NEW YORK (Reuters) - Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.

      That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.

      In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.

      "Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.

      "If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.

      Legal changes would be needed to give the Federal Reserve and the U.S. government the authority to buy stocks. Currently the Federal Reserve can buy only debt issued by the Treasury, as well as U.S. agency debentures and mortgage-backed securities.

      While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.

      The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said..."

      WASHINGTON (Reuters) - "Small businesses are losing confidence in the U.S. economy and have little hope a spate of interest rate cuts or economic stimulus measures will do much to boost sales, according to a survey released on Tuesday.

      The National Federation of Independent Business said its index of small business optimism slipped 2.8 points in January to 91.8, the lowest reading since January 1991, when the U.S. was mired in recession.

      "The index is sending a recession signal," NFIB chief economist William Dunkelberg said in a statement. "But ... this January reading is more of a recession in expectations than in hard economic data," he said, saying that hiring plans and job openings signaled a stronger economy today than in 1991.

      Prior to the first Federal Reserve interest rate cut on September 18, 24 percent of owners polled expected the economy to improve in the coming months, the group said. Twelve days later, just 5 percent expected the economy to improve.

      Optimism among small business owners has declined further after each subsequent Fed rate cut, it said.

      The Fed has lowered borrowing costs by 2.25 percentage points to 3 percent in five steps since mid-September to try to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch.

      The percent of owners citing inflation as their No. 1 problem rose to 8 percent in January, the highest reading since the early 1980s.

      Plans to raise prices were unchanged, holding at 26 percent of all owners in January. "Price hikes are less frequent," Dunkelberg said, adding enough owners are raising prices that inflation gauges are hovering above the Fed's comfort zone.

      During the next three months, 9 percent of the owners plan to create new jobs -- 2 points below the fourth quarter average, but much stronger than the net 2 percent recorded in 1991."

      NEW ORLEANS (Reuters) - "After the storm came the carjackers and burglars. Then came the gun battles and the chemical explosions that shook the restored Victorians in New Orleans' Algiers Point neighborhood.

      "The hurricane was a breeze compared with the crime and terror that followed," said Gregg Harris, a psychotherapist who lives in the battered area.

      As life returned to this close-knit neighborhood three weeks after Hurricane Katrina, residents said they hoped their experience could convince political leaders to get serious about the violence and poor services that have long been an unfortunate hallmark of their city.

      "I think now it's a wake-up call," Harris said.

      After the storm, the neighborhood association had to act as law enforcement and emergency response unit as city services collapsed and the police force was unable to protect them.

      Citizens organized armed patrols and checked on the elderly. They slept on their porches with loaded shotguns and bolted awake when intruders stumbled on the aluminum cans they had scattered on the sidewalk.

      Gunshots rang out for days, sometimes terrifyingly close.

      For Harris, the first warning sign came on Tuesday, the day after the storm, when two young men hit his partner, Vinnie Pervel, over the head and drove off with his Ford van.

      "A police car drove up behind me and saw it happening but he didn't do anything," said Pervel, who heads the 1,500-household neighborhood association.

      Then residents heard that police vehicles were being carjacked and looters were taking guns and ammunition from nearby stores.

      "We thought, 'Perhaps this is going to get really ugly,"' said Gareth Stubbs, a marine surveyor who lives across Pelican Street from Harris and Pervel.

      A Texas woman who runs a Web site called Polimom.com served as a link between those who stayed and those who had left. With her help, they stockpiled an arsenal of shotguns, derringer pistols and an old AK-47.

      They were put to use the next day.

      "Some looters came up and pulled a gun on the wrong group of men," said Harris, who said he did not fire a gun himself and declined to say who else was involved in the battle.

      "Two men were shot right there," Harris said, pointing down the street as he watered his rose bushes. "One was shot in the back, the other in the leg, and the third I was told made it a block and a half before he died in the street. I did not go down to see the body."

      The next day a nearby stockpile of chemicals exploded, shaking the houses and sending a fireball 300 feet into the sky. The fire burned for another three days, Harris said.

      "For five days we didn't need FEMA, the Red Cross or the National Guard," Harris said. "The neighborhood took care of itself.".."

      WASHINGTON (Yahoo) - "Empty homes and for-sale signs clutter neighborhoods. You've lost your job or know someone who has. Your paycheck and nest egg are taking a hit.

Could the country be in recession?

      Sixty-one percent of the public believes the economy is now suffering through its first recession since 2001, according to an Associated Press-Ipsos poll.

      The fallout from a depressed housing market and a credit crunch nearly caused the economy to stall in the final three months of last year. Some experts, like the majority of people questioned in the poll, say the economy actually may be shrinking now. The worry is that consumers and businesses will hunker down further and pull back spending, sending the economy into a tailspin.

      "Absolutely, we're in a recession," said Hilda Sanchez, 44, of Waterford, Calif.

      Squeezed by high energy and food bills, "we can't afford the things that we normally buy," she said. "We are cutting corners in our spending. For our groceries, we are buying a lot of generic and we are eating out less."

      For many, the meltdown in the housing and mortgage markets has proved especially disturbing. Record numbers of people were forced from their homes, unable to afford the monthly loan payments. People watched their single biggest asset fall in value, a reason to tighten the belt.

      "Obviously the housing market is creating deep concern. And one of the real problems could be that if people, as a result of their value of their homes going down, kind of pull in their horns," President Bush said in a television interview aired Sunday.

      Credit has become harder to get, thwarting would-be home buyers, adding to the glut of unsold homes and aggravating the housing industry's woes.

      "For-sale signs are everywhere. In my area, 35 to 40 homes are standing there and aren't even complete. There aren't any buyers," said Jim Sims, 60, of Greer, S.C.

      Nanette Dahlin, 52, of St. Louis Park, Minn., called the situation "very scary." She said friends in Madison, Minn., put their home up for sale recently and reduced the asking price more than $100,000 in just a week. "They are in bad shape," Dahlin said.

      For all of 2007, the economy grew by just 2.2 percent. That was the weakest performance since 2002, when the country was struggling to recover from the last recession. The housing collapse was the biggest culprit in 2007. Builders lowered spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.

      The job market is faltering — a point driven home by a report showing that employers cut jobs in January for the first time in more than four years.

      "The way things are, people are afraid of losing their jobs," Sanchez said."

      New York (financialsense.com) - by J.R. Nyquist -- "A recent Pravda headline stated, “USA absolutely defenseless against possible attack from Russia or China.” Of course, this headline seems ludicrous to most Americans. But there is nothing ludicrous about it. In 1998 a leading Russian military defector told me that Russia and China could combine to defeat the United States in a future war. Yes, such a war is possible, even if the Americans think it’s some kind of joke. According to Pravda, “No matter how mighty it may seem, the United States of America is defenseless in the face of an external enemy. Neither the U.S. Army nor the National Guard will be able to rebuff a sudden attack due to the lack of military training and equipment.” 

      Pravda’s assessment of American strategic vulnerability refers to a 400-page study “prepared by the independent committee which the U.S. Congress set up to test the battling capacity of the national Armed Forces.” According to Pravda, “Any unexpected attack against the USA with the use of chemical, biological or nuclear weapons will become fatal for the [Americans]….”

      Whatever your opinion of the War in Iraq, the most strategically significant result of the war has nothing to do with Iraq. Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff, has admitted that the U.S. military commitment to Iraq and Afghanistan “may have undermined the military’s ability to fight wars against major adversaries….” The U.S. military has changed its focus, losing sight of the real enemy – the most dangerous enemy of all. 

      The danger from Russia and China is not well understood. To complicate matters further, there is a new, rising incompetence in Washington. There is blindness in the governing class, a lack of understanding, an unwillingness to work with facts, a falsification of meanings, and fatal disregard for historical truth. Enemies are not recognized as enemies. Subversion is not recognized as subversion. Madness goes about in the guise of political correctness. 

      There are, of course, flashes of truth and moments of recognition. On the night of the Feb. 5th presidential primary, Republican Senator Orrin Hatch told an interviewer that he feared America could lose the economic wherewithal to sustain its armed forces. The interviewer completely ignored the senator’s statement. It wasn’t something journalists are ready to take seriously. Even so, the senator offered up a warning. He had begun thinking about the military budget and the prospect of declining revenues. You might say that the “writing is on the wall.” The U.S. dollar is falling, the banks are in trouble, the stock market is ready to tumble, the housing bubble is bursting. What will happen to the economy? What will happen to the military?"

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      NEW YORK (prospect.org) -- "These are not good days for the dominant "who could have known?" school of economics. First, they missed the housing bubble. Since it has started to unravel, they have continually understated the size of the fallout. Only now are most economists beginning to acknowledge that the economy is virtually certain to be thrown into a recession from the collapse.

      Fortunately, the media do not hold economists responsible for their failures. The NYT gives us yet another example of non-accountability. At the very end of an article warning that the impact of the housing collapse is likely to be substantial, the NYT reports "The German finance minister, Peer Steinbrück, said members agreed that write-offs at banks related to subprime mortgages could reach $400 billion, about four times estimates just a couple of months ago."

      Being off by 300 percent might be considered a serious problem in other lines of work, but apparently not for economists. For the record, I expect total losses for the financial sector to approach $1 trillion.

--Dean Baker"

      NEW YORK (blacklistednews.com) -- "U.S. troops are being trained to conduct round-ups, confiscate guns and shoot American citizens, including their own friends and family members, as part of a long-standing program to prepare for the declaration of martial law, according to a soldier who recently returned from Iraq.

      We received an e mail from "Scott", a member of a pipefitters union that runs an apprenticeship program called Helmets To Hard Hats, which according to its website, "Is a national program that connects National Guard, Reserve and transitioning active-duty military members with quality career training and employment opportunities within the construction industry."

      "He was asked if he could shoot his friends or family members if ordered to do so. At the time he said he could," writes Scott.

      Its known origins can be traced back to an October 1994 Marine questionnaire out of the Twentynine Palms Marine Base in California. Recruits were asked 46 questions, including whether they would kill U.S. citizens who refused to surrender their firearms.

      Documentary film maker Alex Jones brought to light similar training programs that were taking place across the country in the late 90's which revolved around U.S. Marines being trained to arrest American citizens and take them to internment camps.

      During one such program in Oakland California, dubbed "Operation Urban Warrior," Marines refused to answer if they would target American citizens for gun confiscation if ordered to do so.

      During hurricane Katrina, National Guard units were ordered to confiscate guns belonging to New Orleans residents.

      As we first exposed in May 2006, Clergy Response Teams are being trained by the federal government and FEMA to "quell dissent" and pacify citizens to obey the government in the event of a declaration of martial law.

      Pastors and other religious representatives are being taught to become secret police enforcers who teach their congregations to "obey the government" in preparation for the implementation of martial law, property and firearm seizures, mass vaccination programs and forced relocation.

      Many scoffed at our original story, which was based on the testimony of a whistleblower who was asked to participate in the program. Claims that the story was a conspiracy theory soon evaporated when a mainstream KSLA news report confirmed the existence of the program."

      Atlanta (ABC) -- "Troops arriving home from Iraq and Afghanistan have been carrying a mysterious, deadly bacteria, according to a new magazine report.

      Doctors have linked the bacterium acinetobacter baumannii to at least seven deaths, as well as to loss of limbs and other severe ailments, according to the report, which found the bacterium has spread quickly since the war in Afghanistan began in the fall of 2001

      Acinetobacter baumannii has been found in military hospitals in Germany, the Washington, D.C., area and Texas -- the primary destinations of wounded service members from the two war zones. And it has now spread to civilians, according to the report.

      "The outbreak began traveling with patients or nonpatients from Iraq all the way back to Walter Reed," said Dr. Rox Anderson at Harvard Medical School.

      Dr. Timothy Endy, a retired Army colonel now teaching infectious disease medicine at the Upstate Medical University of the State University of New York, said the outbreak might be the largest of its kind to spread through hospitals in history.

      Doctors quoted in the magazine article agreed. "Of the infectious disease problems that come out of the conflict, it is the most important complication we've seen," Dr. Glenn Wortmann, acting chief of infectious disease at Walter Reed Army Medical Center, said in the February issue of Proceedings, published by the U.S. Naval Institute, a professional organization focused on naval issues."