World stocks tumble on US recession fears

LONDON (AFP) – European equities dived on Monday after heavy falls earlier in Asia as markets were gripped by growing concern that the US economy was slipping into recession, dealers said.

Stock markets in Europe and the United States had sunk late last week following signs that the fallout from the US credit crisis was far from over.

In late morning European trade on Monday, Frankfurt, London and Paris stock markets chalked up fresh losses of about 1.5 percent.

Asian stocks plunged earlier Monday with Tokyo ending down almost 4.5 percent, Hong Kong tumbled 3.07 percent and Seoul gave up 2.3 percent. Singapore and Sydney both shed about 3.0 percent.

“Not a great start to the week with the UK following falls in the US Friday and Asia today,” said Mike Lenhoff, strategist at brokerage Brewin Dolphin.

“What matters most to investors is what is happening in the US. Investors view the US as in recession or going into recession which is not good news for corporate earnings and the market.”

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Read moreWorld stocks tumble on US recession fears

Pizza and beer now cost an arm and a leg

If you’re looking for a sure sign the U.S. economy is headed in the wrong direction, all you need to do is look at the skyrocketing price of “recession-proof” foods: pizza, hot dogs, bagels and beer.For many Americans, the credit crunch and the mortgage mess have left their pocketbooks – and their cupboards – bare. These same consumers, many living paycheck to paycheck, have relied on these cheaper foods to keep their expenditures down. Not anymore.

In the past few months, the news has gone from bad to worse:

* Pizza makers have seen their cheese costs soar this year from $1.30 a pound to $1.76 a pound. Even worse, the flour used to make the dough has gone from $3-$7 dollars a bushel to $25 a bushel in less than a year.
* Beer makers have been forced to raise their prices because of the skyrocketing price of hops – one of the principle ingredients. The price of hops has gone from about $4 a pound in September to $40 a pound. The price of barley, beer’s other main ingredient, has nearly doubled.
* Bagel shops have struggled to hold the line on prices and keep their customers. The exploding wheat prices have made the $1 bagel a fact of life in big cities such as New York. Donuts are averaging $1.50. And many shop owners fear a wheat shortage will drive prices even higher.
* Even the lowly hot dog is getting more expensive. Gray’s Papaya, a New York hot dog institution, will be jacking up the price for its $3.50 “Recession Special” – two hot dogs and a 14-ounce drink. Nicholas Gray, owner of the frankfurter chain, has yet to set the price increase, but he indicated it is coming soon.

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Overall, retail food prices rose 4 percent last year – the biggest jump in 17 years. The USDA officials predicted another 3 percent to 4 percent increase this year and continuing price hikes, faster than the pace of inflation going into 2010. And the price pinch has hit the lower-income shoppers hardest.

Why is this happening? Call it the perfect storm of inflationary pressures.

Bob Goldin, executive vice president of Technomic Inc., a food industry consulting firm, described the cost increases as a “disaster scenario,” with no real end in sight and limited ability for most to pass on the bulk of the costs to consumers.

Surging energy costs have driven up the price of transporting goods from farm to storefront. The national average for a gallon of gas jumped to $3.164, creeping closer to last May’s record of $3.227, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.

While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of virtually every consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, New Jersey.

“It’s everything that gets shipped,” Kloza said of diesel fuel’s impact on the economy. “That is the one that is much scarier.”

Another reason for the sharp hike in food prices is the increasing demand for ethanol, which has driven up the price of corn – and at the same time created a shortage of wheat as farmers shift their crop to the more lucrative corn.

“There are several reasons [for higher food prices], but at the core is corn, the largest and most important of agricultural commodities,” said Bill Lapp, president of Advanced Economic Solutions.

Which brings us back to the price of flour – and the pricier pizza. Jimmy Ferrell, owner of the four Fat Jimmy’s pizza restaurants in Louisville, Ky., said the price of flour has forced him to pass the cost onto his customers. “You have to raise (prices) a couple times a year just to keep up,” he said.

Ferrell thinks the rising flour prices have hurt small operators more than national chains.

“The national chains have a lot more pull and they can negotiate prices. I don’t think we have the same buying power that a Papa John’s or a Domino’s obviously has.”

Food industry consultant Goldin doesn’t see a light at the end of the tunnel. “There are no simple solutions,” he said. “The trend will be to reduce product costs, and some of that may very well affect quality.”

So, how can budget-conscious consumers stretch their dollar? There is one – albeit artery-clogging – alternative.

Fast food companies, looking for a way to attract budget-conscious customers, are increasingly offering more food for less money. The “dollar-menu” option is growing at chains such as McDonald’s, Burger King and Quiznos.

That’s good news for diners like Boston resident Shekia Scott. While lunching with friends at a Burger King, Scott said higher prices for food and gas were hurting her budget. But, she added, “the dollar menu’s been a help.”

So there you have it. Your best option for cheap eats is a gut-busting McDonald’s double cheeseburger for a buck. Makes you want to cry in your beer … if you can afford it.

The Associated Press and CNBC contributed to this report. By Al Olson

MSNBC updated 11:18 p.m. ET Feb. 29, 2008

Source: MSNBC

Russia and China rethink arms deals

Bejing: For almost two decades, it was close to the perfect match of buyer and seller.

Denied weapons and defense technology from the West, China was almost totally reliant on Russia for the hardware it needed to jump-start an ambitious military buildup. And while the Russian economy teetered in the aftermath of the Soviet Union’s collapse, huge orders from China helped keep a once-mighty defense industry afloat.

But powerful new forces, including a fear in Moscow of renewed rivalry with its neighbor and a desire in Beijing to become more self-reliant, have led both sides to re-evaluate this trade.

After orders peaked at more than $2 billion a year early in this decade, Chinese arms deals with Russia shrank to almost nothing in 2006, and no major new contracts are in the pipeline, according to Russian, Chinese and U.S. defense experts.

Read moreRussia and China rethink arms deals

Bank Failures? No big deal, says CNN

I really enjoyed reading this article, although I think TheOnion.com would be much better suited publisher.Here are some excerpts:

Banking experts say there is one thing that will save your money if your bank goes under. That’s FDIC insurance. “It’s the gold standard,” says banking consultant Bert Ely. “The FDIC has ample resources. It’s never been an issue,” he says.

As loan delinquencies rise, and bank failures increase, the FDIC is shoring up its reserves.

That’s fascinating, because last I checked (about five minutes ago), the FDIC had in its assets about 1.2% of the deposits it claims to “insure”.

If your bank bites the dust, there’s nothing to fear according to the FDIC. A healthier banking institution normally buys the failed bank according to Barr. “There is little or no interruption to the consumer,” he says. “If you go to bed one night as a customer of a bank, and you wake up as a customer of a new bank, there is nothing you have to do.” Your checks will still clear, you can still use your ATM card.

See? Bank failure isn’t even a bad thing!

Posted by Chris Brunner at February 29, 2008 11:16 AMSource: lewrockwell.com

Iraq war may cost US USD 7 trillion

Noble Prize-winning economist Joseph Stiglitz estimates that the wars in Iraq and Afghanistan may cost the US up to USD 7 trillion.When US troops invaded Iraq in March 2003, the Bush administration predicted that the war would be self-financing and that rebuilding the nation would cost less than USD 2b, but Stiglitz estimates that the wars in Iraq and Afghanistan are costing America more than USD 3 trillion.

That estimate from the Noble Prize-winning Sttiglitz also serves as the title of his new book, “The Three Trillion Dollar War”, which hits store shelves Friday.

The book, co-authored with Harvard University professor Linda Bilmes, builds on previous research that was published in January 2006. The two argued then and now that the cost to America of the wars in Iraq and Afghanistan is wildly underestimated.

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Joseph Stiglitz and Linda Bilmes

Read moreIraq war may cost US USD 7 trillion

Iran shifts oil sales away from dollar

Deputy head of the National Iranian Oil Company for international affairs says Iran has completely dropped dollar in its oil sales.“We issue invoices in dollars and agree with clients that the letters of credit and other means of payment will have a non-dollar basis,” he said.

In an interview with The Financial Times, Hojjatollah Ghanimifard said that over the past three months, Iran has received 75 percent of the proceeds from its oil sales in euros and the remaining 25 percent in the Japanese currency, yen.

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Hojjatollah Ghanimifard

Read moreIran shifts oil sales away from dollar

Atlanta Fed Releases DVD Aimed at Helping Banks Prepare for Disasters

Source: http://www.frbatlanta.org/invoke.cfm?objectid=5EDC3C78-5056-9F12-12899EC0FD1BFE7E&method=display_pressrelease

In the aftermath of a disaster, banks play a vital role, distributing cash to their customers and ensuring that their customers are able to meet the financial needs of their families and their businesses.

Drawing on the experience of bankers who have weathered crisis situations, the Federal Reserve Bank of Atlanta developed Crisis Preparedness: Reconnecting the Financial Lifeline, a DVD designed to assist bankers with their institutions’ emergency preparedness efforts. Each section of the DVD profiles a facet of crisis preparedness, from preparing and testing a plan to caring for employees to providing cash to customers to working with banks and first responders.

Read moreAtlanta Fed Releases DVD Aimed at Helping Banks Prepare for Disasters

Abu Dhabi fund draws scrutiny in U.S.

The headquarters of the InvestmAbu Dhabient Authority. The authority has a high profile in the emirate, but its secrecy is drawing scrutiny in Washington. (Charles Crowell/Bloomberg News)

Abu Dhabi has about 9 percent of the world’s oil and 0.02 percent of its population. One result is a surfeit of petrodollars, much of which is funneled into a secretive, government-controlled investment fund that is helping to shift the balance of power in the financial world.

After decades in the shadows, the fund, the Abu Dhabi Investment Authority, is turning heads on Wall Street and in Washington by making high-profile investments in the United States and elsewhere.

Known as ADIA (pronounced ah-DEE-ah), the fund recently formed a small team that is now buying big stakes in Western companies. This unit masterminded ADIA’s $7.5 billion investment in Citigroup, the largest U.S. bank, in November. It has also taken a large position in Toll Brothers, one of America’s biggest home builders.

“There is an idea that Abu Dhabi should not be the underdog of the map,” said Frauke Heard-Bey, a historian who has written a book about the political emergence of the United Arab Emirates. “They have the money to buy companies that are ailing, and why should they not? Why not make a mark?”

ADIA is the largest of the world’s sovereign wealth funds, giant pools of money controlled by cash-rich governments, particularly in Asia and Middle East. But Abu Dhabi, the wealthiest of the seven Arab emirates, says little about its fund. Few outsiders know for sure where ADIA invests, or even how much money it controls. And secrecy breeds hyperbole; some estimates of the fund’s size exceed $1 trillion.

Read moreAbu Dhabi fund draws scrutiny in U.S.

Ron Paul has been the only hope for the U.S.

Congressman Ron Paul slammed Federal Reserve chairman Ben Bernanke during a House Financial Services Committee meeting today for following a policy of deliberately destroying the dollar and wiping out the American middle class.
Paul held Bernanke to task over his refusal to address the decline of the dollar and its clear link to inflation.
“Inflation comes from the unwise increase in the supply of money credit….to argue that we can continue to debase the currency, which is really the policy of that you’re following, purposely debasing value of currency – which to me seems so destructive….it just puts more pressure on the federal reserve to create capital out of thin air inorder to stimulate the economy and usually that just goes into mal-investment,” said Paul.
Watch it.
“Ron Paul Schools Ben Bernanke Yet Again”


Paul highlighted the fact that the M3 money supply was rising at a rate of 16 per cent and that this was the real rate of inflation.
“History is against you,” Paul told Bernanke, “History is on the side of hard money – if you look at stable prices you have to look at the only historic sound money that’s lasted more than a few years – fiat money always ends, gold is the only thing where you get stable prices,” he added, pointing out that despite the price of oil’s rapid ascent, it had remained flat when compared to the price of gold.
“I cannot see how we can continue to accept the policy of deliberately destroying the value of money as an economic value,” said Paul, adding that the policy was “immoral,” and would lead to a reduction in American’s living standards and “the middle class being wiped out.”
Asked how he could defend a policy of deliberately depreciating the dollar, Bernanke stumbled through his response and was basically forced to agree with Paul’s point. Paul’s comments come on the day that the dollar hit its all time low against the Euro.
Earlier this week, former Fed chairman Alan Greenspan laid the groundwork for the further collapse of the greenback by encouraging Gulf states to abandon their dollar peg.
Watch Paul’s opening statement.
“Ron Paul opening statement to Bernanke at FSC – 2-27-2008”