About the economy

Momentum asked:


Just an hypothesis.
Cigarettes are killing people. However the business still makes a big contribution to the economy, it employs people.

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jumphigherglobal asked:


Germany as an economic hub

Germany is one of the most highly developed industrial nations in the world and, after the USA and Japan has the world’s third largest national economy. With a population of 82.3 million Germany is also the largest and most important market in the European Union (EU). In 2007, Germany’s gross domestic product (GDP) totaled EUR 2.42 trillion, which translates into per-capita GDP of EUR 29,455. With an Export volume of EUR 969 billion or one third of GDP in 2007, Germany is the biggest exporter of goods worldwide, and as such is considered to be the “export world champion”, more of a global player than almost any other country and more strongly linked to the global economy than many other countries.

Most recently, the German economy has seen a robust upturn, growing 2.5 percent in 2007. The increase in corporate investments was especially pronounced at 8.4 percent. The economic growth, stimulated by factors both inside and outside Germany, sparked a reduction in the number of registered unemployed. Economic policy has improved the overall conditions and companies have sharpened their competitive edge. Thus, ancillary wage costs have been reduced, the labor market made more flexible and red tape slashed.

An attractive location for foreign investments

Germany is one of the most attractive countries world-wide for International investors. On an international country comparison, Germany does especially well as regards R&D, skill levels and logistics. Moreover, it enjoys a central geographical position, offers strong infrastructure, legal certainty, and the right workforce. The labor force’s high level of qualifications is seen as an important plus point. Around 80 percent of employees have undergone formal training and only 20 percent hold the degree from a higher education institutes or university. The “dual system” for vocational training provides the bedrock here, combining on-the-job and college training, a policy which results in the well-known high standard of education.

Technology leader in many sectors

Germany is one of the leading nations regarding numerous technologies of the future that have exceptional growth rates. These include bio-technology, nano-technology, IT and the numerous high-tech divisions in individual sectors (aviation and aerospace, electrical engineering, logistics). Companies specializing in environmental technology (wind energy, photovoltaic power and biomass generation) have emerged as front runners. Today, Information and communications technology follows car-making and electronics engineering as the third largest economy’s sector. As per to genetic engineering, Germany is second to the United States worldwide and already has cutting edge in numerous fields of nanotechnology.

The key industrial sectors

The key industrial sectors are car-making, electronics, mechanical engineering and chemicals. As is the case in all western industrial nations, for several years now German industry has been in the midst of structural transformation. Some traditional industries (steel, textiles) have in partly shrunk considerably in recent years, with target markets now elsewhere and strong pressure from lowwage countries, or, as in the case of the pharmaceuticals industry, through M&As have come under foreign ownership.

Successful: Germany in the global economy

Given its high level of exports, Germany is interested in open markets. The most important trading partners are France, the USA and Great Britain. In 2006, goods and services worth EUR 85 billion were exported to France, EUR 78 billion to the USA and EUR 65 billion to Great Britain. In addition to trade with the original European Union member states, since the EU’s expansion eastwards (2004 and 2007) there has been a pronounced increase in trade with the east European EU member states. In total, a good ten percent of all exports go to these countries. The importance of trade and economic relations with emerging nations in Asia such as China and India is growing continually.

Economic system: Performance and social balance

Germany is a Social market economy. This is other strong reason why Germany enjoys a high degree of social harmony, something reflected in the fact that labor disputes are so rare here. On average between 1996 and 2005 the work force went on strike for on just 2.4 days per 1,000 employees and thus less than even Switzerland, which saw 3.1 days of strikes. The social partnership of trade unions and employer associations is enshrined in the institutionalized settlement of conflicts as outlined in the collective labor law. The Basic Law guarantees the social partners independence in negotiating wages, and they accordingly have the right themselves to select the working conditions.

All the latest information about Germany economy is available at German Information Centre. So if you are interested in knowing about Germany economy please visit at German Information Centre.



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Josh Greenberger asked:


Well, we all know what’s happening. Major corporations are folding, people are losing their jobs, houses are being foreclosed on in record numbers, people who’ve never needed public assistance now do, and our overall standard of living is declining on a daily basis.

No one knows where the bottom is, or how long a come-back will take, if that ever happens. Some of the companies who made our great, vibrant economy what it once was, either no longer exist or are in serious financial trouble.

We’ve tried just about every trick in the book; reducing interest rates, bailouts and stimulus packages. Nothing’s helped, despite the best efforts of our greatest financial analysts and wizards.

The question is: What’s really happening to our economy?

If you went to the same restaurant for years, ate great food and came out feeling fine, then, as the restaurant deteriorated you kept coming out sick after every meal, would you think your ailment stemmed from this restaurant? Of course. Would you have to be a doctor or virologist to come to this conclusion? Certainly not. All you’d need is a half a brain.

What’s the one other thing in our society that’s been deteriorating in lock step with and in almost the exact same proportions as our economy?

Ethics and morality.

Even diseases are sometimes tracked down through nothing more than logical associations. It was that initial connection between Legionnaires’ Disease and the Bellevue-Stratford Hotel in Philadelphia, for example, that eventually led to the source of Legionnaires’ Disease.

If we were to track down what’s ailing our economy in the same way scientists track down some diseases, moral and ethical decay would stick out like a soar thumb. And you don’t have to be a religious person to make this connection.

We’ve been through recessions and depressions before, but nothing like this one. Former Federal Reserve Chairman Alan Greenspan, Sunday, September 14, 2008: The depressed state of our economy is a “once in a half century, probably once in a century, type of event.”

If our moral values of yesteryear, when the economy was relatively stable, were far superior than they are today, and our moral values today, when “coincidentally” our economy is in a state of unprecedented upheaval, are at an unprecedented low, you think there might be a connection? There seems to be no other common thread.

Strangely, our predicament has an eerie resemblance to a story in the Bible — Adam and Eve getting kicked out of the Garden of Eden and their standard of living radically reduced. I’m not saying there’s a connection; that would be ridiculous. But you have to admit the resemblance is uncanny, albeit our circumstances are on a much larger scale.

What sets today’s decadence apart from that of yesteryear is that some decadent behavior today is no longer seen as wrong. In some cases, people are even proud of their decadence.

There’s probably little need to point out the areas in which morality and ethics have declined in recent years; I’m sure we can all come up with lists. But I would like to point out two areas that epitomize the problem.

Having babies out of wedlock is no longer the shame and stigma it once was. In the 1950s a movie or rock star who had a child out of wedlock created a scandal. Today, it’s announced with beaming pride. It even turns into a delightful guessing game — who’s the father? The lack of outrage by the public shows how ingrained this acceptance has become among Americans.

I understand, we live in a more enlightened age and we’re a whole lot smarter then previous generations. We certainly can’t go back to those ignorant days of yesteryear.

But if we’re so much smarter and more enlightened, how come we can’t figure our way out of the deep financial mess we’re in? This is not being facetious; this is a legitimate question. People who are smarter are usually able to figure out things that less intelligent people can’t — that’s what intelligence is. Many previous generations lived in relative comfort and luxury; we’re losing homes, jobs, nest eggs, worrying about putting food on the table, and we can’t figure out how to get out of it. Are we really smarter, or has our arrogance simply led us to blindness and stupidity?

The other glaring difference between today and years gone by is the widespread acceptance of homosexuality as just another lifestyle. What’s worse, gays have parades proclaiming how proud they are of their decadence. If you told someone only 50 years ago that this would one day be the case, they’d laugh in your face.

And the public’s attitude toward this? “Well, everyone’s got their rights.”

First, I find the public’s acquiescence to this abomination absolutely mind-boggling. Gays will have a parade anywhere they can swing it. Should you object on the basis that you don’t want your family or kids exposed to this, it’s doubtful gays would give a rat’s you know what. Gays will selfishly push their agenda on you, your family, your kids, your kids’ schools, whenever and wherever possible, regardless of how you feel about it and regardless of your right to bring up your family as you see fit. And the average American is okay with this?

This is just weakly caving in to others’ demands. If such behavior were imposed on us by a tyrant government, we’d be up in arms. But if it’s an “enlightened” perversion, that’s okay.

Gays have all the rights other citizen have. They can get jobs, start businesses, rent apartments and get (traditionally) married, like everyone else. We do not need laws to accommodate the lifestyles of people who like sleeping with the same sex, sheep or inflatable dolls. And we certainly don’t need them pushing their perversions down our throats.

The public’s acceptance of this abomination, with the often heard words, “They have their rights,” is little more than gutless, spineless passivity. We have as much right to our lifestyle as they think they have to theirs.

How would you feel about a parade through your neighborhood of fathers and daughters or mothers and sons who are proud that they live together as couples? Probably not very supportive.

How about if they were all consenting adults, didn’t hurt anyone, were so happy together, and just wanted to bring up a normal, loving family together? You’ve got to admit, these are some pretty noble intentions. To most Americans, though, this probably wouldn’t make much of a difference.

Aren’t we just a bunch of intolerant bigots and hatemongers — we have so much hatred and intolerance for fathers, mothers, sons and daughters?

Could this be an issue of morality? Well, what’s morality?

That’s a good question: what is morality, anyway? What makes one thing immoral and another thing, like washing dishes, for example, not immoral. After all, incest — among consenting adults, of course — has the potential of bringing blissful happiness to some family members. Washing dishes, on the other hand, only goes so far in bringing happiness to another family member. So shouldn’t incest be more moral than washing dishes?

The answer is that morality has nothing to do with what makes you happy or how noble your intentions are. Morality was not invented by humans. Morality has no other origin but the Bible. Accepting any traditionally immoral act as “moral” essentially does away with the entire system of morality, since there is no discernable difference between their underlying principles.

Homosexuality has always been around. But what makes it so galling today is that what has been traditionally considered an abomination has turned into an acceptable lifestyle, and supporting it has turned into a “noble” cause. How perverted has our society become?

In light of what we consider acceptable today, it makes one wonder how Sodom and Gomorrah got such a bad wrap.

Of course, you’ll always find people who don’t believe in this Biblical stuff. But what surprises me is how many people do believe in God yet never entertain the thought that what they do — in terms of right and wrong — has a direct impact on the events in their lives. God is not part of our democracy; He didn’t ask you if you want to be born, He won’t ask you when it’s time to go, and He obviously didn’t ask anyone when it was time to bring prosperity levels down a few notches.

A correlation between the decline of ethics and morality and the collapse of our economy is hard to deny. Sure you can attribute our economic problems to corporate or governmental mismanagement and go into the intimate details of what mistakes CEOs or officials made. You didn’t expect God to come down with a bunch of angel/accountants to throw things out of kilter, did you? The way it unfolded is the way it happens.

A belief in God and the basic tenets of the Bible alone do not make for a religion. We don’t have to worry that having laws based on Biblical values will make for a “government-sponsored religion.” Using time-tested principles to lay down the foundation for a society is as practical as collecting taxes.

Societies that frown upon Biblical values, like Communist states, for example, will usually allow themselves to perpetrate gross human rights violations, in many cases killing people with little more concern then killing animals.

On the other hand, when the Bible’s tenets are perverted, you can wind up with “religions” that condone murder. Neither the Ten Commandments nor the Old Testament (the root of most major religions) sanctions murder.

The seeds for our current decline were planted as far back as 1962, when the U.S. Supreme Court ruled that the Union Free School District No. 9 in Hyde Park, New York, had violated the First Amendment by directing the Districts’ principles to cause the following prayer to be said aloud in class: “Almighty God, we acknowledge our dependence upon Thee, and we beg Thy blessings upon us, our parents, our teachers and our Country.”

Isn’t it ironic that things have gotten so bad today that it seems as if the only one who can help us is God? It’s almost as if God is talking to us. Maybe we’re just not listening.

The way I see it, we have the choice of fighting either one of two battles. We can fight the battle to save our economy, which we’re already fighting, in futility. Or we can fight the battle to restore previous levels of ethics, morality and integrity. The difference is, if we win the latter, we win both battles; there’s a scriptural axiom: Do God’s will, and He will do yours.



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Sam Williams asked:


The US economy experienced negative growth rates in 2008 (especially in the third quarter). This was primarily due to a slowdown in the market for housing and a significant fall in the consumer spending levels. With the help of financial planners and advisors, it is probable that the US economy might recover in 2009, at least in the second half of the year. A recovery of the US economy is of paramount importance, given the degree of dependence of the world market on the former.

In an attempt to identify the causes for the slowdown in the American economy this year, William Testa (the vice president and regional director of the Federal Reserve Bank in Chicago) said that, about 70% of the total economic activity in the US comprised of household consumer spending. In the face of acute financial crisis, recession and credit crunch, the household spending figures have significantly gone down, causing economic growth in the US to be stalled.

The fear or anxiety of losing one’s job has primarily caused the common individual to cut down on his levels of spending. This retrenchment in expenditure has also resulted from a re-adjustment of personal portfolios and re-valuation of 401K and personal properties.

However, economic experts remain optimistic about the recovery of the US economy in 2009. Echoing this view, Ilian Mihov, professor of economics at INSEAD, added that, the victory of Barrack Obama (the first Afro-American US President) came as a fresh lease of life in this wave of expectations of an economic recovery.

Obama’s campaign strategy was largely based on the policies of an increase in government spending, and a reduction in the tax rates. These steps, if carried out in a focused and aggressive manner, are bound to help the US economy recover. Indeed, by the middle of 2009, it is expected that the economy will start moving in the right direction again. The Federal Reserve has already cut down its key rate from 1.5 to 1.0 per cent, in an attempt to bolster the economy via aggressive rate-reductions. This measure (which can be extended via further reduction in the key rate) and injection of more liquidity in the financial markets (also by the Fed) are likely to stimulate aggregate demand. This, in turn, should help the US economy get out of the current recessionary phase.

Other effective, yet unorthodox, steps are also being adopted by the Federal Reserve to counter deflation in the economy. The purchase of commercial papers (a money-market instrument) represents one such recession-fighting measure. Another step that might be considered is a significant reduction in oil prices. If people can get the requisite oil and gas amounts at a lesser price, (s) he will automatically have more cash that could be spent in other channels.

However, there is one factor critical to the recovery of the US economy by 2009. The transition of power from the office of George W. Bush to Barrack Obama should not take too long. A smooth transition of political power, aggressive anti-recessionary policies initiated by the Federal Reserve and fiscal stimulus (provided by the US Congress), along with help from personal financial advisors and financial planners, should be instrumental in the recovery of the US economy in 2009.



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Vladimir Gonzalez asked:


Canada Economy

The eighth largest economy in the world, measured in US dollars, Canada is one of the world’s wealthiest nations, with an economy dominated by the service industry, having about three quarters of Canadians as employees. With the logging and oil industries being the most important sectors, Canada unusually finds itself among the developed countries, also having a sizable manufacturing sector, with the automobile industry especially important.

At the same time, a large part of the Canadian economy is made up by international trade, which is due mostly to its natural resources. By far Canada’s largest trading partner is the USA, which accounts for approximately 76% of exports and 65% of imports, starting with 2007. 1 year earlier, Canada’s combined exports and imports ranked 8th among all countries and nations. Canada’s economy is mature and diverse, at the same time, and it benefits from an advanced sector of services, natural resources in abundance, rigid management as well as free trade agreements.

As of 2007, its nominal GDP was $1.274 trillion, with growth of 2.7%, due to the country’s change of focus from agriculture to services, which now accounts for nearly 67.9% of GDP. The service industry comprises many sectors, such as the retail sector, financial services, real estate, education, health, high-tech, entertainment, tourism, etc, all of them developing at a rapid rate. Out of the 17,9 million working force existing in Canada, the service industry has employed 75%.

The rapid development witnessed by Canada was also due to the free trade agreement with the US in 1989, together with the NAFTA treaty of 1994. Both treaties linked several other key countries to Canada and Canadian economy. Canada ranks among the most developed countries on the Human development index, having a GDP per capita lower than in the US, and a median household income roughly equal to that of the US.

After Russia, Canada is the second-largest country in the world, by land mass and is also the second-largest oil reserves in the world, with its large oil and gas reserves. Though manufacturing is not a dominant sector of the economy, it is an important secondary industry and a significant number of cars and light aircraft are produced here.

Another important factor that brought its contribution to the country’s economic superiority and growth has been its sound fiscal management, which has given Canada a balanced budget for the past decade. Canada’s sound fiscal management has been another major factor contributing to the country’s economic superiority. Prudent management has given Canada a balanced budget throughout the entire last decade.



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Dov Henis asked:


Economy Collapse Cure Delusion

We are Deluding Ourselves Re The Required Economy Collapse Cure.

It’s Not Just The Economy, It’s The Culture That Collapsed.



A. Notes re the apparent major aspects of the collapse

(1) About “Scientific Progress”

“Implications Of Science And Technology Evolution”

http://blog.360.yahoo.com/blog-P81pQcU1dLBbHgtjQjxG_Q–?cq=1&p=419

What and whereto progresses in “Scientific Progress”?

Answering this requires meticulous pondering. This subject is not one quaint aspect within our present 21st century technology culture. This subject is THE essence and foundation of the course and goal of our existence, of our life as individuals and members of our phenosociety and of Earth’s genohuman group.

Science-based Enlightenment started in the 18th century and was the basis-foundation of Western culture-civilization. It came to a grinding slowdown in the 20th century, and systematic basic study of life ceased by the 21st century. It ceased because the quest for enlightenment has been gradually replaced during the 20th century by the pursuit of technology-capital-greed values-attitudes-morals-ethics of the 21st century technology culture.

“Scientific Progress” is the continuous promotion of the pursuit by science, of convincing, ever closer approaching, approximate models of the real world including life and ourselves. This is furthering Enlightenment’s inherent philosophy and attitudes in regards to individualism, universal human progress and, most important to humanity, the applications of reason.

So What Is Needed To Advance Science?

Again and again, as long as Science and Technologhy are considered and handled, conceptually and administratively, as one realm and one faculty the disregard of science in favor of technology cannot and will not be overcome. This conception and attitude is THE CORRUPTION OF SCIENCE BY THE 21st CENTURY TECHNOLOGY CULTURE. I reckon that most, if not all, readers of this article associate science and technology conceptually, demonstrating the tight hold of the 21st century technology culture on their mentality-concepts-attitudes.

(2) For the 2008 Sciencenews Of The Year, YOK the world-wide economy collapse

http://www.sciencenews.org/index/feature/activity/view/id/39395/title/2008_Science_news_of_the_year

Science News editors and writers survey the top news from the world of science in 2008. The selected stories are featured in this year-end issue, with 13 subjects’-links to the original stories. The subject of one link is “science and society”, and - unbelievable - the 2008 world-wide economy collapse YOK, it does not even exist there…no mention and no reflection or pondering on its nature, symptoms and cause. This subject does not belong in “science and society”…

The world-wide economy can be saved ONLY by conceptual and factual harrowing of the personal, social and societal values of the 1920s technology culture. Science and technology must be conceptually and administratively divorced from each other in order to renovate the old science-oriented culture, with its humanity-oriented values.

(3) “Money Printing Will NOT Cure The Technology Culture Greed Cancer”

http://www.physforum.com/index.php?showtopic=14988&st=390&#entry390280

The Technology Culture Greed is neither a lofty nor an essential societal cultural ideal that should be maintained and upheld at all costs, even if now, March 2009, we still see crowds of pitiful obstinate Pavlov’ed clinging greed-devotees doing their stock-markets activities all over the world. They just would’nt accept reality…

Money printing will NOT cure the technology culture greed disease. Money printing in the present state of affairs, like a blood transfusion in a terminal situation, will only enable temporary precarious respite, not cure. It would take a steadfast dedicated campaign of cultural inovation to save ourselves from collapse and proceed on a course of rational science culture.

(4) “Real And Virtual Energy, And Keynesian Salvation Prospects”

http://www.physforum.com/index.php?showtopic=14988&st=345&#entry384952

There are no short-cuts for effecting a cure of the malignant world economy greed cancer.

The present tone of the world’s culture, and even ethics, including the banners of a variety of types and shades of greed, has been set by the 20th century Technology Culture. Its essence is the legitimacy and admiration of gaining capital via absurd virtual activities, activities without or beyond production of real essential welfare assets for humans.

The prospects of salvation of the collapsed economy via a Keynesian scheme are, in the long run, proportional to the odds that the culture of Earth’s humanity will evolve towards more rational societal values and self-organization…which is - how unsurprisingly rational - the odds of every group of organism to survive…

There are no short-cuts for effecting a cure of the malignant world economy greed cancer. The cure and recovery from this cancer entails a steady resolute cultural modification of 20th century personal and societal capitalistic greed values-ethics-morals. It entails public education to value and promote legitimacy and respect only of shares-stocks of products, services and processes that contribute to public health, security, basic comfort, education and science, and to reject and shun offers of capital gain via matters non strictly-directly welfare-contributive.

And it entails a steady resolute continuous promotion of rational respect to non-luxurious life style, to a wide civic public social security network, and to continuous pursuit of further scientific comprehension of ever closer approaching approximate models of the real world including life and ourselves. This would be a return to and furthering of Enlightenment’s inherent philosophy and attitudes in regards to individualism, universal human progress and - most important to humanity - embarkment on a road to societal application of rationalism.

Dov Henis

(Comments From The 22nd Century)

http://blog.360.yahoo.com/blog-P81pQcU1dLBbHgtjQjxG_Q–?cq=1



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Arian Forrest Nevin, J.D. asked:


WASHINGTON - The Economic Recovery Act passed today in the House by a vote of 349 to 62. The ERA makes it illegal for the economy to “do poorly.” Speaker of the House, Nancy Pelosi, said “We wanted to send a clear message to the economy that poor performance will not be tolerated.” If convicted of doing poorly the economy could face up to five years in prison.

Long thought by many to be completely incompetent and corrupt, Congress has today shown its true merit. By passing the ERA, Congress has taken decisive action to solve the economic crisis, halt the recession, and restore prosperity. Once signed into law the ERA guarantees a return of economic prosperity because it will be required by law. The ERA directs the economy to grow at “not less than 5% per year” and requires the economy to create a minimum of “2 million new jobs every year.” With the new prosperity brought about by the ERA, unemployment will soon vanish and wages will increase.

Outgoing president Bush has already stated he plans to sign the bill into law. Bush is reported to have said, “I don’t know why I didn’t think of this before. It’s such a great idea.” Demonstrating that he is no lame duck, Bush is already several steps ahead of Congress. “Top intelligence sources tell me that the economy has already left America and moved overseas. According to the CIA, the economy was last seen in China.” President Bush is concerned that we may be facing more than just a recession and, in fact, may be dealing with a “rogue economy.”

President elect, Barack Obama, when asked to comment on the ERA, stated, “My middle name is change,” and flew away on a rainbow.

The economy was available for comment; however this reporter must first learn to speak Chinese before he can communicate with the economy.

On a related note, the Mexican economy was recently apprehended trying to illegally enter the country.

 



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Tommy asked:


During the presidential campaign, Obama said McCain was out of touch for saying the fundamentals of the economy were strong.

When Obama was pushing the spending program he said the economy was in bad shape and would fail if we didn’t pass the bill. Now he says the economy isn’t as bad as some people say and the fundamentals of the economy are strong.

Is he saying that the fundamentals of the economy have improved because he passed the bill or is there something else I’m missing?

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Australasian Investment Review asked:


The US economy is in far worse shape than many in the US think, and is heading for a hard landing.

American consumers, who account for 70% of demand and consumption in the huge, $US14.4 trillion economy, are in trouble and cutting back spending, thanks to falling levels of credit.

In fact the credit cuts are now much deeper than anyone thought after the release of up to date figures.

The IMF said overnight that the US appeared to be sinking into a recession, it said.

The Fund said in its latest World Economic Outlook that the US was now poised to expand 1.6% this year and a bare 0.1% in 2009.

That was an increase of 0.3% and a decrease of 0.7%, respectively from the prior forecast just three months ago, in which the IMF had lifted its April WEO forecasts, citing improving economic conditions in the US.

That improvement for this year relates to the 2.8% rise in second quarter economic growth.

The estimates were made before the latest figures though on consumer borrowing which tell a story of US consumers cutting back, or being cut back on credit, the lifeblood of the economy.

Figures for September store sales from some major retailers overnight showed sluggish growth for most, with downturns for those selling more expensive products, such as department stores.

Wall Mart managed a 2.4% rise in same store sales, but that was less than forecast, discount bulk chains lost Costco did OK, but Target reported a 3% drop in comparable store sales.

JC Penny, the big department store chain reported a massive 12.4% drop in same store sales in September, far worse than expected.

But it’s no wonder after the Fed’s earlier report.

Figures Tuesday night from the Federal Reserve on consumer credit show the biggest fall in the history of the recorded figures.

At the same time major industrial, Alcoa, suffered a 52% drop in third quarter earnings and has joined the mighty General Electric in eliminating a share buyback to conserve capital.

The national body for US car dealers warned that 700 would go out of business this year alone, and more would follow in 2009, if the credit freeze was not eased soon. Car sales fell 27% last month and the way the credit freeze is working, that drop will increase in the coming quarter.

And in a dramatic move the Fed extended the boundaries of its ‘Lender of Last Resort’ understanding by supplanting temporarily the frozen $US1.6 trillion commercial paper market, the day to day lifeblood for American business activity.

At the same time Fed chairman, Ben Bernanke held out hopes for a rate cut, but said the US economy was heading into tougher times.

The Fed said it would set up a new Commercial Paper Funding Facility to buy three-month debt from banks and non-financial companies.

It’s probably one of its most important decisions because if this vital short term debt can’t be rolled over for US companies (end employers) when it falls due; the American economy will be crunched to a halt.

The move was desperately needed with figures showing that 28% of the market would fall due this week and a further 12% next week.

The Fed’s figures last Friday showed that in the week to last Wednesday, the market had already contracted $US215 billion in the past three weeks and virtually all new lending was being done overnight.

If that 28% to 40% of that huge amount can’t be rolled over, the US economy will be crunched by the end of October at the latest, so the Fed had to act.

Without the Fed’s move to being a sort of bank, the US economy will crunch to a complete halt in a matter of weeks, throwing hundreds of thousands of people out of work and setting off a domino chain of corporate failures across all sectors.

This freeze in the commercial paper market is why the likes of Alcoa and GE have cut their share buybacks and why Bank of America cut its dividend by 50% and is seeking to raise $US10 billion in new capital.

It has to support the acquisitions of Countrywide Financial Services and Merrill Lynch and the added burdens they will impose on its finances: but it is like all other banks and has cut lending across the board.,

But it’s clear consumers, the engine of the US economy, were being denied credit by banks and other lenders well before the eruption of this latest phase when the credit crunch turned to a freeze.But there’s nothing the Fed can do immediately to ease the squeeze on consumers: each week tens of thousands of them are losing their jobs, their homes, having their pay cut and hours trimmed and are being denied credit at a rate not thought possible until the Fed released the credit figures for August, a month before the crisis worsened with the spate of failures and bailouts in the US starting with Lehman Brothers.

The Fed reported that consumer credit fell by $US7.9 billion in August, the biggest fall since the statistics began being collected in 1943, to $US2.58 trillion.

Bloomberg said that economists forecast an increase of $US5 billion in consumer credit during August, so the Fed’s report came as a complete shock to the market.

Total consumer borrowing dropped at a rate of 4.3% in August, the most since January 1998.

Revolving debt such as credit cards decreased by $US612 million during August and non-revolving debt, including auto loans, dropped by $US7.3 billion.

That fall was a month before the 27% plunge in US car sales last month, so it’s likely that consumer credit again fell sharply in September.

The news of the Fed’s move and the sharp contraction in consumer credit (one of the Fed’s ‘Key Economic Indicators’) makes it easier to understand the contents of a speech overnight by chairman, Ben Bernanke in which he painted a gloomy picture of the US economy.

He would have known of the move to try and stop the rot in the commercial paper market and the sharp fall in consumer credit, so it was no wonder he was saying:

“Economic activity had shown signs of decelerating even before the recent upsurge in financial-market tensions.

As has been the case for some time, the housing market continues to be a primary source of weakness in the real economy as well as in the financial markets. However, the slowdown in economic activity has spread outside the housing sector.

“Private payrolls have continued to contract, and the declines in employment, together with earlier increases in food and energy prices, have eroded the purchasing power of households. This sluggishness of real incomes, together with tighter credit and declining household wealth, is now showing through more clearly to consumer spending.

“Indeed, since May, real consumer outlays have contracted significantly. Meanwhile, in the business sector, worsening sales prospects and a heightened sense of uncertainty have begun to weigh more heavily on investment spending as well.

“The intensification of financial turmoil and the further impairment of the functioning of credit markets seem likely to increase the restraint on economic activity in the period ahead.”

“All told, economic activity is likely to be subdued during the remainder of this year and into next year. The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance and further increase the risks to growth.

“To support growth and reduce the downside risks, continued efforts to stabilize the financial markets are essential. The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity.”

Meanwhile the chairwoman of the National Automobile Dealers Association says the credit crunch and economic problems are likely to cause 700 auto dealers in the US to go under this year.

Speaking to the Automotive Press Association in Detroit, Annette Sykora said quick action will be needed to ease the squeeze and restore consumer confidence and help the industry.

An estimated 94% of American car buyers finance their purchases, Ms Sykora says but even those with good to high scores and solid credit records can’t get financing.

Dealers with good credit also are having trouble getting financing for their inventories.

It’s the same story in home lending and also in credit cards where credit lines and revolving credit arrangements are being terminated or refused.

According to the National Auto Dealers Association, there are around 20,000 auto dealers in the US. About 430 dealerships closed last year and 295 closed in 2006.

The estimate of 700 dealers going out of business does not include new dealers that will enter the market.

According to the Fed’s credit figures, lenders were cutting back on car loans (and other credit in August) and car sales fell 11% in the month. The 27% fall in September reflects the intensification of the credit freeze and helps explain why car sales sank 27% to less than 1 million for the month for the first time since 1993.

Some buyers are not committing because they fear for their jobs or can’t get the right vehicle when they are looking for more fuel-efficient models.

Regardless of the reason, it means consumers are spending less. September’s retail sales figures are out in about 10 days or so and are likely to make miserable reading, along with the consumer spending figures a little later in October.

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