Depression in the USA - Deflation verus Inflation

[mark100]

The world is in a crisis.

Is the world really in a crisis or is it just the financial world at present? The world will be in a crisis when we run low on energy and then climate change will probably be forgotten

[Laxmi]

Yep you are right. If world growth continues at recent historic rates; energy is going to be a big concern, especially electricity when oil becomes too expensive. Unlike oil, electricity is already unable to meet demand, especially in some countries such as South Africa and vast parts of Asia. The only thing that could save us from this concern in the short term, is if growth stalls.

But the big problem at the moment is the financial crisis. Yet another finance company has collapsed in New Zealand. The reason is straightforward. A shortage of funds to pay term investments falling due due to a lack of incoming investors and too many 'bad' loans. Alas, this is one of the many flow on effects of the subprime crisis in the US. In a global economy, the contagion quickly spreads.

Most investment guru's at the moment are cautious about where to best invest you money in the equity market, however there does appear to be one reocurring theme:
Companies with good balance sheets and low levels of debt seem to be favoured.

[Hoop]

An curiosity value article from someones viewpoint...is history repeating itself ?? and do we actually learn anything from history?? ....From this persons viewpoint it seems maybe not.

Reasons for the fall of the Roman Empire. All left Rome open to outside invaders

adapted from History Alive material

There were many reasons for the fall of the Roman Empire. Each one intertwined with the next. Many even blame the introduction of Christianity for the decline. Christianity made many Roman citizens into pacifists, making it more difficult to defend against the barbarian attackers. Also money used to build churches could have been used to maintain the empire. Although some argue that Christianity may have provided some morals and values for a declining civilization and therefore may have actually prolonged the imperial era.
Decline in Morals and Values
Those morals and values that kept together the Roman legions and thus the empire could not be maintained towards the end of the empire. Crimes of violence made the streets of the larger cities unsafe. Even during PaxRomana there were 32,000 prostitutes in Rome. Emperors like Nero and Caligula became infamous for wasting money on lavish parties where guests ate and drank until they became ill. The most popular amusement was watching the gladiatorial combats in the Colosseum. These were attended by the poor, the rich, and frequently the emperor himself. As gladiators fought, vicious cries and curses were heard from the audience. One contest after another was staged in the course of a single day. Should the ground become too soaked with blood, it was covered over with a fresh layer of sand and the performance went on.
Public Health
There were many public health and environmental problems. Many of the wealthy had water brought to their homes through lead pipes. Previously the aqueducts had even purified the water but at the end lead pipes were thought to be preferable. The wealthy death rate was very high. The continuous interaction of people at the Colosseum, the blood and death probable spread disease. Those who lived on the streets in continuous contact allowed for an uninterrupted strain of disease much like the homeless in the poorer run shelters of today. Alcohol use increased as well adding to the incompetency of the general public.
Political Corruption
One of the most difficult problems was choosing a new emperor. Unlike Greece where transition may not have been smooth but was at least consistent, the Romans never created an effective system to determine how new emperors would be selected. The choice was always open to debate between the old emperor, the Senate, the Praetorian Guard (the emperor's's private army), and the army. Gradually, the Praetorian Guard gained complete authority to choose the new emperor, who rewarded the guard who then became more influential, perpetuating the cycle. Then in 186 A. D. the army strangled the new emperor, the practice began of selling the throne to the highest bidder. During the next 100 years, Rome had 37 different emperors - 25 of whom were removed from office by assassination. This contributed to the overall weaknesses of the empire.
Unemployment
During the latter years of the empire farming was done on large estates called latifundia that were owned by wealthy men who used slave labor. A farmer who had to pay workmen could not produce goods as cheaply. Many farmers could not compete with these low prices and lost or sold their farms. This not only undermined the citizen farmer who passed his values to his family, but also filled the cities with unemployed people. At one time, the emperor was importing grain to feed more than 100,000 people in Rome alone. These people were not only a burden but also had little to do but cause trouble and contribute to an ever increasing crime rate.
Inflation
The roman economy suffered from inflation (an increase in prices) beginning after the reign of Marcus Aurelius. Once the Romans stopped conquering new lands, the flow of gold into the Roman economy decreased. Yet much gold was being spent by the Romans to pay for luxury items. This meant that there was less gold to use in coins. As the amount of gold used in coins decreased, the coins became less valuable. To make up for this loss in value, merchants raised the prices on the goods they sold. Many people stopped using coins and began to barter to get what they needed. Eventually, salaries had to be paid in food and clothing, and taxes were collected in fruits and vegetables.
Urban decay
Wealthy Romans lived in a domus, or house, with marble walls, floors with intricate colored tiles, and windows made of small panes of glass. Most Romans, however, were not rich, They lived in small smelly rooms in apartment houses with six or more stories called islands. Each island covered an entire block. At one time there were 44,000 apartment houses within the city walls of Rome. First-floor apartments were not occupied by the poor since these living quarters rented for about $00 a year. The more shaky wooden stairs a family had to climb, the cheaper the rent became. The upper apartments that the poor rented for $40 a year were hot, dirty, crowed, and dangerous. Anyone who could not pay the rent was forced to move out and live on the crime-infested streets. Because of this cities began to decay.
Inferior Technology
During the last 400 years of the empire, the scientific achievements of the Romans were limited almost entirely to engineering and the organization of public services. They built marvelous roads, bridges, and aqueducts. They established the first system of medicine for the benefit of the poor. But since the Romans relied so much on human and animal labor, they failed to invent many new machines or find new technology to produce goods more efficiently. They could not provide enough goods for their growing population. They were no longer conquering other civilizations and adapting their technology, they were actually losing territory they could not longer maintain with their legions.
Military Spending
Maintaining an army to defend the border of the Empire from barbarian attacks was a constant drain on the government. Military spending left few resources for other vital activities, such as providing public housing and maintaining quality roads and aqueducts. Frustrated Romans lost their desire to defend the Empire. The empire had to begin hiring soldiers recruited from the unemployed city mobs or worse from foreign counties. Such an army was not only unreliable, but very expensive. The emperors were forced to raise taxes frequently which in turn led again to increased inflation.
THE FINAL BLOWS
For years, the well-disciplined Roman army held the barbarians of Germany back. Then in the third century A. D. the Roman soldiers were pulled back from the Rhine-Danube frontier to fight civil war in Italy. This left the Roman border open to attack. Gradually Germanic hunters and herders from the north began to overtake Roman lands in Greece and Gaul (later France). Then in 476 A. D. the Germanic general Odacer or Odovacar overthrew the last of the Roman Emperors, Augustulus Romulus. From then on the western part of the Empire was ruled by Germanic chieftain. Roads and bridges were left in disrepair and fields left untilled. Pirates and bandits made travel unsafe. Cities could not be maintained without goods from the farms, trade and business began to disappear. And Rome was no more in the West.

???? Fall of the United States ????

[tricha]

An curiosity value article from someones viewpoint...is history repeating itself ?? and do we actually learn anything from history?? ....From this persons viewpoint it seems maybe not.

Reasons for the fall of the Roman Empire. All left Rome open to outside invaders

adapted from History Alive material


???? Fall of the United States ????

Distortions, Deceptions and Outright Lies
by Martin D. Weiss, Ph.D.
Beware.
The greatest threat to your financial future is not the danger you see or the beast you know. It stems from all those realities that you don't see or don't know.
This great uncertainty is not your fault. Quite the contrary, I lay the blame squarely on ...
1. Washington's distortions of its most vital economic data ...
2. Wall Street's deceptive evaluations of most of your investments, and ...
3. The outright lies that officials of both Washington and Wall Street tell you on a daily basis to cover their tracks or protect their turf.
Take Friday's news, for example.
If you thought that the surge in the U.S. unemployment rate to 5.1% was a shock, consider John Williams' Shadow Government Statistics.
First, Williams points out that the total job loss the government reported on Friday wasn't just 80,000. It was 147,000. Reason: The previous two months of job losses had been greatly understated, forcing the government to revise them by a combined 67,000.
Second, he argues that these huge revisions are no accident. They are the consequence of the government's continuing misuse of seasonal adjustments.
"If the process were honest," he writes in his Flash Update issued to paid subscribers on Friday, "the differences would go in both directions. Instead, the differences almost always suggest that the seasonal factors are being used to overstate the current month's relative payroll level, as seen last month and the month before."
Third, his analysis shows that the job numbers have a built-in bias based on a model that makes assumptions about birth and death rates. Without those distortions, he calculates there would have been additional job losses of 135,000 in February and 142,000 in March.
Fourth and most important, as you probably know, the government excludes "discouraged workers" from its count of the unemployed; and the definition of "discouraged" is highly questionable — anyone who has not looked for a job in just the past four weeks!
His conclusion: The true unemployment rate in America is not 5.1%. It's 13%, or over two and a half times worse than officially reported.
The government's distortions of other critical data are no less egregious, says Williams.
Inflation: The government reports that the Consumer Price Index (CPI) is essentially the same as it was two decades ago: It was approximately 4% in 1987, and it's near 4% right now.
But without the cumulative affect of a series of questionable adjustments made in recent decades, Williams calculates that the CPI has actually risen to almost 12%, or about three times higher than the official figures.
Economic growth: The government reports that, except for a brief interlude in the early 2000s, the U.S. economy has escaped recession throughout this decade, growing by 2% to 4% each year.
But Williams shows how, without the government's distortions of the GDP data, the opposite would be true: Except for brief interludes of mediocre growth in 2000 and 2004, the economy has been stuck in a recession throughout the entire decade.


These are vital stats that could make or break your financial future. To the degree that the shadow government stats are closer to the truth than the official versions, it means that ...

• The value of your bonds is overstated because of a national complacency regarding consumer price inflation ...
  
  
• The value of your stocks is overstated because of false optimism regarding the nation's employment and economic growth. And perhaps most dangerous of all ...
  
  
• Trillions of dollars in derivatives — predicated on the true value of assets like stocks and bonds — could be even shakier than often feared.

This alone should be more than enough to send thousands of officials into the confessional and give millions of investors sleepless nights. But the unfortunate reality is that ...
On Top of Washington's Data Distortions,
Wall Street Adds an Equally Dangerous
Layer of Investor Deceptions
First, most of the derivatives owned by commercial banks, investment banks and so-called "non-bank banks" are kept off their balance sheets. This means that ...

The actual value and stability of the nation's largest and most important institutions are largely unknown — and probably greatly overstated.

Second, with only the rarest of exceptions, the hundreds of thousands of bond ratings issued by Fitch, Moody's, and Standard and Poor's are uniformly bought and paid for by the very same companies that are being rated. As I've written here many times, the result is that ...

There is a built-in bias in the entire system, causing inflated ratings, delayed downgrades and the continuing deception of millions of investors.

Third, brokers and brokerage firms, despite a clear self-interest to keep their clients in the stock market, are routinely allowed to play the role of "objective" advisers and managers. The result is that ...

Investors are almost universally encouraged to buy when they should be holding and to hold when they should be selling. Despite a plethora of guidelines, rules and laws created to encourage fairness, the very structure of the system continually promotes unfairness.

Lies, Lies, Lies


In this environment, the unrelenting pressure — even the mandate — to transform well-meaning public officials into chronic liars is undeniable, and the examples are many:

• High-ranking government officials in the 1970s who swore the S&Ls were safe, even as thousands of thrifts were failing all around them.
  
  
• FDIC and Federal Reserve officials in the 1980s who vehemently denied the threat to commercial banks, even as the bank failure rate surged to the highest since the Great Depression.
  
  
• State insurance regulators in the 1990s who swore to the safety of annuities and life insurance policies, even as six million policyholders were being trapped in failed companies.
  
  
• Major Wall Street firms of the early 2000s that consistently affirmed "hold" and "buy" ratings for the shares of hundreds of companies that were going bankrupt. (For our detailed study documenting these extreme deceptions, see our white paper, Crisis of Confidence on Wall Street.)
  
  
• Auditing firms like Arthur Andersen, KPMG, and Deloitte and Touche that facilitated or even encouraged accounting distortions and cover-ups. (For the details, see our white paper submitted to the U.S. Senate.)

Today, the names and places may have changed. But the systemic deceptions have not.
This leaves you just two choices: Believe them and risk almost everything. Or strike out on an independent path to safety, protection and the potential for very substantial profits.
Good luck and God bless!
Martin

[Steve]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?

[tricha]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?

Page last updated at 17:04 GMT, Wednesday, 9 April 2008 18:04 UK
E-mail this to a friend Printable version
IMF slashes world growth forecast


Analysts forecast the US will briefly go into recession


Steve the International Monetary Fund (IMF) has said that the world economy will grow much more slowly in the next two years as a result of the credit crunch.
In its latest economic forecast, the IMF says that world economic growth will slow to 3.7% in 2008 and 2009, 1.25% lower than growth in 2007.
The downturn will be led by the US, which the IMF believes will go into a "mild recession" this year.
Growth in the UK will slow sharply to 1.6% in both 2008 and 2009.
It said that the UK economy would be affected by a weakening housing market, the contraction of the financial sector, and the impact on UK exports of weaker growth in the US and Europe.
Its UK forecast is substantially below the Treasury forecast of around 2% growth this year and 2.5% next year made at the time of the March Budget.
'Worst since Great Depression'
The greatest risk comes from the still-unfolding events in financial markets (which might lead to) the current credit squeeze mutating into a full-blown credit crunch


IMF World Economic Forecast



How deep will the pain go?
Darling still optimistic
Send us your comments


The IMF admits that the global downturn might be still more severe than it is currently predicting, and says that there is a one in four chance of a "global recession" when world growth falls below 3%.
"The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression," the report says.
The world downturn will be led by problems in the US housing market, but the IMF warns that excessive house price inflation in some European countries, including Spain, Ireland and the UK, has made them more vulnerable to a slowdown.
House prices have already fallen by around 10% in the US by some measures, and the IMF says that they may be over-valued by more than 20% in the UK, Ireland and Spain.
It is forecasting further falls in US house prices of 14% to 20% this year.
The head of the International Labour Organisation (ILO) said that crisis required measures to protect workers from the downturn.
"We need to find a better balance between the democratic voice of society, the productive dynamic of the market and the regulatory function of the state", ILO Director-General Juan Somavia said in a statement to the IMF meeting.
US recession
The IMF forecasts that the US economy will grow by just 0.5% during 2008 and will actually contract in the first half of the year.
WORLD ECONOMIC OUTLOOK
Report in full [5.8MB]
Executive summary [200KB]
Chapter 1: global prospects and policies [1.8MB]
Chapter 2: country and regional perspectives [800 KB]

Most computers will open this document automatically, but you may need Adobe Reader
Download the reader here


Its recovery will be slow, with growth of only 0.6% forecast in 2009.
"The US economy will tip into a mild recession in 2008 as a result of mutually reinforcing housing and financial market cycles, with only a gradual recovery in 2009, reflecting the time needed to resolve underlying balance sheet strains," the report notes.
It says that, comparing the US economy year-on-year from the four quarter of 2007 to the fourth quarter of 2008. it will be 0.7% smaller, as the recession bites in the first half of this year.
And it warns that with the scale of the credit losses to the financial sector approaching $1 trillion (£500bn), there is a risk that the crisis could get worse.
Few countries will escape the impact of the global slowdown


"The greatest risk comes from the still-unfolding events in financial markets," it says, warning that the current credit squeeze could "mutate into a full-blown credit crunch".
The IMF says that losses are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.
The IMF also says that given the potential severity of the problems, "additional initiatives to support the US housing market, including the use of the public balance sheet, could help reduce uncertainties about the evolution of the US financial system" although it warned that "care would be needed to avoid undue moral hazard".
The US Congress and the Bush administration are currently deadlocked over plans for further aid to the housing sector, with Democrats in both branches of Congress proposing an expansion of financial support for home owners facing foreclosure.
European impact
The biggest impact of the US slowdown is likely to felt in Europe, which is the biggest trading partner with the US.
"Activity in the other advanced economies will be sluggish in both 2008 and 2009 in the face of trade and financial spillovers," the IMF says.
It is predicting growth in the eurozone of just 1.4% in 2008 and 1.2% in 2009, with Europe's largest economy, Germany, growing by just 1% in 2009, a sharp revision of its forecast just three months ago.
2008 GROWTH FORECASTS
United States: 0.5%
Eurozone: 1.4%
United Kingdom: 1.6%
Source: IMF


And it says that in light of the slowdown, the European Central Bank - which has kept interest rates unchanged due to concern about inflation - "can afford some easing of its policy stance".
And it suggests that in future, central banks should take more account of rising house prices when setting interest rates, in effect "leaning against the wind" to prevent house prices moving out of "normal valuation ranges".
This is an implicit criticism of the US Federal Reserve which kept interest rates at 1% for several years under former chairman Alan Greenspan.
Worldwide impact
The IMF says that the big emerging market countries like China and India which are growing rapidly will be less affected by the slowdown, although they will be affected by a slowdown in trade among the rich countries. The rate of growth of imports into rich countries is expected to slow sharply, leading to a cut in the rate of growth of exports by developing countries. And it warns that the spillover will more severe in Latin America or in countries linked to the dollar, which has declined sharply on world currency markets.

[tricha]

There have been some reports that while the US economy is still slowing, the worst of the bad news has been factored in. Any thoughts on this?

US consumer mood at 26-year low


US consumers appear fearful about the economy


US consumer sentiment is now at its lowest level in 26 years, a closely-watched survey has found.
With sentiment knocked by recession fears, the University of Michigan's index of confidence fell to 63.2 for April from 69.5 in March.
This month's figure is the lowest since March 1982, when the US economy was deep in an economic downturn.
It is just the latest study to show that US consumer confidence has fallen sharply in recent months.
'Recession territory'
"There have only been a dozen other surveys that have recorded a lower level of consumer sentiment in the more than 50-year history of the survey," said the University of Michigan.
It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one


Carl Lantz, Credit Suisse


It found that respondents were concerned about "persistently high food and fuel prices, as well as rising unemployment".
The figure for April was much worse than analysts' expectations.
"We are definitely in recession territory," said Carl Lantz of Credit Suisse.
"It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one."
Bad debt
The increasing indications of possible recession in the US first started last summer when the revelation of billions of dollars of bad debt in the US housing market sparked the current credit crunch.
With banks much less willing to lend to each other, businesses and consumers, the credit squeeze has spread to the wider economy.
With consumer sentiment hit further by high food and fuel prices, it is starting to hit retail spending, which is the main bedrock of the US economy. US Treasury Secretary Henry Paulson admitted earlier this week that the US economy has "turned down sharply". To try to alleviate the situation, the Federal Reserve, the US central bank, has now cut interest rates six times since mid-September

[Steve]

All these facts are lagging, meaning that they should already be factored in. The recovery will be slow, but what I was asking was whether there would be any further shocks not yet factored in...

[ELYOB]

Will the outlying aboriginal communities [Australia] rise up and invade our cities in large numbers destroying out civilized culture if we are unable to pay social security , services like free education; free housing ;so on ....

Three years ago , I moved permanently to the Philippines , building my own empire from scratch ..... 80% cashed up ; invested in 2 oiler producer/explorers ....

You gotter have a plan ....I learnt this in a previous life on the Tiber . It worked then , and it may work again . The next life one may have to go into orbit abit!

[tricha]

this morning with all comentators wrong on GE ELECTRIC earnings DOWN

The Bull Market of a Lifetime
The Daily Reckoning Australia

Buenos Aires - Melbourne
Monday, 14 April 2008

----------------------------------

From Dan Denning at the Old Hat Factory:

--There's nothing like starting your week with a kick to the guts. The Aussie market was doomed before trading began today with Friday's shock result by GE in New York. But it's the collapse of yet another Australian broker, Lift Capital and its 1,600 clients, which threatens to swamp the Aussie market this week.

--But wait, it's not just Lift. "The list of stock brokers that have been engulfed by the tumbling stock market may be expanded to a fourth victim with concerns growing about Melbourne stock lender Chimaera Capital," reports today's Herald Sun. We are finally learning just how many people bought their way into the boom with borrowed money.

--Valuations are out the door for now. If small brokers that offered their clients leverage keep collapsing and liquidating their portfolios, you'd have to be a daredevil or playing with someone else's money to be a buyer.

--It's not that there's no value in the market. It's that there are so many sellers. The trouble is you just don't know how much more forced selling there's going to be. With so much stock being dumped on the market, it pays to be very discrete.

--A quick word about GE before we move on. GE is a world-class jet engine maker. It's also a shameless money-lender.

--GE's commercial finance business in Australia has a much higher profile than its business in the States, which goes under a different name altogether But the company's dirty little secret is getting out: it's really a financial company masquerading as an industrial.

--The company generated huge earnings during the credit boom as a commercial lender, not an industrial manufacturer. GE reported a double digit decline in first quarter earnings, and promptly blamed the whole thing on Bear Stearns. But if GE's CEO Jeffrey Immelt were being candid with investors, he would admit that the problem isn't with Bear Stearns, but in the performance of GE's financial segments. Don't take out word for it. Look below.

GE Summary of Operating Segments (unaudited)

Source: Edgar Online

--You can see that GE's two big financial segments, Commercial Finance and GE Money, showed a twenty per cent and a nineteen per cent decline in profit in the first quarter, respectively. Earnings in the infrastructure business were actually up.

--GE used to be company that made money by making things. Now it's a company that loses money by lending money. It's a pretty good symbol for much of what's wrong about American capitalism. The truth is, it should probably be two companies, not one.

--While the share market digests the news of collapsing brokers and falling financial profits, the grand poobahs of the world's economy are wringing their hands in worry. What's keeping them up at night? The three Fs, each its own kind of crisis: food, fuel, and finance.

--"The World Bank met on Sunday faced with a mounting food price crisis that has sparked deadly unrest in developing countries, underscoring the urgency of fighting hunger and poverty," reports Channel News Asia.

--How urgent, you ask? The Prime Minister of Haiti was sent packing this weekend by crowds protesting soaring food and fuel prices. We don't even know who the man is but reckon he won't be the last public official to be ridden out of town on a rail before this current crisis is over (and it may not be any time soon).

--As usual, it's the people at the margin (whether lending or with food) that are affected first when surplus turns to scarcity. Despite all the daily signs of abundance here in Australia, let us not forget that there are about four and half billion people on the planet who have little margin for error in their daily lives. If food prices go up, many of these people go hungry.

---World Bank President Robert Zoellick, doing his best impersonation of Franklin Delano Roosevelt, wants a "new deal" for global food programs. He's asked richer nations to contribute US$500 million immediately to help get food to poorer nations.

--IMF President Dominique Strauss-Kahn was less pragmatic but more rhetorical. Wrapping up his organisation's annual spring meeting, he said that, "Food prices, if they go on like they are doing today ... the consequences will be terrible…Hundreds of thousands of people will be starving…As we know, learning from the past, those kinds of questions sometimes end in war."

--People often talk about resource wars being a common feature of the coming century (or decade). But it's usually oil and energy they're talking about, not rice and wheat. Food is fuel for the body (we've been watching the Biggest Loser). If you don't have access to cheap calories, what good is cheap fuel?

--It's our contention here at the Daily Reckoning that both food and fuel are getting more expensive. The scary thought is that artificially low interest rates and cheap energy have, for many years now, sent bogus signals to the world about how much and how fast the population can grow. Agricultural abundance is only a very recent (and perhaps temporary) historical phenomenon. It's no coincidence that it occurred alongside the energy boom from cheap oil.

--Not that it's any consolation to starving people stranded in long petrol lines, but businesses in the agricultural sector are going to boom (provided they aren't nationalised). Farm equipment, fertilizer, and large producers should all see earnings rise this year. And next year. And the year after that.

--The second "f" crisis is in finance. It's been with us so long now it doesn't seem like it's new. But some people are slow on the uptake. The nerve endings of large institutions like the IMF and World Bank are few and far removed from the tiny central brains that direct the movements of these mammoths. Brontosaurus Banks.

--Like a bunch of dinosaurs standing under a meteor shower, the G-7 meeting this weekend produced lots of talk and no action. The ministers agreed that concrete steps need to be taken in the global financial system to improve transparency and the way the banks value certain assets. The G-7 statement also paid lip service to issue of credit ratings and how to make sure in the future that garbage debt doesn't get a Triple A investment grade rating.

--Here's the trouble though…American policymakers are worried about recession and plunging house values. Everyone else-especially the increasingly sweaty Wayne Swan-is worried about inflation. Because of the different concerns, no one can agree on any policy solutions.

--The conclusion? There is no one solution to the credit crisis. That is bad news for people who think of the economy like a machine. It's not just a matter of changing the oil or checking the fuel pump. The engine is sputtering, the drive train is wrecked, the tires are flat, and someone seems to have cut the brake lines. There are no air bags.

--As they say in the used car business, it's not the years, it's the miles. You wonder if this globalisation jalopy is going to make it.

--As for the dollar, Europe would like it to be stronger in order to revive its exports. Dollar-pegging countries in the Persian Gulf would like the dollar to be stronger too, so they don't import inflation and the political instability that goes with it. Even Japan and China would like the dollar to be stronger. Dollar strength maintains the basic economic model of the last 50 years: manufacture cheap and sell to America.

--But the dollar is not strong. And the things that would make it stronger-a lower trade deficit, higher interest rates, lower government spending-are not going to happen. In fact, the opposite will happen. While officials talk up a "strong dollar," everything they actually do weakens the dollar.

--This is why the day-to-day movements in the dollar index and in gold don't tell you much. The most important fact about the gold price is that that the official policy of the U.S. government is to cheapen its currency. Rates are being lowered. The government is spending money. It's also giving away money, hoping Americans can spend the country out of recession.

--Do you know of any person or any nation that ever spent its way to prosperity? Neither do we.

--The fuel crisis hasn't reached the same acute stage as global food markets. But in time, it will. There were two developments in the clean coal front this that caught our eye this week. First, "Australia is now investing $63 million in developing clean-coal technology in China, our biggest coal buyer," according to Dennis Shanahan in today's Australian.

--Making the last stop in his first world tour, Aussie PM Kevin Rudd told reporters made the case for an Australian Chinese partnership on coal, "The fact that Australia is the world's largest coal-exporting country, and that China is the world's largest coal-consuming country, presents both of us with a fundamental responsibility to act in this area of critical technology," he said.

--You say "responsibility" we say "opportunity." Now that we are moving into a world of energy "haves" and "have nots," coal is a realistic source of transportation fuels for oil-poor, coal-rich nations. What coal-rich nations lack is the technology and capital to turn coal into liquid transportation fuel. Australia has several public companies that can help them do it. That's the opportunity.

--The trouble with above ground coal-to-liquids (CTL) technology is that it produces nearly double the carbon dioxide emissions that you get from burning coal to make electricity. In the U.S., green politicians have actually prohibited U.S. government agencies from buying coal-based fuel with tax payer money.

--The U.S. has plenty of coal. The Air Force would like private enterprise to turn that coal into fuel for U.S. planes. But California Congressman Henry Waxman introduced a provision into last year's U.S. Energy bill (section 526) that prohibits government agencies from buying fuels from "unconventional" sources.

--Those "unconventional" sources are oil shale (the Pieceance Basin in Colorado), coal (the Powder River Basin Wyoming), and heavy oil sands (found in Alberta in Canada). Two U.S. Congressman are looking to repeal Section 526 from last year's U.S. Energy Bill and unlock the future fuel from those unconventional hydrocarbons.

--Will the section be repealed? It depends on what you think about global warming. We won't weigh in here. Our main interest is in how governments respond to the dueling crisis of Peak Oil and Global warming.

--The old "real politik" answer is to use your domestic resources to achieve energy security. This way you don't exchange your currency reserves for oil and outsource your supply of a vital industrial commodity to foreign interests. If you have lots of coal but no oil, you turn your coal into fuel.

--But hey, if the planet is warming and coal is the culprit, burning more coal doesn't exactly make things better, does it? What do you do? Go nuclear? Conserve? Go renewable?

--All of these options are on the economic table and an intelligent and prompt response is becoming increasingly urgent. You can bet that the government will do something, and probably the wrong thing. Meanwhile, our money is on the firms doing something with coal, wind, waves, and solar.

--These three crises-food, fuel, and finance-are a formidable triply whammy for the global economy. It's bad news for the indexes, which already have plenty of bad economic news to consider. But for a certain class of agricultural and alternative energy firms, this could be the bull market of a lifetime.