Don't know much 'bout economy...

But should I be worried?:

Cost of the Bush tax cuts.

Don't know much 'bout geography... of the US or the world (via Marcellina of The Practice Room).

It's our money you're spending now

So you corporate guys get to be accountable to us, right?:

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''

Hmmm. Okay, at least you'll rein in your profligate spending?:

AIG is hurting so bad that we just gave them another $40 billion, while execs live it up at another luxury junket, this one costing $343,000. KNVX uncovered another high-priced conference taking place at the Pointe Hilton Squaw Peak Resort in Phoenix, AZ. They reported that AIG made efforts to disguise its presence, making sure no AIG iconography was out in the open. One hotel employee said that staff was forbidden from even saying the word AIG. AIG said seminars like this, which was for independent financial advisers who steer customers to AIG, are essential to its business. They also said that most of the seminar's costs would be picked up by other corporate sponsors. AIG said in a statement, "We take very seriously our commitment to aggressively manage meeting costs."

This 'conference' happened AFTER the pheasant shoot and the negative news AIG received from that. Slow learning curve or an incurable sense of entitlement?

The Deciderer has speechified!

WASHINGTON (AP) -- The economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.

Wednesday's Commerce Department report showed that the economy that deteriorated considerably during the October-to-December quarter as worsening problems in the housing market and harder-to-get credit made individuals and businesses more cautious in their spending. Fears of a recession have grown, even as inflation remained elevated.

For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse was the biggest culprit; builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.

But that doesn't matter! Consumers are confident!:

Consumer spending, which is a key to economic activity, slowed to a two per cent annual pace in the fourth quarter, down from 2.8 per cent in the previous quarter.

Businesses also responded by shaving their inventories of goods, which trimmed 1.25 percentage points from fourth-quarter gross domestic product.

"The U.S. economy fired on just two cylinders late last year (business investment and exports), both of which are likely to downshift just when the consumer faces brisk headwinds," said BMO Capital Markets economist Sal Guatieri in a commentary.

"Looking ahead, we expect consumer spending to slow further in the first quarter of 2008, reflecting softer labour markets, elevated energy prices and declining house prices," said RBC economist Rishi Sondhi.

"On the corporate side, we also expect some weakening in business investment, owing to the effects of the financial market deterioration," Sondhi added.

We're not panicking:

WASHINGTON (AP) -- The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.

The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.

The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.

In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."

Recalling an earlier post, remember the discussion of liquidity traps.

But there's no need for panic. Not yet, anyway.

Strong and solid?

Bush's term for today's financial markets. Is this another oxymoron term like compassionate conservative? So the housing market collapsing with the subprime disaster, the dollar falling, the trade deficit to China, the hemorrhaging of money to the endless Iraq war, the tax cuts for the rich, the growing gulf between rich and poor ... all these are translated by Georgie as strong and solid?

So. How's the rest of the world taking this?:

LONDON (AP) -- Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

U.S. markets were closed for Martin Luther King Jr. Day, but the downbeat mood from last week's market declines there circled through Europe, Asia and the Americas. Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

In Canada, the S&P/TSX composite index on the Toronto Stock Exchange fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of Sao Paulo's Bovespa exchange, and Argentina's benchmark Merval index fell 6.3 percent to close under 1,900 for the first time since August 2006.

Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

[snip]

"It's another horrible day," said Francis Lun, a general manager at Fulbright Securities in Hong Kong. "Today it's because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won't help the economy recover."

[snip]

"People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world," said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

[snip]

Investors took cues from the negative reaction to the president's plan on Wall Street on Friday, when the Dow Jones industrial average slid 0.5 percent to 12,099.30, bringing its loss for the year so far to nearly 9 percent.

Traders also have shrugged off assurances from Federal Reserve Chairman Ben Bernanke that the U.S. central bank is ready to act aggressively - which means a likely big interest rate cut later this month - to help the sagging economy.

So nice to see Georgie's outreach doesn't just affect the United States....

Update: Germany:

Berlin, Germany (AHN) - With its its exposure to U.S. sub-prime mortgages and unauthorized stock market trades, the German bank WestLB announced Monday it is expecting roughly 1 billion euro ($1.47 billion) in losses for 2007.

WestLB's announcement was made after German financial watchdog Bafin and the country's central bank, the Bundesbank, attended an emergency meeting with the bank's owners aimed at helping the financial institution stabilize.

The expected billion-dollar loss affirms effects of the subprime-triggered credit markets crisis on Germany which has almost plunged into bankruptcy two of its banks while affecting many more.

How can you restore confidence when the dollar and house prices are tanking?

Bet you retail's counted-on-to-keep-in-the-black Christmas spending spree will be a dud, too:

The dollar has fallen to yet another all-time low against the euro, after further weak US economic data.

Figures showed that US consumer confidence has fallen to a near two-year low, while house prices have seen the sharpest drop in 16 years.

Analysts said the data boosted expectations that the Federal Reserve will cut interest rates still further.

In early trading on Wednesday, the euro hit a high of $1.4162, before pulling back to $1.4131 by 2230 GMT.

'Anti-dollar momentum'

The Fed cut US interest rates to 4.75% from 5.25% last week, in a move aimed at restoring confidence in both the housing and financial markets.

And then this by Max Fraad Wolff of The Asia Times:

New data for September are available now - after all, it is September now. These data suggest rising prices led by surging oil, wheat, gold and foreign-currency prices. Not to worry, the Fed will monitor that while pumping money into banks and slashing rates to prevent the economic downturn that has already arrived!

In early August it was clear that foreclosures were spiking, markets were boiling over and panic was rife. Bernanke decided that it was time to sound the all-clear with a cautionary note on inflation risks. After all, oil was a whopping and scary US$70 a barrel back then. Now it has settled down to $82, and so the worry has lifted?

Food costs - especially wheat - have surged in the month since the Fed worried about inflation. I guess that is why we are now worried about financial-market conditions. Across the one month and one week between the meetings, the broadest US stock-market index, S&P500, went from 1,476.71 to Monday's close of 1,476.65. This must have been the radical deterioration that caused the about-face!

Bernanke is ideally focused on inflation-fighting, price stability and economic growth. It would seem he is concerned about bank demands for liquidity and equity-market indices. I am not saying there is anything wrong with that. I am saying the talk, the action and the statements are not anywhere near to being on the same page.

[snip]

The truth is that Tuesday's reassurance and logic are as frightening as the logic and all-clear sounded on August 7. Buckling under Wall Street pressure and slashing rates help stock prices. The way and timing in which the discount rate was cut - twice now - attack market shorts and artificially push up stock prices.

Thus it will be seen as genius by those you hear on TV, radio, and many newspapers. I am concerned that the Fed acted late, is confused about where we are in the calendar year, pays no mind to its recent statements, and is acting to head off future economic trouble that everyone else knows is already here.

Now... just exactly how do I go about changing my dollars into Euros?

A snowball rolling down a hill

And getting bigger all the time:

Ben Bernanke, the Federal Reserve chairman and the man who controls the central bank strings, made a game effort to explain the numbers to legislators here this week.

The big demographic bulge known as the baby boomers is getting ready to retire, he noted. Meaning they will start to collect social security, and will likely require considerably more medical attention.

Those two items represent an unfunded liability that can also be measured in the trillions, and no one has done a thing to prepare for it.

Bernanke delivered a simple lesson about the public ledger sheet. Basically, that the money has to come from somewhere.

Either taxes have to go up, and considerably, or spending has to be slashed on an unheard-of scale. Keep borrowing, and the public debt balloons so fantastically it becomes an unmanageable fiscal crisis.

"This is sort of like a snowball rolling down the hill," said Bernanke, striving for a metaphor to impress a panel of skeptical politicians. "It's already a pretty big snowball, but it's going to get a lot bigger a lot faster."

And:

A lot of wags have noticed that for the US stock market, bad news is frequently treated as good news. Unemployment is up, or industrial production is down, and stocks rally (due to attendant possibility seen in these reports of upcoming Fed interest-rate cuts). However, when major financial institutions have what are delicately called "liquidity issues" (ie, their loans aren't being paid back - they have no income), that is always bad news. What if the bank defaults, declares bankruptcy? Other banks that it had borrowed money from now won't be getting paid back, they'll lose whatever income stream they were receiving from the first bank. The same with that bank's creditors, and then other banks and so on.

This kind of cascading financial catastrophe is often called a "contagion", and with good reason. Like a virus, it can spread and bankrupt the entire financial system. It almost did in 1998, during the LTCM hedge-fund crisis; in 1929,in an era when the worldwide financial system was far less globalized and integrated than it is today, after the Great Crash it actually did, and so initiated the Great Depression of the 1930s.

Is it over? Not necessarily. Two little-known indicators that more investors should be cognizant of are what are called the VIX and VXN indicators. (Put these letters in the stock symbol line of your quote website; they should come up - watch how their values move inversely to stock prices.) Technically, what these two indices measure is what is called stock-option volatility (stock "beta", in jargon), but what they really tell smart investors is just how much fear there is in the markets. When these levels get very high (roughly above 30 in both indices; after the selling caused by the Enron corporate-management scandals of 2002, the VXN actually topped out over 70), it indicates that the market has seen so much fear-driven panic selling that, by the rules of what is called contrarian investment philosophy, stocks are due for a turnaround. As of the first weekend in March, neither index had reached those extreme levels.

So it's not China. It's not Nancy Pelosi, it's not the Easter Bunny, nor is it the War on Easter. It has been said that all market psychology, all market movement, is a continuous oscillation between the mental polar opposites of optimism and pessimism, between greed and fear, between Pollyanna and Cassandra. Since at least the market rally that started in early 2003, optimistic Pollyanna has ruled the markets, and greed has run rampant. As the markets wait for Fed chairman Ben Bernanke to put on his best Donna Reed mask to bail out the subprime lenders with the Bailey family's honeymoon money, Cassandra and her fear are ruling the day.

And:

While the most recent slump was set off by a 9.2 percent plunge in the Shanghai and Shenzhen 300 Index on Feb. 27, U.S. shares have been hit by concern economic growth will slow.

Last week, reports showed that in January new-home sales dropped by the most in 13 years, while the economy also expanded less than initially estimated in the fourth quarter of 2006.

Alan Greenspan, former chairman of the Federal Reserve, weighed in by saying profit margins at U.S. companies are peaking and the growth cycle is in a mature phase. He also said there's a ``one-third probability'' of a U.S. recession this year.

Meanwhile, delinquencies and defaults on subprime mortgages, or home loans made to people with limited credit records or higher debts, are at the highest in at least seven years, a Feb. 22 report by Barclays Capital showed.

``We were just due for a correction,'' said Steven Folker, who helps oversee $3 billion as managing director at Fifth Third Asset Management in Cincinnati. ``We may not have seen the worst'' of the slump.

Wheeeeee!

Update: Yen carry trade:

NEW YORK (CNNMoney.com) -- As investors wonder if the global market selloff is reaching a bottom, economists are keeping a close eye on one big trading bet that could send more seismic tremors through Wall Street.

For more than a decade, investors have profited by borrowing yen at ultra-low interest rates and using the funds to buy higher-yielding investments based in other currencies - known in Wall Street parlance as the yen carry trade.

But last week's market swoon has brought risk back into focus, and a number of these borrowers have been unwinding those trades lately.

"There's been complacency and under pricing of risk across the board," said Nouriel Roubini, chairman of Roubini Global Economics, a research firm. But now many big investors, as well as policy-makers, are bracing for more volatility in the markets, he said.