IMF urges radical action to fight global recession

The International Monetary Fund has slashed its forecast for the world economy next year, predicting outright contraction for the rich economies of North America, Europe, and Japan for the first time since the Second World War.


Taxi driving through Tokyo at night. Photo: GETTY

“Prospects for global growth have deteriorated over the past month. The financial crisis remains virulent. Markets have entered a vicious cycle of asset deleveraging,” said the fund yesterday.

Britain’s economy will suffer and will see the steepest decline in G7 club of leading powers, shrinking 1.3pc as the crunch in the City of London leads to more job losses. Germany will decline by 0.8pc, The US and Spain by 0.7pc.

Sending shivers through stockmarkets everwhere, the Fund cut its world outlook next year to just 2.2pc, down from 3pc just a month ago. This is a global recession under the IMF’s 3pc rule-of-thumb.

“Financial stress is likely to be deeper and more protracted than envisaged in October. Markets are pricing in expectations of much higher corporate default rates, as well as higher losses on securities and loans,” it said.

“Activity is increasingly being held back by slumping confidence. As the financial crisis has become more entrenched, households and firms are increasingly anticipating a prolonged period of poor prospects for jobs and profits. As a result, they are cutting back.”

Olivier Blanchard, the IMF’s chief economist, called on authorities around the world to respond rapidly with combined monetary and fiscal stimulus, saying risk on an inflationary surge had subsided as commodities prices slump.

Read moreIMF urges radical action to fight global recession

Darling summons bank chiefs over rate cut failure

Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders – including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey – to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period – a key measure in the wholesale money market – is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

Read moreDarling summons bank chiefs over rate cut failure

Record opium harvest in Afghanistan threatens new heroin crisis in Britain

• EU agency fears glut and reversal of deaths decline
• UK tops cocaine abuse table for fifth year in row


Afghan farmers in a poppy fi eld: Helmand province, centre of British military operations, accounts for over half of the opium crop. Photograph: Ahmad Masood/Reuters

A glut of opium on the world market, fuelled by a record Afghan harvest, threatens a new heroin crisis in Britain, the European Union’s drug agency warned yesterday. The agency’s annual report also confirms that the UK remains at the top of the European league table of 27 countries for cocaine abuse for the fifth year in a row. The UK accounts for 820,000 of the 4 million Europeans who have “recently used” cocaine.

But the agency also reports that there are “stronger signals” of the declining popularity of cannabis across Europe, especially among British school students.

Nevertheless the drug experts say that a quarter of all Europeans – 71 million people – have tried cannabis at some time in their lives.

The heroin warning from the European monitoring centre for drugs and drug abuse follows two record opium harvests in Afghanistan of 8,200 tonnes in 2007 and 7,700 tonnes this year. The harvests represent 90% of the world’s illicit opium production with Helmand province, the centre of British military operations, accounting for over half of the crop.

Read moreRecord opium harvest in Afghanistan threatens new heroin crisis in Britain

US Imposes Banking Sanctions on Iran


A general view shows the reactor building of the Bushehr nuclear power plant in southern Iran (File)

The U.S. Treasury has moved to further restrict Iran’s access to the U.S. financial system, by banning certain money transfers.

The Treasury Department announced on Thursday that it will revoke Iran’s so-called “U-Turn” license, which currently allows transfers to briefly enter the United States before being sent to offshore banks.

Until Thursday, U.S. banks were allowed to process certain money transfers for Iranian banks and other Iranian customers as long as the payments were initiated by and ended up in offshore non-U.S. and non-Iranian banks.

U.S. officials say the ban is aimed at increasing financial pressure on Iran to end alleged support of terrorist groups and nuclear proliferation.

Iran is under three sets of international sanctions. It has been accused by several Western countries of seeking nuclear weapons. Tehran says its nuclear program is solely for peaceful purposes.

Separately on Thursday, Israeli Foreign Minister Tzipi Livni said any U.S. talks with Iran may be seen as a sign of weakness.

The statement was Israel first official note of caution over Barack Obama’s election as U.S. president. Mr. Obama said during the campaign he would be willing to hold talks with Iranian leaders.

Read moreUS Imposes Banking Sanctions on Iran

Philadelphia to close libraries, pools, cut jobs

Mayor says city among many facing large budget shortfalls in bad economy

PHILADELPHIA – The city will close libraries and swimming pools, suspend planned tax reductions, cut more than 800 jobs and trim salaries for some administrators in order to weather “an economic storm” that could leave the city with a $1 billion shortfall, Mayor Michael Nutter said Thursday.

Nutter outlined the drastic budget cuts in a live, 10-minute televised address – a rarity that represented an attempt to convey the dire nature of the city’s financial situation.

“The city must prepare for the worst,” Nutter said. “Painful program and service cuts are necessary.”

The city is facing a deficit of $108 million this year, and the shortfall could grow to more than $1 billion by 2013, Nutter said.

Read morePhiladelphia to close libraries, pools, cut jobs

Jobs lost in 2008: 1.2 million

Payrolls shrink by 240,000 in October, 10th straight month of cuts. Unemployment soars to 6.5%

chart_job_losses2.03.jpg

NEW YORK (CNNMoney.com) — The government reported more grim news about the economy Friday, saying employers cut 240,000 jobs in October – bringing the year’s total job losses to nearly 1.2 million.

According to the Labor Department’s monthly jobs report, the unemployment rate rose to 6.5% from 6.1% in September and higher than economists’ forecast of 6.3%. It was the highest unemployment rate since March 1994.

“There is so much bad in this report that it is hard to find any silver lining,” said Morgan Keegan analyst Kevin Giddis.

Economists surveyed by Briefing.com had forecast a loss of 200,000 jobs in the month. October’s monthly job loss total was less than September’s revised loss of 284,000. Payroll cuts in August were revised up to 127,000, which means more than half of this year’s job losses have occurred in the last three months.

September had the largest monthly job loss total since November 2001, the last month of the previous recession and just two months after the Sept. 11 terrorist attacks.

With 1,179,000 cuts, the economy has lost more than a million jobs in a year for the first time since 2001 – the last time the economy was in a recession. With most economic indicators signaling even more difficult times ahead, job losses will likely deepen and continue through at least the first half of 2009.

Read moreJobs lost in 2008: 1.2 million

Ford Has $2.98 Billion Operating Loss as Sales Plunge

Nov. 7 (Bloomberg) — Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Ford said it would trim more salaried jobs by January, deepen its fourth-quarter production cuts and shrink capital spending by as much as 17 percent.

Revenue plunged 22 percent to $32.1 billion, forcing Ford to triple its consumption of cash compared with the second quarter. Cash, cash equivalents and marketable securities for Ford’s automotive business plummeted 29 percent to $18.9 billion on Sept. 30, the Dearborn, Michigan-based company said today.

“Cash burn is the No. 1 issue,” Rebecca Lindland, an IHS Global Insight Inc. analyst, said in a Bloomberg Television interview. “We associate cash burn with General Motors. It has not always been a problem with Ford. That is potentially a new problem.”

Read moreFord Has $2.98 Billion Operating Loss as Sales Plunge

Obama’s Chief of Staff Was Director Of Freddie Mac During Scandal

New Obama Chief of Staff, Others on Board, Missed “Red Flags” of Alleged Fraud Scheme

President-elect Barack Obama’s newly appointed chief of staff, Rahm Emanuel, served on the board of directors of the federal mortgage firm Freddie Mac at a time when scandal was brewing at the troubled agency and the board failed to spot “red flags,” according to government reports reviewed by ABCNews.com.

Rahm_Emanuel
President-elect Barack Obama’s newly appointed chief of staff, Rahm Emanuel, served on the board of directors of the federal mortgage firm Freddie Mac at a time when scandal was brewing at the troubled agency and the board failed to spot “red flags,” according to government reports reviewed by ABCNews.com.

According to a complaint later filed by the Securities and Exchange Commission, Freddie Mac, known formally as the Federal Home Loan Mortgage Corporation, misreported profits by billions of dollars in order to deceive investors between the years 2000 and 2002.

Emanuel was not named in the SEC complaint (click here to read) but the entire board was later accused by the Office of Federal Housing Enterprise Oversight (OFHEO) (click here to read) of having “failed in its duty to follow up on matters brought to its attention.”

In a statement to ABCNews.com, a spokesperson said Emanuel served on the board for “13 months-a relatively short period of time.”

Read moreObama’s Chief of Staff Was Director Of Freddie Mac During Scandal

Obama’s Chief of Staff pick is one of the biggest recipients of Wall Street money in Congress


Rep. Rahm Emanuel (D-Ill.) with Sol Schatz of the VFW, Thomas Lonze of the State of Illinois, James O’Rourke of the American Legion and Sen. Dick Durbin discussing the Welcome Home GI Bill. (Photo courtesy of congressional website)

(CNSNews.com) – President-elect Barack Obama’s choice for White House chief of staff is one of the biggest recipients of Wall Street money in Congress, according to a Washington, D.C.-based “money-in-politics” watchdog group.

The Center for Responsive Politics has issued a report highlighting millions of dollars in campaign contributions that Rep. Rahm Emanuel (D-Ill.) has raised from individuals working in the hedge fund industry, private equity firms, and large investment firms.

Emanuel has raised more money from individuals and political action committees in securities and investment businesses than from any other industry.

This comes after a presidential campaign that saw Obama frequently criticize Wall Street and blamed lack of government regulations for the economic crisis that hit the country in mid-September.

Read moreObama’s Chief of Staff pick is one of the biggest recipients of Wall Street money in Congress

GM Says It May Not Have Enough Cash to Operate This Year

Nov. 7 (Bloomberg) — General Motors Corp., seeking federal aid to avoid collapse, said it used $6.9 billion in cash in the third quarter and may fall below the minimum it needs to operate before the end of this year.

GM said it will be near its minimum threshold for operating cash for the remainder of 2008 and will be “significantly short” of that level by the end of June without an improvement in market conditions, a major asset sale or access to new loans or cash support. GM has said it needs at least $11 billion in cash to pay its bills each month.

“GM is making a pretty direct plea for help,” said Pete Hastings, a fixed-income analyst at Morgan Keegan Inc. in Memphis, Tennessee. “The message is, `we’ve done all the things we can do, and we need help.’ And if we don’t get help, fill in the blank.”

Read moreGM Says It May Not Have Enough Cash to Operate This Year

Deportation reaches all-time high

The pace of deportations of illegal immigrants from the Pacific Northwest has reached an all-time high.

U.S. Immigration and Customs Enforcement deported 10,602 people from Washington, Oregon and Alaska in fiscal 2008, which ended Sept. 30. That’s a 37 percent increase over fiscal 2007 when 7,688 illegal aliens were sent back to their home countries, according to an ICE press release.

Read moreDeportation reaches all-time high

Credit Swap Disclosure Obscures True Financial Risk

Nov. 6 (Bloomberg) — The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A report by the Depository Trust and Clearing Corp. doesn’t include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of contracts linked to mortgage securities, according to Andrea Cicione at BNP Paribas SA in London.

New York-based DTCC’s data, released on its Web site Nov. 4, showed a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers. While designed to ease concerns about the amount of risk banks and investors amassed on borrowers from companies to homeowners, the report may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” Cicione, who correctly forecast in January that the cost of protecting European companies from default would rise, said in an interview. “A broadening of the coverage to the entire market is what investors really need.”

Read moreCredit Swap Disclosure Obscures True Financial Risk

Hundreds of small firms to go bust by Christmas


Business Secretary Peter Mandelson, is being urged to do more to help small businesses

Hundreds of small firms will go bust by the end of the year if ministers fail to deliver quickly on their pledge to increase bank lending, business leaders have warned.

Despite repeated calls for action from Gordon Brown and Chancellor Alistair Darling, it emerged that companies were still suffering from banks doubling overdraft charges and increasing interest rates.

The squeeze on bank lending puts huge pressure on the Government amid public expectation of a return for its £37 billion bailout with taxpayer cash.

Abbey yesterday increased rates by half a percentage point and Mr Brown was facing further embarrassment today as the nationalised northern Rock was expected to axe its tracker mortgages.

As Business Secretary Lord Mandelson prepared for a grilling by the House Of Lords, it emerged he had been personally warned by business leaders yesterday that firms were facing bankruptcy before Christmas.

Read moreHundreds of small firms to go bust by Christmas

Hong Kong Mandatory Pension Plan Loses 15% April to September

Nov. 6 (Bloomberg) — Hong Kong’s Mandatory Provident Fund, the city’s compulsory retirement savings plan, may be headed for its largest annual loss since inception after declining 15 percent between April and September.

Net asset values of MPF dropped to HK$223.8 billion ($28.9 billion) at the end of September, from HK$248.2 billion in April, according to the latest statistics posted on the Web site of the Mandatory Provident Fund Schemes Authority Oct. 31. The fund covers more than two-thirds of the 3.5 million employees and self-employed workers in the city.

Hong Kong, which doesn’t have a universal government pension plan like the Social Security in the U.S., started MPF in December 2000 to provide a basic safety net for the city’s elderly, as the portion of people over 65 is projected to more than double to 27 percent of the population by 2033 over 2004.

Read moreHong Kong Mandatory Pension Plan Loses 15% April to September

Citigroup, Goldman Said to Begin Eliminating More Than 12000 Jobs

Nov. 6 (Bloomberg) — Citigroup Inc. and Goldman Sachs Group Inc., faced with a weakening economy and the prospect of mounting losses, began firing workers as part of the firms’ plans to cut more than 12,000 jobs, people with knowledge of the matter said.

Goldman, which converted last month from the biggest U.S. securities firm into a commercial bank, yesterday began telling about 3,200 employees, or 10 percent of its workforce, they were out of a job, according to one of the people who declined to be identified because the decisions were confidential.

Citigroup has been notifying staff this week who are affected by the bank’s plan to discard 9,100 positions over the next 12 months, or about 2.6 percent of its headcount, another person said.

The ousted workers add to the swelling ranks of Wall Street’s unemployed, their lives upended by the credit crisis. Both New York-based firms have already cut staff, and are among the banks and brokerages worldwide that have shed almost 150,000 jobs since the subprime mortgage market collapsed last year. Led by Chief Executive Officer Lloyd Blankfein, Goldman said in April it would fire more after culling about 1,500 underperformers. Vikram Pandit, Citigroup’s CEO, shed 12,900 over the past year.

“We haven’t hit bottom yet,” said Henry Higdon, managing partner at Higdon Partners LLC, a New York-based search firm specializing in financial services. “They have to adjust the size of their businesses to the realities, not only today, but what it’s going to look like in the next two or three years.”

Read moreCitigroup, Goldman Said to Begin Eliminating More Than 12000 Jobs

Government black boxes will collect every email

Home Office says all data from web could be stored in giant government database

Internet “black boxes” will be used to collect every email and web visit in the UK under the Government’s plans for a giant “big brother” database, The Independent has learnt.

Home Office officials have told senior figures from the internet and telecommunications industries that the “black box” technology could automatically retain and store raw data from the web before transferring it to a giant central database controlled by the Government.

Plans to create a database holding information about every phone call, email and internet visit made in the UK have provoked a huge public outcry. Richard Thomas, the Information Commissioner, described it as “step too far” and the Government’s own terrorism watchdog said that as a “raw idea” it was “awful”.

Read moreGovernment black boxes will collect every email

National road toll devices to be tested by drivers next year

Trial could lead to £1.30-a-mile charges

Hundreds of drivers are being recruited to take part in government-funded road-pricing trials that could result in charges of up to £1.30 a mile on the most congested roads.

The test runs will start early next year in four locations and will involve fitting a satellite-tracking device to the vehicles of volunteers. An on-board unit will automatically deduct payments from a shadow account set up in the driver’s name.

Paul Clark, the Transport Minister, confirmed yesterday that the trials would proceed despite previous statements from the Government suggesting that it had abandoned the idea of a national road-pricing scheme. In 2004 a feasibility study considered a range of possible prices, up to £1.30 a mile. It said that the highest rate “would be paid by only 0.5 per cent of traffic”.

The on-board unit could be used to collect all road charges, such as congestion charges in London and Manchester and tolls for crossing bridges and using new lanes on motorways.

In the longer term the technology could be used to introduce pricing on all roads, with the price varying according to the time of day, direction of travel and the level of congestion.

Drivers would use the internet to check all their payments on a single bill. They would choose whether the bill showed where they had travelled or simply the amounts they had paid.

Read moreNational road toll devices to be tested by drivers next year

U.S. Stocks Post Biggest Post-Election Drop on Economic Concern


Traders work on the floor of the New York Stock Exchange in New York, Nov. 5, 2008. Photographer: Ramin Talaie/Bloomberg News

Nov. 5 (Bloomberg) — The stock market posted its biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.

Citigroup Inc. tumbled 14 percent and Bank of America Corp. lost 11 percent as the Standard & Poor’s 500 Index and Dow Jones Industrial Average sank more than 5 percent. Nucor Corp., the largest U.S.-based steel producer, slid 10 percent after bigger rival ArcelorMittal doubled production cuts amid slowing demand. Boeing Co., the world’s second-largest commercial planemaker, lost 6.9 percent after UBS AG forecast a 3 percent drop in global air traffic next year.

Read moreU.S. Stocks Post Biggest Post-Election Drop on Economic Concern

Boeing, Airbus May End Up With 200 Planes `Parked in Desert’ Amid Crunch

Nov. 6 (Bloomberg) — Airbus SAS and Boeing Co. may end up with as many as 200 new planes without buyers next year because airlines are unable to obtain funds to pay for them amid a global credit squeeze, a consultant said.

“There’s a funding gap and we don’t really know where the money is coming from,” Eddy Pieniazek, a director of aviation adviser Ascend, said at a conference in Hong Kong yesterday. “If the money doesn’t arrive, you can quite easily see 200 new aircraft, or whitetails, parked in a desert.”

Airbus and Boeing, the world’s two-biggest airplane makers, will probably deliver about $65 billion of large commercial aircraft next year, according to a report by JPMorgan Securities Inc. Leasing companies and banks, which will account for about 60 percent of the aircraft financing market in 2008, are likely to “pull back substantially,” creating a funding gap as wide as $20 billion, the report said.

“Nobody is getting out of this alive,” said Bill Cumberlidge, director of aviation asset finance at Allco Finance Group, which on Nov. 4 handed over operations to outside managers after warning it may default on its debt. “The debt market is dead.”

“Zero Liquidity”

Read moreBoeing, Airbus May End Up With 200 Planes `Parked in Desert’ Amid Crunch

UK energy prices rising twice as fast as EU average


Energy bills in the UK rise faster than in the EU, figures show. Photo: David Sillitoe

Energy prices in Britain in the past year have risen twice as fast as the European Union average, according to latest figures.

Gas and electricity prices in the UK rose by 29.7% in the last 12 months compared with a 15% increase for the EU.

The figures, released by the Organisation for Economic Co-operation and Development (OECD), show bills are up just 14% in France and 12.2% in Germany.

Ed Mayo, chief executive of government watchdog Consumer Focus, said: “The UK energy consumer is being clobbered faster and harder than those in Europe. Other countries may be doing more to keep their prices down and we should learn from them.

“The UK has a relatively free market, but the freedom to cut prices in the early years now seems to be the freedom to raise prices with impunity.

Read moreUK energy prices rising twice as fast as EU average