Greenspan Urges Tighter Regulation After `Breakdown' (Update1)
(Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create.

Credit-Rating Companies `Sold Our Soul' for Pay, Employees Said
(Bloomberg) -- Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

Quick Overview

• Canada’s retail sales fell 0.3%. Excluding autos, retail sales rose 0.4%
  Canada’s index of leading indicators fell 0.2% in September
  

• Australia's consumer prices rose 5.0%.

• New Zealand's central bank cut its benchmark interest rate by a record 1% to 6.5%
  
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 3.2 million barrels to 311.4 million barrels
  Supplies of gasoline rose 2.7 million barrels
  Supplies of heating oil rose 800,000 barrels.
  Refinery use increased from 82.2% to 84.8% of capacity
  Gasoline demand fell 4.3% YoY
  Distillate demand fell 5.8% YoY
  

Don't make a drama out of this financial crisis
The scale of what has happened is breath-taking. The oil price has halved since July. Wheat prices have halved since spring. Rice prices are down by a third. Remember that early this year there were riots in many developing countries – not over the antics of Wall Street investment bankers but over the price of food. And in many countries, until recently anyway, the forces pushing towards recession have been more about the squeeze on real incomes than about the credit crunch. What will happen now is that, thanks to the fall in commodity prices, the squeeze will go into reverse, thereby handing purchasing power back to the consumers.

Spreading the wealth
And there is a lot of spreading potential: income distribution in America is the widest of the 30 countries of the OECD. The top 10% (or decile) of earners have an average $87,257 of disposable income, while those in the bottom decile have $5,819, among the very lowest of any country.

Quick Overview

• The Chicago Federal Reserve's index of national activity fell from -1.81 to -2.57 in September.
  

• Canada reduced its interest rate from 2.50% to 2.25%.
  

• (Bloomberg) -- Argentine bonds plunged, sending benchmark dollar yields over 24 percent, and stocks sank the most in a decade on speculation the government will nationalize pension funds in a bid to attain financing and stave off a second default this decade.
  

• Cash strapped Pakistan is looking for loans from the IMF and other bodies of up to $15 billion to avert a balance of payment crisis.

• China will raise tax rebates for a quarter of its exports and jumpstart infrastructure projects, trying to buffer the impact of weaker overseas demand.

• China intends to set up a soybean reserve of up to 1.5 million tonnes.

The United States, Europe and Bretton Woods II
The Europeans are not looking to challenge the reality of American power, they are looking to increase the degree to which the rest of the world can influence the dynamics of the American economy, with an eye toward limiting the ability of the Americans to accidentally destabilize the international financial system again.

Coffee and chocolate are the key to long life
Chocolate, coffee and tea are among the key foods and drinks needed to live a long and healthy life, according to a leading nutritional scientist.

Quick Overview

• Bernanke endorsed a new economic stimulus package -- Bush is open to the idea.
  

• YoY China's economy expanded at 9% in the third quarter.
  

• Sweden became the latest European economy to introduce a bailout plan to support its banks.
  

• Canada wholesale sales fell 1.5% in August
  

• U.K.'s budget deficit out at 37.6 billion pounds in the first half of 2008-2009.

• India cut its discount rate from 9% to 8%.

Lahde Quits Hedge Funds, Thanks `Idiots' for Success (Update1)
``I was in this game for money,'' Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. ``The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.

``All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.''

Quick Overview

• Warren Buffett said “bad news is an investor's best friend” – he’s buying U.S. stocks.
  

• U.S. housing starts were at an annual rate of 817,000 in September, down 6.3% MoM, and down 31% YoY.
  

• The University of Michigan's consumer sentiment index fell from 70.3 to 57.5
  
  

Quick Overview

• U.S. consumer price index unchanged in September -- up 4.9 YoY. Excluding food and energy prices rose 0.1% -- up 2.5% YoY.
  

• U.S. industrial production fell 2.8% in September
  

• U.S. Capacity utilization fell from 78.7% to 76.4%.
  

• The Philadelphia regional index of manufacturing fell from +3.8 to -37.5
  

• Canada’s manufacturing sales fell 3.7% in August.
  
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 5.6 million barrels to 308.2 million barrels.
  Supplies of gasoline rose 7.0 million barrels
  Supplies of heating oil fell 200,000 barrels.
  Refinery use rose 80.9% to 82.2% last week.
  Gasoline demand fell 5.2% YoY
  Distillate demand fell 6.9% YoY.
  

Quick Overview

• U.S. stocks dropped the most since the crash of 1987, fed by bleak economic data.

• Japan pledged unlimited supply of dollars to lenders.
  

• Hong Kong guaranteed all bank deposits.

• European car sales fell 8.2% last month. BMW has begun to idle three plants - Opel has shut a factory.

• U.S. producer prices fell 0.4% MoM, but rose 8.7% YoY.
  

• U.S. retail sales fell 1.2% in September, weaker than expected.
  

• The Empire State manufacturing index fell from -7.4 to -24.62 in October.
  

• YoY consumer prices in the Euro area rose 3.6% in September.
  

• The U.K.'s unemployment rate rose to 5.7% from 5.5%.

• Investors pulled at least $43bn from US hedge funds in September.
  

Bloomberg (October 14, 2008) Roubini Sees Worst Recession in 40 Years, Rally's End (click for video):

Europe stuns with €1.5 trillion bank rescue, as France plays role of saviour
Germany, France, Italy, Spain, Holland and Austria have joined forces to launch the greatest bank bail-out in history, offering over €1.5 trillion in guarantees and fresh capital in a "shock and awe" blitz to halt the credit panic.

Quick Overview

• Bush said the government is taking a $250 billion stake in the nation's top financial institutions as part of its latest plan to tackle the credit crisis.
  

• U.K.'s consumer prices rose 5.2%.
  

• Industrial production in the Euro area rose 1.1% in August, but fell 0.7% YoY.
  

• Australia will spend A$10.4 billion to help stimulate the economy.
  

• Europe's cocoa grind fell 0.7% QoQ. YoY it is up 2%.
  

Paulson's statement on actions to protect the US economy
Today I am announcing that the Treasury will purchase equity stakes in a wide array of banks and thrifts. Government owning a stake in any private U.S. company is objectionable to most Americans – me included. Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn’t available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop.

This Is What Denial Does
But one of the benefits of modernity is our ability to spot trends and predict results. If fish in a depleted ecosystem grow by 5% a year and the catch expands by 10% a year, the fishery will collapse. If the global economy keeps growing at 3% a year (or 1700% a century) it too will hit the wall.

Quick Overview

• The U.S. government is closed for Columbus Day.
  

• The Dow Industrials rose 936.42 points -- 11%, as global plans to rescue banks through capital injections sent the DJI to its biggest one-day point gain ever.
  
  

A light at the end of the tunnel?
..At first blush—and in contrast to previous failures after half-hearted efforts—the new plans seem to be working...

European Leaders Vow Bank Guarantees, Bid to Stop Financial Rot
The key measures announced today are: a pledge to guarantee new bank debt issuance until the end of 2009; permission for governments to shore up banks by buying preferred shares; and a commitment to recapitalize any ``systemically'' critical banks in distress.

Lehman Brothers demise triggers huge default
An auction of Lehman’s bonds yesterday determined that the bank’s borrowings were worth only 8.625 cents on the dollar. The valuation leaves the insurers of the debt a bill of about $365 billion. It is not clear whether the insurers, which are required to settle the bill in the next two weeks, will be able to pay – a development that could further undermine increasingly stressed capital markets.

Paulson Says Will Buy Bank Equity `Soon as We Can' (Update2)
(Bloomberg) -- U.S. Treasury Secretary Henry Paulson said the U.S. will buy equity ``as soon as we can'' in banks and other financial institutions to restore market stability and revive economic growth.

G-7 Commit to `All Necessary Steps' to Stem Crisis (Update2)
``The current situation calls for urgent and exceptional action,'' the G-7's finance ministers and central bankers said in a 266-word statement after talks in Washington. Officials pledged to ``take all necessary steps to unfreeze credit and money markets'' without detailing how that would be accomplished.

Quick Overview

• All hands on deck! Officials from G-7 /G-8 meet to conside ways to stem the panic.

• (Bloomberg) -- The Federal Reserve Bank of New York plans to meet with the credit-default swap industry to accelerate plans for a central clearinghouse for the $55 trillion market.

• Preliminary results of the auction credit-default swaps indicate an initial value of 9.75 cents on the dollar

• U.S. exports fell $3.4 billion in August to $164.7 billion while imports fell $5.5 billion to $223.9 billion -- resulting in imports of $59.1 billion.
  

• Canada's unemployment rate remained at 6.1%.
  

• Germany is working on a plan to prop up its major banks that may well include taking government stakes.
  
  

• The USDA estimates 2008-2009 ending stocks for:
  Corn was increased from 1.018 to 1.154 billion bushels.
  Soybeans were increased from 135 to 220 million bushels.
  Wheat was increased from 574 to 601 million bushels.
  Sugar was increased from 505,000 to 656,000 tons.
  Cotton was increased from 4.90 to 6.20 million bales.
  

• The USDA estimates 2008-2009 world ending stocks for:
  Corn was reduced from 110 to 108 million tons.
  Soybeans were increased from 51 to 55 million tons.
  Wheat was increased from 140 to 144 million tons.
  Cotton was increased from 52 to 55 million tons.
  The USDA estimates the Florida orange crop at 166 million boxes, down from last season's 170 million boxes. The projected juice yield was 1.59 gallons per box at 42.0 degrees Brix, down from last year's record high 1.67 gallons per box.
  

• The International Energy Agency reduced its forecast of 2008 world oil demand from 86.7 to 86.5 million barrels per day, an increase of just 0.5% from last year. In 2009, the IEA is expecting world demand to increase 0.8% to 87.2 million barrels per day.
  

Quick Overview

• U.S. wholesale sales fell 1.0% in August -- inventories rose 0.8%.
  


• U.S. jobless claims fell 20,000 last week to 478,000.
  


• Australia's unemployment rate fell from 4.3% to 4.1% in September
  


• Japan's machinery orders fell 14.5% in August,
  


• GDP in the Euro area fell 0.2% in the second quarter.
  


• S&P put GM's credit on a negative watch list. GM dropped 31%, their lowest level since 1950 as it contends with a deteriorating global sales and deteriorating cash reserves.
  

Financial Crisis: Who is going to bail out the euro?
The US has guaranteed the $3.5 trillion money market funds. It has nationalised the $5.3 trillion pillars of the mortgage market, Fannie and Freddie. The Fed is accepting any junk as collateral at its lending window. This week it went the whole hog after panic hit the $1.6 trillion market for commercial paper. It is now offering loans without any security at all. The US government has become a bank. Yes, this is US socialism. What is the alternative

Attacking Cancer Stem Cells
A team of researchers at Harvard Medical School has now developed a new way to find drugs that selectively kill cancer stem cells or prevent them from dividing.

Quick Overview

• The U.S. Fed lowered rates from 2.00% to 1.50%.
  

• The ECB, Bank of England, Bank of Canada and Sweden each cut their benchmark rates by half a percentage point.
  The ECB's rate is now 3.75 %; Canada's 2.5%; the U.K.'s at 4.5%; and Sweden's rate at 4.25%.

• China cut its interest rate from 7.20% to 6.93%
  

• U.S. pending home sales rose 7.4% in August, more than expected.
  

• The U.S. DOE said:
  Supplies of crude oil rose 8.1 million barrels to 302.6 million barrels,
  Supplies of gasoline rose 7.2 million barrels
  Supplies of heating oil supplies were up 400,000 barrels.
  Refinery use rose from 72.3% to 80.9%
  Gasoline demand fell 5.3% YoY
  Distillate demand fell 8.3% YoY.
  
  

• (Bloomberg) Exports of palm oil from Indonesia, the largest producer, may decline by as much as 1.5 million metric tons a year after the nation made the use of renewable energy mandatory, a government official said.

ECB sees crisis of "enormous proportions" as Spain creates mortgage rescue fund
The result is a mish-mash of policies that have eroded the confidence of Asian and Mid-East investors, sending the euro into free-fall. Economists have begun to warn openly about the risks of an EMU break-up.

Quick Overview

• In its efforts to stem the financial crisis, the Federal Reserve and Treasury created a new lending facility to help backstop the commercial paper market.
  

• The EU's Central Bank, Bank of England, and the Swiss National Bank injected $70 billion to the banking system to keep the sector liquid.
  

• Iceland nationalized its second-largest bank and is negotiating a loan from Russia to shore up the nation's finances. Meanwhile Russia unveiled an aid package for its own banks.
  
  
• Australia reduced its interest rate from 7.0% to 6.0% -- more than expected.
  

• U.K.'s manufacturing output fell 0.4% in August.
  

• Japan left interest rate unchanged at 0.50%.
  

• The DOE said average household heating fuel costs this winter will be 15 percent higher than last year.

Quick Overview

• Germanys Merkel announced that all private deposits in German banks would from now on be guaranteed.
  
  

• The USDA said:
  14% of the corn crop was harvested, down from the five-year average of 30%.
  31% of the soybean crop was harvested, down from the five-year average of 41%.
  16% of the cotton crop was harvested, down from the five-year average of 24%.
  59% of the winter wheat crop was planted.
  

• Bank of America announced a dividend cut and a plan to sell $10 billion in stock to raise capital.

A lighter view of the Sub Prime Crisis

Germany takes hot seat as Europe falls into the abyss

Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.

Quick Overview

• U.S. Payrolls fell by 159,000, the biggest job loss in over five years. U.S. Jobless rate remained at 6.1%.

• Institute of Supply Managements' index of services fell from 50.6 to 50.2
  

• Retail sales volume in the Euro area rose 0.3%
  

• An index of services in the U.K. fell from 49.2 to 46.0 in September
  

• World airfreight traffic saw its third consecutive month of contraction with a 2.7% decline for August.

• Congress passed the $700 billion financial rescue

Investors start fresh gold rush
The investors’ response is a rush into physical gold not seen since the second oil crisis in 1979, bankers say. The shift into gold coins and bars is so extreme that it is causing shortages at refineries and mints around the world.

Quick Overview

• The U.S. Senate approved the $700 bailout plan.
  

• U.S. factory orders fell 4.0% in August, more than expected.
  

• The European Central Bank kept its interest rate unchanged at 4.25%. Trichet said policy makers “discussed” cutting interest rate.
  

• Producer prices in the Euro area fell 0.5% in August.
  

Financial Crisis: So much for tirades against American greed
We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.

Quick Overview

• The U.S. Senate set a vote for tonight on a $700 billion financial-rescue plan, along with raising the limit on federal deposit insurance to $250,000 from $100,000. Business and trade groups urged Washington to enact the plan, warning that inaction would have grim consequences
  

• The Institute of Supply Managements' index of manufacturing fell from 49.9 to 43.5, a lot weaker than expected.
  

• Unemployment for the Euro area rose from 7.4% to 7.5% in August.
  

• U.K.'s index of services rose 0.6% in July
  U.K.’s manufacturing fell from 45.3 to 41.0
  

• Japan's Cabinet agreed to a $17 billion stimulus package.
  

• Manufacturing in Australia improved from 47.0 to 47.2
  
  

• The U.S. Department of Energy said:
  Supplies of crude oil rose 4.3 million barrels to 294.5 million barrels,
  Supplies of gasoline rose 900,000 barrels
  Supplies of heating oil supplies rose 1.3 million barrels.
  Refinery use improved from 66.7% to 72.3%
  Gasoline demand fell 4.5% YoY
  Distillate demand fell 8.4% YoY.

• Sales of cars and light trucks fell 35% YoY at Ford, 32% at Toyota and 24% at Honda. GM's fell 16%, Nissan Motor fell 37 %.
  

Quick Overview

• According to Standard & Poor's/Case-Shiller index U.S. Home prices fell 0.9% in July, and down 16.3% YoY.
  

• The Conference Board said U.S. consumer confidence rose from 56.9 to 59.8 in September.
  

• The Chicago Purchasing Managers' index fell from 57.9 to 56.7 in September
  

• Canada’s GDP rose 0.7% in July and up 1.2% YoY.
  

• Japan’s unemployment rate rose from 4.0% to 4.2% in August.
  Japan’s industrial production fell 3.5% in August
  Japans household spending fell 4.0%
  

• U.K.'s GDP rose 1.5%
  

• Euro zone consumer prices rose 3.6%.
  
  

• The USDA said as of September 1st, stocks of:
  Corn totaled 1.624 billion bushels.
  Soybeans totaled 205 million bushels.
  Wheat totaled 1.857 billion bushels.
  

• Bush signed a spending bill that includes a $25 billion loan package for troubled automakers
  
  
  

Banking crash hits Europe as ECB loses traction
Data from the IMF shows that European banks hold 75pc as much exposure to toxic US housing debt as US banks themselves. Moreover they have mounting bad debts from the British, Spanish, French, Dutch, Scandinavian, and East European housing markets, where property bubbles reached even more extreme levels that in the US.

U.S. Stocks Plunge After House Votes Against Bailout Plan

'Unimaginable'

``They've got to come up with something or the damage is unimaginable,'' said Henry Herrmann, Overland Park, Kansas-based president and chief executive officer of Waddell & Reed Financial Inc., which manages $70 billion.

Quick Overview

• Sept. 29 (Bloomberg) -- The Federal Reserve increased the size of previously arranged currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available to banks worldwide.
  

• U.S. Consumer spending was unchanged in August.
  

• U.S. Personal incomes rose 0.5%.
  

• YoY Japan's retail sales rose 0.7% in August.

US Economy: Even Hank Paulson's bail-out plan cannot detox global banking
Hopes that the world can cruise happily on as the US buckles have been dashed by the violent downturn across Europe and Asia over the summer. The Baltic Dry Index measuring freight rates for ships has plummeted by two thirds since May. Japan’s economy is already contracting. China’s may be close behind: a third of all textile factories in Guangdong have closed this year. House prices are tumbling in Shenzen, Beijing, Shanghai.

While Rome burns
Sceptics on that point prefer to look at European banks’ leverage ratios, which measure the amount of capital banks hold relative to total assets. By some estimates, Deutsche Bank, Barclays and UBS have leverage ratios of 1.2%, 2.4% and 2.1% respectively, which would make broker-dealers weep with fear. Get the risk calculations wrong (it can happen) and the cushion of capital looks horribly thin.

Quick Overview

• (Reuters) - Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
  

• Congress might be close to a deal on the $700 billion financial sector bailout.
  

• U.S. durable goods orders fell 4.5% in August -- weaker than expected. Excluding transportation, orders were down 3.0%.
  

• U.S. new home sales fell 11.5% from July's pace -- weaker than expected.
  

• U.S. jobless claims rose 32,000 last week to 493,000
  

• Japan's manufacturing sentiment improved from -15.1 to -10.0
  

• Bellwether GE cut its earnings outlook and announced steps to strengthen its capital base, including suspending share repurchases and holding its dividend flat through next year.
  

• YoY, Global Insight anticipates inbound cargo volumes at US ports will be down 6%.

EU refuses bail-out package despite crisis fears
Mr Gross said Deutsche Bank deploys fifty times leverage and has liabilites of $2,000bn, equivalent to 80pc of Germany’s GDP. Fortis Bank has liabilities of 300pc of Belgian GDP. These dwarf the burden of any US bank on the US government balance sheet. He said EU states do not have the means to bail out these banks. Any rescue would have to come from the European Central Bank, yet it is not allowed to carry out bail-outs under the Maastricht Treaty law.

The Winter of Our Discontent
The Bush administration used the 9/11 attacks as an excuse for the biggest increase in military spending and police power since WWII.

Now it is using the market correction (caused largely by its own interventions in the credit industry) to expand state power in the financial area. Half of all Americans pay their mortgages, directly or indirectly, to the federal government. Most older Americans depend, in whole or in part, on money from the government to live. Now, Americans depend on the government to keep house prices up - by subsidizing demand for mortgage backed securities - and to keep up stock and bond prices too - by buying up Wall Street's mistakes. Homeowners want protection from their own bad judgment. Investors want protection from Mr. Market. The old want free medicine. The young want free schooling. The unemployed want jobs and money. The rich want politicians in their pockets. The poor want the rich's money. Investors, homeowners, pensioners - is there anyone left in America who isn't trying to pick someone else's pocket?

Bringing Down Wall Street as Ratings Let Loose Subprime Scourge
``I view the ratings agencies as one of the key culprits,'' says Joseph Stiglitz, 65, the Nobel laureate economist at Columbia University in New York. ``They were the party that performed that alchemy that converted the securities from F- rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.''

Quick Overview

• U.S. existing home sales fell 2.2% on the month -- weaker than expected.
  

• Business confidence in Germany dropped from 94.8 to 92.9 in September, the lowest in three years.
  

• Pressure to regulate the $62,000bn credit derivatives market mounted as the main US market regulator called on Congress to pass laws to supervise the industry
  

• The U.S. Department of Energy said:
  Supplies of crude oil fell 1.5 million barrels
  Supplies of gasoline fell 5.9 million barrels
  Supplies of heating oil rose 300,000 barrels.
  Refinery use fell from 77.4% to 66.7% of capacity
  Gasoline demand fell 3.5% YoY
  Distillate demand fell 5.5% YoY
  

• (Bloomberg) -- CME Group Inc., the world's largest futures exchange, will offer a steel contract beginning Oct. 19 after the rival London Metal Exchange introduced a similar product earlier this year.

• (Bloomberg) -- Barrick Gold Corp. Chairman Peter Munk said bullion prices will go higher, driven by large-scale buying by ``major, major'' holders of dollars who fear the effects of the U.S. government's bailout plan on the currency.