Friday, November 7, 2008

Philadelphia to close libraries, cut jobs

Philadelphia to close libraries, cut jobs

Mayor says city among many facing large budget shortfalls in bad economy

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The city will close libraries and swimming pools, suspend planned tax reductions, cut more than 800 jobs and trim salaries for some administrators in order to weather "an economic storm" that could leave the city with a $1 billion shortfall, Mayor Michael Nutter said Thursday.

Nutter outlined the drastic budget cuts in a live, 10-minute televised address — a rarity that represented an attempt to convey the dire nature of the city's financial situation.

"The city must prepare for the worst," Nutter said. "Painful program and service cuts are necessary."

The city is facing a deficit of $108 million this year, and the shortfall could grow to more than $1 billion by 2013, Nutter said.

The fiscal problems stem from the same troubles overwhelming the national and global economies, he said.

Job cuts include layoffs and open positions
The city has about 23,000 employees, according to the Pennsylvania Intergovernmental Cooperation Authority, a state agency that helps oversee Philadelphia's budgets.

The job cuts include 220 layoffs and the elimination of 600 open positions.

Nutter said no firefighters or police officers will be laid off, but 200 police vacancies will go unfilled and some fire equipment will be taken out of service.

Nutter also is calling for about 2,000 employees to be put on five-day, unpaid furloughs in 2009 and 2010.

Cabinet-level officials, including deputy mayors and Nutter himself, will face salary cuts of 3.75 percent to 5 percent.

Other major cities including New York, Los Angeles and Chicago are facing similar issues, Nutter said.

Some of the changes, such as the furloughs, can be imposed without legislative approval, but other aspects will be sent before City Council. Legislation already was introduced Thursday morning to raise some city fees.

Councilman Frank DiCicco said he understands the gravity of the situation.

"I'm a realist. There is no money," DiCicco said.

Pending Sales of Existing Homes in U.S. Fell 4.6%

Pending Sales of Existing Homes in U.S. Fell 4.6%

By Shobhana Chandra

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Fewer Americans signed contracts to buy previously owned homes in September, indicating the credit crisis will inflict more damage on the housing market.

The index of signed purchase agreements, or pending home resales, fell 4.6 percent, more than forecast, to 89.2, the National Association of Realtors said today in Washington.

The housing slump may extend well into a fourth year as banks turn away borrowers, foreclosures worsen the glut of unsold homes and job losses climb. Lower property values will keep eroding home-equity, causing consumers to retrench further and reinforcing the risk of a deeper recession.

''The outlook has deteriorated,'' said David Sloan, a senior economist at 4Cast Inc. in New York, who estimated a 5 percent drop. ''The tightening of credit conditions will push pending home sales lower. We're in quite a sharp recession, and housing is part of it.''

Economists expected pending sales to fall 3.4 percent, according to the median forecast of 30 economists in a Bloomberg News survey. Estimates ranged from a drop of 6 percent to a gain of 1 percent. The jump in August was revised up to 7.5 percent from an originally reported 7.4 percent gain.

A Labor Department report today showed the U.S. unemployment rate rose to 6.5 percent in October, the highest level since 1994, and payrolls plunged by 240,000. Economists said the figures indicate the economy is heading for the steepest decline in decades.

The Realtors' group, whose data on pending sales go back to January 2001, started publishing the index in March 2005.

Northeast Slump

Three of four regions saw a drop, led by a 17 percent slump in the Northeast and a 7.9 percent decline in the South. They rose 3.7 percent in the West.

Compared with September 2007, pending resales increased 1.6 percent.

Pending resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or two later, are tallied in the existing-home sales report from the Realtors.

An earlier report from Realtors showed purchases of existing homes jumped 5.5 percent in September to a 5.18 million annual pace, the highest level in a year. Foreclosure-related sales accounted for 35 percent to 40 percent of the total, it said.

Sales of new houses also increased in September, according to a Commerce Department report on Oct. 27.

Extended Slump

Today's report signals the improvement in sales may be short-lived. The lending crisis worsened last month and persistent job losses have led consumers to retrench further. Home prices will likely keep falling, extending the housing recession well into 2009, economists predict.

Housing-related companies are bracing for prolonged weakness. Illinois Tool Works Inc., the maker of Duo-Fast nail guns and Wilsonart countertops, predicts home construction won't hit bottom until 2010 because of large inventories and tight lending.

''There are too many issues to be sorted out with both the inventory of existing homes as well as the mortgage market for us to see much change,'' Chief Executive Officer David Speer said in a Webcast yesterday. ''We're going to be in a reasonably long period -- four to six quarters -- before we would see the bottom.''

Consumer bankruptcies in October top 100,000

Consumer bankruptcies in October top 100,000

By Christine Dugas

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The sagging economy sparked 106,266 consumer bankruptcy filings in October, the first time monthly filings topped 100,000 since the bankruptcy law changed in 2005, the American Bankruptcy Institute said Tuesday.

During the first year after the new law took effect, personal bankruptcy filings plummeted dramatically, and since then, have risen gradually. In October, though, filings jumped 40% over the same month in 2007.

For the year, bankruptcy filings are expected to exceed 1 million.

"This underscores that the underlying economic problems of consumers who are facing high debts, flat incomes and now declining home values are a very powerful force that pushes people over the edge," says Samuel Gerdano, ABI executive director.

The new law had two goals — reducing filings overall and encouraging more consumers to file under Chapter 13, which requires debtors to repay creditors using a schedule established by the courts. Chapter 7 bankruptcy eliminates most debts. The new law also requires debtors to undergo credit counseling before they can seek bankruptcy court protection.

Until recently, the law seemed to accomplish those goals. Now, filings are not only rising rapidly, they're reverting to the traditionally higher rate for Chapter 7 bankruptcy filings, Gerdano says.

Now that home values are falling, many debt-laden consumers have few options. They can no longer rely on home-equity loans, for example.

So far this year, consumers have filed more than 880,000 bankruptcy petitions, eclipsing 822,000, the total for all of last year, the non-profit education and research group said. ABI used data from the National Bankruptcy Research Center in its report.

The agencies that provide pre-bankruptcy credit counseling have seen a dramatic jump in business.

"We've seen a marked increase," says Mitchell Allen, at Debt Education and Certification Foundation, which provides credit-counseling service nationwide. "Nov. 3 was our biggest day ever. We see an uptick in people who are trying to save their homes from foreclosure."

Jobs lost in 2008: 1.2 million

Jobs lost in 2008: 1.2 million

Payrolls shrink by 240,000 in October, 10th straight month of cuts. Unemployment soars to 6.5%

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The government reported more grim news about the economy Friday, saying employers cut 240,000 jobs in October - bringing the year's total job losses to nearly 1.2 million.

According to the Labor Department's monthly jobs report, the unemployment rate rose to 6.5% from 6.1% in September and higher than economists' forecast of 6.3%. It was the highest unemployment rate since March 1994.

"There is so much bad in this report that it is hard to find any silver lining," said Morgan Keegan analyst Kevin Giddis.

Economists surveyed by Briefing.com had forecast a loss of 200,000 jobs in the month. October's monthly job loss total was less than September's revised loss of 284,000. Payroll cuts in August were revised up to 127,000, which means more than half of this year's job losses have occurred in the last three months.

September had the largest monthly job loss total since November 2001, the last month of the previous recession and just two months after the Sept. 11 terrorist attacks.

With 1,179,000 cuts, the economy has lost more than a million jobs in a year for the first time since 2001 - the last time the economy was in a recession. With most economic indicators signaling even more difficult times ahead, job losses will likely deepen and continue through at least the first half of 2009.

"It's pretty clear that we're in a recession," said Robert Brusca, economist at FAO Economics. "There is reason for us to believe we'll see a drumbeat of heavy job losses for a while, and there's room for them to get even worse."

Brusca noted that separate readings on the manufacturing and auto industries indicated economic conditions are the worst in about 30 years.

"We may be in a severe recession, in which case these job numbers are not even big yet," he said, suggesting monthly job loss totals could grow in excess of 300,000 an unemployment could rise to around 7%.

Losses across the board

Job losses were spread across a wide variety of industries. Manufacturing lost 90,000 jobs, the leisure and hospitality industries cut 16,000 jobs, and construction employment shrank further by 49,000 jobs.

Terence O'Sullivan, president of construction workers' Laborers' International Union of North America, noted the construction unemployment rate rose to 10.8% - double what it was a year ago. He called the report an "urgent alarm sounding the need to halt our nation's spiraling job loss."

In an ominous sign for the upcoming holiday shopping season, retailers trimmed payrolls by 38,000 workers last month.

Professional and business services, a category seen by some economists as a proxy for overall economic activity, had a 45,000 drop in employment.

"Job loss has a big impact on the economy," Brusca said. "When people have no income, they spend less, businesses make less money, and they cut more jobs."

In another sign of weakness, a growing number of workers were unable to find jobs with the amount of hours they want to work. Those working part-time jobs - because they couldn't find full-time work, or their hours had been cut back due to slack conditions - jumped by 645,000 people to 6.7 million, the highest since July 1993.

The so-called under-employment rate, which counts those part-time workers, as well as those without jobs who have become discouraged and stopped looking for work, rose to 11.8% from from 11%, matching the all-time high for that measure since calculations for it began in January 1994.

Temporary employment, including workers employed by temp agencies, fell by 50,800 jobs last month. That could mean even more full-time payroll reductions to come, as employers often cut temporary workers before they begin cutting permanent staff.

But some industries were hiring last month. Government hiring has stayed strong throughout the downturn, adding another 23,000 jobs in October. Education and health services also grew payrolls, which grew by 21,000 employees.

In a somewhat encouraging sign, the average hourly work week did not fall last month, holding at 33.6 hours, in line with expectations. With a modest 4-cent gain in the average hourly salary, the average weekly paycheck rose by $1.35 to $611.86.

Trying to get back on track

Solutions are not simple. Support for a second stimulus package has grown in Congress, and President-elect Barack Obama has indicated that he would support such a measure. The prior stimulus package in the spring helped the economy grow in the second quarter, but it did little to stem the tide of job loss in the country. Many economists have also called on the Federal Reserve to cut rates to historic lows to encourage growth.

"These are all the right solutions, but the real question is are they enough to get the economy on the right path," said Anthony Chan, chief economist for JP Morgan private wealth management. "They're necessary, but we don't yet know if they're sufficient."

President Bush said Friday the government's plans to address tight credit and housing markets are the solution to rising unemployment.

"The Federal government has taken aggressive and decisive measures to address this situation," the President said. "It will take time for these measures to have their full impact on an economy in which many Americans are struggling."

Chan said the programs will work, and that the government needs to continue to "slug it out," perhaps putting even more stimulus programs in place to encourage job growth.

The Escalation of the New Arms Race!

The Escalation of the New Arms Race!

By Rev. Richard Skaff

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The winning of Barack Obama in the US presidential election signaled a possible shift in international policy from anti-Islamism back to anti-Russian-ism and prospective anti-Chinese-ism.

The myth of Al Qaeda will be replaced by a new monster to slay, namely, the Russian Bear.

Obama’s national security Adviser will be the lifetime CFR member, Rockefeller henchman, and the architect of the Mujahedeen ”Zbigniew Brzezinski.”

The Polish Zbigniew has always harbored a strong dislike and resentment toward the Russians, and his policy has always been hostile against them.
When it comes to the Chinese meteoric economic rise on the global stage with the aid of the West, which also coincided with the decline of Japanese influence by accident or by design, Zbigniew the soothsayer will certainly anticipate future conflict between the Chinese regional power and the US superpower. As a result, the Asian Pacific Union will be completed and strengthened to contain a future ogre that the Anglo-American Military Industrial Complex has to defeat.

Henry Kissinger will have to wait this time until the next Republican candidate wins back the white house, because his partner Zbig is back.

Henry Kissinger and Zbignew Brzezinsky have been involved as presidential advisers and foreign policy makers in every administration for the last forty years, to ensure the policies of the Rockefellers’ and their global partners are implemented.

As JP Morgan once enunciated that it is essential to have a foot in every camp, so the money masters have Henry for the Republicans and Zbigniew for the democrats.

Historically, every American administration sets the stage for the next one, and every new president will complete what his predecessor has started. The recent war in Georgia, as well as the ballistic missiles pact that binds Poland and the Czech Republic to the US has set the stage for Obama’s advisers to choreograph the next conflict with the Russians.

Sure enough the Russians are responding with escalating rhetoric and threats. On Wednesday, 11-05-08 the Russian President Dmitry Medvedev stated in his first state of the nation address to parliament that Russia would deploy short-range Iskander missile systems in its exclave of Kaliningrad "to neutralize if necessary the anti-ballistic missile system in Europe." [1].

Anatoly Tsyganok, head of the Moscow-based Military Forecast Center stated that the deployment of Iskander missile systems with a range of 500 km (310 miles) [in the Kaliningrad region] would allow Russia to target the entire territory of Poland and also parts of Germany and the Czech Republic. [1].

So here we are, once again, a new American administration, a new conflict, a new monster to quell, and a new arms race.

The new face in the White House who was chosen for us to elect will only bring the public vague promises, different rhetoric, additional newspeak, but no true change; instead what we get is more erosion of our personal and national sovereignty as well as the identical revolving advisers and policy makers, and more of the same.

Two-Month Decline in Jobs Reaches 524,000

Two-Month Decline in Jobs Reaches 524,000

by: Dean Baker

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The broad U-6 measure of labor market slack is at its highest level since January 1994.

The loss of 240,000 jobs in October, coupled with a job-loss figure for September that was sharply revised upward to 284,000, brought the two-month decline to 524,000. The private sector lost 263,000 jobs in October, for a two-month total of 506,000. This is the sort of sharp decline in employment that is typical for recessions. The unemployment rate jumped to 6.5 percent in October, the highest rate since March of 1994.

Almost all the news in this report was negative. In the addition to the sharp rise in unemployment, there was also a sharp increase in the number of people involuntarily working part-time. This rose by 544,000 in October, bringing the two-month rise to a record 844,000. The U-6 index, the broadest measure of labor market slack, rose to 11.8 percent, tying the rate for January 1994 (when the measure was first established) as the highest on record.

There were also big increases in all the measures of unemployment duration. The percentage of long-term unemployed (more than 26 weeks) rose by 1.2 percentage points to 22.3 percent. It had been 17.9 percent a year ago. The average duration of unemployment increased by 1.3 weeks to 19.7 weeks. The two-month rise of 2.3 weeks in average duration is the sharpest increase ever.

Younger workers continue to be hardest hit as employment is still rising among workers over age 55. Employment of workers between the ages 35 and 44 fell by 2.6 percent over the last year. It fell by 2.0 percent for workers age 20 to 24, and it dropped 1.5 percent for workers age 25 to 34.

There is virtually no positive news in the establishment survey as almost every major sector lost jobs. Construction lost 49,000 jobs in October, as both residential and nonresidential construction are now shedding workers at a rapid rate. The two nonresidential categories together lost 17,300 jobs in October after losing 19,200 jobs in September. With considerable overbuilding in the nonresidential sector, this rate of job loss is likely to continue well into 2009.

Manufacturing lost 90,000 jobs in October, although this number was inflated by the 27,000 workers on strike at Boeing. Even after correcting for these workers, the sector has still lost 180,000 jobs over the last three months and 490,000 jobs over the last year (3.6 percent of total employment). With the recent run-up in the dollar hurting trade, it is unlikely that this job loss will be reversed any time soon.

Retail trade lost 38,100 jobs, with auto dealers accounting for 20,300 of the lost jobs. Employment in car dealers is only down by 7.0 percent from year ago levels. Much sharper declines are likely as employment adjusts to the fall in car sales.

Employment services shed 50,800 jobs in October, bringing the drop over the last year to 367,600 (10.3 percent). This is an indication that employers expect to need fewer workers in the near future. The government sector added 23,000 jobs in October, but this followed a sharp downward revision of 60,000 to the job growth numbers for the prior two months. Most of the revision was attributable to a drop of 49,900 in the number of jobs reported in local government education.

Health care was the one sector that continues to add jobs at a healthy rate, adding 26,000 jobs in October. This sector has added 347,800 jobs over the last year.

In addition to the decline in employment, the number of hours worked appears to be edging downward with the average workweek averaging 33.6 hours in the last two months, compared to 33.7 hours the prior four months, and 33.8 hours a year. The index of aggregate weekly hours is almost a full percent below its July level.

With energy prices falling, nominal wage growth is now modestly outpacing inflation, having risen at a 3.3 percent annual rate over the last quarter. But it is clear that workers' buying power will be dropping due to the fall in employment. With the loss of housing equity putting a lid on borrowing, consumption is virtually certain to fall much further in the months ahead.

Bush officials moving fast to cut environmental protections

Bush officials moving fast to cut environmental protections

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In the next few weeks, the Bush administration is expected to relax environmental-protection rules on power plants near national parks, uranium mining near the Grand Canyon and more mountaintop-removal coal mining in Appalachia.

The administration is widely expected to try to get some of the rules into final form by the week before Thanksgiving because, in some cases, there's a 60-day delay before new regulations take effect. And once the rules are in place, undoing them generally would be a more time-consuming job for the next Congress and administration.

The regulations already have had periods of public comment, and no further comments are being taken. The administration has proposed the rules and final approval is considered likely.

It's common for administrations to issue a spate of regulations just before leaving office. The Bush administration's changes are in keeping with President Bush's overall support of deregulation.

Here's a look at some changes that are likely to go into effect before the inauguration.

GRAND CANYON

Higher prices for uranium, driven by expanded interest in nuclear power, have resulted in thousands of mining claims being filed on land within three miles of the Grand Canyon.

The House of Representatives and Senate natural resources committees have the authority under the Federal Land Policy and Management Act to order emergency withdrawals of federal land from future mining claims for three years, while Congress decides whether a permanent ban is needed. The House committee issued such a withdrawal order in June for about 1 million acres near the Grand Canyon, including the land the claims were filed on.

Now the Department of Interior has proposed scrapping its own rule that puts such orders from the congressional committees into practice.

The Interior Department could decide to use its own power to halt new claims, but it doesn't see any emergency that would prompt such action, department spokesman Chris Paolino said. The department would require environmental impact studies before it approved any mining on the claims, he added.

One of the main hazards from uranium mining is seepage from tailings piles that poisons water. A report for the Arizona Department of Game and Fish said people would be at risk if they ingested radium-226, arsenic and other hazardous substances from water and tainted fish.

Environmental groups say the government must consider the possible danger of uranium leaching into the Colorado River, a source of drinking water for Phoenix, Las Vegas and Los Angeles. Arizona Gov. Janet Napolitano in March urged Interior Secretary Dirk Kempthorne to halt new claims and order a study of uranium mining near the canyon.

MOUNTAINTOP-REMOVAL COAL MINING

Another proposed rule change from the Department of Interior would change rules on dumping the earth removed for mining into nearby streams.

The current rule, dating from the Reagan administration, says that no surface mining may occur within 100 feet of a stream unless there'd be no harm to water quality or quantity. The rule change essentially would eliminate the buffer by allowing the government to grant waivers so that mining companies can dump the rubble from mountaintops into valleys, burying streams.

The new rule would let companies explain why they can't avoid dumping into streams and how they intend to minimize harm. A September report on the proposal by the department's Office of Surface Mining said that environmental concerns would be taken into account "to the extent possible, using the best technology currently available."

The government and mining companies have been ignoring the buffer since the 1990s, said Joan Mulhern, an attorney with Earthjustice, a nonprofit law firm for environmental protection.

Before the rule can be changed, however, the Department of Interior must get written approval from Environmental Protection Agency Administrator Stephen Johnson.

"In order to concur, the EPA would have to find that the activities authorized by the rule would not violate water-quality standards, and all the evidence is to the contrary," Mulhern said.

AIR POLLUTION

Two rule changes would apply to electric power plants and other stationary sources of air pollution.

The first mainly concerns older power plants. Under the Clean Air Act, plants that are updated must install pollution-control technology if they'll produce more emissions. The rule change would allow plants to measure emissions on an hourly basis, rather than their total yearly output. This way, plants could run for more hours and increase overall emissions without exceeding the threshold that would require additional pollution controls.

The other change would make it easier for companies to build polluting facilities near national parks and wilderness areas. It also would change the way that companies must measure the impact of their pollution.

ENDANGERED SPECIES

The Endangered Species Act prohibits any federal actions that would jeopardize the existence of a listed species or "adversely modify" critical habitats. The 1973 law has helped save species such as the bald eagle from extinction.

Bush administration officials have argued that the act can't be used to protect animals and habitats from climate change by regulating specific sources of greenhouse gas emissions.

A proposed rule change would allow federal agencies to decide for themselves whether timber sales, new dams or other projects harm wildlife protected under the act. In many cases, they'd no longer have to consult the agencies that are charged with administering the Endangered Species Act, the Fish and Wildlife Service and the National Marine Fisheries Service.

OTHERS

Among the rule changes and plans that might become final are commercial oil-shale leasing, a new rule that would allow loaded, concealed weapons in some national parks, and oil and gas leasing on wild public lands in West Virginia and Utah.

Europe plunges into recession

Europe plunges into recession

By Chris Marsden
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The European Central Bank yesterday cut interest rates for the second time in less than a month. The ECB, meeting in Frankfurt, cut the benchmark lending rate by half a percent, to 3.25 percent from 3.75 percent, and is predicted to cut the rate to 2.5 percent by April.

Prior to the move by the ECB, the Bank of England made a shock decision to cut interest rates in the UK by 1.5 percent to 3.0 percent, its lowest rate since 1955.

The interest rate cuts are yet another attempt to stimulate the economies of Europe, amidst reports that the continent was entering a recession and had already suffered its worst slump for 15 years.

All previous measures to encourage banks to step up lending to pump-prime the economy have failed. The euro-zone economies have committed a combined US$1.7 trillion to protect the region's banks and this does not include measures taken such as Britain's £500 billion package and other stimulus measures such as German Chancellor Angela Merkel's proposal to inject €50 billion into the economy. Even so, interest rate cuts have often not been passed on and banks have been depositing record amounts of money overnight with the ECB rather than lending to each other, even after they have been given hundreds of billions in taxpayers' money.

In its half-year report issued Tuesday, the European Commission admitted that the 15-member euro-zone economy—worth US$12.2 trillion—was probably already in recession for the first time since the currency's inception in 1999.

The euro-zone's economy—both the manufacturing and service industriescontracted by 0.2 percent in the three months to July and would probably continue to contract for the next two quarters. The commission statement said, "In 2009, the EU economy is expected to grind to a standstill."

Joaquin Almunia, European economic and monetary affairs commissioner, warned, "The horizon that this forecast offers is dark."

In an extraordinary admission of incompetence and bewilderment, euro-zone chairman Jean-Claude Juncker told the European Parliament in Brussels, "Recession awaits us, and we didn't think that recession lay in waiting. We were badly mistaken with the different sequences of this crisis.... The headwinds we were facing turned into a veritable storm."

According to the EC, the Irish, Spanish and UK economies will all contract next year, while Germany (Europe's largest economy), France and Italy will stagnate. Growth in 2009 is projected at just 0.1 percent. For 2010, the commission predicted the euro-area economy would expand by 0.9 percent.

Investment is set to fall amid slowing demand and tightening credit standards. Unemployment will rise to 8.4 percent next year across the euro-zone from 7.5 percent in September and will rise still further in 2010. Budget deficits are also expected to widen. Executive and consumer confidence has slumped to a 15-year low.

Economists at BNP Paribas and Citigroup said the EU was still overly optimistic and predicted that the euro-area economy will shrink next year. Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Plc in London agreed, stating, "Today's new GDP forecast of 0.1 percent for 2009 by the European Commission still looks too optimistic to us.... A recession in 2009 seems now unavoidable."

Neville Hill, economist with Credit Suisse in London, was more specific, predicting the economy would shrink by 0.3 percent next year. "The idea that the euro-zone will not see negative year-on-year growth seems contradictory to all the data," he said. "We're in the midst of one of the most synchronised global recessions we've ever seen."

French Prime Minister Francois Fillon also admitted that France, the euro-zone's second largest economy, faces "a context of quasi-recession."

The European Union leaders are meeting today to formulate a recovery plan and to hopefully coordinate their position before a summit of world leaders hosted by President George W. Bush on November 15. Speaking for the EU, Economic and Monetary Affairs Commissioner JoaquĆ­n Almunia urged, "We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector."

But there remains widespread concern that the EU has not been able to formulate such a combined response to the financial crisis and will not be able to do so now that the recession is hitting the manufacturing sector. All measures taken so far have been purely national in scope and have the impact of plunging the economy into beggar-thy-neighbour competition for markets and investment. Germany, which alone has not suffered a rise in employment, in particular wants to utilise its economic advantage against its rivals and has opposed any cross-border response.

Euro-zone manufacturing activity sank to record lows in October, with output, new orders and the number of purchases falling at the steepest rate in 11 years. This is the fifth consecutive month of a contraction in manufacturing.

The Markit Euro-zone Purchasing Managers' Index for the manufacturing sector fell to 41.1, a record low. All countries within the euro-zone saw new orders and manufacturing output fall, with Germany, France, Italy, Spain, Austria and Ireland experiencing record falls. The Markit index for the service sector also revealed that activity in October fell to its lowest level since the index was first compiled a decade ago.

"The surveys continue to show record pessimism," said Guillaume Meneut of Merrill Lynch.

Retail sales also fell in September by 0.2 percent from August, and by 1.6 percent compared to September 2007. Of the 15 euro-zone economies, Germany suffered the biggest drop in retail trade from August, falling 2.3 percent. The biggest annual fall came in Spain, where spending has fallen 7.1 percent.

New-car registrations, a major indicator of economic health, have fallen in Germany, France, Spain and the UK. The number of newly registered cars in Germany fell by 8 percent in October. Orders for new cars in Germany dropped 12 percent. Car exports declined 10 percent last month, while foreign orders fell by 24 percent. French car sales fell by 7 percent. New-car sales in the UK were down by 23 percent from October last year, the largest monthly fall in 17 years. Spanish car sales have fallen by fully 40 percent.

European companies also cut jobs at the fastest rate since January 2002. Stocks of finished goods awaiting sale reached a record high. Even as the report was issued, shares across Europe were in a steep decline that has continued against a background of even bigger falls in Asia and the United States.

The economic crisis is leading to a massive rise in job losses. Ireland's unemployment reached its highest level in a decade in October, at 6.7 percent. Unemployment in Spain has reached a 12-year high of 11.9 percent, an increase in the number of those claiming jobless benefit of 37.5 percent.

Unemployment in Britain is set to reach 7.1 percent, according to the EC, which predicts that the UK will be the worst-hit economy in Europe. Unemployment will increase by 25 percent in 2009 to 2.25 million. The commission predicted a contraction in the UK of 1 percent and revised its prediction on unemployment upwards by almost 1.5 percent. Only Estonia and Latvia are expected to suffer deeper recessions next year.

The commission's report spoke of a "budget deficit and debt spiral," with the budget deficit rising to 5.6 percent of GDP next year, about £80 billion, and 6.5 percent, or £94 billion, in 2010. New figures from the Halifax showed house prices fell by another 2.2 percent in October, pushing the drop in house prices to 13.7 percent annually. Activity in the service sector shrank in October for the sixth month in a row. Services are the backbone of the UK economy, accounting for more than half the GDP. Manufacturing also shrank by 1.3 percent in the last quarter and has fallen for seven consecutive months.

US, world stock markets plummet on global recession forecasts

US, world stock markets plummet on global recession forecasts

By Patrick O’Connor

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Share markets in the US and internationally have again fallen sharply in response to more data indicating the world economy is headed for a severe and prolonged recession. In the US yesterday, the benchmark Dow Jones Industrial Average closed 443 points lower, after losing 486 points on Wednesday. The combined decline of 9.7 percent is the largest two-day fall since the crash of October 1987.

Share markets closed lower yesterday around the world. Britain's leading FTSE 100 index lost 5.7 percent, the CAC 40 in Paris fell by 6.3 percent, and in Germany the DAX declined by 6.8 percent. In Asia, Tokyo closed 6.5 percent lower, Hong Kong 7.1 percent, and Sydney 4.3 percent.

Among the sharpest indications of the worsening state of the world economy is the revised International Monetary Fund (IMF) October "World Economic Outlook" report released yesterday. The IMF forecast that the combined gross domestic product (GDP) of the world's advanced economies would shrink by 0.3 percent in 2009—the first such retraction experienced since 1945.

The US is forecast to decline by 0.7 percent, Japan by 0.2 percent, Britain by 1.3 percent, and the Eurozone by 0.5 percent. The combined 0.3 percent estimated decline is substantially worse than the IMF's previous forecast, issued just one month ago, which anticipated 0.5 percent growth. The IMF also lowered expected overall 2009 world growth from 3 percent to 2.2 percent, due to slowing—though still positive—GDP growth in developing economies.

One of the key factors in the world downturn is the collapse in US consumer confidence. Consumer spending—which accounts for more than two thirds of all GDP activity in the world's largest economy—has been hit by mounting job losses, declining real wages, the rising cost of living and restricted access to credit.

Most leading US retailers yesterday reported a double-digit drop in October sales. Luxury department store Neiman Marcus reported the largest decline of 27.6 percent; others included Abercrombie & Fitch (down 20 percent), the Gap (16 percent), and Nordstrom (15.7 percent). Many discount retail chains also saw lower sales last month, with Target down 4.8 percent. Wal-Mart was one of the few retailers to buck the trend, with sales finishing 2.4 percent higher. This was attributed to more people trying to save money by shopping at the low-cost, bulk supply retailer.

Further evidence of slowing US economic activity came with the release of the Institute for Supply Management's (ISM) factory index. The manufacturing measure fell to 38.9 in October, from 43.5 in September, with sub-50 regarded as indicating a contraction.

The ISM also found that export orders were the weakest recorded since 1988, when such data was first collected. "The domestic economy was already weak, and we were kind of hitching a ride on the overseas economy," Brian Bethune, chief economist at IHS Global Insight, told Bloomberg News. "That beacon of light from overseas economies has basically burned out."

Labor Department figures released yesterday showed the number of people receiving unemployment benefits increased by 122,000 in late October, bringing the total to 3.84 million. This figure was significantly higher than analysts' reported expectation of a total of 3.74 million, and is the highest level recorded since February 1983.

The government figures recorded that "real compensation per hour"—that is, hourly wages after inflation—fell by 1.9 percent in the third quarter, the third quarter in a row in which real wages have declined.

The Labor Department also recorded a 2.7 percent fall in the third quarter hours of work. This is the fifth consecutive quarter of decline, indicating that businesses are continuing to eliminate shifts and cut back on overtime to try to reduce costs.

The assault on workers' jobs, wages, and conditions is set to accelerate in the next period. A report issued Wednesday by outplacement firm Challenger, Gray & Christmas found that planned layoffs reached their highest level in nearly five years last month. "A year ago, job cuts were concentrated in the financial sector and home-building industries," John Challenger, the company's CEO, told Reuters. "Job cuts are now rising across the board."

The retail sector is preparing for the worst holiday sales season in two decades. Yesterday, toy maker Mattel announced it was cutting 1,000 jobs, or 3 percent of its workforce.

Job losses continue to mount in the financial sector. Fidelity Investments announced yesterday that it was laying off 1,300 employees this month, or almost 3 percent of its total workforce. Another round of layoffs is planned for the first quarter of 2009, with up to 4,000 more jobs reportedly at risk.

The auto industry crisis continues to see near-daily mass layoff announcements. Auto parts supplier Dana Holding Corp. said yesterday that it will soon close up to 10 plants and lay off 5,000 workers, 2,000 more than previously anticipated, equivalent to more than 15 percent of the company's total workforce. So far, the Ohio-based company has only identified one of the ten plants slated for closure—a drive shaft plant in Quebec, Canada.

Japanese auto giant Toyota has reported a 69 percent fall in net profits for the second quarter, the first decline recorded in nine years. The company warned it would barely break even in the second half of 2008 amid falling world vehicle sales. "The financial crisis is negatively impacting the real economy worldwide, and the automotive markets, especially in developed countries, are contracting rapidly," Toyota executive vice president Mitsuo Kinoshita declared. "This is an unprecedented situation."

US auto sales last month were the lowest in 25 years. Analysts continue to speculate whether one of the Big Three auto makers will collapse. Ford, Chrysler, and General Motors (GM) executives are now in Washington for discussions with senior law makers, including Democratic House Speaker Nancy Pelosi.

Chrysler and GM are especially desperate to secure billions of dollars in public money to finance a proposed merger that will see the destruction of tens of thousands more jobs. On Wednesday, the Center for Automotive Research estimated that if the Detroit automakers cut their operations by 50 percent, 2.5 million jobs could be lost within 12 months.

As the American working class is experiencing the greatest attack on its living conditions in generations, the financial elite responsible for the economic crisis continues to enrich itself.

The Wall Street Journal yesterday published an extraordinary article headlined "On Street, the Incredible Shrinking Bonus", sympathetically reporting that bonuses for banking, investment, and brokerage firm executives may have reduced by 20 to 50 percent from last year. The Journal noted, however, that even in "particularly hard-hit areas such as structured credit, which churned out collateralized debt obligations that blew holes in many Wall Street balance sheets," managing directors could still be taking home bonuses of between $750,000 to $950,000.

Even those executives who share responsibility for destroying their own companies can expect lucrative rewards this year.

The now bankrupt Lehman Brothers, having recorded an official net income loss of more than $2 billion for 2008, will still pay out annual bonuses of about $2.5 billion. Merrill Lynch, which has since been sold off to the Bank of America, having recorded a net income loss of nearly $12 billion in 2008, will pay employees more than $6 billion in bonuses. According to the Journal, the firm earned just $3.05 billion from 2002 through to the third quarter 2008, but paid out $52.4 billion in bonuses over the same period.

This report follows the earlier revelation that nearly one-third of the $125 billion in public money to the nine largest US banks will be handed over to company executives as private compensation and pensions amassed up to the end of 2007. (See "Wall Street's Great Heist of 2008")

Wall Street Fat Cats Are Trying to Pocket Billions in Bailout Cash

Wall Street Fat Cats Are Trying to Pocket Billions in Bailout Cash

By Nomi Prins

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The election results pretty much confirmed the extent to which Main Street is rightly livid about the Wall Street mentality that led to our financial crisis. During his historic victory speech, President-elect Barack Obama told supporters, and the rest of the world, "If this financial crisis taught us anything, it's that we cannot have a thriving Wall Street while Main Street suffers."

But, it seems that Wall Street didn't get that memo. It turns out that the nine banks about to be getting a total equity capital injection of $125 billion, courtesy of Phase I of The Bailout Plan, had reserved $108 billion during the first nine months of 2008 in order to pay for compensation and bonuses (PDF).

Paying Wall Street bonuses was not supposed to be part of the plan. At least that's how Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson explained it to Congress and the American people. So, on Oct. 1, when the Senate, including Obama, approved the $700 billion bailout package, the illusion was that this would magically loosen the credit markets, and with taxpayer-funded relief, banks would first start lending to each other again, and then, to citizens and small businesses. And all would be well.

That didn't happen. Which is why it's particularly offensive that the no-strings-attached money is going to line the pockets of Wall Street execs. The country's top investment bank (which since Sept. 21 calls itself a bank holding company), Goldman Sachs, set aside $11.4 billion during the first nine months of this year -- slightly more than the firm's $10 billion U.S. government gift -- to cover bonus payments for its 443 senior partners, who are set to make about $5 million each, and other employees.

Whereas Wall Street may not believe in higher taxes for the richest citizens, it does believe in higher bonuses for the head honchos. No matter what the market conditions are on the outside, steadfast feelings of entitlement tend to prevail.

Last year, when the financial crisis was just brewing, the top five investment banks paid themselves $39 billion in compensation and bonuses, up 6 percent over 2006. Goldman's CEO, Lloyd C. Blankfein, bagged a record bonus of $60.7 million, including $26.8 million in cash. That amount was nearly double the $38 million that Paulson made at the firm in 2005, the year before he became the Treasury secretary, a post for which he received unanimous approval from the Senate on June 28, 2006.

Two of those firms, Bear Stearns and Lehman Brothers, went bankrupt this year. Bank of America is acquiring a third, Merrill Lynch. Shares in the remaining two, Morgan Stanley and Goldman Sachs, took a 60 percent nosedive this year.

Yet, that didn't stop their campaign contribution money from spewing out. Goldman was Obama's largest corporate campaign contributor, with $874,207. Also in his top 20 were three other recipients of bailout capital: JP Morgan/Chase, Citigroup and Morgan Stanley.

Last week, House Oversight Committee Chairman Henry Waxman, D-Calif., gave the bailout capital recipient firms until Nov 10 to come up with some darn good reasons to be paying themselves so much (PDF). Specifically, he requested detailed information on the total and average compensation per year from 2006 to 2008, the number of employees expected to be paid more than $500,000 in total compensation, and the total compensation projected for the top 10 executives.

Similarly, New York state Attorney General Andrew Cuomo demanded information about this year's bonuses, including a detailed accounting of expected payments to top management and the size of the firms' expected bonus pool before and after knowing that they would be recipients of taxpayer funds.

The deadline Cuomo set for receiving bonus records was Nov. 5. Predictably, the firms in question requested more time as the date approached -- it takes a while to massage numbers, after all.

Meanwhile, they have been subtly releasing data to the media regarding how much lower bonuses will be this year, in order to combat inspection and criticism. This is Wall Street in its best defense mode, projecting an aura of accommodation and self-pity (because it's shedding jobs, too), in order to maintain a status quo state of self-regulation.

House Financial Service Committee Chairman Barney Frank is holding his own oversight hearing on the matter next week, having announced that "any use of the these funds for any purpose other than lending -- for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. -- is a violation of the terms" of the bailout plan.

Banks are going to tell Congress that of course they won't use that $125 billion for bonuses -- it will go to shoring up balance sheets and for acquisitions just like they promised. And bonus money will come from earnings, as it always does.

If it sounds like accounting mumbo-jumbo, that's because it is. It doesn't matter where in the balance sheet capital comes from or goes, the point is there's more of it because of taxpayer redistribution in the wrong direction than there would have been otherwise, and that's not just. This begs the larger question: Why pay bonuses in a year of massive financial destruction, anyway?

"Exactly," says Gar Alperovitz, co-author, with Lew Daly, of the new book Unjust Deserts. "We're making homeowners take a big hit, and if there's any justification for any of these bonuses -- which is dubious -- sharing that burden is important."

But that's not quite the sharing that Wall Street wanted from the bailout package. Yet, if "change has come to America," as per Obama's promise, then it's high time for Wall Street to shoulder its part -- starting with this bonus season. A decisive move by Obama on this topic would go a long way toward solidifying the central promise of his campaign.

Jobless claims higher than expected Number of Americans filing for unemployment insurance reaches 481,000, those continuing to receive benefits at 25-

Jobless claims higher than expected

Number of Americans filing for unemployment insurance reaches 481,000, those continuing to receive benefits at 25-year high.

By Lara Moscrip

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The number of Americans filing new claims for unemployment insurance last week was higher than economists expected, and the number continuing to collect benefits shot to a 25-year high.

The U.S. Department of Labor reported Thursday that initial filings for state jobless benefits reached 481,000 for the week ended Nov. 1.

While that was down 4,000 from the revised 485,000 reported the week before, it was above the 476,000 claims expected by economists surveyed by Briefing.com. The prior week was revised up by 1,000 to 479,000.

The report shows the number of Americans continuing to collect unemployment benefits surged to 3,843,000, the highest level since 1983. The number increased by 122,000 for the week ended Oct .18, the most current data available. A year ago, the number stood at 2.59 million.

The 25-year high level of continuing claims outweighs the slight drop in initial jobless claims, according to Bob Brusca, economist at FAO Economics.

"It's a problem," he said. "The labor market is not looking good at all. The small back off, that's not great...initial claims have fulfilled any expectation you have of them for a normal or severe recession."

The four-week moving average of unemployment claims, used to smooth fluctuations in the data, remained unchanged at 477,000 from the previous week. A reading above 400,000 has been present during the past two recessions. A year ago, the four-week moving average was 324,000.

Last week, nearly 7,500 jobless claims were attributed to the effects of Hurricanes Ike and Gustav, but no such claims were reported this week.

The number of jobless claims spiked in late September to 499,000, the highest level recorded since the 517,000 claims filed in wake of Sept. 11 terrorist attacks.

Job cuts

On Wednesday, a private outplacement firm reported that last month had the highest number of pink slips handed out since January 2004. The job cut announcements soared to 112,884, up 19% from September's 95,094 cuts, according to Challenger, Gray & Christmas Inc.

Separately, payroll manager ADP said the private sector lost a seasonally adjusted 157,000 jobs last month - more than six times September's decrease and the largest drop since December 2001.

The Department of Labor's monthly unemployment report due Friday is expected to show that 200,000 jobs were lost in October and that the unemployment rate grew to 6.3% from 6.1% a month earlier.

President-elect Barack Obama has put forth a few economic stimulus proposals, which may gain bipartisan support.

Some of his ideas include temporarily exempting the unemployed from having to pay income tax on their unemployment benefits, extending unemployment benefits, spending more on infrastructure to create jobs, and temporary tax credits for businesses that create jobs in the United States.

Retailers had the weakest October in at least 39 years

Holiday outlook turns grimmer after dismal October

Holiday outlook turns grimmer after stores report weakest October since at least 1969

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Retailers suffered through the weakest October in at least 39 years, despite frenzied price cutting as they desperately try to pull in consumers who are too worried about their finances to shop.

The sales tallies from major retailers on Thursday -- many showing declines of 10 percent or more -- suggests that shoppers will remain skittish through the holiday season, buying presents for children but not much else.

"There was every reason for consumers not to shop," said Walter Loeb, a New York-based retail consultant. "Layoffs are rising, the stock market is tumbling. Consumers are feeling poorer."

One of the few bright spots was Wal-Mart Stores Inc., whose results show how much frugal consumers are focusing on necessities. The world's largest retailer also said it will cut prices on items from toys to laptops over the next seven weeks. Department store J.C.Penney Co. is also offering extended hours and markdowns of up to 60 percent this weekend.

The stunning and rare drop in sales last month, following an already weak September, showed the toll the financial crisis is taking on all shoppers, from teens to the affluent, and analysts expect no recovery until at least the second half of 2009.

Not even receding gas prices -- their rise a cause of angst for shoppers just a few months ago -- are expected to provide much relief for the holidays as consumers fixate on shriveling retirement funds and job security amid widespread layoffs. The number of people continuing to receive jobless benefits reached its highest level in more than 25 years, according to government figures released Thursday.

All of that is fueling more concern about the retail industry, which is expected to report its sixth consecutive quarter of profit declines when it reports third-quarter results this month. A growing number of merchants are facing a do-or-die holiday season, having already seen competitors like Mervyns LLC and Linens 'N Things forced to liquidate.

Loeb now predicts that total retail sales for the November-December period could drop 1 percent, compared with his original growth estimate of 0.5 percent. That would be the worst performance he's seen since at least the 1970s.

He says shoppers may focus on buying presents for children and skimp for most everyone else.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, described October's performance as "awful."

"This reflects the severity of the current financial crisis," he said.

According to the ICSC-Goldman Sachs index, sales fell 0.9 percent, the weakest October performance since at least 1969 when the index began. That compares to a 1 percent gain in September and is well below the 1.8 percent average pace so far this fiscal year, which for retailers begins in February. Niemira said October's decline is the first non-Easter related drop since at least 1986.

Excluding Wal-Mart, the October sales number was down 4.6 percent. The index is based on same-store sales, or sales at stores opened at least a year, which are considered a key indicator of a retailer's health.

As a result, Niemira now expects same-store sales for the combined November and December period to rise 1 percent; his original forecast was for growth of 1 percent to 2 percent.

Wal-Mart posted a 2.4 percent gain in same-store sales, better than the 1.6 gain projected by analysts surveyed by Thomson Reuters. Including fuel sales, they were up 2.5 percent. But Target Corp. -- which has lagged behind Wal-Mart because of its heavier emphasis on nonessentials -- posted a 4.8 percent drop, worse than the 2.8 percent decline expected.

"We expect the recent challenging sales environment to continue into the holiday season and beyond as a result of the economic factors currently affecting consumer spending," Target's President and Chief Executive Gregg Steinhafel said in a statement.

Even Costco Wholesale Corp, hurt by currency effects, reported a 1 percent decline in October, compared with the 3.6 percent gain Wall Street projected.

But most mall-based stores fared even worse, reporting double-digit percentage sales declines. Penney reported a 13 percent drop in same-store sales at its department store business and cut the top end of its profit outlook. Macy's Inc. posted a 6.3 percent drop.

Luxury stores were hit hard as affluent shoppers cut back on designer clothing amid rising layoffs on Wall Street and shrinking bonuses. Nordstrom posted a 15.7 percent drop in same-store sales, while Saks Inc., which operates Saks Fifth Avenue, recorded a 16.6 percent drop. Saks also said it expects a "significant" decrease in profit margins for the third and fourth quarters as it ramps up discounting.

Even teens stayed away from malls. American Eagle Outfitters Inc. announced a 12 percent drop in same-store sales, while Abercrombie & Fitch Co. suffered a 20 percent drop.

U.S. to Sell $55 Billion in Long-Term Debt Next Week

U.S. to Sell $55 Billion in Long-Term Debt Next Week

By Rebecca Christie and John Brinsley

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The U.S. Treasury said it plans to sell $55 billion in long-term government debt this quarter and bring back auctions of three-year notes, as a slowing economy balloons the budget deficit to a record level.

The Treasury's quarterly refunding of longer-dated securities is the biggest in four years. Three-year notes, which had been suspended since May 2007, will now be issued on a monthly basis, the department said in Washington today. The government will also increase the frequency of 10-year and 30- year debt auctions.

Borrowing needs have surged in the wake of higher spending, a $700 billion financial rescue plan and plunge in tax receipts amid what economists estimate may be the worst recession since the early 1980s. Debt issuance may increase further after bond trading firms this week predicted the budget shortfall will more than double to $988 billion in 2009.

''These are highly uncertain times,'' Karthik Ramanathan, head of the Treasury's debt management, said in a press briefing. He said private deficit estimates ''vary greatly, and the marketable borrowing estimates are even broader,'' ranging from a projected shortfall this year of $1.1 trillion to $2.1 trillion.

The Treasury plans to auction $25 billion in three-year notes on Nov. 10, $20 billion in 10-year notes Nov. 12 and $10 billion in 30-year bonds Nov. 13, the department said.

Most Since 2004

The total was in line with analysts' forecasts and was the largest quarterly figure since the first three months of 2004. The department last quarter said it was considering a second reopening of the 10-year note and a move to quarterly new issues of 30-year bonds.

In a Bloomberg News survey of six analysts, the median estimate predicted $25 billion in three-year note sales, $20 billion in 10-year-note sales and $8 billion in bond sales.

Three months ago, the Treasury's announced quarterly sales of $17 billion in 10-year notes and $10 billion in reopened 30- year bonds.

''We will continue to monitor projected financing needs and make adjustments as necessary including, but not limited to, the reintroduction or establishment of other benchmark securities,'' Ramanathan said in a statement.

The Bush administration's most recent budget forecast, issued in July, projected a $482 billion deficit for the 2009 fiscal year, which started Oct. 1. Since then, the government has taken over mortgage companies Fannie Mae and Freddie Mac, intervened to save insurance company American International Group Inc., and embarked on the bank rescue program.

$550 Billion

As a result, borrowing needs are expected to rise to a record $550 billion in the three months to Dec. 31, the Treasury said Nov. 3. That follows a $530 billion record in the July to September quarter.

''From a fiscal perspective, borrowing requirements have steadily increased,'' the Treasury said in charts prepared for its advisory committee meeting. ''The economic outlook continues to present challenges.''

The borrowing announcement noted that upcoming auctions of 10-year and 20-year Treasury Inflation Protected Securities, also known as TIPS, will help meet financing needs. In the department's meeting this week with bond dealers, there was debate over whether five-year TIPS are an effective way for the government to borrow.

Longer-Dated TIPS

''Recent cost studies as well as investor participation statistics suggest that TIPS issuance, particularly for shorter- dated TIPS, has not reduced borrowing costs nor diversified the investor base, both of which were objectives at the start of the program,'' minutes of the meeting said.

''Focusing on longer-dated TIPS may be an approach to reducing effective costs, capturing a higher inflation premium, and increasing liquidity among benchmark TIPS instruments while at the same time extending the duration of the portfolio,'' the Treasury said.

Ramanathan told reporters there were no immediate plans to change the TIPS borrowing calendar, which includes a prospective five-year note TIPS sale in April. He noted the cost studies and said the Treasury would consider their findings.

The government sells debt to finance the excess of spending over revenue. The Treasury also sells shorter-term debt on a monthly and weekly basis to manage the government's finances.

In today's announcement, the Treasury said it expects to issue cash-management bills, ''some longer dated,'' during the current quarter. The Treasury said unscheduled reopenings of government securities will be the ''exception'' in its debt management because the department has a policy of ''transparency, regularity and predictability.''

Treasury, Fed

The Treasury also has borrowed money on behalf of the Federal Reserve, which has launched a slate of new lending programs to fight the credit crunch.

Ramanathan said in the statement that the department ''strongly encourages'' financial firms to step up efforts to settle failed transactions in the secondary debt market.

''Recent market turbulence and the low level of short-term interest rates resulted in a substantial and broad increase in persistent fails in U.S. Treasury securities,'' Ramanathan said. ''Other regulatory measures may be considered if private sector efforts are not implemented.''

30 US states in recession, 19 at risk: Moody's

30 US states in recession, 19 at risk: Moody's

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Thirty US states were mired in recession in September, and 19 others are at risk of falling into recession in the coming months, a survey by ratings agency Moody's Investors Service said Tuesday.

Moody's defined recession for the study as a decline in a state's gross domestic product (GDP) on average over a six-month period, compared with the prior six-month period.

According to the March-September study, 27 states were already in recession in August.

States with shrunken GDPs were concentrated in the eastern half of the United States -- the Midwest, the southeast and the northeast -- and the West (California, the largest state economy; Oregon; and Hawaii).

At-risk states were located in the center of the country and in the northeast, including New York state.

Moody's said the only state that showed growth was Alaska, whose economy is dominated by the oil and gas industry.

While not one of the 50 states, Moody's survey included the US capital Washington, also called the District of Columbia, where the heavily government-dependent economy also grew during the period.

IMF now sees global recession in 2009

IMF now sees global recession in 2009

U.S., EU economies likely to contract, Canada only major economy to grow

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The worldwide outlook for economic growth has weakened severely over the past month, researchers at the International Monetary Fund said Thursday.

For years, the IMF has used an informal definition of a recession as global growth at below 3%. That is because it is rare for emerging market economies to record negative growth.

In its updated forecast, the IMF said world output would fall to 2.2% growth in 2009, down from 3.7% pegged for 2008.

The projection is below the IMF's prior forecast, released just a month ago, which had called for 3.0% growth.

But at a press conference, IMF chief economist Olivier Blanchard refused to use the term "recession."

"Choosing a number is not very useful. Growth is very low," he said.

Former IMF officials haven't been as reluctant to call the downturn a recession. "Global fiscal expansion is very much needed at this point," said Blanchard.

Former IMF economists Kenneth Rogoff and Simon Johnson have already said the global economy is in recession.

"The IMF hates to use the word recession - for fear that it could make things worse...but I see no reason to change it," said Johnson in an interview.

The advanced industrial economies will contract as a group for the first time since World War II, the IMF said. Negative growth is expected in the all major economies except Canada.

Growth was expected to fall 0.3% in the euro zone. France is expected to experience a negative 0.5% growth rate, while Germany is seen shrinking 0.8%.

A fall of 1.3% is projected for the United Kingdom's economy.

The downturn is broadly comparable to severe contractions seen in 1975 and 1982, the IMF said, and recovery is projected to begin in late 2009.

Emerging economies also hit

Emerging-market economies will also weaken sharply, with revised growth of 5.1%. This is down from the prior forecast of a 6.1% growth rate.

The growth forecast for China was cut to 8.5% in 2009, down from the previous forecast of a 9.3% rate.

In response to the forecast, the IMF called for global action to support financial markets and for fiscal- and monetary-policy actions to limit the downturn.

"Global fiscal expansion is very much needed at this point," said Blanchard.

Earlier Thursday, the European Central Bank and the Bank of England cut interest rates again. The ECB lowered its benchmark rate by half a point, while the Bank of England slashed rates by a startling 1.5 percentage points, to 3.0%. See full story.

Financial stress is looking deeper and more stubborn than only a month ago, the IMF said.

Even more worrisome, what's been afflicting the financial markets seems more impervious to policy measures so far than previously anticipated

In response to market developments, the IMF slashed its 2009 outlook for oil prices to $68 a barrel, down from a previous $100-a-barrel forecast.

Against the current economic backdrop, the risks are to the downside, the IMF said, including the possibility of deflation.