NEW YORK (functionpix.com) - "2008 is set to be the darkest ever year in financial history according to Goldman Sachs – a new report claims.

      The Times reports that the credit crunch is so serious that it may force the US banking system to cut lending by as much as $4,000 billion, prompting a “substantial recession” in the US.

      The mass of defaults on high-risk home loans in America has emerged in greater detail over the last 3-4 months but more and more banks and lending institutions are having to own up to the full extent of their losses as the financial world is being rocked to it’s core with the sheer scale of the financial melt-down.

      “If leveraged investors see $200 billion of the $400 billion aggregate credit loss, they might need to scale back their lending by $2 trillion,” Mr Hatzius said.

      “The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognised. It is easy to see how such a shock could produce a substantial recession,” Mr Hatzius said.

      The Bottom Line:  This isn't news anymore; it is a harbinger of things to come.

      New York (time.com) - "Is the world headed for a food crisis? India, Mexico and Yemen have seen food riots this year. Argentines boycotted tomatoes during the country's recent presidential elections when the vegetable became more expensive than meat; and in Italy, shoppers organized a one-day boycott of pasta to protest rising prices. In late October, the Russian government, hoping to ease tensions ahead of parliamentary elections early next year, announced a price freeze for milk, bread and other foods through the end of January.

      What's the cause for these shortages and price hikes? Expensive oil, for the most part.

      The United Nations Food and Agricultural Organization (FAO) reported last week that, at nearly $100 a barrel, the price of oil has sent the cost of food imports skyrocketing this year. Add in escalating crop prices, the FAO warned, and a direct consequence could soon be an increase in global hunger — and, as a consequence, increased social unrest. Faced with internal rumblings, "politicians tend to act to protect their own nationals rather than for the good of all," says Ali Ghurkan, a Rome-based FAO analyst who co-authored the report. Because of the lack of international cooperation, he adds, "Worldwide markets get tighter and the pain only lasts longer."

      What's more, worldwide food reserves are at their lowest in 35 years, so prices are likely to stay high for the foreseeable future. "Past shocks have quickly dissipated, but that's not likely to be the case this time," says Ghurkan. "Supply and demand have become unbalanced, and... can't be fixed quickly."

      The world's food import bill will rise in 2007 to $745 billion, up 21% from last year, the FAO estimated in its biannual Food Outlook. In developing countries, costs will go up by a quarter to nearly $233 billion. The FAO says the price increases are a result of record oil prices, farmers switching out of cereals to grow biofuel crops, extreme weather and growing demand from countries like India and China. The year 2008 will likely offer no relief. "The situation could deteriorate further in the coming months," the FAO report cautioned, "leading to a reduction in imports and consumption in many low-income food-deficit countries."

      Hardest hit will likely be sub-Saharan Africa, where many of the world's poorest nations depend on both high-cost energy as well as food imports. Cash-poor governments will be forced to choose between the two, the FAO says, and the former has almost always won out in the past. That means more people will go malnourished. Further exacerbating the problem are the current record prices for freight shipping brought on by record fuel prices. An estimated 854 million people, or one in six in the world, already don't have enough to eat, according to the World Food Programmer..."

      NEW YORK (Reuters) - "Freddie Mac's credit losses may surpass its historic high, if the U.S. mortgage market deteriorates more than what is forecast by the No. 2 mortgage finance company, Moody's Investors Service said.

      Such a spike in credit losses at the government-sponsored enterprise, which reported a $2 billion quarterly loss earlier this week, could result in Moody's downgrading the ratings on Freddie Mac's bank financial strength, subordinated debt and preferred stock ratings, the debt rating agency said in a statement dated Thursday.

      Freddie Mac expects credit losses stemming from its subprime mortgage exposure to rise through at least 2009, equaling 11 basis points of its credit guarantee portfolio, which was the historic high in credit losses for the GSE, Moody's said.

      "In Moody's view, continued deterioration in the mortgage market, resulting in further decline in these books may lead to credit losses in excess of their 11 basis point loss forecast," Moody's said.

      On September 30, Freddie Mac reported total assets of $792.9 billion and guaranteed securities totaling $1.3 trillion.

      Moody's revised outlook on these ratings on Freddie Mac, followed similar moves by Fitch Ratings and Standard & Poor's.

      For now, Moody's said it affirmed the credit ratings on Freddie Mac including the all-important "Aaa" senior debt rating, which is vital for investors to gauge the company's default risk..."

      The Bottom Line:  Further and further down the rabbit hole we go.

      LONDON (Reuters) - "Oil recovered from early lows to stand above $97 a barrel on Friday, in sight of the $100 milestone, reflecting moves in the dollar,

      U.S. light crude for January delivery rose 17 cents from Wednesday's settlement price to $97.49 a barrel by 1518 GMT (10:18 a.m. ET) in thin trading on the Globex electronic exchange, off lows of $96.16.

      London Brent crude was 45 cents up at $94.95.

      Traders said the dollar's recovery from fresh record lows weighed on oil prices, although thin trading volumes exaggerated price movements.

      The dollar fell to a record low against the euro on Friday, before the European currency was knocked off its high perch by comments from a euro zone policymaker. Oil came close to breaching $100 a barrel on Wednesday but fell, after hitting a lifetime high of $99.29 a barrel.

      On Thursday, a market holiday in the United States because of Thanksgiving, signs of higher OPEC shipments in early December sent crude lower.

      OPEC oil exports, excluding Angola, will rise by 720,000 barrels per day (bpd) in the four weeks to December 8, according to Roy Mason of consultancy Oil Movements, which tracks the oil tanker market.

      TOKYO (Reuters) - "The dollar hit a record low against the euro and a basket of currencies on Thursday as expectations for a further Federal Reserve interest rate cut were reinforced by the central bank's projection that U.S. economic growth will slow next year.

      But the dollar fared better against the yen, pushing up from a 2-½ year low hit the previous day. The yen's rally on risk aversion ran out of steam as Japanese shares held their ground despite a slide in U.S. equities on Wednesday.

      Traders said further sharp currency moves were likely in the near term because of thin liquidity, as U.S. markets are closed on Thursday for the Thanksgiving holiday and may be lightly staffed on Friday. Japanese financial markets will be closed on Friday for a national holiday.

      "The market is now closely watching what the authorities in Japan and Europe have to say about their rising currencies as the yen approaches the psychologically key 105 yen (against the dollar) and the euro nears $1.50," said Kengo Suzuki, a currency strategist at Shinko Securities.

      The dollar rose to 108.99 yen, pulling away from the 2-½ year low of 108.25 yen hit on electronic trading platform EBS on Wednesday.

      Buying by Japanese institutional investors helped boost the dollar versus the yen, traders said.

      The euro hit a record high of $1.4873 on EBS earlier in the day. It later trimmed its gains to stand at $1.4860, steady from late U.S. trading.

      The Bottom Line:  The other pin just dropped.

      SEOUL (Reuters) - "Oil held firm above $97 a barrel on Thursday, after a big build in stocks at a key U.S. storage hub knocked prices off a record high near $100.

      U.S. light crude for January delivery (CLc1: Quote, Profile, Research) gained 25 cents to $97.54 a barrel by 1:27 a.m. EST. Oil ended 74 cents lower a day ago after the stockbuild coupled with growing pessimism over the U.S. economy cut down an early rally to a peak of $99.29.

      NYMEX floor trading will be closed on Thursday for Thanksgiving holiday, although Globex electronic trade continues as normal.

      London Brent crude (LCOc1: Quote, Profile, Research) rose 34 cents to $95.18 a barrel.

      Crude stocks at the delivery point for U.S. crude futures in Cushing, Oklahoma, rose 1.2 million barrels to 14.6 million barrels last week, overshadowing an overall drawdown in U.S. crude stocks.

      "The inventory increase at this key physical delivery point of the NYMEX crude oil contract obviously caught the market somewhat flat-footed, leading to the price pullback," First Energy Capital said in its daily market statement..."

      TOKYO (Reuters) - "The dollar hovered near a record low against the euro on Wednesday after the Federal Reserve said U.S. growth would likely slow in 2008, underscoring market expectations for more monetary easing. The Fed projected on Tuesday that U.S. economic growth will slow in 2008 to between 1.8 percent and 2.5 percent, down sharply from the 2.5 percent to 2.75 percent forecast in June, before picking up in 2009.

      U.S. interest rate futures on Tuesday implied that investors see a roughly 90 percent chance that the Fed will cut interest rates by one-quarter point to 4.25 percent on December 11.

      "There is no change to the market sentiment that favors selling dollars," said the head of foreign exchange sales at a U.S. investment bank.

      The euro stood at $1.4818, hovering near a record high of $1.4853 hit on electronic trading platform EBS on Tuesday.

      The dollar also stayed near an all-time low against the Swiss franc, and stood at 1.1062 francs. The dollar earlier fell to as low as 1.1055 francs on EBS, matching a record low first struck on Tuesday.

      The yen rose against the dollar and higher-yielding currencies as regional equities fell despite a rise in U.S. share prices on Tuesday, as worries persisted about financial institutions' losses from credit market turmoil.

      Falls in share prices can curb investors' willingness to take on risk and trigger the unwinding of risky carry trades, in which investors sell low-yielding currencies like the yen to buy higher-yielding currencies.

      The Bottom Line:  Now is the time to invest in precious metals.

      US light, sweet crude touched a record-equalling $98.68 a barrel before settling up $3.39 at $98.03 a barrel.

      London Brent crude also enjoyed a spurt, adding $3.21 to $95.49.

      Tight supplies, winter demand and ongoing geopolitical concerns have also contributed to oil prices climbing by about 45% since August.

      Some observers say that $100-a-barrel oil is now inevitable.

      Adjusting for inflation, US light crude's record peak of $101.70 came in 1980 against a backdrop of war between Iraq and Iran.

Cut expectations

      Analysts examining minutes from the Federal Reserve's latest rate-setting meeting, released on Tuesday, said there was a good chance that there would be another interest rate cut in December.

      WASHINGTON (Reuters) - "The U.S. Supreme Court said on Tuesday it would decide whether handguns can be banned in Washington, D.C., a case that could produce a decisive ruling on whether individual Americans have a right to keep firearms.

      The nation's highest court agreed to hear an appeal by the District of Columbia government arguing that the city's 31-year-old law banning private possession of handguns in the U.S. capital should be upheld as constitutional.

      The justices said they would review a precedent-setting U.S. appeals court ruling, which held that individual Americans had a right to bear arms under the Constitution's Second Amendment and struck down Washington's law.

      The Supreme Court will hear arguments most likely in March, with a ruling expected by the end of June. The decision could become an issue in 2008 elections in the United States, which is estimated to have the world's highest civilian gun ownership rate...

      ...The politically powerful National Rifle Association, which opposes gun-control laws, denounced what it called Washington's "unconstitutional gun ban." Wayne LaPierre, NRA executive vice president, predicted the Supreme Court would overturn it and rule in favor of broad individual gun rights.

      The dollar fell to $1.4659 against the euro by late afternoon trade in New York, and dropped to 110.04 yen.

      At the start of November, the dollar hit a record low of $1.4752 against the single European currency.

      The strength of the dollar had been undermined further by weak US economic data released on Friday.

Interest rate cuts

      As a growing number of US banks reveal their exposure to bad US mortgage debt, data on Friday showed the biggest drop in American industrial production since January.

      Taken together, analysts say this suggests further cuts in US interest rates.

      "There are no fundamental reasons to buy the dollar," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.

      The US Federal Reserve last cut interest rates in October to 4.5%, in an effort to kick-start the faltering housing and credit markets, as well as making borrowing cheaper to encourage consumer spending in the run-up to the key Christmas shopping period.

      The Bottom Line:  This situation is becoming a chronic illness of our economy.

      Already stung by a two-year rise in gasoline prices, American consumers now face sharply higher prices for foods they can't do without. This little-known fact may go a long way to explaining why, despite healthy job statistics, Americans remain glum about the economy.

      Meeting with economic writers last week, President Bush dismissed several polls that show Americans are down on the economy. He expressed surprise that inflation is one of the stated concerns.

      "They cite inflation?" Bush asked, adding that, "I happen to believe the war has clouded a lot of people's sense of optimism."

      But the inflation numbers reveal the extent to which lower- and middle-income Americans are being pinched.

      The Bureau of Labor Statistics said in its July inflation report that egg prices are 33.7 percent higher than they were in July 2006. Over the same period, according to the department's consumer price index, whole milk was up 21.1 percent; fresh chicken 8.4 percent; navel oranges 13.6 percent; apples 8.7 percent. Dried beans were up 11.5 percent, and white bread just missed double-digit growth, rising by 8.8 percent.

      These numbers get lost in the broader inflation rate for all goods and services, which measured 2.4 percent for the same 12-month period. Across the economy, rising food prices were offset by falling prices for things bought at the mall: computers, cameras, clothing and shoes.

      "All of that stuff is going down in price, but prices for gasoline have gotten higher, and food prices have gone up," said Mark Vitner, a senior economist for Wachovia, a large national bank based in Charlotte, N.C.

      People also go to the mall a lot less than they go to the grocery store, so they're constantly reminded that dietary staples are up sharply.

Why are food prices rising?

      It's partly because of corn prices, driven up by congressional mandates for ethanol production, which have reduced the amount of corn available for animal feed. It's also because of tougher immigration enforcement and a late spring freeze, which have made farm laborers scarcer and damaged fruit and vegetable crops, respectively. And it's because of higher diesel fuel costs to run tractors and attractive foreign markets that take U.S. production.

      The Labor Department's last detailed survey of consumer spending, in 2005, showed that Americans spent about 12.8 percent of their income on food. A bit more than 7 percent of their income was spent on food at home, and 5.7 percent was spent on food away from home.

      These percentages suggest that higher food prices, while unwelcome, won't break the bank for most consumers. But for retirees such as Jacqueline Wilson, 60, of Upper Marlboro, Md., rising food and fuel prices take a big bite out of fixed income..."

      The hardline Iranian leader's comments also highlighted the growing challenge that Saudi Arabia, the world's largest oil producer, faces from Iran and its ally Venezuela within the Organization of Petroleum Exporting Countries.

      "They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bush's policies for the decline of the dollar and its negative effect on other countries.

      Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves.

      "All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."

      Venezuelan President Hugo Chavez echoed this sentiment Sunday on the sidelines of the summit, saying "the empire of the dollar has to end."

      "Don't you see how the dollar has been in free-fall without a parachute?" Chavez said, calling the euro a better option.

      Saudi Arabia's King Abdullah had tried to direct the focus of the summit toward studying the effect of the oil industry on the environment, but he continuously faced challenges from Ahmadinejad and Chavez.

      Iran and Venezuela have proposed trading oil in a basket of currencies to replace the historic link to the dollar, but they had not been able to generate support from enough fellow OPEC members -- many of whom, including Saudi Arabia, are staunch U.S. allies.

      Both Iran and Venezuela have antagonistic relationships with the U.S., suggesting their proposals may have a political motivation as well. While Tehran has been in a standoff with Washington over its nuclear program, left-wing Chavez is a bitter antagonist of Bush. U.S. sanctions on Iran also have made it increasingly difficult for the country to do business in dollars..."

      The Bottom Line:  This sounds serious.

      The average price of a gallon of self-serve regular is $3.09, the Lundberg Survey found. That's just 9 cents below the record set in May.

      The latest price is also 9 cents below the inflation-adjusted all-time high, said survey publisher Trilby Lundberg. In 1981, the price peaked at $1.35 -- which, in today's dollars, comes out to $3.10 using the latest Consumer Price Index data, she said.

      Don't be surprised if the records are shattered in the coming weeks, Lundberg said. Even if crude oil doesn't climb further, "we can easily see another dime at the pump," she said, "because refiners are severely squeezed between their oil buying price and their gasoline selling price."

       Presidential spokesman George Charamba said Harare remained ready to defend itself against the "sinister threats".

       He was responding to comments by a former British general Lord Guthrie in a UK newspaper a week ago.

       Lord Guthrie recalled advising the ex-Prime Minister Tony Blair against invading Zimbabwe.

       Zimbabwe has often accused its former colonial ruler of attempts to interfere in its internal affairs, in part out of concern for white farmers - many of British origin - whose farms have been seized and redistributed.

       But the UK accuses the government of President Robert Mugabe of gross human rights violations and of creating a "tragedy" in Zimbabwe.

Invasion considered

       In a frank interview with the UK's Independent on Sunday on 11 November, Lord Guthrie told the newspaper he had had a close relationship with Mr Blair.

       "We used to talk about things," he said. "I could say anything to him because he knew I wasn't going to spill the beans.".."

      Prince Saud Al-Faisal was overheard ruling out a proposal from Iran and Venezuela to discuss pricing crude in a private meeting at the oil cartel's conference.

      In an embarrassing blunder at the meeting in Riyadh, ministers' microphones were not cut off during a key closed meeting, and Prince Al-Faisal was heard saying: "My feeling is that the mere mention that the Opec countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. "There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."

      After around 40 minutes press officials cut off the feed, which had been accidentally broadcast to the press room.

      Prince Al-Faisal added: "This is not new. We have done this in the past: decide to study something without putting down on paper that we are going to study it so that we avoid any implication that will bring adverse effects on our countries' finances."

      Iran and Venezuela have argued that the meeting's final communique should voice concern about the level of the dollar, which has recently fallen to new record lows against the euro. They are pushing for oil to be denominated against a basket of currencies.

      The greenback also weakened slightly against the pound, although sterling's own recent weakness has pushed it down from $2.10 to $2.0457 during the week.

      Nigerian finance minister Shamsuddeen Usman said that Opec could declare in the communique that: "While underlining our concern for the continued depreciation of the dollar and its adverse impact on our revenues, we instruct our finance ministers to study the issue exhaustively and advise us on ways to safeguard the purchasing power of our revenues, of our members' revenues."

      The Bottom Line:  Are we truly on the brink of a dollar collapse?  It's definately not looking good, that's for certain.

      SANTIAGO (Reuters) - "A 6.0 magnitude earthquake struck northern Chile on Saturday, the latest in a series of aftershocks to hit the mineral-rich Andean country since a powerful temblor on Wednesday.

      The epicenter was 41 miles north-northwest of Antofagasta, the U.S. Geological Survey reported.

      The quake, near the coast and Chile's border with Peru, struck just 4.3 miles below the surface, but Chilean and Peruvian media did not report any damage or injuries.

      A Reuters witness said the quake was not felt hundreds of miles (km) south in Santiago, the Chilean capital.

      The USGS later said there was an aftershock of 5.2 magnitude in almost the same area.

      Earthquakes frequently strike Chile, where most residents live in valleys sandwiched between the Pacific Ocean and the Andes.

      On Wednesday, a 7.7 magnitude quake near Antofagasta collapsed homes and large buildings, killing two people and injuring 115 others. On Thursday, two aftershocks with magnitudes of 6.2 and 6.8 hit northern Chile.

      At least 15,000 people were left homeless by Wednesday's quake, which temporarily halted production at Chile's huge copper mines by cutting off power, the government has said..."