This recession will be deeper than the shallow contraction earlier in this decade. The dot-com-led downturn was set off by a collapse in business capital spending, which at its peak in 2000 accounted for only 13 percent of the country's gross domestic product. The current recession is all about the coming capitulation of the American consumer - whose spending now accounts for a record 72 percent of G.D.P.

More:

Morgan Stanley Posts Loss on Writedown

Bear Stearns Posts 4Q Loss

Fatwa against the dollar?

Now that Everybody is Suddenly an Expert...

Bear Stearns has huge loss and cuts executive bonuses

MBIA details huge mortgage exposure, shares collapse

Credit crisis grasps bond insurer

      ROME (iht.com)  - "In an "unforeseen and unprecedented" shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, the top food and agriculture official of the United Nations warned Monday.

      The changes created "a very serious risk that fewer people will be able to get food," particularly in the developing world, said Jacques Diouf, head of the UN Food and Agriculture Organization.

      The agency's food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.

      At the same time, reserves of cereals are severely depleted, FAO records show. World wheat stores declined 11 percent this year, to the lowest level since 1980. That corresponds to 12 weeks of the world's total consumption - much less than the average of 18 weeks consumption in storage during the period 2000-2005. There are only 8 weeks of corn left, down from 11 weeks in the earlier period.

      The Bottom Line:  Stock up now.

      NEW YORK (Reuters) - "The Dow industrials and the S&P 500 declined slightly on Wednesday in light trading on concerns about more fallout from the housing slump.

      Large-cap technology shares such as Intel Corp (INTC.O: Quote, Profile, Research) helped lift the Nasdaq for the session. After the bell, Oracle Corp shares gained almost 4 percent after the business software maker's results showed quarterly revenues that exceeded Wall Street's estimates.

      During the regular session, deteriorating mortgage debt resurfaced as an issue driving the market after Standard & Poor's warned it is more likely to cut credit ratings of Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) and MBIA Insurance Corp (MBI.N: Quote, Profile, Research), two of the world's biggest insurers of bonds.

      If these two companies are downgraded, the $1.2 trillion of debt they insure will fall in value.

      Despite the blow to the market's overall confidence, downtrodden bank stocks rebounded on news that a Chinese sovereign wealth fund had bought a $5 billion stake in U.S. investment bank and brokerage Morgan Stanley (MS.N: Quote, Profile, Research).

      Morgan Stanley's shares rose 4.2 percent even after Morgan Stanley reported a quarterly loss driven by a larger-than-expected $9.4 billion of write-downs in mortgages and other assets..."

More:

Morgan Stanley takes $9.4bn hit

Morgan Stanley posts loss, sells stake to China

Barclays sues Bear Stearns over hedge funds

When Bearish Reality Breaks through a Rose-Colored Haze

ECB steps up liquidity fight

Bargain houses largely unsold

      NEW YORK (Reuters) - "Oil prices rallied on Wednesday as a slump in U.S. crude oil stockpiles to their lowest level in nearly three years rekindled worries of a winter supply crunch.

      U.S. crude settled up $1.16 at $91.24 a barrel. London Brent rose $1.36 to $91.48.

      The U.S. Energy Information Administration reported that crude stockpiles in the world's largest energy consumer dropped 7.6 million barrels last week to 296.9 million, the lowest since February 2005.

      Experts attributed the slump in stockpiles to a slowdown in imports after fog interrupted shipping along the U.S. Gulf Coast and a deadly ice storm in the U.S. heartland temporarily shut down major crude oil pipelines.

      "Of the unexpectedly large drop in crude oil stocks this week, 5.8 million barrels came out of the Gulf Coast. That means the majority can be attributed to fog in the Houston Ship Channel last week," said Tim Evans, energy analyst at CitiGroup Futures Research in New York.

      U.S. crude stocks have fallen about 16 percent since late June, and are about 9 percent below a year ago, pressured in part by tight-fisted OPEC output policy, according to the EIA.

      Inventory levels have tightened just as a cold snap in the U.S. Northeast has bolstered fuel demand in the region, home to about 80 percent of the nation's heating oil consumption.

      The Bottom Line:  See the trend here?

      DALLAS (Reuters) - "The Federal Reserve must not "overreact" to the credit crisis and take risks with inflation, one of its top policy-makers said on Tuesday, in a clear hint at his reluctance to cut interest rates any further.

      "The actions we've taken should provide some buoyancy through the course of next year to the economy. But I want to make sure that we don't overreact and create further problems down the road," Richard Fisher, president of the Federal Reserve Bank of Dallas, told Reuters in an interview.

      Fisher, an avowed anti-inflation hawk, is a voting member on the Fed's interest rate-setting committee next year.

      "Cutting rates, doing the things we've done, will facilitate economic growth next year from where it otherwise would have been. But I am also mindful of the fact that we've got some inflationary pressures building, and so we have to be careful that we don't stir those embers," he said.

      The overall consumer price index rose 0.8 percent in November while prices excluding energy and food increased by 0.3 percent, taking the year-on-year growth in this measure of so-called core inflation to 2.3 percent.

      Higher energy costs explained part of the rise, but food prices have also mounted and the front page of Tuesday's Dallas Morning News was emblazoned with the headline "Grocery bills to keep growing".

More:

Failure Beyond Finance

A Loss of Faith

State Budgets Between a Rock and a Hard Place

Property-Tax Frustration Builds

      Growth in gasoline demand has been slowing all year. In five of the last seven weeks, the amount of gas that Americans consume has actually fallen compared to the same time last year, according to retail sales data gathered by MasterCard SpendingPulse, a research report that tracks gasoline sales using MasterCard, other credit cards and cash purchases at approximately 140,000 service stations around the country.

      "With prices over $3 a gallon, there seems to be some real resistance from the consumer," said Michael McNamara, director of research for MasterCard SpendingPulse.

      In some weeks demand has fallen by as much as 3 percent.

      Although the public has seen $3 gasoline before, 2007 has been different. Where previous price spikes were short-lived, this one seems to be here to stay.

      Another reason demand is falling could be due to a slowing economy, or even fears of a recession.

      Since topping $3 back in April, gasoline has stayed consistently high, with the nationwide weekly average price never dropping below $2.70 a gallon, according to the Energy Information Administration. For 19 of the last 33 weeks, gasoline has averaged over $3 a gallon.

      The first time in recent memory that gasoline prices hit $3 was September 2005, following Hurricane Katrina, and then once again in the summer of 2006. (Gasoline prices were also over $3 in the early 1980s, adjusted for inflation.)

      Analysts reported a slight drop in consumer demand growth following each of those spikes, but they where short lived. Gasoline eventually returned to the low $2 range and demand quickly resumed its normal rate of growth of around 1.5 percent per year..."

      The Bottom Line:  Oh boy.

      Administration Reports Benefit Shortfall Totals $45 Trillion Over Next 75 Years

      That is the gap between the promises the government has made in benefits and the projected revenue stream for these programs over the next 75 years, the Bush administration estimated Monday.

      The $45.1 trillion shortfall has increased by nearly $1 trillion in just one year, according to the administration's "Financial Report of the United States Government" for 2006. And, it's up 67.8 percent in just the past four years. In 2003, the shortfall between promised benefits and revenue sources over a 75-year period was put at $26.9 trillion.

      The shortfall includes Social Security and Medicare in addition to Railroad Retirement and the Black Lung program.

      When the gap in funding social insurance programs is added to other government commitments, the total shortfall as of Sept. 30 represented $53 trillion, up more than $2 trillion in just a year, the report said.

      "Our government has made a whole lot of promises in the long-term that it cannot possibly keep," Comptroller General David M. Walker, the head of the Government Accountability Office, said Monday.

      Members of Congress said the increase in the unfunded liability for Social Security and Medicare underscored the critical urgency to do something in light of the looming retirement in coming years of 78 million baby boomers.

      "The longer we delay action on the issue of entitlement reform, the more difficult the solution will become," said Sen. Judd Gregg, the top Republican on the Senate Budget Committee.

      Rep. Jim Cooper, D-Tenn., said the new report emphasized the need to enact legislation he is supporting that would create a bipartisan commission to make recommendations on overhauling benefit programs and then submit those recommendations to an up-or-down vote in Congress.

      "If we don't take action now, it threatens to destroy our social safety net and ruin our economic prosperity," Cooper said in a statement.

      The new report said that the federal budget deficit would have been 69 percent higher than the $162.8 billion reported two months ago if the government had used the same accounting methods as private companies. Under the accrual method of accounting, the deficit would have totaled $275.5 billion for the fiscal year ending Sept. 30.

      Under the accrual method of accounting, expenses are recorded when they are incurred rather than when they are paid. That raises the costs for liabilities such as pensions and health insurance. The new report was released by the Treasury Department and the president's Office of Management and Budget..."

More:

An Oncoming Fiscal Train Wreck

Stocks knocked back

      The Bottom Line:  Wood is still a viable remedial backup for home-heating; if used in responsible quantities.

-  Wheat Price Surges Above $10 for First Time on Supply Concerns

      New York (Bloomberg) -- "Wheat rose above $10 a bushel for the first time, bolstering prices for other grains and oilseeds and stoking inflation.

      Chicago wheat futures rose as much as 30 cents, or 3.1 percent, to $10.095 as dry weather threatened crops in Argentina, adding to concern the world's farmers may not be able to grow enough to meet demand for bread, pasta and livestock feed. Rice also jumped to a record, while soybeans reached the highest in 34 years and corn was its costliest in nine months.

      Kellogg Co., the maker of Frosted Mini-Wheats cereal and Eggo waffles, and General Mills Inc., the maker of Cheerios cereal, already have raised prices. Kikkoman Corp., Japan's biggest maker of soy sauce, is planning its first price increase in 18 years, while Sara Lee Corp. said Dec. 13 it will increase bread prices for a second time since September.

      ``We are seeing a broad-based increase in cost pressures,'' Brian Redican, senior economist at Macquarie Group Ltd., said in an interview from Sydney today. ``The increase in soft commodity prices is really the next stage in that process.''

      The price of wheat has more than doubled in the past year as drought reduced output from Australia to Canada. Dry, warm weather may hurt yields in Argentina, the world's fourth-largest exporter, forecaster Meteorlogix LLC said Dec. 14.

      A smaller Argentine crop may reduce global wheat inventories that the U.S. government says will drop 11 percent by May 31 to 110.1 million metric tons.

`Fear Factor'

      ``Global supply is really tight at this time,'' said Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia. ``Saying there's a near-term top in the price is a very dangerous thing to do.''

      Wheat for March delivery, the most-active contract, rose 21.5 cents, or 2.2 percent, to $10.01 a bushel after earlier rising the exchange-imposed daily limit of 30 cents in after- hours electronic trading on the Chicago Board of Trade.

      U.S. consumer prices rose the most in more than two years last month, reinforcing the Federal Reserve's concern that inflation will erode confidence in the economy.

      The consumer price index, a U.S. Department of Labor measure of prices paid by urban customers for a basket of goods or services, showed on Dec. 14 that the cost of food rose 4.1 percent in the three months ended Nov. 30.

      The CPI for food and beverages rose partly because of increased costs for cereal and bakery products, along with higher prices for fruits and vegetables, the department said.

      ``You can see inflation picking up,'' said Jerod Leman, a broker at Wellington Commodities in Carmel, Indiana.

Accelerating Inflation

      Inflation is accelerating partly because U.S. interest rates are too low, eroding the value of the dollar, Leman said.

      ``Interest rates have been too low for too long,'' he said. Former Federal Reserve Chairman Alan Greenspan ``kept interest rates way too low and he started something that can't be stopped,'' Leman said. ``Inflation is starting to take over, and really, we haven't seen anything yet.''

      Food prices will continue to rise through 2008 because wheat, corn and soybeans are expected to continue to rally, said Darin Newsom, a senior analyst at agriculture information company DTN in Omaha, Nebraska. Wheat may reach $14.50, based on technical and fundamental indicators, Newsom said.

      Many speculative traders are trying to buy back their short positions, or bets that prices would fall, in the March and May contracts, and they are selling their July contracts. May contracts in Chicago rose 15.5 cents, or 1.6 percent, to $9.90 a bushel. Wheat for July delivery in Chicago fell 11.75 cents, or 1.5 percent, to $7.7625 a bushel overnight..."

      WASHINGTON (Reuters) - "The U.S. economy is showing early signs of stagflation as growth threatens to stall while food and energy prices soar, former U.S. Federal Reserve Chairman Alan Greenspan said on Sunday.

      In an interview on ABC's "This Week with George Stephanopoulos," Greenspan said low inflation was a major contributor to economic growth and prices must be held in check.

      "We are beginning to get not stagflation, but the early symptoms of it," Greenspan said.

      "Fundamentally, inflation must be suppressed," he added. "It's critically important that the Federal Reserve is allowed politically to do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer-term period."

      The U.S. central bank has lowered its benchmark interest rate three times since mid-September as a housing downturn, tightening credit conditions, and steep food and energy prices threaten to push the U.S. economy into recession.

      But cutting rates can have the unwanted side effect of pushing up prices, so the Fed finds itself in a tricky position of trying to revive growth without spurring inflation.

      Last week, U.S. data showed that wholesale inflation rose at the highest rate in 34 years, while consumer prices rose the most in more than two years.

      Greenspan repeated his assessment that the probability of a U.S. recession had moved up toward 50 percent but noted that corporate America's debt levels were in good shape, which should help cushion the blow from tightening credit terms.

More:

Unimpressive weekend has retailers nervous

Greenspan: Interest rates won't help housing

Investor group misses debt deal deadline

Schwarzenegger says he will declare fiscal emergency

Retailers see slower holiday growth: reports

Hotel shares fall on recession fears

Wall Street indexes fall as inflation worries weigh

Bank earnings hold pre-Christmas key

Investors wary of inflation, housing

Prudent Bear's PMs See Structured Finance Woes Leading To Recession

Money Funds Feel the Credit Squeeze

What Bankers Fear

Fear and Loathing in the Credit Markets

The Industry Doth Protest too Much, Methinks?

      The world is overdue for an influenza pandemic, and if one were to strike many people would be expected to bunker down at home rather than risk infection by going in to work or other places where people congregate.

      It might be several weeks before the danger passed. But whose larders are already so well stocked that they could last that long?

      And who would be able to hit the supermarket with a realistic idea of what they needed to buy to last a couple of months, and not end up with supplies so unbalanced that the crackers run out weeks before whatever has been bought to spread on them? Who has a good enough grasp of nutrition to ensure one's household does not begin to resemble some throwback to scurvy ravaged sailors?

      Jennie Brand-Miller, professor of human nutrition at the University of Sydney, is concerned many Australians do not give enough thought to supplies needed to survive a crisis such as a global pandemic.

      "I think it's complacency," Brand-Miller says. "I don't think people appreciate that something like bird flu would be terribly contagious, and I don't think enough people understand it would mean isolation."

      Along with a team of nutritionists, including Norwegian food expert Anna Haug, Brand-Miller has assembled a "food lifeboat", which would provide an individual with the energy and nutrition requirements needed to survive three months in lock-down.

      "We became quite excited about the possibility that we could come up with a food lifeboat, because the best way to avoid something like avian flu is to go into isolation -- so to continuously go out to buy foods would expose one to risks," Brand-Miller said.

      The Bottom Line:  The same cure for diseases is the cure for blatant ignorance:  be ready for a disaster and don't follow the establishment blindly.

-  Furious snow storm blows north, blankets Great Lakes states

      Meteorologists said that 18 inches was possible in northern New England and that there was a chance of 14 inches in parts of Michigan.

      Meteorologists said 18 inches was possible in northern New England and there was a chance of up to 14 inches in parts of Michigan.

      "Our biggest advice right now is stay home," said Maine State Police Sgt. Andrew Donovan.

      Visibility in the blowing snow was less than 200 yards, and in stronger gusts "if there's a car in front of you, you can't even see it," he said.

      Every available plow truck was at work in Vermont, said Reggie Brown, highway department dispatcher in Montpelier. "Everybody's out and running," he said.

      Illinois Department of Transportation spokesman Mike Claffey said 1,000 trucks were out clearing snow Sunday.

      Snow depths in some places were uncertain. "They can't tell how much because it's blowing so hard," Brown said.