FTSE 100 heads for sharpest fall since 1987

FTSE 100 heads for sharpest fall since 1987
Graham Ruddick and Malcolm Moore
Oct 07, 2008

http://www.telegraph.co.uk/finance/markets/3146097/
FTSE-100-heads-for-sharpest-fall-since-1987.html

The FTSE 100 tumbled more than 6pc and is heading for its worst day since 1987 as the global financial crisis deepens.

The UK's index of leading shares dropped more than 300 points shortly after the open and continued falling during a tumultuous day's trading. By 3:30pm in London the index was off 335 points, or 6.7pc. It has not fallen more in a day since October 1987.

Shares in HBOS, Royal Bank of Scotland, Barclays, Lloyds TSB and HSBC all registered sharp falls.

The intensity of the banking crisis that has spread from America to Europe's shores also rattled investors on Wall Street. The Dow Jones Industrial Average tumbled through the 10,000 mark for the first time in four years and the Standard & Poor's 500 Index was also lower.

Miners added to the pain for investors after investment bank UBS warned earnings in the mining sector could fall 46pc this year and warned commodity prices could drop another 25pc as the global economy slows.

The whole sector tumbled, with Kazakhmys and Eurasian Natural Resources leading the fallers.

In Europe, stock markets in Germany, France, Italy and Spain were also down between 4pc and 5pc, while Russian stocks tumbled 12pc as the rouble-denominated Micex index slumped to its lowest level since October 2005.

Mike Lenhoff, the chief strategist at Brewin Dolphin, said the markets needed to see leadership from politicians around the world in tackling the crisis.

In another turbulent day, on the foreign-exchange markets, sterling and the euro weakened against the dollar and oil slid to $86.18 as fears of a global slowdown mount.

Earlier in Japan, the Nikkei Exchange was down 322.35 points, or 2.95pc, in the early afternoon at 10,615.79. The benchmark Shanghai composite index lost 109.12 points, or 4.76pc, to 2184.68.

A similar picture emerged across India, South Korea, Hong Kong, Taipei and Australia as worries spread that Asia may be hit harder than many analysts initially thought.

"It's becoming increasingly evident that the fallout of the banking crisis is rapidly spreading around the world. It is clear Asia will not escape unscathed," said Timothy Bond, Merrill Lynch's chief Asia economist.

Simon Denham of Capital Spreads warned that the increasing trend across Europe of guaranteeing depositors savings, as seen by the Irish, Greek, Danish and possibly the German governments, could have serious consequences.

"If we effectively nationalize all our banks in Europe then what is that going to do in terms of growth?" he said. "If any loan or mortgage that anyone takes out is effectively approved by the government it's not good. People talk about the lost decade in Japan and we could say that money is going to be difficult to come by for a good few years here.

A $75 trillion fright fest

A $75 trillion fright fest
By Paul B. Farrell
MarketWatch
Sep 08, 2008

http://www.marketwatch.com/news/story/75-trillion-fright-fest-8/
story.aspx?guid=%7B1E95D857%2D7CB8%2D46AD%2DB26C%2DD3732D93FD06%7D

Eight megahorror debts chilling America

America's out of control, drowning in debt, gorging: $75 trillion and getting worse. Now we're dumping Fannie and Freddie on America's balance sheet. Every year we pile trillions more on future generations.

[..] But with "I.O.U.S.A." America's debt will haunt you for years. It already totals about $150,000 for every single household. Worse yet, it's metastasizing $1.9 billion each and every day on the National Debt Clock. So who will go see the film? Few:

Liberals. Maybe a small contingent of lefties. But they already know the story about America's lethal addiction to living on borrowed money.

Conservatives. No way. They actually love big deficits and big federal debt. That money comes out of taxpayers' wallets, pays for their wars and all the profitable deals with China and oil producers that make neocons personally rich.

Main Street. The other 95% of Americans are too focused on their own personal problems; gas, food, rent, foreclosures, inflation, teen pregnancies, credit-card fees, outsourced jobs, and so much more.

So here's my adaptation of the 8 most "megahorror" debts to focus on: A format for a film festival highlighting the "The Megahorror Hits of American Debt:"

1. Horrors of Endless Massive War Debt
2. Horrors of Gluttonous, Addictive Oil Debt
3. Horrors of Trillions in Trade Deficits and Foreign Debt
4. Horrors of Killer Social Security and Medicare Debt
5. Horrors of Cheap Money, Self-indulgent Consumerism, Zero Savings
6. Horrors of Skyrocketing Health-care Debt
7. Horror of a Failing Educational System Debting America's Future
8. Horrors of Failed Leaders Triggering Catastrophic Debt Meltdown

In that worst-case scenario, our fate parallels the Rome of Caligula, decadent, vulnerable, ripe for a "Fiscal Armageddon," and eventually overrun by foreigners.

Who Is Really Printing Money?

Who Is Really Printing Money?
Boris Sobolev
www.ResourceStockGuide.com
August 11, 2008

http://www.gold-eagle.com/editorials_08/sobolev081008.html

During a credit crisis which is characterized by a steep slowdown of credit creation, growth of money supply in the financial system slows as well. It is silly to think that the Fed can replace the whole system of commercial banks by creating money itself from thin air. What the Fed can do is influence money supply by adjusting interest rates creating more or less incentive for the fractional-reserve lending by the commercial banks.

Going forward, gold will likely resume its up-trend due to one of two reasons:

(1) Another spell of problems in the financial system will cause gold (and the US treasuries) to once again take the place of safe haven investments, as was the case in the second half of 2007.

(2) Fear of deflation and a further slowdown in the US will spread around the world. As a result, a vicious wave of competitive devaluation will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation, eventually raising long-term bond yields. This will be the beginning of a real gold bull market when gold outperforms all other major classes of assets including most hard assets.