Morning Economic News - October 8, 2008

In overseas markets, oIl is down over 1.5%, the Dow Jones Industrial Average futures are down 148 points and the dollar is down 0.9% against the yen and 0.2% against the euro. [2:45 AM Eastern Time] The dollar is up against the pound sterling 0.38%. European countries are starting to point together individual bank rescue plans as European Union leaders failed to agree on a combined effort and the European Central Bank lacks the Federal Reserve's lender of last resort powers.

Federal Open Market Committee Minutes - September 16, 2008

Committee members generally saw the current stance of monetary policy
as consistent with a gradual strengthening of economic growth beginning
next year, although they recognized that recent financial developments
had boosted the downside risks to the economic outlook.

Consumer Credit G.19 - August 2008

• Total outstanding consumer credit: $2577.3 billion


• Total rate of change: -3.7%

Japan continues to tank

The Japanese economy continued to deteriorate quickly in August, following July’s half percent drop in the Leading Index with a 0.6% drop in both Leading and Coincident Indexes in August.

Three Silver Linings

Amidst all this pessimism, permit me three silver linings: First, the
strong dollar. Second, plunging energy prices that will generate an
economy-wide tax-cut effect. And third, rapid money-supply growth after
18 months of flat money. In fact, on this last point — which is so
important — it looks like the Fed has un-pegged its fed funds target
rate and is instead focused on pouring cash into the liquidity-starved
global banking system. Meanwhile, the Treasury purchase plan for toxic
assets will get off the ground sooner, not later. And the Fed is now
backstopping the commercial paper market.

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Fed Will Lend Directly to Corporations

The Fed said it will bypass ailing banks and lend directly
to U.S. corporations for the first time since the Great Depression,
while hinting strongly at further rate cuts.

Yes, the Credit Markets Are That Bad

However, the credit crunch will not last forever. We expect the lack of
confidence now permeating the financial system to dissipate in the next
few months, leading to a return to healthy real GDP growth and rising
inflation in the second half of 2009.

Consumers Trim Their Borrowing

Consumer borrowing contracted in August for the first time
in more than a decade, compounding worries about the economy's health.

U.S. CBO says FY08 budget deficit hit $438 billion

US consumer confidence falls in the latest week-ABC

Goldman sees oil slump until global GDP stabilises

GLOBAL MARKETS-World stocks tick higher; Iceland pegs FX

IMF Report Predicts Global Economy Heading for a `Major Downturn' in 2009 The global economy is headed for a
recession next year, as U.S. gross domestic product grinds close
to a halt, the International Monetary Fund said in reports ahead
of a Group of Seven meeting this week.

Fed Will Purchase U.S. Commercial Paper in Attempt to Ease Credit Crunch The Federal Reserve will create a
special fund to buy U.S. commercial paper, seeking to unblock the
financing tool that drives everyday commerce for American
businesses.

China May Cut Rates as Soon as This Week After Central Bank Yields Decline China may cut interest rates as soon as
this week after the yield on one-year central bank bills issued
yesterday had the biggest drop this year, analysts said.

Bernanke Fails to Quell Market Turmoil as Investors Clamor for Rate Cuts Federal Reserve Chairman Ben S.
Bernanke's message of readiness to cut interest rates failed to
assuage in