in December, rang one of the loudest warning bells. It raised concerns that consumers would clamp down, sending the economy into a tailspin.

On Wednesday, the Fed observed that "holiday sales were generally disappointing" and pointed to "further weakness in auto sales."

A day earlier, the government reported that shoppers cut back on their spending by 0.4 percent in December, wrapping up the weakest year for retailers since 2002.

Adding to worry about how consumers will hold up: Consumer confidence, as measured by the RBC Cash Index, fell in January to its lowest point in figures dating back to 2002.

The housing picture remains bleak -- "quite weak" in all Fed regions, the survey said. Sales continued to be sluggish, and inventories of unsold homes "persisted at historically high levels."

Manufacturing activity varied around the country, but there was one common thread: Factories reported "pronounced weakness" in housing-related industries as well as the automobile business. The Fed, in a separate report Wednesday, said production by big industry was flat in December, fresh evidence of an economic slowdown.

Mayland was more graphic. "Manufacturers have gotten cold feet," he said.

Businesses are having to cope with high costs for energy and food, too. That's squeezing profit margins for companies and boosting prices to some customers.

Consumer prices moderated in December, rising by 0.3 percent, the Labor Department reported Wednesday. For all of 2007, prices jumped 4.1 percent, the biggest increase in 17 years.

America is in for major changes coming down the pike. Get ready.


http:// www.kunstler.com

January 14, 2008

[by James Kunstler]

The dark tunnel that the US economy has entered began to look more and more like a black hole last week, sucking in lives, fortunes, and prospects behind a Potemkin facade of orderly retreat put up by anyone in authority with a story to tell or an interest to protect -- Fed chairman Bernanke, CNBC, The New York Times, the Bank of America.... Events are now moving ahead of anything that personalities can do to control them.


The "housing bubble" implosion is broadly misunderstood. It's not just the collapse of a market for a particular kind of commodity, it's the end of the suburban pattern itself, the way of life it represents, and the entire economy connected with it. It's the crack up of the system that America has invested most of its wealth in since 1950. It's perhaps most tragic that the mis-investments only accelerated as the system reached its end, but it seems to be nature's way that waves crest just before they break.


This wave is breaking into a sea-wall of disbelief. Nobody gets it. The psychological investment in what we think of as American reality is too great. The mainstream media doesn't get it, and they can't report it coherently. None of the candidates for president has begun to articulate an understanding of what we face: the suburban living arrangement is an experiment that has entered failure mode.


I maintain that all the "players" -- from the bankers to the politicians to the editors to the ordinary citizens -- will continue to not get it as the disarray accelerates and families and communities are blown apart by economic loss. Instead of beginning the tough process of making new arrangements for everyday life, we'll take up a campaign to sustain the unsustainable old way of life at all costs.


A reader sent me a passle of recent clippings last week from the Atlanta Journal-Constitution. It contained one story after another about the perceived need to build more highways in order to maintain "economic growth" (and incidentally about the "foolishness" of public transit). I understood that to mean the need to keep the suburban development system going, since that has been the real main source of the Sunbelt's prosperity the past 60-odd years. They cannot imagine an economy that is based on anything besides new subdivisions, freeway extensions, new car sales, and Nascar spectacles. The Sunbelt, therefore, will be ground-zero for all the disappointment emanating from this cultural disaster, and probably also ground-zero for the political mischief that will ensue from lost fortunes and crushed hopes.


From time-to-time, I feel it's necessary to remind readers what we can actually do in the face of this long emergency. Voters and candidates in the primary season have been hollering about "change" but I'm afraid the dirty secret of this campaign is that the American public doesn't want to change its behavior at all. What it really wants is someone to promise them they can keep on doing what they're used to doing: buying more stuff they can't afford, eating more s#!tty food that will kill them, and driving more miles than circumstances will allow.


Here's what we better start doing.


Stop all highway-building altogether. Instead, direct public money into repairing railroad rights-of-way. Put together public-private partnerships for running passenger rail between American cities and towns in between. If Amtrak is unacceptable, get rid of it and set up a new management system. At the same time, begin planning comprehensive regional light-rail and streetcar operations.End subsidies to agribusiness and instead direct dollar support to small-scale farmers, using the existing regional networks of organic farming associations to target the aid. (This includes ending subsidies for the ethanol program.)


[i]Begin planning and construction of waterfront and harbor facilities for commerce: piers, warehouses, ship-and-boatyards, and accommodations for sailors. This is especially important along the Ohio-Mississippi system and the Great Lakes.[/i]In cities and towns, change regulations that mandate the accommodation of cars. Direct all new development to the finest grain, scaled to walkability.



This essentially means making the individual building lot the basic increment of redevelopment, not multi-acre "projects." Get rid of any parking requirements for property development. Institute "locational taxation" based on proximity to the center of town and not on the size, character, or putative value of the building itself. Put in effect a ban on buildings in excess of seven stories. Begin planning for district or neighborhood heating installations and solar, wind, and hydro-electric generation wherever possible on a small-scale network basis.


We'd better begin a public debate about whether it is feasible or desirable to construct any new nuclear power plants. If there are good reasons to go forward with nuclear, and a consensus about the risks and benefits, we need to establish it quickly. There may be no other way to keep the lights on in America after 2020.


We need to prepare for the end of the global economic relations that have characterized the final blow-off of the cheap energy era. The world is about to become wider again as nations get desperate over energy resources. This desperation is certain to generate conflict. We'll have to make things in this country again, or we won't have the most rudimentary household products.



We'd better prepare psychologically to downscale all institutions, including government, schools and colleges, corporations, and hospitals. All the centralizing tendencies and gigantification of the past half-century will have to be reversed. Government will be starved for revenue and impotent at the higher scale. The centralized high schools all over the nation will prove to be our most frustrating mis-investment. We will probably have to replace them with some form of home-schooling that is allowed to aggregate into neighborhood units. A lot of colleges, public and private, will fail as higher ed ceases to be a "consumer" activity. Corporations scaled to operate globally are not going to make it. This includes probably all national chain "big box" operations. It will have to be replaced by small local and regional business. We'll have to reopen many of the small town hospitals that were shuttered in recent years, and open many new local clinic-style health-care operations as part of the greater reform of American medicine.


Take a time-out from legal immigration and get serious about enforcing the laws about illegal immigration. Stop lying to ourselves and stop using semantic ruses like calling illegal immigrants "undocumented."


Prepare psychologically for the destruction of a lot of fictitious "wealth" -- and allow instruments and institutions based on fictitious wealth to fail, instead of attempting to keep them propped up on credit life-support. Like any other thing in our national life, finance has to return to a scale that is consistent with our circumstances -- i.e., what reality will allow. That process is underway, anyway, whether the public is prepared for it or not. We will soon hear the sound of banks crashing all over the place. Get out of their way, if you can.


Prepare psychologically for a sociopolitical climate of anger, grievance, and resentment. A lot of individual citizens will find themselves short of resources in the years ahead. They will be very ticked off and seek to scapegoat and punish others. The United States is one of the few nations on earth that did not undergo a sociopolitical convulsion in the past hundred years. But despite what we tell ourselves about our specialness, we're not immune to the forces that have driven other societies to extremes. The rise of the Nazis, the Soviet terror, the "cultural revolution," the holocausts and genocides -- these are all things that can happen to any people driven to desperation...

We have prints hanging!

One Arts Plaza - - Resource One
1722 Routh Dallas, Texas75201
Exhibition in Lobby

US unveils new driver's license rules

By DEVLIN BARRETT, Associated Press Writer 43 minutes ago

Americans born after Dec. 1, 1964, will have to get more secure driver's licenses in the next six years under ambitious post-9/11 security rules to be unveiled Friday by federal officials.

The Homeland Security Department has spent years crafting the final regulations for the REAL ID Act, a law designed to make it harder for terrorists, illegal immigrants and con artists to get government-issued identification. The effort once envisioned to take effect in 2008 has been pushed back in the hopes of winning over skeptical state officials.

Even with more time, more federal help and technical advances, REAL ID still faces stiff opposition from civil liberties groups.

To address some of those concerns, the government now plans to phase in a secure ID initiative that Congress passed into law in 2005. Now, DHS plans a key deadline in 2011 — when federal authorities hope all states will be in compliance — and then further measures to be enacted three years later, according to congressional staffers who spoke to The Associated Press on condition of anonymity because an announcement had not yet been made. DHS officials briefed legislative aides on the details late Thursday.

Without discussing details, Homeland Security Secretary Michael Chertoff promoted the final rules for REAL ID during a meeting Thursday with an advisory council.

"We worked very closely with the states in terms of developing a plan that I think will be inexpensive, reasonable to implement and produce the results," he said. "This is a win-win. As long as people use driver's licenses to identify themselves for whatever reason there's no reason for those licenses to be easily counterfeited or tampered with."

In order to make the plan more appealing to cost-conscious states, federal authorities drastically reduced the expected cost from $14.6 billion to $3.9 billion, a 73 percent decline, according to Homeland Security officials familiar with the plan.

The American Civil Liberties Union has fiercely objected to the effort, particularly the sharing of personal data among government agencies. The DHS and other officials say the only way to make sure an ID is safe is to check it against secure government data; critics like the ACLU say that creates a system that is more likely to be infiltrated and have its personal data pilfered.

In its written objection to the law, the ACLU claims REAL ID amounts to the "first-ever national identity card system," which "would irreparably damage the fabric of American life."

The Sept. 11 attacks were the main motivation for the changes.

The hijacker-pilot who flew into the Pentagon, Hani Hanjour, had a total of four driver's licenses and ID cards from three states. The DHS, which was created in response to the attacks, has created a slogan for REAL ID: "One driver, one license."

By 2014, anyone seeking to board an airplane or enter a federal building would have to present a REAL ID-compliant driver's license, with the notable exception of those more than 50 years old, Homeland Security officials said.

The over-50 exemption was created to give states more time to get everyone new licenses, and officials say the risk of someone in that age group being a terrorist, illegal immigrant or con artist is much less. By 2017, even those over 50 must have a REAL ID-compliant card to board a plane.

Among other details of the REAL ID plan:

_The traditional driver's license photograph would be taken at the beginning of the application instead of the end so that should someone be rejected for failure to prove identity and citizenship, the applicant's photo would be kept on file and checked in the future if that person attempted to con the system again.

_The cards will have three layers of security measures but will not contain microchips as some had expected. States will be able to choose from a menu which security measures they will put in their cards.

Over the next year, the government expects all states to begin checking both the Social Security numbers and immigration status of license applicants.

Most states currently check Social Security numbers and about half check immigration status. Some, like New York, Virginia, North Carolina and California, already have implemented many of the security measures envisioned in REAL ID. In California, for example, officials expect the only major change to adopt the first phase would be to take the photograph at the beginning of the application process instead of the end.

After the Social Security and immigration status checks become nationwide practice, officials plan to move on to more expansive security checks, including state DMV offices checking with the State Department to verify those applicants who use passports to get a driver's license, verifying birth certificates and checking with other states to ensure an applicant doesn't have more than one license.

A handful of states have already signed written agreements indicating plans to comply with REAL ID. Seventeen others, though, have passed legislation or resolutions objecting to it, often based on concerns about the billions of dollars such extra security is expected to cost.

____

Associated Press writer Eileen Sullivan contributed to this report.

There appears to be no real slowdown in construction in Dallas...we counted no less than four new towers going up while in town 2nite!

McKinneyNews.net Staff Report

Dec 31st, 2007 8:36pm

Beginning Tuesday, the City of McKinney is cracking down on smokers.


New smoking regulations in McKinney go into effect Jan. 1. The ordinance adopted by McKinney City Council in September 2007 bans smoking in any public places in the city starting New Year’s Day.


However, existing businesses with a valid certificate of occupancy dated prior to Jan. 1, 2008, have until Sept. 4, 2008, to comply with the ordinance. Smoking will be prohibited in all enclosed places of employment within the city on Sept. 4, including retail stores, offices, restaurants, public transit, museums, theaters, public parks, hospitals and common use areas in apartment and other buildings.


“Anyone who chooses to smoke can still do so on their personal property, among other select places. Smoking is also allowed in the parking lots of city parks and on public sidewalks more than 25 feet from a door or window. We’re really focused on public health and maintaining the quality of life that helps make McKinney unique,” said Executive Director of Development Services John Kessel.


McKinney’s ordinance allows smoking in private residences, including porch and yard areas, personal automobiles, retail tobacco stores and designated smoking rooms of country clubs. Smoking is also allowed in outdoor places of employment, public sidewalks 25 feet from doors and windows, and parking lots within public parks.


“The last time the city had updated any smoking ordinance was about 15 years ago, and the population has more than quadrupled since then,” Kessel said. “We needed a new ordinance that reflects the changes since our last updated ordinance and better protects the health of our citizens.


In addition, not more than 10 percent of hotel and motel rooms can be designated smoking rooms. All smoking rooms must be on the same floor, adjacent to the other smoking rooms and require separate ventilation systems.


Any person or business violating the ordinance will be punishable by a fine of up to $500. For more information about McKinney’s smoking ordinance, visit www.mckinneyinfo.com.

UP AND DOWN WALL STREET By ALAN ABELSON

Wolf at the Door

TALK ABOUT GREAT ENTRANCES! For investors, anyway, they don't make them any better than the memorable one staged by that precocious calendrical infant, 2008. That is, if you're an investor who happens to have a portfolio chock full of gold and overflowing with oil.

The precious metal never glistened more brightly than it did last week as it soared past the all-time peak of $850 an ounce set nearly four decades ago. Not be outdone, crude made hydrocarbonic history of its own by topping $100 a barrel, an all-time record high and, keep in mind, please, we're not talking any old all-time, we're talking the real thing: geologic all-time.

Now, we're not so cloistered or insensitive as to fail to recognize that an absolutely humongous number of investors to their sorrow -- including not a few of those extraordinarily bright chaps and chicks who subscribe to this august magazine -- own neither a speck of gold nor a thimble of oil.

In that melancholy event, obviously 2008 did not begin on an upbeat note. Quite the contrary. But, hey, don't lose heart -- the year still has 365 other days, at least two of which, even a timid soul like us would be brave enough to wager, will witness a rise in stock prices.

Actually, we can understand why folks, especially those of a chronically cheerful disposition, shy away from gold. It is, after all, the nearest thing we have to a Dow Jones Average of Global Misery. We are a nation of optimists, and a real optimist would just as soon drink a quart of sour milk as own something that keeps reminding him that everything isn't hunky-dory. Then, too, for a lot of people, the mere mention of gold stirs up painful pre-fluoride childhood memories of having cavities filled by drill-happy dentists.

Gold's perverse proclivity to feed on bad news was much in evidence as the gathering woes of the economy at large (think housing collapse and the gaping black hole in our accounts with the rest of the world) and the financial sector in particular (the mother of modern credit crunches) provided the spark for the precious metal's combustible performance that sent it soaring to unprecedented heights.

And it's not an accident that bullion has battened rich on the sickening downward spiral of the dollar, which, easy to forget, was until not all that long ago the most revered currency on the face of the planet. The remorseless shrinking of the greenback's value has given rise to a clutch of scary scenarios, from an inflationary chain reaction to a kind of global Olympics in which nations fiercely compete in a race to devalue their own coin that is destined to end with every participant (except Zimbabwe) a loser.

Oil eased off its peak toward week's end, as buyers took a breather and concerns arose that the awful jobs report for December represented a harbinger of recession that would curb demand for all that crucial stuff like gasoline and heating oil that's squeezed out of a barrel of crude. And no doubt it will.

But, as we've said before (like George Bernard Shaw, we quote ourselves to spice our conversation), should oil suffer a slide, it'll probably be only to $80 a barrel, $75 at worst, not the $30-$40 the petro bears fantasize. And looking out a piece, prospects get increasingly bleak, not least because OPEC seems to have gotten its evil act together and China's inexorably growing thirst for oil shows no sign of being slaked.

Matt Simmons, boss man at Houston-based Simmons & Co., which covers energy the way Willie Mays used to cover center field, put out one of his rare personal reports on oil, and it doesn't make for pleasant reading. Matt lays out the case quite persuasively that global production peaked in 2005 at 74,298,000 barrels a day and is now a couple of million below that, while daily consumption has continued to climb and is rapidly approaching 88 million barrels. To fill the gap, he reports, various sources are being tapped, all of which share one quality -- they're not sustainable.

That suggests to him, among many more horrific things, that we'd better get used to $100-a-barrel oil, which he reassuringly reflects "is the equivalent of only 15 cents a cup." Somehow, that doesn't make us feel any better, even if it isn't "social chaos and widespread geopolitical conflict or war," possibilities he also alludes to if we don't get off our butts and do something about finding new energy sources, seriously pushing conservation and weaning ourselves from "a chronic addiction" to fossil fuels.

IT CAN GET AWFUL COLD in a terrific hurry in Iowa. We know because we spent a fair slug of time in the state way back when and grew quite fond of it and its homespun folks. We have a feeling that Hillary Clinton and Mitt Romney also have concluded, but more than a little ruefully, that Iowa gets awful cold in a hurry. Both spread plenty of the long green around the state and both enjoyed early success wooing the voters. Only to get blindsided by a pair of political parvenus.

The geographically challenged Mr. Huckabee, whose strongest card seems to be his amiability, demonstrated to the apparent satisfaction of the state's Republicans that he was a regular guy by donning some hunting gear and shooting at flocks of quizzical birds. But, in fact, our Iowa sources tell us, he was really after bigger game: He was keen on picking off some Pakistani terrorists who, he implied, have been sneaking into Iowa by the thousands to do their mischief.

For Mr. Huckabee seems to have confused Pakistan with Mexico in terms of their respective locations and also seems to believe that Iowa borders on Mexico/Pakistan. We must admit we never did a thorough survey of the state in the considerable time we spent in such places as Red Oak and Iowa City. So it could be he's discovered a hitherto unknown sliver of the state snakes its way undetected to the nation's southern border. We're quite eager to see what comparable revelations Mr. Huckabee's journeys through New Hampshire yield.

The Democrats, for their part, spurned Hillary Clinton and her new-found smile, which we can authoritatively report, despite all appearance, was not surgically affixed to her face, in favor of Barack Obama. Rubbing it in a bit, the Iowa voters or whatever you call participants in a caucus (caucusees? caucusers?) relegated her to third place behind John Edwards and Mr. Obama. Whatever the effect on her political fortunes, she manifestly isn't invincible, which seemed to be her biggest claim for the nomination.

Mr. Obama is long on oratory and short on any concrete qualifications for the presidency. But as recent history has mordantly demonstrated, that might be just the ticket for election. His main pitch is that he's not an old Washington hand. Which raises two questions: If he thinks Washington is such an evil place why is he panting to get back there? Or, at the very least, why doesn't he propose that the nation's capital be relocated to a city at some remove from D.C., say Honolulu?

All the pundits agree that Iowa is not the end of the road to the nomination. We find that a most depressing thought.

WALL STREET, NOT SURPRISINGLY, didn't give a fig as to who won or lost in Iowa. But that failed to keep it from getting deeply depressed. And who can blame the investing masses? After duly celebrating the arrival of the new year, they woke up only to find the wolf at the door.

For many months now, there had been plenty of warning that recession was lurking out there in the tall grass. But it went pretty much unheeded, when not scorned. However, even the most ebullient bull began to breathe heavily as 2008 dawned, accompanied by a swell of evidence that the economy was tanking, led by manufacturing, which was supposed be enjoying a boomlet thanks to the debased dollar and demand from abroad, and retailing, which presumably could always count, in fair weather or foul, on consumers to consume. Alas, it ain't necessarily so.

Came Friday and with it the crusher in the form of an exceptionally ugly report from the Bureau of Labor Statistics on jobs -- or more precisely, the lack of them -- in December. As Philippa Dunne and Doug Henwood of the Liscio Report neatly summed it up, the payroll number was quite weak and its household counterpart even weaker.

All told, supposedly 18,000 jobs were added. We might note right off the bat that there were no fewer than 66,000 mythical jobs added, courtesy of the infamous birth/death adjustment; save for that curious confection, the total would have gone considerably negative. That handy adjustment, incidentally, was responsible for 89% of all the reported payroll additions in 2007.

Unemployment jumped to 5%, from 4.7%. And the big losers were widely dispersed, paced by construction, where 49,000 jobs vanished last month and manufacturing, which lost 31,000. Apart from health-care and restaurants and bars, there were virtually no conspicuous gainers. As Philippa and Doug quip: "Our new economic model: eat, drink and check into the hospital."

They anticipate "some significant negative employment numbers in the coming months" and point out that "the unemployment rate is already above what the Fed had projected for the next three years." We imagine the Fed will do what it always does when it gets agitated -- cut rates. And we suspect that'll have zilch lasting effect on the economy and the stock market.

http://online.barrons.com/article/SB119949084836468909-search.html?KEYWORDS=birth+death&COLLECTION=barrons/6month

For month of December:

Here are some same-store sales numbers reported this morning

WalMart +2.4
Aeropostale +12.2
99 Cent Only +2.9
Costco +7.0
Buckle +18.7
Ross +3.0
Wet Seal +0.6
Gap -6.0
PacSun -2.9
Ann Taylor -9.4
Macy's -7.9
Dillard's -5.0
Limited -8.0
American Eagle -2.0
Stein Mart -5.7
Bebe -7.9
Stage STores -7.1
Hardee's -0.6
Cato -8.0
Nordstrom -4.0
Zale -9.0
Big Five -4.7
Gottschalks -13.8
Chico's -11.1
Hot Topic -6.2
Target -5.0

Getting ready to show prints again! Love it when this happens!



Every day you should do something that makes your heart dance. If you find that you are too depressed, then makes somebody else's heart dance.

Yoko Ono

This is the face of a man who can no longer keep up with all the news...its like an avalanche the last couple of days!...

New Hampshire was a great disappointment: McCain wins and Hillary wins! UGH!!!!!

Thanx to MO for help on the image...

Warner Bros. may cut 1,000 jobs

1 hour, 1 minute ago

Up to 1,000 employees on the Warner Bros. lot in Burbank could be laid off anytime after Friday as a result of the Hollywood writers strike.

The studio distributed legally mandated warning notices on November 12, five days after the Writers Guild of America walkout began, stating that recipients could be subject to layoff after 60 days. The notices represent the first concrete sign that the strike could trigger massive job cuts across Hollywood.

A Warner Bros. spokeswoman declined to say when or how many pink slips might eventually fly. She said the notices were mandated under the U.S. Department of Labor's Worker Adjustment and Retraining Notifications (WARN) regulations, which are designed to give employees some advance notice of possible job eliminations in the event of a strike.

"These WARN notices were sent because, in certain circumstances, federal and California law can require employers to give notice of staffing changes," Warners spokeswoman Stacey Hoppe said. "Due to the ongoing WGA work stoppage, some studio divisions will have to lay off employees. We regret the impact this will have on our employees, and we hope to bring them back to work once the WGA strike ends."

Those receiving WARN notices are employees of Warner Bros. Studios Facilities, primarily production workers and others involved in lot maintenance and facility management.

News of the development circulated Tuesday, the 65th day of the writers strike. It wasn't immediately clear if any other major studios have issued similar notifications.

But there already have been widespread cost-cutting moves on most studio lots. At Fox and elsewhere, overtime pay has been curtailed for many positions, and industryites coast to coast have been finding their department budgets scrutinized more thoroughly than usual.

Elsewhere, TV production companies have shed workers as show after show has run out of scripts and shut down operations, and now film producers with overall deals on the various lots are coming under similar scrutiny.

Some TV studios, including Warner Bros. TV, are expected to send out letters shortly to terminate deals with select writer-producers. And on the film side, Universal recently parted ways with Vertigo Entertainment, the company behind the "Ring" and "Grudge" horror movies, upon the expiration of their production pact.

In the 1988 WGA strike, almost every studio eventually laid off scores of workers during the five-month work stoppage.

Reuters/Hollywood Reporter

Oil $200 Options Rise 10-Fold in Bet on Higher Crude

By Grant Smith

Jan. 7 (Bloomberg) -- The fastest-growing bet in the oil market these days is that the price of crude will double to $200 a barrel by the end of the year.

Options to buy oil for $200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5,533 contracts, a record increase for any similar period. The contracts, the cheapest way to speculate in energy markets, appreciated 36 percent since early December as crude futures reached a record $100.09 on Jan. 3.

While analysts at Merrill Lynch & Co. and UBS AG say the slowing U.S. economy will lead to the biggest drop in prices since 2001, the options show some traders expect oil to rise for a seventh straight year. Demand will increase 2.5 percent in 2008, according to the International Energy Agency. U.S. inventories fell to a three-year low on Dec. 28. Production from Mexico is declining and Saudi Arabia is behind schedule in opening its newest field.

``One hundred dollars a barrel is actually 14.9 cents a cup, so we're still talking about oil being remarkably cheap,'' said Matthew R. Simmons, chairman of Simmons & Co. International, a Houston-based investment bank that focuses on energy. Inventories``are tight as a drum and I don't see how we get out of this box,'' he said in a Bloomberg television interview last week. ``Demand clearly isn't starting to slow down.''

Global Consumption

World consumption will rise to 87.8 million barrels a day this year, 2.1 million more than in 2007, or about the same amount that Nigeria supplies, according to the Paris-based IEA, an adviser to oil-consuming nations. Demand from China alone will increase 5.7 percent to 8 million barrels a day as imports expand to support an economy that's likely to grow 11 percent, the IEA said.

Oil suppliers are straining to increase production. Saudi Arabia, the world's largest exporter, said last week that the 500,000 barrel-a-day Khursaniyah oilfield missed a December start date. Brazil's Tupi field, the second-largest find of the past two decades, lies more than eight kilometers (five miles) below the ocean surface and will take at least five years to develop.

Petroleos Mexicanos, Mexico's state oil monopoly, suffered a three-year, 40 percent decline at its Cantarell field, the world's third-largest. Fighting in Nigeria reduced production 11 percent since December 2005 to 2.18 million barrels a day, according to data compiled by Bloomberg.

U.S. Inventories

Crude futures rose 2 percent in the first three trading days of the new year, closing at $97.91 a barrel in New York on Jan. 4. U.S. crude inventories fell to a three-year low of 289.6 million barrels on Dec. 28, according to a Jan. 3 Energy Department report.

Oil for February delivery today fell as much as 80 cents, or 0.8 percent, to $97.11 a barrel in after-hours electronic trading on Nymex. It was at $97.42 at 3:08 p.m. Singapore time.

``We haven't got to $100 on just a whim,'' said Paul Horsnell, head of commodities research at Barclays Capital in London. ``This is at heart also about longer-term concerns that supply capacity investment needs higher prices to keep up with demand growth.''

Barclays forecasts oil will average $87.40 a barrel this year, a 21 percent increase from the 2007 average.

`Strike' Price

The Nymex options, which give speculators the right to buy 1,000 barrels of oil in December, are becoming a favorite for traders even if they don't expect crude to reach $200 because they are a cheaper way to speculate than using futures contracts. Options expire worthless if crude fails to reach the ``strike'' price. There were 500 of the options on Nov. 7.

The price of the options rose as high as $550 last week before closing at $300 on Jan. 4. That amounts to 30 cents a barrel. The December futures to purchase 1,000 barrels in December rose 3.5 percent to $94,010, or $94 a barrel.

``The most common analogy used to describe options is that it represents insurance'' against ``low probability'' events, said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York.

Oil forecasters say there's no chance of $200 crude, as the U.S., which consumes a quarter of the world's oil, slows. Prices will average $78 a barrel this year, 20 percent below the current level, and $75 in the fourth quarter, according to the median forecast of 27 analysts surveyed by Bloomberg. The last time prices fell that much was in 2001, when they dropped 26 percent.

Jobless Rate

Merrill Lynch and Morgan Stanley in New York expect the U.S. economy, the world's largest, will slip into recession this year. The jobless rate rose to 5 percent in December, the highest in two years. The Institute for Supply Management's factory index fell to the lowest level in almost five years in December.

The U.S. probably expanded 1 percent last quarter, according to the median estimate of 63 economists surveyed by Bloomberg. Gross domestic product will grow 2.3 percent in 2008, the survey showed.

Oil is overpriced, given the outlook for the economy, said Jan Stuart, an analyst at UBS AG in New York. He forecasts an average price of $74 a barrel this year, little changed from 2007. Merrill Lynch's Francisco Blanch predicts $78 in the fourth quarter.

``I am afraid that we are going to see an economic slowdown that we have not seen the beginning of yet that will take some significant amount of oil demand off the table,'' Stuart said in a Bloomberg television interview Jan. 2.

Strategists Surprised

Most strategists didn't foresee last year's 57 percent gain. Crude traded at an average of $72.36 in 2007. A Bloomberg survey of 29 analysts in September 2006 forecast a median price of $64.

``Going through $100 means that people are seeking more protection against a higher number,'' said Michael Lewis, a strategist at Deutsche Bank AG strategist in London. Deutsche Bank expects oil to fall to about $80 a barrel.

Options trading indicates that the likelihood of crude reaching $125 a barrel in December has almost doubled since Dec. 25, to 18 percent, Lewis said.

While $200 may remain an outside chance, Simmons at Simmons & Co. showed he's willing to make that bet. He wagered $5,000 with New York Times columnist John Tierney in August 2005 that oil would average at least $200 a barrel in 2010.

The latest assessment from OPEC, which produces 40 percent of the world's oil, suggests prices will rise.

``There is enough oil in the market,'' Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, told reporters in Algiers two days ago. Khelil, who is also Algeria's energy minister, said rising prices aren't OPEC's fault. The group is scheduled to meet Feb. 1.

``You will see even $200 oil in the next five years,'' said Jean-Francois Tardif, senior portfolio manager at Sprott Asset Management Inc. in Toronto.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aERkSvnAUV_U&refer=home



January Prices of Oil the last 5 years.

Jan. 2004 --- $28.00
Jan. 2005 --- $35.16
Jan. 2006 --- $55.12
Jan. 2007 --- $54.63
Jan. 2008 --- $99.62

Things to consider in the coming days:


Problems Bernanke Faces


Falling real estate prices
Subprime housing mess
Alt-A mortgage mess
Pay Option ARM mess
Sharply rising unemployment
Rising credit card defaults
Commercial Real Estate implosion
Global wage arbitrage
Falling US dollar
Overheating China
Slowing global economy
Tapped out consumers
Implosion of $500 trillion in derivatives
Solvency issues at banks
Forced unwind of massive Yen carry trade
Boomer retirement Pension plan assumptions in an economy starving for yield
Rising corporate defaults


Why The Credit Bubble Lasted For Decades

Single household breadwinner became two household bread winners
Interest rates were at 18% headed to 1%
Internet revolution provided tremendous numbers of jobs
Lending standards declined
Housing boom provided jobs
Rising asset prices supported consumption
Every one of those things allowed the credit bubble to keep expanding. Many of those factors took years to play out, decades in aggregate. The decline in interest rates alone made housing more affordable for quite some time, at least until things went extremely loony a few years back. And when housing prices went loony, progressively lower credit standards kept the expansion going. The madness ended when there was no one left to buy, and no way to keep that portion of the credit bubble expanding.

Treasury Plans Social Security Debit Card

A Bid for Payments
To Become Cheaper
And More Secure
By ELEANOR LAISE
January 4, 2008


The Treasury Department plans to introduce a prepaid debit card for Social Security recipients in an effort to provide safer and cheaper benefits payments.


The Direct Express debit card, set to be announced today, will be introduced in a handful of states this spring and rolled out nationwide by the end of the summer. Dallas-based Comerica Inc.'s Comerica Bank has been selected as the card issuer for the program, which is targeted at Social Security and Supplemental Security Income recipients who don't have a bank account.


The card could mean significant cost savings for benefits recipients as well as the federal government, Treasury officials and banking experts say. People who sign up for the card will also gain faster access to their money and avoid some security problems, like stolen checks.


But there are some cardholder fees associated with Direct Express, and a significant education effort may be required to get users to accept and understand the card.


The debit card is part of a broader effort by the Treasury to move to electronic payments. In 2005, the department started its Go Direct campaign, which is designed to encourage benefits recipients with bank accounts to switch to direct deposit.


Many state agencies in recent years have offered prepaid debit cards to recipients of unemployment benefits or child support payments, and the Federal Emergency Management Agency in 2005 offered debit cards loaded with emergency-relief funds to hurricane victims.


"We've been working for a while to try to understand the needs of the unbanked," says Judith Tillman, commissioner of the Treasury's Financial Management Service, which disburses most government payments. "Combine that with problems we've seen with financial crimes and identity theft, problems with forged checks and stolen checks and so on -- the debit card seemed like the right answer."






As many as 40 million U.S. households either have no bank account or make little use of banking services, according to an estimate from the Chicago-based Center for Financial Services Innovation. For these people to save effectively, "the first step is to convert one's pay or benefits check into a convenient and usable form of money," says Jennifer Tescher, the center's director.


In April, Treasury plans to begin mailings to encourage benefits recipients without bank accounts to sign up for the debit card and those with bank accounts to sign up for direct deposit.


For benefits recipients who sign up for the card, Social Security retirement, disability and survivor benefits as well as SSI benefits will be automatically loaded onto the card account on the designated payment day. Card holders will be able to use the card at ATMs, bank branches, retail locations and online.


Fifteen financial institutions competed to issue the debit card. Comerica was chosen because of its previous experience running state-government debit-card programs, its ability to offer features like text-messaging of low-balance alerts and its reasonable fees, Ms. Tillman says.


Comerica will earn money on cardholder fees, interchange fees when cardholders use the card at the point of sale, and the float on funds sitting in cardholders' accounts. Comerica estimates that there may be anywhere from 2.5 million to 10 million Direct Express card holders in five years. The company's government card business, begun in 2004, now has over two million card holders.


The debit card should mean cost savings for many Social Security recipients who don't have a bank account and who use check-cashing services to cash their benefits checks, banking experts say.


Cardholders will get one free ATM cash withdrawal per deposit per month, but Comerica will charge 90 cents for each additional withdrawal. Like other debit-card holders, users may also face surcharges at many ATMs. Other fees include $3 for international ATM withdrawals, 3% on international currency exchanges, 50 cents for each online bill payment and 75 cents per month for paper statements.


Cardholders can avoid surcharges at more than 56,000 designated ATMs, including those run by 7-Eleven and PNC Bank. ATM balance inquiries and cash withdrawals at a teller window will be free, and there will be no fees for overdrafts, declined transactions, or inactivity. Cardholders can opt to receive free deposit notifications or low-balance alerts via text message, email or automated phone call.The card should bring substantial savings for the federal government. The government's cost to issue a paper check was 89 cents in fiscal year 2006, versus nine cents for an electronic payment. Four million recipients of Social Security and SSI don't have a bank account. If each of them signed up for the debit card, the government would save $44 million a year, Ms. Tillman says.


The debit cards should be more secure than paper checks, the Treasury and banking experts say. In 58,000 cases last year, Social Security checks were forged, Ms. Tillman says. Nine times out of 10, problems with benefits payments are associated with paper checks, she says. The debit-card accounts are protected by PIN numbers and FDIC insured.


http://online.wsj.com/article/SB119942055595667309.html?mod=hpp_us_whats_news

http://www.bloomberg.com/apps/news?pid=20601087&sid=az6udZUEQ8vM&refer=home

U.S. Payrolls Rise 18,000, Smallest Gain Since 2003 (Update1) By Bob Willis


Jan. 4 (Bloomberg) -- Hiring in the U.S. slowed more than forecast in December and unemployment jumped to a two-year high, raising the odds the Federal Reserve will need to cut interest rates to ward off an economic slowdown.
Payrolls rose by 18,000, the least since August 2003, after a 115,000 gain in November that was larger than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.0 percent from 4.7 percent in November.


Slowing job growth is the clearest sign yet that the U.S. expansion is at risk amid tighter credit, a deeper housing slump and a stumbling stock market. Fed policy makers last month lowered growth forecasts and said they were concerned a ``marked deceleration'' in spending could hurt the economy, according to meeting minutes.


``The labor market is loosening up and bodes poorly for consumer spending,'' Dana Saporta, an economist at Dresdner Kleinwort in New York who had forecast a gain of 40,000, said before the report. ``Certainly a slowing labor market would add to the risk of recession.''


Treasuries climbed after the report, with the yield on the 10-year note falling to 3.83 percent at 8:35 a.m. in New York from 3.89 percent late yesterday.

Twenty-five-year-old Egyptian woman dies of bird flu, country's 16th fatality

THE ASSOCIATED PRESS
LINK

CAIRO, Egypt - A 25-year Egyptian woman has died of bird flu after she apparently contracted the disease from domestic foul, a ministry of health spokesman said Wednesday.

Ola Youness Mohammad, from the town of Beni Soweif, some 200 kilometres south of Cairo, tested positive of the H5N1 strain of bird flu after she was admitted to hospital last Friday, said spokesman Abdel-Rahamn Shahin.

Mohammed died Tuesday night, bringing to 16 the number of Egyptians to have succumbed to the fatal strain since it first appeared in the country last year.

A total of 39 bird flu patients have been registered so far in Egypt, including those who died of the disease, Shahin said.

Mohammed contracted the virus after coming in contact with an infected chicken raised by her family, he said.

Most of the fatalities have been women or girls whose families raise poultry in backyards and who had daily contact with chickens or turkeys.

Egypt is one of the countries most affected by the H5N1 strain outside Asia, where the bird flu outbreak began. The country lies on a main route for migratory birds, which are believed to have brought the disease.

The H5N1 strain of bird flu has hit 45 countries and has killed nearly 200 people worldwide since 2003. It has resulted in the culling of millions of birds.

Commodities Surge, Led by Oil at $100, Record Gold
By Pham-Duy Nguyen



Jan. 2 (Bloomberg) -- Crude oil reached $100 a barrel and gold soared to a record, leading a surge in commodities as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation.

Spot gold climbed to $860.10 an ounce, and wheat and soybeans jumped more than 3 percent. The UBS Bloomberg Constant Maturity Commodity Index gained as much as 2.2 percent today after climbing 22 percent in 2007. The dollar fell on speculation the Federal Reserve will cut borrowing costs in an attempt to bolster the U.S. economy.

``The most salient buzzword in 2008 is going to be inflation,'' said Michael Pento, senior market strategist for Delta Global Advisors Inc. in Huntington Beach, California, which manages about $1.4 billion. ``The Fed is lowering interest rates and vastly increasing the money supply. They're further fueling inflationary expectations.''

Crude-oil futures for February delivery rose $3.228, or 3.4 percent, to $99.20 a barrel at 12:31 p.m. on the New York Mercantile Exchange. The previous record was $99.29 on Nov. 21.

Gold for immediate delivery surged $25.05, or 3 percent, to $858.75 an ounce after reaching a record $860.10. Gold futures for February delivery rose $24, or 2.9 percent, to $862 an ounce on the Comex division of the Nymex. The metal earlier reached $864.90, the highest for a most-active contract since Jan. 21, 1980, the day futures reached a record $873.

Nigerian Oil Output

Crude oil rose on concern that violence may further cut output in Nigeria, Africa's biggest producer, and on speculation U.S. petroleum inventories fell for a seventh week. Gold gained as rising energy costs boosted the metal's appeal as a hedge against inflation.

Natural-gas and heating-oil prices also climbed, and platinum jumped to a record. The dollar fell as much as 1 percent against a basket of six major currencies after the index tumbled 8.3 percent in 2007.

The Fed reduced the overnight lending rate three times since Sept. 18 from 5.25 percent to 4.25 percent on concern a housing slump will lead to a slowdown in the U.S. economy. The UBS Bloomberg CMCI has climbed for the past six years. It was up 26.27, or 2.1 percent, to 1,303.15 today. A close at that price would mark a record.

The rate cut sparked inflation concerns. Some investors buy commodities to hedge against rising consumer prices, and the falling dollar makes raw materials priced in the U.S. currency cheaper for buyers holding other currencies.

Declining Dollar

``Anything priced in dollars has to move higher to make up for the declining dollar,'' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``It looks like lower interest rates as far as the eye can see. People are putting their money where their memory is, and that's in commodities'' after the rally last year, he said.

Rising wealth from Shanghai to Sao Paulo is leading to better diets and straining grain supplies just as record energy prices boost sales of biofuels. Wheat and soybean prices jumped almost 80 percent last year, and corn last month climbed to the highest in 11 years.

Soybean futures for March delivery rose 37.5 cents, or 3.1 percent, to $12.5175 a bushel on the Chicago Board of Trade. The price earlier reached $12.64, the highest since June 1973.

U.S. farmers planted the fewest acres in 12 years to sow the most corn since 1944. China imposed an export tax on grains to ensure domestic supplies and curb increases in food prices.

Wheat futures for March delivery rose 30 cents, the most allowed by the CBOT, or 3.4 percent, to $9.15 a bushel. The price reached a record $10.095 a bushel on Dec. 17 as global demand outpaced dwindling worldwide inventories.

Drought hurt crops in Canada and Australia and excessive rain curbed yields in the U.S.

To contact the reporter on the story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .

http://www.bloomberg.com/apps/news?pid=20601087&sid=aNk2D9ERhFxI&refer=home

AP
Oil Futures Rise to $100 a Barrel
Wednesday January 2, 1:01 pm ET Crude Futures Hit Record $100 a Barrel on Supply Concerns

NEW YORK (AP) -- Oil prices soared to $100 a barrel Wednesday for the first time ever, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will continue to outstrip supplies.

Surging economies in China and India fed by oil and gasoline have sent prices soaring over the past year, while tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices even higher.

Violence in Nigeria helped give crude the final push over $100. Bands of armed men invaded Port Harcourt, the center of Nigeria's oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel. Word that several Mexican oil export ports were closed due to rough weather added to the gains, as did a report that OPEC may not be able to meet its share of global oil demand by 2024.

Light, sweet crude for January delivery rose $4.02 to $100 a barrel on the New York Mercantile Exchange, according to Brenda Guzman, a Nymex spokeswoman, before slipping back to $99.48.

Crude prices, which have flirted with $100 for months, have risen in recent days on supply concerns exacerbated by Turkish attacks on Kurdish rebels in northern Iraq and falling domestic inventories. However, post-holiday trading volumes were about 50 percent of normal Wednesday, meaning the price move was likely exaggerated by speculative buying.

"I would imagine the speculators are the biggest drivers today," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

It's hard to say whether prices would have risen as quickly on a normal trading day, Flynn said. While crude prices have soared on mounting supply concerns in recent months, speculators have often been cited as a reason for the swiftness of oil's climb.

Moreover, many of the concerns about supply disruptions have yet to materialize, but that hasn't stopped buyers from driving prices higher.

"Although the (Nigerian) violence has not impacted oil flow out of the country, it has reignited supply concerns as militant attacks have reduced Nigeria's crude output by roughly 20 percent since 2006," said John Gerdes, an analyst at SunTrust Robinson Humphrey in a research note. Nigeria is Africa's largest oil producer.

Separately, the Organization of Petroleum Exporting Countries said its member nations may not be able to meet demand as early as 2024, though OPEC also said that deadline could slide for decades if members increase production more quickly. Word that several Mexican oil export ports were closed due to rough weather added to the gains.

On top of those concerns, investors are anticipating that crude inventories fell by 1.8 million barrels last week, which would be the 7th weekly decline in a row.

"(A decline) is not anything unusual for this time of year, but when it happens for 7 weeks in a row, it starts to add up," said Amanda Kurzendoerfer, an analyst at Summit Energy Services Inc. in Louisville, Ky.

Oil prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

At the pump, meanwhile, gas prices rose 0.6 cent Wednesday to a national average of $3.049 a gallon, according to AAA and the Oil Price Information Service. Gas prices, which typically lag the futures market, have edged higher in recent days, following oil's approach to $100.

Gas prices peaked at $3.227 a gallon in May as refiners faced unprecedented maintenance issues and struggled to produce enough gasoline to meet demand. A similar scenario is expected this spring, when gas prices could peak above $3.40 a gallon, according to the Energy Department's Energy Information Administration.

The EIA's inventory report, delayed until Thursday this week due to the New Year's holiday, is also expected to show gains in gasoline supplies and refinery activity, and a decline in supplies of distillates, which include heating oil and diesel.

In other Nymex trading Wednesday, February heating oil futures rose 9.06 cents to $2.74 a gallon while February gasoline futures climbed 7.92 cents to $2.57 a gallon. February natural gas futures advanced 26.7 cents to $7.75 per 1,000 cubic feet.

In London, February Brent crude rose $3.11 to $97.58 a barrel on the ICE Futures exchange.

Associated Press Writers George Jahn in Vienna and Gillian Wong in Singapore contributed to this report.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Global Gas Prices can be found here:

http://money.cnn.com/pf/features/lists/global_gasprices/price.html

Global: The Great Monetary Easing of 2008

Joachim Fels | London

Central banks’ dilemma: ‘stag’ versus ‘flation.’ I continue to expect the global macro environment in 2008 to be characterized by an unpleasant mix of relative economic stagnation in the developed countries and continuing global inflation pressures (see The Stagflation Threat, 9 November 2007). This stagflationary environment creates a dilemma for central banks. If they play tough on inflation, stagnation may turn into a full-blown recession. If they decide to stimulate the economy, inflationary pressures may intensify. Central bankers are acutely aware of this dilemma, which explains why many have been reluctant to ease monetary policy so far. However, more signs of economic slowdown or even recession in early 2008 are likely to swing the balance towards more aggressive monetary easing in the advanced economies. Thus, I expect 2008 to mark the beginning of another global liquidity cycle that is likely to lift most boats again in the following years.

Current problems have monetary roots. Today’s problems can be traced back to overly expansionary monetary policies in the first half of this decade, when the Fed, the ECB and the Bank of Japan kept rates at unusually low levels for extended periods of time. Zero or negative real short-term interest rates, combined with very low long-term interest rates, encouraged excessive risk-taking and myopic behaviour amongst lenders and borrowers, and thus helped pump up the credit bubble that is now bursting. And just as easy credit supported consumer and capital spending then, tight credit conditions will now dampen domestic demand in the US and Europe. Moreover, easy money in the first half of this decade, with a long time lag, created the global inflationary pressures that are now playing out and are likely to persist, especially as monetary conditions in many emerging economies are still expansionary.

Into the ‘stag.’ Economic growth in the advanced economies is likely to slow sharply in 2008. Our US economists even expect two quarters of negative GDP growth in the first half of 2008, followed by a sub-par recovery in the second half (please see Recession Coming, by Dick Berner and David Greenlaw, in this issue). Similarly, our Japan economists expect a mild recession and have slashed their full-year 2008 GDP forecast to only 0.9%. Our European and UK economists look for sub-par growth in the next several quarters, too, with full-year 2008 growth at 1.6% in the euro area and 1.8% in the UK and thus significantly lower than in the last couple of years. For more colour and detail, see their articles in this issue. Emerging economies, where growth is still strong, are likely to be affected by the slowdown in the advanced economies but have significant room for monetary and fiscal stimulus and are less exposed to the credit crunch in the developed world, which should make any slowdown much less severe.

A new inflation regime. The much more controversial part of my stagflation call is the ‘flation’ part. Typically, a slowdown of growth that creates additional slack in the economy should be disinflationary. However, there are two important caveats. First, empirically, the link between ‘slack’ — measured by the output gap or the deviation of unemployment from its natural rate — is fairly weak. For example, estimates by my colleague Manoj Pradhan suggest that over the past two decades, a one percentage point increase in the output gap has reduced inflation by only one-tenth of a percentage point. Second, global factors have become more important in explaining the ups and downs of national inflation rates, especially over the last 10 years, when globalization accelerated. Globalization was disinflationary for many years. More recently, however, globalization has turned into an inflationary force, due to expansionary monetary policies in the emerging world, which have fuelled strong overall demand growth and, specifically, demand for energy and food. Rising energy and food prices have also pushed total inflation higher in the advanced economies, which has started to translate into higher inflation expectations. As I see it, the ‘low’ inflation regime of the past decade is now giving way to a ‘medium-size’ inflation regime in the advanced economies more akin to the one prevailing in the early to mid-nineties. Cyclical factors, such as a sharp economic slowdown, may still temporarily dampen inflation, but the underlying inflation trend should be higher. In theory, of course, central banks have the wherewithal to keep inflation low. However, it would require much higher real interest rates than in the past ‘low’ inflation regime. In an environment of weak growth as we envisage it in 2008, I strongly doubt central banks would tighten the screws.

The Great Monetary Easing of 2008. Right now, most central banks in the advanced economies are still reluctant to ease, given still-strong growth and rising inflation pressures. Only the Fed, the Bank of England and the Bank of Canada have cut rates so far. But with weaker growth or even a mild recession ahead, I expect more central banks to reverse course and join these three in cutting official rates in 2008. Lower rates in the advanced economies will also ease monetary conditions in those emerging economies that have their currencies tied to the dollar or the euro. With monetary easing spilling over from the advanced economies to the emerging world, and a further rise in inflationary pressures. In the meantime, buckle up for a stagflationary 2008.

http://www.morganstanley.com/views/gef/index.html#anchor5902

Mortgage crisis takes a bite out of states and cities

Tax revenue is down considerably across the nation, creating budget shortfalls and forcing hard choices on what to cut.

By Stephanie Simon, Los Angeles Times Staff Writer
December 31, 2007

DENVER -- Dozens of states, counties and cities across the nation will enter the new year facing deep and unexpected budget holes as the widening mortgage crisis cuts sharply into tax revenue.

Elected officials, scrambling to adjust, are trimming money for public schools, reducing grants to help the homeless, even asking police to dry-clean their uniforms less often.

"We're talking about a pretty tough fiscal environment for the next four or five years," said Christopher W. Hoene, the director of policy and research for the National League of Cities. "Libraries, parks, after-school programs . . . you'll see lots of questions raised about cities' abilities to fund them."

What makes this all so painful is that up until a few months ago, many government officials felt certain they could weather the storm. They knew property values wouldn't soar forever. So they factored a downturn into budget calculations. They built up sizable emergency funds.

But the rainy day they prepared for turned out to be a monsoon.

"We had predicted a slowdown -- but not this much," said Tim Nash, finance director for Greeley (population 90,000), a college town in a heavily agricultural region of north-central Colorado. Nash thought he was being prudent when he budgeted for 200 new housing starts in the city this year, down from 310 last year.

He wasn't even close.

Instead of the $2.6 million that Nash expected in sales taxes on new construction, Greeley will collect $1.2 million. As a result, Greeley has left vacant 49 city positions, most of them building inspectors whose services are, abruptly, no longer in demand.

The effects of the housing slowdown are not being felt evenly across the nation; in states such as Wyoming, Alaska and Texas, they're more than offset by the boom in oil and gas prices. But in a recent survey, 24 states reported that their tax collections had taken a hit because of the housing crisis.

The 10 most affected states, including California, Nevada and Arizona, will lose a combined $6.6 billion in tax revenue next year, according to a report prepared for the U.S. Conference of Mayors.

"We're at the early stage of a problem that's going to get worse," said Corina Eckl, an analyst for the National Conference of State Legislatures.

The mortgage crisis cuts into tax revenue in several ways.

The most obvious victim is property tax collection. Homeowners in foreclosure don't pay taxes on time. And as foreclosures spread, property values drop -- dragging down assessments and collections.

To take one example: In wealthy Fairfax County, Va., property values were jumping 20% a year. Now values are flat or falling. The number of foreclosures has exploded, from fewer than 200 two years ago to about 4,000 this year. The resulting $220-million budget shortfall has officials warning of significant cuts in services, including spending on public schools.

"Instead of having a soft landing, we've crashed," said Edward L. Long Jr., a deputy county executive.

When the housing market is flat, governments also lose out on the many transaction fees tacked onto real estate sales. This revenue stream is down in several states, in a few cases by 20% or more.

Even more distressing to budget planners is the decline in sales tax revenue. If people aren't buying homes, they're not buying refrigerators and washing machines to furnish them. Nationwide, orders for durable goods have been flat for the last four months. (November saw the first slight uptick: 0.1%. Economists had been hoping for 2.2%.)

On average, states receive about a third of their revenue from sales taxes. So it hurts -- deeply -- when families don't have reason to splurge on the new sofa and coffee table that will make a just-purchased house look like home.

Jacqueline Byers, director of research for the National Assn. of Counties, said she had taken to wondering, as she drove past yet another vacant house: "Does that translate into the library's going to close at 6 p.m. instead of 9? Little things like that are all affected. It's a phenomenal impact."

The fallout has been most severe in California, where officials are grappling with a $14-billion gap. Gov. Arnold Schwarzenegger has ordered agencies to immediately trim spending by 10%.In Florida, the Legislature recently took emergency steps to close a budget shortfall estimated at $2.5 billion over the next 18 months. Lawmakers raised tuition at state universities by 5%, sliced money for long-term nursing home care for the indigent, and requested that state law enforcement officers take their uniforms to be cleaned less frequently.

In Nevada, Gov. Jim Gibbons this month ordered a 4.5% across-the-board cut.

In Arizona, state Sen. Bob Burns will spend his holiday poring over a budget that looked balanced six months ago but is now in the red -- with spending nearly 10% above what the state can afford, given the anemic pace of tax collection.

"We're not even sure we're at the bottom yet," said Burns, a Republican who chairs the Senate Appropriations Committee.

"Education and healthcare are usually politically untouchable, but we have to put those on the table now. We have to include just about everything, really," Burns said. "If we don't make some serious moves in '08 and '09, we'll be out of savings. And out of gimmicks."

Though such cuts may sound dire, fiscal analysts emphasize that for most states, counties and cities, the belt-tightening follows several years of expansion. It pinches, for sure. But in many, if not most, cases, services will still be better-funded than they were during the last fiscal crises, in the late 1990s and after the terrorist attacks of 2001.

Many of the cuts are more aptly described as scaling back than slashing: States defer road improvement projects; counties close libraries an hour or two earlier; cities cancel plans to build new schools or modernize recreation centers.

"Everyone here understands that we had five incredible years when everything was escalating and revenues were free-flowing," said Amy Baker, who runs Florida's legislative office of economic and demographic research. "We couldn't continue at that pace. This is a correction."

But half a continent away in Kansas City, Mo., the correction feels like a crisis to Evelyn Craig, the executive director of reStart Inc., an interfaith ministry to the homeless. Missouri levies a $3 recording fee on all real estate documents. That money -- about $5 million in 2007 -- is used to support programs such as reStart, offering free shelter, hot meals, addiction counseling, parenting classes and other services for the homeless.

The demand for such services is rising fast as more and more families lose their homes to foreclosures. But at the same time, the state is collecting many fewer $3 fees on home sales and refinancing. Just before Christmas, Craig was notified that she would lose up to half of her organization's funding for the coming year.

"The cut's going to be just staggering," she said. "What will we do? I can't tell you."

http://www.latimes.com/news/nationworld/nation/la-na-budget31dec31,0,1654836.story?page=2

Attention Walmart Shoppers:

China Labor Law Comes Into Force; May Raise Manufacturing Costs

By Mark Lee

Jan. 1 (Bloomberg) -- China today introduces a new labor law that enhances rights for the nation's workers, including open- ended work contracts and severance pay.

``The government that is making the most concerted effort to protect workers rights is China,'' said Auret van Heerden, Geneva-based head of Fair Labor Association, which monitors work conditions in 60 countries. That ``goes against the conventional wisdom that China is leading the race to the bottom.''

Higher costs may drive manufacturers with low margins out of China, damping investment in factories that helped push inflation to a 10-year high. Olympus Corp., the world's No.4 digital camera maker, and Yue Yuen Industrial (Holdings) Ltd., the biggest maker of shoes for brands such as Nike Inc., are among companies shifting some production to Vietnam to cut costs.

``We are likely to see more factory closures next year,'' said Stanley Lau, vice-chairman of the Federation of Hong Kong Industries. The new law will make it more difficult for companies to hire temporary workers, a practice favored by exporters to cope with fluctuations in orders, he said.

The Labor Contract Law aims to improve job security for workers, making open-ended terms of employment for those who have completed two fixed terms. The legislation limits overtime, sets minimum wages and guarantees one month's pay for each year worked for sacked employees.

The new law ``will definitely raise our costs,'' said Edmund Ding, spokesman for Hon Hai Precision Industry Co. Taipei-based Hon Hai, the world's biggest contract manufacturer of consumer electronics, has 61 units in China making products including mobile phones and music consoles.

Terminating Contracts

Some companies have been terminating contracts and asking employees to resign ahead of the introduction of the law.

Huawei Technologies Co., China's largest maker of telecommunications equipment, offered about 7,000 workers new contracts with benefits if they terminated their old agreements, spokesman Ross Gan said in an e-mail.

Some employees accepted, while others chose not to sign and left, he said, without providing details. The move wasn't aimed at evading legislation, Gan said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKzXeLoq8olU&refer=home

U.S. Diplomat Killed in Sudan Shooting

By Ellen Knickmeyer
Washington Post Foreign Service
Tuesday, January 1, 2008; 11:17 AM
LINK

CAIRO, Jan. 1 -- Gunmen opened fire on a car carrying a U.S. diplomat in the Sudanese capital of Khartoum early Monday, fatally wounding the American official and his Sudanese driver, the U.S. Embassy there said.

U.S. authorities declined to immediately identify the American or comment on possible motives for the attack. The killings came a day after a U.N.-African Union force took over peacekeeping in the Sudanese region of Darfur, raising tensions in Sudan's capital over what some Sudanese see as outside interference in Darfur.

The slain American was an official with the U.S. Agency for International Development, according to Walter Braunohler, a U.S. Embassy spokesman in Khartoum.

The American and his Sudanese driver were traveling in a suburb of Khartoum early Monday at the time of the attack. The driver, 40, died during the attack or soon after. The American died Monday afternoon while receiving medical treatment in Khartoum, Braunohler said.


Braunohler said he did not know the number of gunmen involved or whether the victims had been robbed. Citing security, he refused to say whether the embassy had received increased threats before the shootings or assumed a heightened state of alert after the shootings.

Sudan's Foreign Ministry said in a statement that the killings occurred at about 4 a.m.

Alfred Taban, editor of the independent Khartoum Monitor newspaper, said the U.S. diplomat was returning home after a New Year's Eve party hosted by the British Embassy. Gunmen opened fire near the diplomat's house, Taban said.

Khartoum is not particularly known for violent crime.

On Sunday, the United Nations joined the African Union in assuming peacekeeping responsibilities for Darfur. The new hybrid force incorporated troops who were serving with the African Union mission.

The United States had supported sending U.N. peacekeepers to Darfur, where Arab tribal militias allegedly allied to the Sudanese government are accused in the deaths of hundreds of thousands of African villagers during the past five years.

Sudanese President Omar al-Bashir long resisted U.N. deployment in Darfur, and he threatened to wage "jihad" against any U.N. peacekeeping force that set foot there. But this summer he agreed to the operation.

The official start of the U.N.-African Union mission on Monday marked the greatest international involvement yet in the Darfur crisis.

"There are people who are very close to the government who are really not happy with this U.N. thing," Taban said.