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Markets foresee global contraction
Peter Grier, The Christian Science Monitor
France, Ireland, and Denmark are in recession. Others teeter on the edge.
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Battered by successive shocks, the world economy may be slipping into multicontinent recession.

First, the housing bubble burst in the US and some European nations. Then soaring commodity prices hit countries around the world, especially poor food-importers. Now the bank turmoil wrought by the real estate downturn is spreading beyond Wall Street to other financial capitals.

Ireland, Denmark, and France have declared a recession. Germany and Britain are teetering. Even the hot economies of India and China may suffer slowing growth.

"At this point it is a very fragile situation," says Eswar Prasad, an international economics professor at Cornell University and a fellow at the Brookings Institution in Washington. "There is a crisis of confidence more than anything else."

The US economy remains the world's biggest, and its course is a powerful influence on business from London to Kuala Lumpur. While US stock indices continue to gyrate in the face of financial uncertainty, a growing number of economists believe America's economy as a whole is either already in a recession or on the brink of one.
(7 October 2008)

The Borg: A Financial Allegory
Jason Bradford, The Oil Drum
Gail the Actuary writes:
This is an allegory explaining some of the monetary issues associated with the current financial crisis. It was written by Jason Bradford. Jason was an academic biologist who "retired" at a young age to become a community organizer and learn how to farm with peak oil in mind. He also hosts a biweekly radio show on public radio called The Reality Report.

I have never been a huge follower of Star Trek, but when thinking about the financial beast thrashing about the Borg comes to mind.

"I am Locutus of Borg. Resistance is futile. Your life as it has been is over. From this time forward, you will service us." - Locutus of Borg.

"Strength is irrelevant. Resistance is futile...Your culture will adapt to service ours." -- The Borg.
The Borg is a hive-like hybrid swarm of humanoid species, turned partially robotic. They are distinctly goal oriented towards “assimilation” of all other humanoids and press themselves relentlessly with the creepy mantra “Resistance is futile.”

The money system is eerily Borg-like. Because it structurally requires growth, it works relentlessly to assimilate all forms of capital. The natural consequence is that everything must be for sale. Values of freedom, independence, self-reliance, and even conservation are subservient to the goal of growth—which is really just growth of the financial Borg, not human welfare or the security of a habitable planet.

How the Money System Depends on Growth

Modern money is not based on any physical assets or intrinsic value. Instead it is called a “fiat currency,” which in Latin means, “let it be done.” The government, or law, decrees that the face value of money is what it is. Money is created through forms of credit and debt, i.e., when banks make loans and debtors accept them, the money instantly exists. Only a fiat system can allow this form of money creation.
(6 October 2008)

Energy/Credit/Currency Crisis Open Thread
Nate Hagens, The Oil Drum
In what feels like the middle of a multi-round heavyweight bout, the world financial markets continue to be buffeted tonight, following the recent trend of lower equities, stronger dollar (vs Euro, SF and Sterling), sinking energy and commodities prices and considerably less confidence in the overall system than in weeks prior. Theoildrum.com has historically focused on the biophysical aspects of a world economy based on energy (and occasionally the human aspects that impact energy demand).

Most research here attempts to predict what world oil and gas production might look like in a future where depletion inexorably overtakes technology, and the costs of procuring large amounts of quality fuels continue to increase. However, the spiralling of recent events make it likely that, at least for a time, be it a week - or several years - oil and gas depletion might be more than offset by the reduction in demand due to the manifold implications of the reduction in global financial leverage and resulting credit contractions and dislocations in the real economy. The linkages between finance and energy are becoming more direct, but I'm quite certain there are many under the surface we are yet unaware of.

Below are a few article links followed by some open ended questions. Please deposit data, charts and links of relevance.
(6 October 2008)

Kunstler: All Fall Down
Jim Kunstler, Blog
God knows what manner of deals went down this past weekend in the Hamptons wine cellars and below-decks among the Chesapeake Bay sailboat fleet. All these hidey-holes must have been dank and fetid with the sweat of mortal fear. Will the US Government declare itself a subsidiary of General Electric? Will Vlad Putin be roped in to save Goldman Sachs? Meanwhile, the whole noisome rat maze of international counter-party deals was taking on sewer water and rodents of every nationality were seen leaping for daylight all over the fusty old motherlands of Europe. A cascading collapse of international finance is underway. While many fixers may jump heroically into the tumbling wreckage hoping to rescue this-and-that, the outcome by Friday is liable to be an unrecognizable smoldering landscape of the G-7's hopes and dreams.

Some big questions for the week: will the Euro survive as a currency? Will the rush into the US dollar continue even as the US financial system dematerializes in a Fibonacci fever of accelerating de-leveraged infinitude? Will the remaining Big Boyz, Goldman Sachs and JP Morgan succumb to the counter-party hemorrhagic fever? Will great rows of lesser banking dominoes now start clacking onto their faces? Will all fifty states follow the leads of California and Massachusetts and line up at the US Treasury's hand-out window. Will the entity that calls itself the civilized world be left at week's end with anything resembling money?

Your guess is as good as mine. We've entered the realm of phase change, where everything is slipping and nothing has settled. The final result, when the dust settles -- and that may not be for weeks to come -- will certainly be a poorer western world. Will it be so poor that it can no longer afford to import anything? Including oil from the land of the date palm? If so, we are really in for a rough ride, poised as we are at the edge of the heating season here in the temperate regions. Notice, by the way, that the $700 billion just approved by congress to bail out Wall Street is exactly the same sum of money that we send to the oil exporting nations this year.
(6 October 2008)
Events are catching up with Jim Kunstler. -BA

Chris Martenson on the current financial crisis (audio)
Reality Report via Global Public Media
Today's guest is scientist and financial expert Chris Martenson, here to explain how the financial crisis is a predictable outcome of a money system requiring exponential growth on a finite planet. Learn more at: www.chrismartenson.com
(6 October 2008)