NEW YORK (Reuters) - "The dollar fell broadly on Friday after the Federal Reserve slashed its discount rate on loans to banks and said U.S. economic growth could slow in light of tightening credit markets.

      The dollar started to pull back from a seven-week high against a basket of major currencies on Thursday after investors sought safe-haven bids in low-interest currencies and U.S. Treasuries in the midst of a global equities weakness.

      The Fed's action, cutting the interest rate charged on direct Fed loans to banks by a half-percentage point to 5.75 percent, followed a month-long slide of more than 1,100 points on the Dow Jones industrial average (.DJI: Quote, Profile, Research) and eased credit shortage fears in the equities market.

      But the greenback fell as many players speculated on the chances for an interest rate cut by the central bank, which would reduce the dollar's yield advantage against other currencies.

      "The Fed's move seems to be an acknowledgment of the disorderly markets," said Tom Benfer, vice president of foreign exchange at Bank of Montreal in New York. "The immediate impact was on equities, and foreign exchanges followed the equities market, moving the euro and Australian dollar up against the dollar."

      In late afternoon trades, the euro was 0.5 percent higher at $1.3485, on pace for the biggest gain in a month.

      The dollar index (.DXY: Quote, Profile, Research), which tracks the dollar's performance versus a basket of currencies, was down 0.44 percent to 81.371, after reaching a seven-week high early Thursday of 82.132.

      Against the yen, the dollar was nearly flat at 114.28 yen while the euro climbed 0.42 percent to 153.99 yen.

      The Bottom Line:  Fear not, when lending institutions lose all of their liquidity, the Fed will whip up some cash out of thin air (they have that ability) and pump it back into the system... Inflation-Shminflation....

      MIAMI (Reuters) - "Hurricane Dean is expected to grow into a ferocious Category 5 storm as it passes Jamaica and nears Mexico's Yucatan Peninsula and the oil and gas rigs of the Gulf of Mexico after it smashed into several Caribbean islands, the U.S. National Hurricane Center said on Friday.

      With winds near 145 mph (230 kph) late on Friday, Dean was a Category 4 storm, the second-highest level on the five-step Saffir-Simpson scale and capable of widespread destruction.

      The hurricane center said it was expected to strengthen to Category 5, with top sustained winds in excess of 155 mph (249 kph), before plowing directly over Jamaica toward the Gulf, home to a third of U.S. domestic crude oil and 15 percent of natural gas production.

      Dean roared through the narrow channel between the Lesser Antilles islands of St. Lucia and Martinique early Friday, crossing from the Atlantic Ocean to the warm Caribbean Sea.

      Its progress was being nervously watched by energy markets, which have been skittish about hurricanes since powerful storms in 2004 and 2005, including Ivan, Katrina and Rita, disrupted oil and gas production. Transocean, Royal Dutch Shell, Murphy Oil and other companies pulled dozens of workers from offshore rigs.

      Hurricane warnings were issued for southern areas of Haiti and the Dominican Republic.

      Dean, the first hurricane of what is expected to be an above-average Atlantic season, lifted the roof off the pediatric wing at Victoria Hospital in St. Lucia's capital, Castries, but patients had already been moved, officials said.

      Mr Putin said the move to resume the flights permanently after a 15-year suspension was in response to security threats posed by other military powers.

      He said 14 bombers had taken off from Russian airfields early on Friday.

      The move came a week after Russian bombers flew within a few hundred miles of the US Pacific island of Guam.

      A few days ago Moscow said its strategic bombers had begun exercises over the North Pole.

Flexing muscles

      "We have decided to restore flights by Russian strategic aviation on a permanent basis," Mr Putin told reporters at joint military exercises with China and four Central Asian states in Russia's Ural mountains.

      "In 1992, Russia unilaterally ended flights by its strategic aircraft to distant military patrol areas. Unfortunately, our example was not followed by everyone," Mr Putin said, in an apparent reference to the US.

      "Flights by other countries' strategic aircraft continue and this creates certain problems for ensuring the security of the Russian Federation," he said.

      In Washington, state department spokesman Sean McCormack played down the significance of Russia's move, saying: "We certainly are not in the kind of posture we were with what used to be the Soviet Union."

      "If Russia feels as though they want to take some of these old aircraft out of mothballs and get them flying again, that's their decision," he told reporters.

      One of the reasons Russia halted its flights 15 years ago was that it could no longer afford the fuel.

      Today Moscow's coffers are stuffed full of oil money, says the BBC's Rupert Wingfield-Hayes in Moscow, and the Kremlin is determined to show it is still a military power to reckon with.

'Shadowed by Nato'

      Russian media reported earlier on Friday that long-range bombers were airborne, and that Nato jets were shadowing them.

      Itar-Tass quoted Russian air force spokesman Alexander Drobyshevsky as saying: "At present, several pairs of Tu-160 and Tu-95MS aircraft are in the air over the Atlantic and Pacific oceans, which are accompanied by Nato planes."

      Nato said it was aware of the flights but had no comment on whether Nato planes were in attendance.

      In last week's incident near Guam, the Russian pilots "exchanged smiles" with US fighter pilots who scrambled to track them, a Russian general said.

More:

Putin revives Russia's long-haul bomber flights

      CHICAGO (Reuters) - "Financial markets are convinced that a Federal Reserve rate cut must come soon in order to help stem the global liquidity crisis, but many economists feel major hurdles stand in the way.

      The biggest open question is whether Fed policy-makers believe that the financial crisis has spread beyond Wall Street to the so-called real economy. Recent signs have been inconclusive outside of housing, where a recession already rages.

      In Fed-think, what constitutes a true calamity?

      St. Louis Fed President William Poole was the first policy-maker to speak since the mortgage and general credit market crisis worsened late last week.

      Poole said in an interview on Wednesday with Bloomberg TV that only a "calamity" would justify an interest-rate cut now, and that "no one has called up and said the sky is falling."

      "It's premature to say that this upset in the market is changing the course of the economy in any fundamental way," Poole said, adding that the Fed would have to rely on some real evidence before making a move.

      Marc Chandler, chief global currency strategist at Brown Brothers Harriman in New York, said: "That evidence is not just lacking, but the data over the past week or so suggests that the U.S. economy was a bit stronger than previously thought going into August."

      Short-term interest rate futures fully price a potential quarter-percentage-point cut in benchmark lending rates in September and a strong chance the Fed will cut rates by a half point at that point. Prospects for an inter-meeting rate cut are also running high.

      The Bottom Line:  Implications?  Check your wallet next time you're out buying food or pumping gas.

      Peru (BBC) -- "Peru will hold three days of mourning for the victims of a devastating earthquake that has left hundreds dead.

      Rescuers are still pulling bodies from ruined buildings in the rural town of Pisco and nearby villages, 200km (190 miles) south-west of the capital, Lima.

      Hospitals and morgues were overwhelmed by the disaster, forcing residents to place dead bodies on the streets.

      At least 450 people died and many more were injured, but officials say they expect the death toll to rise.

      President Alan Garcia declared that all public buildings would be closed for three days - including schools, military bases and museums.

      Mr Garcia had earlier announced a state of emergency and sent cabinet ministers to the area.

      The UN's Margareta Wahlstrom said power and communications were down and that 80% of houses in some areas had been destroyed because of poor construction.

      Ms Wahlstrom, UN deputy emergency relief co-ordinator, said that the death toll was likely to rise as the destruction of buildings in the area was "quite total".

      She said almost $1m (£500,000) had already been pledged by several UN agencies to help the victims.

      The 8.0-magnitude earthquake struck on Wednesday evening at 1841 (2341 GMT), just off the coast of Peru.

      The province of Ica was the most damaged, but even in Lima, 150km (95 miles) from the epicentre, people stood trembling on the streets as buildings around them shook.

      Juan Mendoza, mayor of Pisco, told a radio station that "the dead are scattered by the dozens on the streets".

      He estimated that 70% of his coastal city was in ruins.

      "We don't have lights, water, communications. Most houses have fallen, churches, stores, hotels, everything is destroyed," he said..."

      Dean's top sustained winds at 5 p.m. EDT were 100 mph, up from 75 mph earlier in the day. It was a Category 2 storm and centered about 210 miles east-northeast of Barbados. It was moving west at around 23 mph, and its center should approach the Lesser Antilles on Friday.

      "It's so far out, but it's not too early to start preparing," said Katherine Cesinger, a spokeswoman for Texas Gov. Rick Perry. "We have more notice than with Erin. We're glad for that especially since (Dean) is projected to bring some strength."

      Houston-based Transocean Inc., which operates the largest deepwater drilling rig fleet in U.S. waters in the Gulf of Mexico, said Thursday it had evacuated 11 nonessential workers late Wednesday as a precaution. About 125 people remain on board the moored, semisubmersible rig about 160 miles southeast of New Orleans.

      Shell Oil Co. evacuated 188 people this week from offshore facilities in Erin's path and said Thursday it was already monitoring Dean.

      The Caribbean islands of Dominica and St. Lucia issued hurricane warnings as Dean approached. Hurricane watches were issued for Martinique and Guadeloupe and its dependencies. About 2 to 5 inches of rain was expected, with mountainous areas getting up to 7 inches.

      Tropical storm warnings were issued for Antigua; Barbados; Barbuda; Grenada and its dependencies; Monserrat; Nevis; Saba; St. Eustatius; St. Kitts; St. Vincent and the Grenadines; and St. Maarten. A warning means storm conditions are expected within 24 hours, a watch means 36 hours.

      Hurricane specialists expect this year's Atlantic hurricane season — June 1 to Nov. 30 — to be busier than average, with as many as 16 tropical storms, nine of them strengthening into hurricanes. Ten tropical storms developed in the Atlantic last year, but only two made landfall in the United States..."

More:

Hurricane Dean stirs up storm warnings on its way into Caribbean

Hurricane Dean poses major Caribbean storm threat

      NEW YORK (Reuters) - "Investors' flight to safe haven assets to escape the global credit and liquidity squeeze of the past week has given the U.S. dollar a reprieve from a long-term decline this summer, but capital flows suggest the greenback's weakness will resume when the dust settles.

      As easy-financing conditions dry up on signs that losses in the U.S. subprime mortgage market are being felt as far away as Europe and Canada, some U.S. domestic investors have begun to bring money back home from overseas, providing support to the dollar.

      However, a close look at cross-border capital flow data shows the U.S. dollar will probably resume a broad-based decline before long.

      "You've seen in the initial wave some U.S. selling of foreign equities to shore up balance sheets," which has helped to push up the dollar, said Parker King, chief investment officer of the currency investment unit at Putnam Investments in Boston.

      "When all this normalizes, you're going to be back to a dollar negative environment that is both fundamentally and structurally driven," said King, who oversees a $36 billion portfolio.

      For now, despite news last week that the largest French investment bank BNP Paribas froze around $2 billion in funds exposed to U.S. subprime mortgage debt, investors last week placed a net $10.9 billion in fresh money into U.S. equity funds, the largest weekly increase since EPFR Global started tracking the data five years ago.

      Foreign flows into U.S.-domiciled equity funds were $11.3 billion, while a net $361 million left non-U.S.-domiciled U.S. funds, suggesting that U.S. investors were repatriating funds.

      Furthermore, according to AMG Data Services, U.S. equity funds took in a net $21.6 billion in the month to August 9, the biggest monthly increase since the month to March 15, when once again a surge in risk aversion caused U.S. investors to cut their foreign exposure..."

      The Bottom Line:  Conditions are ripe for things to turn very, very, very sour.

      Peru (CNN) -- "A magnitude 7.9 earthquake struck off the coast of central Peru on Wednesday evening, killing 15 people and leaving 70 hurt, President Alan Garcia said on national television.

      Peru's Panamericana TV put the death toll at 17. It showed footage of traffic lights in the capital, Lima, swaying with the quake.

      After everything stopped shaking, medics were seen tending to a woman.

      The video also showed chunks of plaster that had fallen from buildings.

      Some Lima residents were sobbing after the temblor, while others appeared to be praying.

      "This has been the most terrifying experience we've had," Gladys Tarnawiecki told CNN from her home in Lima.

      "It was chaos," said Fernando Calderon, an American visiting Peru. "Everybody started crying -- kids, everybody. Everybody started running toward any empty space. Everybody was afraid the buildings were going to collapse."

      "It's an awful experience, because there's no warning," he said.

      The quake shook inland towns, as well as cities near the coast and the mountains. There were power outages in Lima, Reuters reported, and people ran into the streets in panic as the tremor shook office buildings. Many stayed outside, afraid to go back indoors after the warnings of possible aftershocks.

      Meanwhile, tsunami warnings and watches issued after the quake for several Central and South American countries were canceled Wednesday night, as was a tsunami advisory for Hawaii.

      HOUSTON (Reuters) - "Tropical Storm Erin, swirling in the Gulf of Mexico, took aim at the Texas coast on Wednesday while Tropical Storm Dean strengthened in the open Atlantic and was expected to become the season's first hurricane.

      Texas officials closed beaches and put emergency crews on standby before Erin's expected landfall on Thursday near the seaside city of Corpus Christi.

      "We're out of here. We're outta here real quick," one man said as he prepared to evacuate the Padre Island National Seashore near Corpus, 200 miles southwest of Houston.

      Erin, currently with maximum winds of 40 miles per hour, was located about 140 miles southeast of Corpus Christi and about 200 miles south-southwest of Galveston, the National Hurricane Center said.

      Erin was moving erratically toward the west-northwest, and a tropical storm warning was in effect for the Texas coast from Brownsville to San Luis Pass near Galveston.

      A tropical storm watch for northeastern Mexico had been canceled, the hurricane center said.

      The storm could strengthen before it hits land, forecasters said, but local officials said they were worried mostly about heavy rains and possible flooding. Forecasters said Erin could bring up to 8 inches of rain.

      The U.S. Minerals Management Service said workers had been evacuated from five natural gas production platforms in the Gulf of Mexico, where about a third of U.S. oil and gas is produced.

More:

Texans Prepare for Tropical Storm Erin as 'Dean' Gathers Strength in South Atlantic

Tropical Storm Erin heads toward Texas

      BOSTON (Reuters) - "For hedge funds, August 15 may be D-Day, when investors rattled by heavy losses demand their money back from big and small portfolios alike.

      "We are seeing a 'shoot first and ask questions later' mentality among many investors," said Philippe Bonnefoy, chairman of hedge fund advisory group Cedars Partners, describing how everyone from the wealthy to chief investment officers at endowments are now shunning risk.

      Unnerved by heavy losses at some of the $1.75 trillion industry's most famous offerings, including AQR Capital Management, Highbridge Capital Management, D.E. Shaw and Goldman Sachs (GS.N: Quote, Profile, Research), many people want out before things get worse.

      But exiting can be a difficult process in an industry where managers routinely lock up money for months, if not years, and often require 45 days' advance notice before returning it.

      To pull out at the end of the third quarter, investors will have to notify their managers by August 15.

      "Everyone always waits until the last second to get out, and (Wednesday) is the last second," said Mike Hennessy, managing director at hedge fund of funds Morgan Creek Capital.

      Redemption notices began piling up weeks ago at hedge funds that specialize in subprime mortgages after two prominent Bear Stearns funds collapsed.

      Now, what seemed like a contained problem has spread from credit-focused strategies to a broad range of funds, including one with a so-called market-neutral focus, that are not supposed to see huge losses, analysts and investors said.

      The Bottom Line:  Everything adds up, and everything effects everything else to some degree.  Usually it's so complicated and foggy, and very difficult to tell.  But if you look at a little bit of everything recently, you don't have to be a prophet to see what's coming here.

      SINGAPORE (Reuters) - "U.S. oil prices extended gains to near $73 a barrel on Wednesday as fears that production could be disrupted by a gathering Gulf storm outweighed credit worries that slammed other markets.

      U.S. light, sweet crude for September delivery rose 47 cents to $72.85 a barrel by 0217 GMT, building on a 76 cent rise a day ago. Crude is rebounding from its lowest in over a month after a wave of profit-taking and long liquidation.

      London Brent crude rose 39 cents to $70.90 a barrel, lagging the U.S. gains after a 28 cent rise on Tuesday.

      Shell (RDSa.L: Quote, Profile, Research) shut in 5 million cubic feet per day of gas production in the Gulf of Mexico and began evacuating non-essential personnel due to a weather system in the region that later on Tuesday became a tropical depression.

      Other energy companies operating in the Gulf of Mexico, which produces roughly a third of U.S. domestic oil and gas production, were monitoring the tropical depression, this year's fifth, which formed in the central Gulf.

      Tropical Storm Dean also formed in the Atlantic Ocean midway between Africa and the Caribbean on Tuesday, and forecasters said it could become the first Atlantic hurricane of 2007 later in the week, although it was days away from reaching land.

      The focus later on Wednesday will shift towards weekly U.S. inventory data, expected to show a decline in crude stocks of 2.3 million barrels for the week through August 10.

      Distillate stocks, increasingly in the spotlight as some traders start looking ahead to winter, were seen rising by 1.2 million barrels and gasoline stocks falling by 900,000 barrels.

      Florida (National Geographic) - "The moon should be developed as a sanctuary for civilization in case of a cataclysmic cosmic impact, according to an international team of experts.

      NASA already has blueprints to create a permanent lunar outpost by the 2020s.

      But that plan should be expanded to include a way to preserve humanity's learning, culture, and technology if Earth is hit by a doomsday asteroid or comet, said Jim Burke, a scientist at NASA's Jet Propulsion Laboratory in California.

      Burke, a project manager on some of the earliest American lunar landings, now heads an International Space University study on surviving a collision with a near-Earth object.

      An impact of the size that wiped out the dinosaurs hasn't happened since long before the rise of humans, he pointed out.

      Yet scientists' expanding knowledge of asteroids and craters left throughout the solar system has created a consensus that Earth remains vulnerable to a civilization-crushing collision.

      This calls for the creation of a space age Noah's ark, Burke said.

Lunar Ark

      Humans are just beginning to send trinkets of technology and culture into space. NASA's recently launched Phoenix Mars Lander, for example, carries a mini-disc inscribed with stories, art, and music about Mars.

      Laying the foundation for "rebuilding the terrestrial Internet, plus an Earth-moon extension of it, should be a priority," Burke said..."

      The Bottom Line:  I guess at least someone in NASA is a Readiness-minded individual. This is GOOD News.

     HONOLULU, Hawaii (AP) -- "Hurricane Flossie weakened to a Category 3 storm Monday with maximum sustained winds of 126 mph as it roared toward Hawaii, but it was expected to pass by the islands.

      Forecasters earlier had said cooler weather would weaken the storm to a Category 1 hurricane, with sustained wind of at least 74 mph, by the time it passes about 70 miles south of the Big Island of Hawaii late Tuesday or early Wednesday.

      But on Monday forecasters said they now expected a Category 3 hurricane, with little change in strength when it passes the island. Earlier in the day, Flossie had been a Category 4 storm with maximum sustained winds of 140 mph.

      "The intensity has remained stronger than what was originally forecast, but the track has been pretty much right on," said Jim Weyman, the National Weather Service's meteorologist in charge in Honolulu.

      The Central Pacific Hurricane Center said Flossie "remains a dangerous hurricane with a clear well-defined eye and good outflow. ... It must be noted that Flossie has been surprisingly resilient to cooler ocean temperatures so far."

      The Big Island is largely rural, with about 150,000 people, and most live in the west or northeast, not the southern portion expected to be hit hardest by the hurricane. Other islands are expected to get much less of the storm's wind and rain.

      At 5 p.m. EDT, Flossie was about 425 miles southeast of Hilo, the Central Pacific Hurricane Center said. It was moving west-northwest at about 15 mph.

      Meteorologists cautioned that even a slight change of course in the unpredictable storm could take it closer to land.

      Emergency workers had mobilized Sunday afternoon to prepare for the potentially devastating hurricane, the mayor said.

      "You always prepare for the worst case scenario and hope for the best," Kim said.

      Even though the eye of the storm may miss the Hawaiian Islands, Flossie could still bring strong wind and heavy rain, forecasters said.

      Officials strongly urged residents statewide to prepare, including having a supply of food, water and disaster plans.

      "If Flossie misses us, that's great. But we're still in hurricane season," said Ray Lovell, spokesman for the state Civil Defense Agency.

      Parts of the Big Island, home to one of the world's most active volcanoes in Kilauea, likely will experience tropical storm-level winds and at least 10 to 15 inches of rain, Weyman said..."

      The Bottom Line:  Mother Nature's unpredictability never fails to surprise me.

       California (National Geographic) - "It's only a matter of time before a massive earthquake shakes Southern California to its core, scientists say. Though dormant for more than 300 years, the southern end of the San Andreas Fault is long overdue for a giant upheaval, according to experts.

       And the results of such a quake would be devastating.

       "A large earthquake would likely kill thousands and cause billions of dollars in damages," said Lucy Jones, a seismologist with the U.S. Geological Survey.

       Jones serves as chief scientist of the Southern San Andreas Earthquake Scenario, a team of scientists assessing potential earthquake scenarios in an area of Southern California known as the Coachella Valley.

When, Not If

       Historical data show that the average time between earthquakes in the southern end of the fault line is 150 to 200 years.

       However, the last earthquake struck the area back in 1680.

       While scientists can't explain this long gap between seismic activity, the experts are almost certain that it's a question of when, not if, the next one will strike.

       "Even though there hasn't been an earthquake in a long time, the reality is that there will be one," explained Tom Fumal, research geologist with the U.S. Geological Survey's Earthquake Hazards Team..."

     WASHINGTON (Reuters) - Credit spreads and collateralized debt obligations may not mean much to the average U.S. consumer, but if market gyrations persist, Wall Street's pain may come home to hurt Main Street.

      Consumer spending, the driving force behind the U.S. economy, has slowed in the past few months, although it did prove remarkably resilient through a series of gasoline price spikes and the early stages of the housing market slump.

      Easy credit terms have underpinned that spending, and this week's wild ride in financial markets shows how deeply the global economy depends on that free-flowing cash too.

      The problem is, the easy money is drying up.

      First it was mortgage-related markets where credit tightened as home prices fell and subprime mortgage defaults hit a record high.

      The root of the problem can be traced back to U.S. home loans made to people with poor credit histories. But it became a global market problem when the investment community bundled those loans and sliced them up into risky, riskier and riskiest pieces that were resold to investors such as hedge funds and banks.

      Homeowners had little to do with that -- and were often unaware that someone other than their mortgage companies held their notes.

      But in recent weeks, the pain has spread to corporate debt as credit markets have tightened up, and some businesses are starting to hoard cash.

      The Bottom Line:  Economic History - Proof that we're royally screwed is in front of our faces.

      SINGAPORE (Reuters) - "Oil prices edged up above $71 a barrel on Monday as central bankers injected cash into jittery financial markets and fundamental support came from expectations of robust demand.

      U.S. crude for September delivery (CLc1: Quote, Profile, Research) rose 22 cents to $71.69 a barrel by 0144 GMT, after ending 12 cents down on Friday. London's Brent crude (LCOc1: Quote, Profile, Research) rose 4 cents to $70.43, adding to the previous session's 18-cent gains.

      Central bankers by late Friday had restored an uneasy calm by injecting a massive and unprecedented $323 billion into money markets that had almost seized up in panic over exposure to complex credit derivatives linked to defaulting U.S. mortgages.

      "The market is still nervous, but after the sharp drop since a record high there's been some short-covering," said Ken Hasegawa of Himiwari CX. "I think funds will continue to liquidate long positions so the upside is limited."

      Forecasts that oil demand will remain strong have helped to put a floor under oil prices. The International Energy Agency said on Friday world oil demand will grow at a faster pace in 2008 than this year and repeated its call for more OPEC oil.

      Demand from the world's second largest consumer China also remains strong, with July imports of crude surging 39 percent versus a year ago.

      NEW YORK (CNNMoney.com) -- "The outlook for the housing market looks even bleaker than it did a week ago. Last Friday we reported that foreclosures were skyrocketing, home prices falling and recovery forecasts were being scaled back.

      And now this week, the mortgage meltdown spread to the financial markets with ebola-like speed, sparking fears that tighter credit will have a broader impact on consumers, markets and the economy.

      The U.S. government continues to downplay the danger. When the Federal Reserve met this week, the central bank said that inflation is the greatest threat to the economy, not the mortgage crisis.

      Yet, Countrywide Financial, the nation's largest mortgage lender by volume, reported Thursday that "unprecedented disruptions" in the mortgage market were forcing it to cut way back on the number of loans it was securitizing and selling in the secondary markets.

      In the financial markets, credit, including corporate bonds, has become harder to get. Mark Zandi, chief economist of Moody's Economy.com, had been loath to call it a "credit crunch." Instead, he called it a "liquidity squeeze," that had spread to corporate bond and other financial markets. The difference: In a crunch, nobody can get a loan; in a squeeze, only the riskier borrowers are cut out.

      "I think it's still a liquidity squeeze," Zandi now says, "but it has elements of a credit crunch, affecting much of the mortgage market."

      It has yet to severely disrupt the prime loan market, however, according to Zandi. The situation will continue until financial institutions revalue their mortgage-backed securities to what they're actually worth.

      "They're faced with redemptions and margin calls, and they have to value their securities to their market prices because they have to sell them," said Zandi. That will determine how hard a hit the investment community will take.

      Peter Schiff, president of Euro Pacific Capital Inc. and author of "Crash Proof: How to Profit from the Coming Economic Collapse," has said the problem goes way beyond subprime.

      "It's a mortgage problem," he said. "Subprime is like a little leak where the underlying problem is the integrity of the dam itself. Most of the mortgages taken out during the past few years will fail."

      Schiff expects huge losses in the housing market with home prices falling by half in some areas, which he said has to affect the overall economy. He said he'd been expecting the financial markets to start taking hits long before this week's drop.

      "This week is making more sense," he said. "The economy is a basket case."

      Most economists are nowhere near as pessimistic. Standard and Poor's chief economist, David Wyss, and Moody's Economy.com's chief economist, Mark Zandi, have forecast 8 percent price drops in the housing market, peak to trough.

      Zandi does not believe a consumer spending slowdown is enough to trigger a recession, but he hasn't counted it out. What it will do, he said, is "ensure that the economy grows at a pace below its potential. I wouldn't dismiss the possibility of a recession. I put the possibility at one in five."

      Ken Goldstein, an economist for the Conference Board, has said he doesn't believe the subprime contagion is enough to send the economy off-track, and that "the idea that average consumers are quaking over the prospects of losing their homes or much of their equity is wrong.".."

      The Bottom Line:  It's ok, the IMF and the FRB just conjured up $68+ Billion dollars from thin air to bail out the broke lending institutions.  I guess Hyper-inflation is more acceptable than a few greedy lending institutions going bankrupt.

      HONOLULU (Fox) —  "Hurricane Flossie strengthened to a Category 4 storm Saturday as it spun more than 1,000 miles south of Hawaii.

      At 11 a.m. EDT, Flossie had intensified with maximum sustained winds near 132 mph, and was about 1,100 miles southeast of Hilo, Hawaii. Flossie was upgraded to Category 3 from a Category 1 overnight.

      The storm was expected to weaken later in the day as it passed over cooler waters. It was traveling west at about 12 mph.

      Jeff Powell, lead forecaster at the National Weather Service in Honolulu, said Flossie hadn't changed its course and was expected to pass the Hawaiian Islands early Wednesday with rough surf. A "ramp up" of surf on the Big Island was expected late Monday.

      The island's southeastern shores could see waves of 8 to 12 feet, forecasters said, with the surf rising during the day Monday and peaking Tuesday. The island's South Point is the southernmost area of the United States.

      State civil defense officials urged residents to be prepared because of the unpredictable nature of hurricanes. A one or two degree direction change, they say, could make a big difference..."

       East Africa (National Geographic) - "Heavy rain, flooding, and even outbreaks of bug-borne disease in East Africa may be linked to sunspots, scientists say. The unusual finding is the result of a new study that found a correlation between peak sunspot activity and severe, mosquito-breeding rains in East Africa.

      What drives the dynamic is not clear, said the study's lead author, J. Curt Stager of Paul Smith's College in New York.

      The key factor is likely not the sunspots themselves but the slight brightening of the sun that goes along with them, he said.

      This brightening isn't severe—only a fraction of a percent—but in the intense sunlight of the tropics, it may be enough to warm the oceans slightly, putting more moisture in the air, Stager said.

      At the same time, the land may also warm up, causing the moist air to rise and producing more rain clouds.

      "So you get a double-whammy amplifying effect from what would otherwise be a weak solar signal," Stager said.

      The solar cycle, which runs in 11-year phases, is also known to affect winds in the upper atmosphere, he noted.

      "That can affect the flow of air that makes it rain," Stager said. "So it could be little things that hit certain parts of the world just the right way.

      "The basic story is that the rhythm has been steady for more than a hundred years," Stager said of the pattern his team observed.