Investors should brace themselves for a prolonged period of market turmoil, Henry Paulson, the US Treasury Secretary, said yesterday as he held emergency meetings with the Chancellor and the French Finance Minister.

Mr Paulson flew to London to discuss the financial crisis with Alistair Darling as markets remained in the grip of anxieties over the continuing toll from the global credit squeeze.

Speaking after talks with his counterparts in France and Britain, Mr Paulson insisted that the global economy remained strong despite the seizures in interbank lending, but admitted that the American economy would take a knock from the turmoil.

After meeting Christine Lagarde, the French Finance Minister, Mr Paulson said: “It will take a while to work through the turbulence in capital markets.”

Mr Paulson acknowledged that bad lending practices were to blame for the present financial crisis, which has been triggered by the high number of American homeowners falling into arrears on their mortgages.

However, he added that “the whole world, including the US, has benefited from . . . credit availability”.

Ms Lagarde had called for new rules to prevent a repeat of the credit turmoil, but Mr Paulson argued that “we want to make sure we don’t rush to judgments”.

Mr Paulson ruled out an immediate recession, saying that the United States’s economy would continue to grow in the second half of the year, despite the country’s housing slump.

The Treasury Secretary said that the credit crunch was the result of bad lending practices rather than any problems in the real economy. “We are already seeing modest reductions in the strains in some markets,” he said.

Mr Paulson described his country’s economy as “diverse” and “healthy”, with inflation controlled and growth good, and expressed confidence that growth would continue in the second half of the year. He said that the decline in US employment in August, the first drop in four years, had not been a surprise, “given where we are in the economic expansion”.

However, the financial turbulence will “extract some penalty” from the US economy, he said.

Turbulence in capital markets across the globe and the slump in US property prices are expected to force the hand of the US Federal Reserve Bank today to cut interest rates by at least a quarter of a percentage point, to avert the chance of a US recession.

Some analysts believe that the Fed will bow to pressure from financial institutions and make a half-point cut.

Mr Paulson declined to comment on the Fed’s meeting, saying that he had “great confidence” in its Chairman, Ben Bernanke.

Full Article can be found Here

Yeah, he's right. I'm bumping up the economy section of the page closer to the top. I have a friend who's an economist and he's been warning me about this for weeks. We could be on the doorstep of something that makes the great depression look like a walk in the park.

http://business.timesonline.co.uk/tol/busi...icle2485085.ece


Chief strategist at CLSA predicts record gold run

Leo Lewis in Hong Kong

It would be the biggest run on gold since the attempted French invasion of Britain of 1797 that sent prices through the roof.

The precious metal, long a safe haven for investors, yesterday was predicted by a leading analyst to quadruple within three years as buyers seek shelter from prolonged turmoil in mainstream financial markets.

According to Christopher Wood, chief strategist at the broker CLSA, market ructions and a collapse of the dollar could send gold prices to more than $3,400 an ounce within the next three years. Gold futures last night hit a 28-year high at $733 an ounce, but are more than $100 short of the record. Mr Wood said that the sub-prime conflagration would be the catalyst for a wider breakdown in markets.

However, Wood predicted that investors would soon realise that the sub-prime crisis is simply the catalyst of a much wider breakdown, arguing that it has been the “Archduke Ferdinand assassination event” that sparks a bigger calamity.

“This is not a sub-prime crisis. Sub-prime has merely exposed the bigger scam of structured finance; a scam that is about pretending that bad credit is good credit,” he said.

I THINK (that's for sky) what happened is that the american people have been so blind to the results of free trade they failed to realize that the exportation of manufacturing is crippling our economy. The bill is coming due and no one is going to like the cost. When the year-end report comes out in October we may face a crises we have never seen in our history. Sure Americans are buying but at what cost? When the bill comes due no one will have the currency to pay it. This has been a warning since the Reagan years and rather than correct it the Feds just carried on business as usual. Well now we've surpassed the point of no return. There is no other category of people to sell credit to. There is no more categories of people to loan money to. There is no savings to salvage what's coming. As dyer as this sounds it's long past the point of discussion.

(channeling Jubal here)
Is it bad that manufacturing has collapsed?
Is it bad that the "service economy" is by definition somewhere between a house of cards and a ponzi scheme?
Is it bad that free trade and deficit spending has made us totally dependent on the goodwill and charity of foriegn nations who don't particularly like us?
Is it bad that NAFTA and the WTO are going to punish any actions we try to take to remedy the problem, thus making recovery even harder?
Is it bad that our currency is poised to become worthless?

I have been following this. All of the deficit spending of the Bush Administration and the Republican Congress is having its effect. If there is economic trouble, we have bought it in spades by our own (and I speak of the U.S. government here) irresponsible behavior. Eventually the shit will hit the fan. Unfortunately, if the economy does collapse, all of us will pay, including those who had nothing to do with setting the policies that led to it.

My biggest fear in all of this is what the U.S. may try to do with its military as a way to protect its economy. I fully believe the U.S. will not sit idly by and see its economic dominance in the world slip away while its economy goes deeper and deeper into recession. I could see a desperate United States going to war if it thought doing so would help it economically. Perhaps the Iraq War was just that, as some say, but this is even more serious. Whatever happens to the economy is like a chain reaction, and if it gets pushed past the point of no return, than we will be in serious trouble. I cannot stress this enough. And there are many things that could lead to that situation.

The US is a wounded and out of control bird that can see the writing on the wall? 9/11 destroyed it's myth of invulnerability....and exposed the incompetence? "Free trade" and the other Wall St games. The struggles since....pushed by the retrograde among us...have only tangled the bird MORE in the NET OF REALITY?

In a time of global warming and peak oil....the last thing the world needs are more wars. But if there are PROFITS to be made...who cares about peoples suffering...and the planets demise as a functioning biosphere?

MONEY...MONEY...MONEY?

The profits of large cap multinationals have been decoupled from the US economy? Profits are good while US individual incomes suffer? The dollar falls...but multinational profits are protected? World government bought by corporations...including oil, defense contractors, and Blackwater? Guess who will have the $$ to hire Blackwater?

The US is NOT a democracy. When will the people regain control of the corporations????? Will they ever... when they can't see five feet ahead? When so many are a part of the problem?