Stiglitz Criticizes Bad Bank Plan as Swapping ‘Cash for Trash’

Jan. 31 (Bloomberg) — Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt.

Obama’s administration is moving closer to buying the illiquid assets currently clogging bank’s balance sheets and preventing them from boosting lending, people familiar with the matter said this week.

That amounts to swapping taxpayers’ “cash for trash,” Stiglitz said in a panel discussion at the World Economic Forum in Davos, Switzerland today. “You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage.”

Stiglitz, a professor at Columbia University in New York and a former adviser to President Bill Clinton, says the plan would leave taxpayers picking up the bill for years of excess lending by banks. It would also deprive the government of money that would have been better spent shoring up Social Security, he said.

Read moreStiglitz Criticizes Bad Bank Plan as Swapping ‘Cash for Trash’

Japan’s markets prepare for horror week

DREADFUL December industrial production figures from Japan and South Korea show the global recession is smashing manufactured trade.

Japan’s industrial production index dropped a record 9.6 per cent, month-on-month, solidifying fears the world’s second-largest national economy is shrinking at a double-digit rate.

Many economists expect preliminary GDP figures to be released in a fortnight will show the Japanese economy shrank at an annualised 10 per cent or more in the fourth quarter of last year.

Read moreJapan’s markets prepare for horror week

Britain’s richest man and his £35bn loss

Over the past eight months, Lakshmi Mittal, Britain’s wealthiest man, has lost around $51bn (£35bn). Mittal, who controls steel producer Arcelor Mittal, has profited from the construction boom of the past decade, driven by the emerging economies of China and India.

His stake in the business in June was worth $65bn. But, as demand for steel has crashed, so has the Arcelor Mittal share price. His holding is now worth $14bn – a staggering loss, although he is not exactly on the streets yet.

Mittal is not alone. Many of the world’s richest are finding their fortunes hollowed out by the havoc wreaked on financial markets.

Read moreBritain’s richest man and his £35bn loss

$4B shortfall – New York City may cut 23,000 jobs

Mayor says New York City may need to reduce payroll by 23,000 and increase sales tax to close $4 billion budget gap.

NEW YORK (CNNMoney.com) — The Big Apple will have to tighten its belt as the city that leans heavily on Wall Street’s profits is expected to suffer a dramatic decrease in tax revenues in coming years.

Mayor Michael Bloomberg said Friday that New York City may have to cut tens of thousands of jobs and it may have to increase the sales tax to make up for the city’s $4 billion budget shortfall in the fiscal year that begins in July.

“We had prepared for a downturn, but I think it’s safe to say nobody prepared for the severity of the downturn that we have been experiencing,” said Bloomberg.

As many as 23,000 city employees might be cut from the city payroll as part of an effort to save roughly $1 billion in expenses, the city said.

The public school system would suffer. If new aid does not come from the state, 14,000 teachers could lose their jobs. Most of the remaining 9,000 positions would be lost through attrition and about 1,000 layoffs.

The tax hikes could raise an estimated $900 million, Bloomberg said, but that may be “nowhere near adequate,” depending on the aid the city gets from the state and federal governments. He said he is hoping to get some concessions from city labor unions and aid from the state and federal governments totaling $2 billion.

Read more$4B shortfall – New York City may cut 23,000 jobs

TREASURIES-Bonds set for worst month in 5 yrs as GDP falls

The bond bubble is about to burst (this year).

This is the ultimate bubble.

Are you ready for the “Greatest Depression”?


* Anxiety about ballooning supply cap bond’s gains

* Treasuries on track for worst month in nearly 5 years

* Long-dated debt set for weakest month in about 16 years

NEW YORK, Jan 30 (Reuters) – The U.S. Treasury bond market crashed back to earth in January after a high-flying 2008, as fears over the government’s mammoth borrowing needs overshadowed evidence of further economic contraction.

U.S. government securities, despite their price gains on Friday, were on track for their worst month since April 2004, dragged down by a dramatic sell-off in long-dated Treasuries.

“It’s been an ugly month,” said Ralph Manigat, senior bond strategist with 4Cast Ltd. in New York.

On a month-to-date basis, Barclays Capital’s Treasury total return index was down 2.80 percent through Thursday. In 2008, it rose 13.74 percent, the largest annual gain since 1995.

Read moreTREASURIES-Bonds set for worst month in 5 yrs as GDP falls

Global News (01/31/09)

Australian PM calls for new economic order (AFP):
SYDNEY (AFP) — Australia’s prime minister has called for a “new world order” of government intervention and regulation, blaming capitalist greed for the global economic crisis.

UN: Babies caught in Sri Lankan crossfire (CNN):
A “handful” of United Nations staff are working around the clock to save a growing number of children caught in heavy crossfire between government forces and Tamil rebels in Sri Lanka’s volatile northeast, a U.N. spokesman said Saturday.

Bush shoe sculpture ‘taken down’ (BBC News):
A sculpture of a shoe erected in Iraq to honour a journalist who threw his footwear at George W Bush has been dismantled, reports say.

DEA quits Bolivia on Morales’ order (Market Watch)

Canada’s Economy Shrinks the Most Since 2003 Blackout (Bloomberg)

Thousands protest across Russia (BBC News):
Thousands of people have held rallies across Russia protesting against what they describe as the government’s mismanagement of the economy. The biggest demonstration took place in the eastern city of Vladivostok, where protesters demanded the resignation of Prime Minister Vladimir Putin.

Buckling Europe fears protests may spark a new revolution (The Age)

Homelessness surges as funding falters (msnbc)

Gannett To Take Quarterly Charge Of Up To $5.2 Billion (CNNMoney):
CHICAGO (Dow Jones) — Gannett Co., the largest U.S. newspaper publisher, said Friday that it will take non-cash charges of as much as $5.2 billion against financial results for the fourth quarter, as a number of its assets have diminished in value because of the worldwide financial crisis.

It’s time to rattle and bang in protest at this outrage (Guardian):
Delving into the truth of corporate taxes has taken our Guardian team months. What they have found is truly shocking

S&P may cut Gannett into junk territory (Reuters)

Are we in a Depression? (321gold)
(A rhetorical question)

Banks to transfer $535 million to Madoff firm trustee (Reuters)

Steep Slide in US Economy as Unsold Goods Pile Up (New York Times)

Catholic US Lawmakers Call for Direct Repudiation (Washington Post)

US pours cold water over hopes of Iran deal (Times Online)

Groups review Gaza conflict for war crimes (Globe and Mail)

Deficits For The Shrinking World Economy (The International Forecaster)

Weather Channel Founder Blasts Gore Over Global Warming Campaign (FOX News)

Humans ‘will be implanted with microchips’ (Ninemsn)

Economist John Williams on Real Unemployment Rate

John Williams, Founder of Shadow Government Statistics, calculates that the jobless rate is a full l0 percent higher than the government is reporting. He also discusses the news Monday morning that American companies (including Sprint, Home Depot) are cutting about 43,000 jobs.


Source: YouTube

For more information: Shadow Government Statistics

Lenders abruptly cut lines of credit, fear excessive use amid hard times

Banks and other lenders nationwide, seeking to reduce their debt exposure, are shutting off and limiting consumer credit card lines, even for many customers who carry low balances and pay on time.

As much as $2 trillion in consumer credit – nearly half of what is available – could be rescinded, according to an estimate by a prominent banking analyst. Just two years ago, institutions were handing out liberal borrowing lines to almost anyone. But now, drowning in debt and soured investments, lenders are seeking to stop consumers from running up big balances in hard times, bills they might not be able to pay.

The credit squeeze doesn’t just limit spending potential; it can also damage cardholders’ credit ratings by making them appear to be riskier borrowers. And in many cases, the institutions pulling back on credit took government bailout funds that were supposed to encourage them to lend more freely.

Read moreLenders abruptly cut lines of credit, fear excessive use amid hard times

Porsche looks to cut costs amid sharp drop in sales

Porsche yesterday ann-ounced a cost-cutting programme and further production cuts after the German sports carmaker and owner of a majority stake in Volkswagen reported a fall in half-year operating profits and a sharp drop in sales.

Wendelin Wiedeking, Porsche’s chief executive, said the company had initiated a programme to cut costs by far more than €100m ($128m) and would idle its plants for another 19 days before this year’s summer break.

Porsche, like many other carmakers, has already halted production longer than usual over the Christmas break.

Related article:
Porsche Faces Frankfurt Investigation Over VW Trading (Bloomberg)

Mr Wiedeking’s comments came as Porsche’s sales dropped by 27 per cent in the first six months of its fiscal year, which ended today.

“It is fair to say that operating earnings in the first half of the year were down by the same extent as the company’s sales,” Mr Wiedeking said at the company’s annual shareholders’ meeting.

But overall earnings, boosted by VW option trades, would exceed the €1.66bn of the first six months of the previous fiscal year, Mr Wiedeking said.

Porsche has used a controversial options strategy to gradually take over VW, Europe’s largest carmaker with a revenue 15 times larger than Porsche’s.

Read morePorsche looks to cut costs amid sharp drop in sales

Once-in-century Australian heatwave claims almost 30 lives


Spectators seek shade at the Australian Open in Melbourne

MELBOURNE (AFP) – Australia’s second-largest city Melbourne ground to a halt Saturday, crippled by a once-in-a-century heatwave that has claimed almost 30 lives and razed at least 17 homes.

Wildfires raged through the southeastern state of Victoria, where authorities said flames had come dangerously close to major electricity transmission lines which supplied power to Melbourne on Saturday.

More than 500,000 homes and businesses in Melbourne were left without power on Friday night after an electrical substation exploded in the heat, bringing the city to a standstill.

Temperatures in Victoria topped 43 degrees Celsius (109 Fahrenheit) for a record-breaking third consecutive day on Friday, when 10 homes and a timber plantation were destroyed in a 6,500 hectare (16,000 acre) blaze.

Read moreOnce-in-century Australian heatwave claims almost 30 lives

North and South Korea stand on ‘the brink of war’

The confrontaion between North and South Korea has escalated with Kim Jong-il’s regime claiming it was on the ‘brink of war’ after tearing up a non-aggression pact signed in 1991.


North and South Korea stand on the ‘brink of war’ as Kim Jong-il’s tears up the non-aggression pact Photo: REUTERS

In a significant escalation of tensions, North Korea cancelled all military and political agreements after accusing Seoul of aggressive posturing.

Pyongyang’s decision to nullify all accords increases the prospect of an armed confrontation on the Peninsula, where over a million soldiers face each other across the Demilitarised Zone that divides the two Koreas.

North Korea’s Committee for the Peaceful Reunification of Korea blamed the South for pushing the two countries “to the brink of a war”.

Pyongyang said it now regarded the maritime border between the two states as “void”. The last time the two countries clashed militarily was at the disputed frontier in the Yellow Sea, when their navies fought a deadly gun battle in June 2002.

Read moreNorth and South Korea stand on ‘the brink of war’

Honda shuts UK factory for four months

Honda Jazz
Honda has stressed its commitment to retaining its Swindon workforce until the autumn when a new Jazz model is due to go into production. Photograph: Garry Weaser/Guardian

Japanese carmaker Honda will shut its British factory for four months this evening, after a slump in sales.

Production at the plant in Swindon, Wiltshire, will be halted at the end of today’s shift until 1 June.

The 4,200 workers will receive full basic pay for the first two months, falling to 60% for the rest of the shutdown.

Read moreHonda shuts UK factory for four months

Another day, yet another bail-out: £50bn to rescue ailing firms

Quantitative easing: The Bank of England will “create money out of thin air” and inject it into the financial system, this will “increase the money supply” (= “Inflation”). Inflation is a hidden tax.

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes

The government and the Bank of England are robbing the people of their wealth.



Economic jitters: Alistair Darling has set out the details of a £50billion scheme to head off a slump

The Bank of England was put on standby to print more money last night amid growing signs of Labour jitters about the Prime Minister’s strategy for escaping a political wipeout.

Alistair Darling set out the details of a radical £50billion scheme to head off a slump by injecting hard cash into the stricken economy.

The move represents a major step towards so-called quantitative easing, whereby the Government creates more money to ease the shortage of credit in the economy.

But it also takes the Bank a step closer to losing the independence it won from Mr Brown more than a decade ago, as ministers prepare to seize control of monetary policy.

The Chancellor wrote to Bank Governor Mervyn King to confirm that the £50billion fund will be used to effectively purchase companies’ debts and even give them extra cash.

Read moreAnother day, yet another bail-out: £50bn to rescue ailing firms

Global News (01/30/09)

Japanese economy hit by “perfect storm” (Telegraph):
The indicators were so bad that analysts have described it as the day the “perfect storm” came ashore.

Japan heads for worst recession since the second world war (Guardian)

Global Worries Over US Stimulus Spending (New York Times)

US set for ‘big bang’ financial clean-up (Financial Times)

U.S. Economy Shrinks at 3.8% Pace, Most in 26 Years, as Spending Crumbles (Bloomberg)

Stocks in U.S. Retreat, Extending Losses in S&P 500’s Worst-Ever January (Bloomberg)

Barack Obama abandons Afghan President Hamid Karzai (Telegraph):
The Barack Obama administration has abandoned Afghan President Hamid Karzai and now believes he is a major obstacle to defeating the Taliban-led insurgency.

Saddam’s hometown unveils statue dedicated to man who threw shoe at President Bush (New York Daily News)

Germany plans individual ‘bad banks’ (Financial Times)

Toyota set to post first net loss since 1963 (Guardian)

Zimbabwe abandons its currency (BBC News)

Opec warns of further oil output cuts (Guardian):
Oil producers’ cartel tells World Economic Forum its members need a higher price if they are to have sufficient income to invest

Mobs arrested as rioters call for ‘Sarko out’ (This is London)

Strikes spread across Britain as oil refinery protest escalates (Guardian)

‘British jobs for British workers’: Wildcat strikes spread over foreign workers shipped into the UK (Daily Mail)

Up against basic principle of EU law (Independent)

Debt has become a drug. Withdrawal will be painful (Guardian)

Pakistan envoy suggests India faked Mumbai transcripts (Times Online)

Florida beans and corn destroyed, potatoes delayed (The Packer):
“All of our beans were wiped out,” said Bryan Biederman, assistant sales manager for Pioneer Growers Co-op, one of the region’s largest growers of beans and corn. “Any corn we had planted for the month of March has been wiped out. It was truly a setback for our winter program.”

Iceland to be fast-tracked into the EU

Plan for cash-strapped state to become member by 2011

Iceland will be put on a fast track to joining the European Union to rescue the small Arctic state from financial collapse amid rising expectations that it will apply for membership within months, senior policy-makers in Brussels and Reykjavik have told the Guardian.

Ian Traynor on fast-tracking Iceland into the EU and the euro Link to this audio

The European commission is preparing itself for a membership bid, depending on the outcome of a snap general election expected in May. An application would be viewed very favourably in Brussels and the negotiations, which normally take many years, would be fast-forwarded to make Iceland the EU’s 29th member in record time, probably in 2011.

Read moreIceland to be fast-tracked into the EU

Russian prime minister Vladimir Putin calls for end of dollar stranglehold

Russian prime minister Vladimir Putin has called for concerted action to break the stranglehold of the US dollar and create a new global structure of regional powers.


For a few dollars less: Vladimir Putin has called for the end of the dollar as the world’s reserve currency. Photo: ASSOCIATED PRESS

“The one reserve currency has become a danger to the world economy: that is now obvious to everybody,” he said in a speech at the World Economic Forum.

It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.

Mr Putin said the leading powers should ensure an “irreversible” move towards a system of multiple reserve currencies, questioning the “reliability” of the US dollar as a safe store of value. “The pride of Wall Street investment banks don’t exist any more,” he said.

For all his bluster, Mr Putin’s bargaining power is weakening by the day. Russia’s foreign reserves have fallen by 34pc since August to $396bn (£277bn) after months of capital flight and the collapse in the price of Urals crude oil to $45 a barrel. The rouble also fell to a record low yesterday after sliding for weeks in a controlled devaluation.

Mr Putin said: “We are witnessing a truly global crisis. The speed of developments beats every record, and the strategic difference from the Great Depression is that under globalisation this touches everyone. This has multiplied the destructive force. It looks exactly like the perfect storm.”

Read moreRussian prime minister Vladimir Putin calls for end of dollar stranglehold

US-EU trade war looms as Barack Obama bill urges ‘Buy American’

Jim Rogers: If Obamanomics happens it’s all over


The prospect of a trade war between the US and Europe is looming after “Buy American” provisions were added to President Barack Obama’s $820 billion (£573 billion) stimulus package.

President Barack Obama's $820 billion stimulus package was passed by the House of Representative
President Barack Obama’s $820 billion stimulus package was passed by the House of Representatives Photo: AP

The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects.

The Senate’s version of the legislation, which will be debated early next week, goes even further, requiring that any projects related to the stimulus use only American-made equipment and goods.

The inclusion of protectionist measures has quickly raised hackles in Europe.

Catherine Ashton, the EU trade commissioner, said: “We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore.”

Despite the parlous state of the US economy, some major American firms, including General Electric, are also opposed to the Buy American stipulations, fearing reprisals from overseas and further damage to the global economy.

Read moreUS-EU trade war looms as Barack Obama bill urges ‘Buy American’

Ex-Fed Official Poole Against Buying Treasurys

“The Fed currently owns some $413 billion in Treasurys.”


Poole

The Federal Reserve should stop dropping hints that it could buy longer-maturity Treasurys to help the economy, said former St. Louis Federal Reserve President William Poole, adding that buying long-end Treasurys to anchor rates would be a serious mistake.

Poole, who retired from the central bank last spring after serving for 10 years, said instead, the Fed should let the expansion in money work its way through the economy. While that will take some time to kick in, it will eventually aid the recovery.

Poole said the costs of potential Treasury-buying aimed at anchoring interest rates far surpass the benefits, and exiting such a strategy would be a messy affair for the government bond market. Already, speculation over what the Fed might do has led to volatile trade.

Treasury yields shot lower in December after the Fed first said it was considering the benefits of Treasury-buying. The 10-year yield, which moves inversely to price, dropped by about 25 basis points after the Fed’s hints. The Fed’s failure to shed more light on possible buying Wednesday led to a 13-basis-point rise in the 10-year yield.

“The Fed has completely and unnecessarily whipsawed the market by putting this idea out there,” said Poole in an interview with Dow Jones Newswires on Thursday. “The Fed ought to abandon these hints that it might intervene directly in the Treasurys market for the purpose of setting a particular Treasury rate or price.”

Read moreEx-Fed Official Poole Against Buying Treasurys

Airlines report ‘shocking’ plunge in traffic

The airline industry reported on Thursday an “unprecedented and shocking” plunge in global air cargo traffic.

Air freight accounts for 35 per cent of the value of goods traded internationally and the International Air Transport Association said traffic volumes had fallen by 22.6 per cent year-on-year in December.

Giovanni Bisignani, Iata director general, said, “there is no clearer description of the slowdown in world trade. Even in September 2001 (after the 9/11 terrorist attacks in the US), when much of the global fleet was grounded, the decline was only 13.9 per cent.”


“there is no clearer description of the slowdown in world trade,” … oh, wait a minute:

Investmenttools.com
– In German: Baltic Dry Index crasht
Baltic Dry Index (Wikipedia)

US to be CUT OFF from World – Baltic Dry Index Falls 93%

Source: YouTube


International passenger traffic fell in December by 4.6 per cent. Iata said the drop was less dramatic than in cargo, as volumes had been supported by year-end leisure travel that had been booked in advance.

Read moreAirlines report ‘shocking’ plunge in traffic

Fortress Blocks Redemptions as Shareholders Lose 96% Since IPO


The $43 million Peak to Peak gondola which connects Whistler and Blackcomb mountains, financed by Fortress after they acquired Canadian ski-resort conglomerate Intrawest Corp., is seen in Whistler, British Columbia, on Dec. 2, 2008. Photographer: Robbie McClaran/Bloomberg Markets via Bloomberg News

Jan. 30 (Bloomberg) — One of the things Wesley Edens did soon after his company bought Canadian ski-resort conglomerate Intrawest Corp. in October 2006 was to finance construction of a $43 million gondola at Whistler, British Columbia.

The new lift, completed in December 2008, is the longest unsupported span for any gondola, stretching 2.73 miles (4.4 kilometers). It’s also the highest, dangling 1,427 feet (435 meters) over Fitzsimmons Creek between Whistler mountain and its sister peak, Blackcomb. Visitors to the 2010 Winter Olympics, for which Intrawest’s Whistler Blackcomb resort is a venue, are likely to ride it just for thrills: Two of the 28 cars have glass bottoms.

Two years after commissioning the ski lift, Edens, 47, finds himself staring into an abyss of a different sort. He’s the chief executive officer of money manager Fortress Investment Group LLC. Edens and his partners became instant billionaires when the company, which manages $34.3 billion in private equity and hedge fund holdings, went public in 2007. The Montana-born Edens, who ski-raced in high school, could have paid for the gondola himself.

In the past four months the shares of Fortress have lost most of their value, falling 96 percent to $1.34 from $31 on Feb. 9, 2007, their first trading day. “There’s been a lot of hardship in the world since then,” says Edens in a rare interview.

The stock prices of a half dozen other publicly traded companies controlled by Fortress have also plunged.

Analysts are bearish on Fortress, even at a rock-bottom price.

Drips of Bad News

“The more I’ve learned about Fortress, the less comfortable I’ve become,” says Jackson Turner, who follows the company at New York-based Argus Research Co. “There’s just this drip, drip, drip of bad news.” He recommends selling the shares. Only one of nine Fortress analysts tracked by Bloomberg rates them a buy.

Read moreFortress Blocks Redemptions as Shareholders Lose 96% Since IPO

Flood of foreclosures: It’s worse than you think

Banks are moving slowly to list repossessed homes for sale, which could mean that housing inventory is even more bloated than current statistics indicate.

NEW YORK (CNNMoney.com) — Housing might be in worse shape than we think.

There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

The problem: Many foreclosed homes and other distressed properties that are now owned by banks have yet to be listed for sale. The volume of this so-called ‘ghost inventory’ could be substantial enough to depress already steeply falling prices when it does go on the market.

“That’s not good news,” said Pat Newport, an analyst with IHS Global Insight. “[Excess] inventory is the biggest problem in housing these days, and it leads to lower housing prices, which leads to more foreclosures.”

Read moreFlood of foreclosures: It’s worse than you think

Dose of Own Stem Cells Reverses Patients’ Multiple Sclerosis

Jan. 30 (Bloomberg) — A dose of their own stem cells “reset” the malfunctioning immune system of patients with early-stage multiple sclerosis and, for the first time, reversed their disability, according to researchers at Northwestern University in Chicago.

All 21 patients in the study had the “relapsing-remitting” form of the disease that makes their symptoms alternately flare up and recede. Three years after being treated, on average, 17 of the patients had improved on tests of their symptoms, 16 had experienced no relapse and none had deteriorated, the study found.

“This is the first study to actually show reversal of disability,” said Richard Burt, an associate professor in the division of immunotherapy at Northwestern, and the lead author of the study published yesterday in the British journal, the Lancet Neurology. “Some people had complete disappearance of all symptoms.”

Researchers are using stem cells taken from people’s own bodies to try to fight conditions such as heart disease, orthopedic ailments and to reconstruct women’s breasts after cancer surgery. These adult stem cells differ from those derived from embryos, which have the potential to form any of the roughly 210 cell types in the human body. Geron Corp. last week was given U.S. regulatory approval to conduct the first human studies with embryonic stem cells.

Read moreDose of Own Stem Cells Reverses Patients’ Multiple Sclerosis

Japan Heads for Worst Recession as Output Tumbles


Mazda Motor Corp. vehicles are assembled at the company’s Ujina plant in Hiroshima City, Japan, on Sept. 16, 2008. Photographer: Tomohiro Ohsumi/Bloomberg News

Jan. 30 (Bloomberg) — Japan headed for its worst postwar recession as factory production slumped an unprecedented 9.6 percent, NEC Corp. said it will cut more than 20,000 workers and Hitachi Ltd. forecast a record loss.

The December drop in output eclipsed the previous record of 8.5 percent set only a month earlier, the Trade Ministry said today in Tokyo. NEC, Japan’s biggest personal-computer maker, forecast its first loss in three years.

The Nikkei 225 Stock Average slumped 10 percent this month, extending last year’s record 42 percent drop as the global recession smothered demand for Japanese cars and electronics. Mounting losses forced companies to fire workers in December, spurring the biggest jump in the unemployment rate in 41 years.

“Japan’s economy is falling off a cliff,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “There’s really nothing out there to drive growth.”

The International Monetary Fund said this week that Japan’s gross domestic product will shrink 2.6 percent this year, the bleakest projection for any Group of Seven economy except the U.K. That contraction would be Japan’s worst since World War II.

“We’re in a very grave situation,” Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo today. “Japan is being hit by this wave of weakening global demand.”

Read moreJapan Heads for Worst Recession as Output Tumbles

Residents face long, icy wait for power to return

A vehicle drives under a tree that is weighed down by ice on Old Wire Road as a result of wintry weather on Wednesday Jan. 28, 2009, in Fayetteville, Ark. (AP Photo/Beth Hall)

LOUISVILLE, Ky. – More than a million homes and businesses were left in the cold without power Thursday in the wake of an icy winter storm could face a lengthy wait for electricity to come back, even as federal help was promised to two states hit hardest by the blast.

Read moreResidents face long, icy wait for power to return