economy

by Alan Farago

A week ago, on the day President Bush disavowed government intervention in financial markets, the Federal Reserve announced the fruit of its weekend labor: essentially guaranteeing hundreds of billions in toxic financial derivatives owned by banks. Money laundering has become the de facto standard of Federal Reserve policy.

The financial press has been filled with praise for the US government rescue of Bear Stearns, one of the worst offenders of reason and logic in the issuance of securitized mortgage debt. You have to turn to blogs to get a sense of the malfeasance.

Last week, President Bush didn't know that analysts had predicted that gas prices could reach as high as $4.00 per gallon nation wide.

This week, gas prices for premium gas in Oregon topped out at $3.89 per gallon at stations in Eugene and Gold Beach.

The average price of standard gas in Oregon is now $3.41 per gallon, up more than $.45 in the last month, and $.70 in the last year.

by Mike Whitney

“Market conditions are the worst anyone in this industry can ever remember. I don't think anyone has a recollection of a total disappearance in liquidity...There are billion of dollars worth of assets out there for which there is just no market.” Alain Grisay, chief executive officer of London-based F&C Asset Management Plc; Bloomberg News

by Mike Whitney

The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20 per cent on some bonds -- a new benchmark for short term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm.

Martin Luther King Day was one of the worst days of global trading in world history.

US markets were given a brief reprieve thanks to the holiday, but the Dow Jones, is down 263 points in the first hour of trading on Tuesday.

The Federal Reserve responded to weak futures for US companies and massive losses in European and Asian markets by cutting interest rates on Monday.