RETAIL OFF-EXCHANGE FOREX EXAMINATION

Overview of Series 34 Exam Questions

Series 34 – Retail Off-Exchange Forex Examination

The Series 34 exam is broken up into five main parts: definitions and terminology, forex trading calculations, risks associated with forex trading, forex market concepts and theories, and forex regulatory requirements.  Within these five main parts the exam is expected to cover many of the sub-parts listed below.  Please note that the following items are general and are not representative of actual test questions and do not necessarily represent the relative weighting of each of the categories.

Please check back with us soon for a Series 34 Study guide and Series 34 Flashcards.

Definitions and Terminology
•    American terms, European terms
•    Base currency, quote currency, terms currency, secondary currency
•    Bid/ask spread
•    Collateral, security deposit, margin
•    Counterparty, dealer: Futures Commission Merchant,  Retail Foreign Exchange Dealer, other regulated entities listed in the Commodity Exchange Act
•    Cross rates
•    Currency crosses
•    Currency pairs
•    Direct quotes, indirect quotes
•    Exchange rate
•    Exotic options: barrier, double barrier, knock in, knock  out, compound options
•    Forward points
•    Forward rate, bid forward rate
•    Interest rate differential
•    Interest rate parity
•    Mark-ups, mark-downs
•    PIPs
•    Rollovers
•    Spot rate, spot price
•    Tom-next and spot-next
•    Trade date and settlement date
•    Swaps

Forex Trading Calculations
•    Cross rate transactions
•    Effects of leverage calculations
•    Netting of positions
•    Open trade variation
•    Profi t & loss calculations
•    Pip values, price after pips
•    Option and exotic option profit & loss calculations
•    Return on collateral, security deposit, margin
•    Transaction costs

Risks Associated with Forex Trading
•    Country or sovereign risk
•    Credit risk
•    Exchange rate risk
•    Interest rate risk
•    Liquidity risk
•    Market risk
•    Operational risk
•    Settlement risk, Herstaat risk

Forex Market – Concepts, Theories, Economic Factors and Indicators, Participants
•    Balance of payments
•    Balance of trade
•    Bank for International Settlements (BIS)
•    Capital account and current account
•    Central bank activities, intervention, sterilized intervention, interference
•    Clearing House Interbank Payment  System (CHIPS)
•    Discount rate
•    Economic indicators: employment, consumer spending, income, industrial  and inflation indicators
•    Elasticity of exchange rates
•    Exchange rate intervention
•    Exchange rate volatility
•    Federal Reserve Board, Fedwire
•    Fiscal policy
•    Fisher effect
•    Foreign investment indicators
•    Gross national product, gross  domestic product
•    Inflation
•    Interbank funds transfer and  settlement systems
•    International Fisher effect
•    International Monetary Fund
•    Portfolio balance
•    Role of central banks
•    Theory of elasticities
•    Theory of purchasing power parity
•    World Trade Organization

Forex Regulatory Requirements
•    CFTC jurisdiction and jurisdictional limitations
•    Conflicts of interest
•    Disclosures to customers
•    Jurisdictional & regulatory framework
•    Know your customer
•    NFA Interpretive Notice Regarding Forex  Transactions
•    NFA Interpretive Notice      Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems
•    NFA Notice to Members: Supervision of Forex Promotional Materials
•    NFA membership and associate membership requirements
•    Promotional material & solicitation
•    Registration requirements
•    Reports to customers, confirmations, monthly  summaries
•    Security deposit rules
•    Security of customer funds, no segregation

http://www.nfa.futures.org/registration/SO-Series34.pdf

Dubai Mumbai or Goodbye

http://blogs.wsj.com/deals/2008/05/08/its-dubai-mumbai-or-good-bye/ Investment banks following the money trail are shifting some top earners to Dubai to help tap the booming oil-rich Persian Gulf economies and the estimated $1.5 trillion held by sovereign wealth funds there.

http://www.ft.com/cms/s/0/c47190fe-a452-11dd-8104-000077b07658.html?nclick_check=1 Thailand on Monday said it planned to barter rice for oil with Iran in the clearest example to date of how the triple financial, fuel and food crisis is reshaping global trade as countries struggle with high commodity prices and a lack of credit.

http://economictimes.indiatimes.com/Slice_of_forex_reserves_for_liquidity-hit_banks/articleshow/3644203.cms


Last week, the Reserve Bank of India (RBI) governor said that the monetary policy authority would take conventional and unconventional measures to ensure financial as well as price stability and growth.

The committee, appointed by the finance minister to assess the liquidity situation, has said that a portion of India's forex reserves, aggregating $273 billion, could be used to invest in securities such as bonds issued by foreign offices of Indian banks, said a person familiar with the issue.

Currency Crisis brewing

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become "the second epicentre of the global financial crisis", this time unfolding in Europe rather than America.

Austria's bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

http://www.nakedcapitalism.com/2008/10/currency-crisis-is-gathering-storm.html

It might get the people who run our companies and our regulatory agencies into the business of telling the truth....    http://www.nytimes.com/2008/10/26/business/26gret.html?_r=1&oref=slogin&ref=business&pagewanted=print

In the days leading up to the conference, volunteers in lederhosen draped the village with hundreds of white and blue banners that declared the 38-year-old conclave's purpose: ``Committed to Improving the State of the World.''

WEF organizers often pulled stunts to hoodwink delegates who preferred partying and meeting privately with clients over attending forum sessions.

In the ``Why Do Brains Sleep?'' meeting in 2007, a cadre of eminent psychologists and psychiatrists explored whether financial leaders got enough rest and ``what that tells us about the quality of their decision-making.''

To spur delegates into addressing financial-market alienation, a session in 2004 was held to discuss whether extraterrestrials had taken control of Wall Street: ``Have Extraterrestrials Made Contact With Government Leaders?'' http://www.bloomberg.com/apps/news?pid=20601109&sid=a9wVqOPk.T_4&refer=home

Currency War with the Dollar

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.

The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.

"The grim reality has led people, amidst the panic, to realise that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

http://www.nakedcapitalism.com/2008/10/china-launches-salvo-against-dollar.html

http://www.nakedcapitalism.com/2008/03/chinese-avoiding-dollar-as-invoicing.html Rising numbers of Chinese exporters are shunning the US dollar or devising ways to offset the impact of the falling currency as they confront rising labour and raw material costs at home.

According to Alibaba.com, the online company that matches Chinese suppliers with international buyers, the vast majority of their almost 700,000 Chinese suppliers no longer use dollars to settle non-US transactions in order to minimise foreign exchange risk.

"They are moving to euros, pounds, Australian dollars or even quoting prices in renminbi," David Wei, chief executive, told the Financial Times. Moreover, he added, prices quoted in dollars were now often valid for just seven days compared with the 30-60 days common previously.

http://www.bloomberg.com/apps/news?pid=20601087&sid=apjqJKKQvfDc&refer=home Oct. 19 (Bloomberg) -- European Central Bank council member Ewald Nowotny said a ``tri-polar'' global currency system is developing between Asia, Europe and the U.S. and that he's skeptical the U.S. dollar's centrality can be revived.

 

FRIDAY MORNING HORROR

EUROPE INDICES...
MARKETS DIVE...
Recession alarm rings around the world...

Obama Does Not Regret 'Spread the Wealth' Comment...

PAPER: AN OBAMA PANIC? MARKETS FEAR HIS POLICIES...

Greenspan Concedes to `Flaw' in His Market Ideology (Update2)

Greenspan Concedes to `Flaw' in His Market Ideology (Update2)

By Scott Lanman and Steve Matthews

Oct. 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.

``Yes, I found a flaw,'' Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. ``That is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.''

Greenspan said he was ``partially'' wrong in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected.

``We cannot expect perfection in any area where forecasting is required,'' he said. ``We have to do our best but not expect infallibility or omniscience.''

Part of the problem was that the Fed's ability to forecast the economy's trajectory is an inexact science, he said.

``If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,'' Greenspan said. ``Forecasting never gets to the point where it is 100 percent accurate.''

Self-Policing

The admission that free markets have their faults was a shift for the former Fed chairman who declared in a May 2005 speech that ``private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.''

Today Committee Chairman Henry Waxman, a California Democrat, said Greenspan had ``the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis.''

``You were advised to do so by many others,'' he told Greenspan. ``And now our whole economy is paying the price.''

Waxman and other lawmakers repeatedly interrupted Greenspan as he answered their questions, in contrast to deference to his testimony while he was Fed chairman.

Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony. Other rules should address fraud and settlement of trades, he said.

Resistant to Regulation

Greenspan opposed increasing financial supervision as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and almost $660 billion in writedowns and losses tied to U.S. subprime mortgages.

Today, the former Fed chairman asked: ``What went wrong with global economic policies that had worked so effectively for nearly four decades?''

Greenspan reiterated his ``shocked disbelief'' that financial companies failed to execute sufficient ``surveillance'' on their trading counterparties to prevent surging losses. The ``breakdown'' was clearest in the market where securities firms packaged home mortgages into debt sold on to other investors, he said.

``As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitizers retain a meaningful part of the securities they issue,'' Greenspan said. That would give the companies an incentive to ensure the assets are properly priced for their risk, advocates say.

Subprime Lending

Greenspan said the Fed didn't know the size of the subprime mortgage market until late 2005.

Securities and Exchange Commission Chairman Christopher Cox and former Treasury Secretary John Snow also appeared at the House committee hearing.

Snow said the economy is headed down a ``bad, bad path'' and he endorsed consideration of more fiscal stimulus. For the longer term, Snow said the global financial system should be reorganized by focusing on increasing transparency of ``excessive'' leverage to prevent institutions from creating too much risk.

The U.S. needs ``one strong national regulator'' to oversee firms and fix what Snow called ``a fragmented approach'' to regulation. ``Steps to restore transparency and responsibility in the marketplace will go a long way towards restoring stability and confidence,'' he said.

Addressing the trio that oversaw the U.S. financial markets as the housing bubble developed, Representative John Yarmuth, a Democrat from Kentucky, characterized them as ``three Bill Buckners,'' referring to the Boston Red Sox first baseman whose fielding error some fans blame for the team's loss in the 1986 World Series.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net.

Last Updated: October 23, 2008 14:14 EDT

Is Switzerland the next Iceland?

http://www.independent.co.uk/news/business/analysis-and-features/is-switzerland-the-next-iceland-964325.html Is Switzerland the next Iceland?

Bretton Woods 3

EU leaders weigh overhaul of Western financial foundations

BRUSSELS: Shaken by the financial meltdown and plunging markets, leaders of the world's economic powers said Wednesday that they favored an ambitious campaign to revamp the structures that have governed global finance for more than 60 years.

Officials from Britain, France and Germany, meeting before a summit meeting here of European Union leaders, said they approved of convening a conference in November or December aimed at revising the system put in place toward the end of the World War II.

In a statement issued Wednesday, the Group of 8, which also includes the United States, Japan, Canada, Italy and Russia, said it looked forward to a meeting "to adopt an agenda for reforms to meet the challenges of the 21st century."

Prime Minister Gordon Brown of Britain, regarded as the architect of a rescue package agreed upon Sunday by the euro-zone countries, said the world needed to alter the institutions that were created by the 1944 Bretton Woods conference and that have governed global finance. Brown also called for reviving the talks on global trade that broke down in July.

President George W. Bush has said he was in favor of a summit meeting on global financial institutions and wants to attend even if it takes place after the presidential election on Nov. 4, said European diplomats who asked not to be identified. The thinking was that the main economies would also hold a separate meeting with the U.S. president-elect if he were available before Inauguration Day on Jan. 20.

The EU meeting Wednesday was dominated by the fallout from the banking crisis and by fears of a recession. One consequence of that concern was a growing threat to Europe's ambitious plans to cut carbon dioxide emissions by 20 percent by 2020.

Poland led a rebellion by a group of nations threatening to block the conclusions of the meeting unless there was an agreement to abandon the December deadline for reaching an accord on a climate-change package. Eight East European nations want the EU to ease targets for greenhouse-gas cuts because of the economic crisis. Italy has also aired concerns, calling for an impact study of the effects on the real economy.

The meeting began with a bizarre feud between Prime Minister Donald Tusk of Poland and the country's euro-skeptic president, Lech Kaczynski. Denied a seat on Tusk's plane, Kaczynski chartered his own and crashed the meeting, provoking a diplomatic incident.

But the meeting saw consensus on the need to make financial changes. France, which holds the EU's rotating presidency, said it hoped that almost all 27 nations would endorse the principles agreed on by the euro-zone on Sunday.

Big nations rallied behind the notion of a "Bretton Woods II" conference. "I think there is a general agreement there should be an international leaders' meeting," Brown said before the start of the meeting. The agenda, he added, would be "far-reaching reform of the international financial system" and global trade talks.

Brown also called for changes at the International Monetary Fund and the World Bank, which he said were "built for the circumstances of 60 years ago." He urged the creation of an early warning system for the international economy and greater supervision of multinational companies.

He suggested that the IMF work more closely with the Financial Stability Forum, which was convened in April 1999 to promote the exchange of information and international co-operation in financial supervision and surveillance.

Prime Minister François Fillon of France, meanwhile, said, "The financial system is suffering a heart attack" and added that it would be "irresponsible" not to consider ambitious international changes "after the financial hurricane that has been hitting the world."

As the effort Sunday to coordinate European action in the financial crisis appeared to calm the markets for a time, José Manuel Barroso, the president of the European Commission, argued Wednesday that attention should shift to longer-term changes.

"We see light at the end of the tunnel but we are not there yet," he said. "Once we have put financial markets back on their feet, we must ensure that in the future they function properly for the benefit of citizens and businesses, rather than themselves."

The European Commission, meanwhile, has proposed changing accounting rules so assets do not have to be revalued so often, and plans to pass laws that will legalize the commitments made to guarantee bank deposits in Europe of up to €50,000, about $67,000, rising to €100,000 in time.

Proposals to govern executive pay and to regulate hedge funds are also being weighed.

But there was no indication Wednesday that Britain would drop its opposition to one important proposal from the European Commission - a so-called capital requirements directive. The proposal would require financial institutions to retain at least the equivalent of 5 percent of the capital value of an asset that they securitize.

Several EU officials, meanwhile, said they were worried that some countries might use the crisis to try to change long-established rules that block state aid to ailing companies, a central pillar of the EU's internal market.

Inside Details of Sequoia Capital’s Doomsday Meeting With its Companies

http://gigaom.com/2008/10/09/what-startups-can-learn-from-sequoias-doomsday-warning/

Inside Details of Sequoia Capital's Doomsday Meeting With its Companies

Om Malik

, Thursday, October 9, 2008 at 11:27 AM PT Comments (68)

Updated with the Sequoia powerpoint: Last night I reported on a special meeting held by Sequoia Capital for its portfolio companies, warning them about the fiscal hurricane that was going to hit them, and how they'd better figure out ways to survive what could be a big downturn.

There were some gaps in the details about that meeting, but I have since been able to piece together the minutes and what folks there essentially said. Since these are second-sourced details, I cannot say they are a 100 percent accurate, so please view them with a degree of skepticism. Nevertheless, I still feel confident enough to share them.

These were the four speakers:

Mike Moritz, General Partner, Sequoia Capital, who moderated the speakers. The speakers were Eric Upin, Partner, Sequoia Capital, who until recently ran the $26-billion Stanford Endowment Fund, and Michael Partner, Sequoia Capital, who was Sequoia's very first hedge fund manager and worked at Maverick Capital and Robertson Stephens. The last speaker was, as I mentioned before, Doug Leone, General Partner, Sequoia Capital.

Moritz Musings

Mike Mortiz kicked off the proceedings by saying that these are drastic times and that means drastic measures must be taken to survive. His message to companies was don't worry about getting ahead, instead, "We're talking survive. Get this point into your heads." He warned that companies need to be cash-flow positive, and if they are not, then they need to get there now, because raising capital without being cash-flow positive is going to be tough. He was warning that there will be a price to pay for those who hesitate to act.

Upin Says

Upin, who knows a thing or two about money and markets, told the room that we are in the beginning of a long cycle, what he called a "secular bear market." This could be a 15-year problem, he said. This comment was accompanied by many slides that showed historical charts of previous recessions averaging 17-year cycles. He pointed out that the issue here is not the equity markets but the credit market, and that will take a long time to recover. He was ominous in warning the startups that this is a global issue, it is not a normal time, and is a significant risk not just to growth but to personal wealth.

He advised startups to make drastic changes, to cut expenses and to cut deep, but to still keep marching. "You can't be a general if you turn back," he apparently said. The point he hammered on was that since you can't manage the economy, manage everything else, including your business. He had some interesting advice for startups.

• Cut spending. Cut fat. Preserve capital.
  
• Throw out the models and spreadsheets, because all assumptions will be wrong.
  
• Focus on quality.
  
• Reduce risk.
  

Michael Beckwith

Michael Beckwith's presentation had lots of charts and data and he pointed out that the V-shaped recovery is unlikely. He also said that the cuts in spending will accelerate in the fourth quarter and the first quarter of 2009, and pointed to eBay as an example.

Leone's lessons

Doug Leone told the group that this downturn was a different animal and one from which it would take "years to recover." He was clear in pointing out that:

• Unprofitable companies would have a tough time raising cash, so get cash-flow positive as soon as possible.
  
• Go on the offensive and pound on your competitors' shortcomings.
  
• Be aggressive with your messaging and be out there. In a downturn, aggressive PR and communications strategy is key.
  
• Decline in M&A will mean that only lean companies with sales models that work will get bought.
  
• When it comes to deciding between capital preservation and grabbing market share, he advised that everyone should be preserving capital.
  

Leone's other tips for companies, especially the Sequoia portfolio companies, were something like this:

• Start with zero-based budgeting.
  
• Cutting deeper is the formula to survive, and this is an era of survival of the quickest.
  
• Make sure you have one year's worth of cash.
  
• If you have a product, reduce expenses around it and boost sales. If the product is ready, cut the number of engineers.
  
• Focus on building the absolutely essential features in your product.
  
• Be brutal when it comes to marketing — anything that isn't working, cut it.
  
• Don't burn through your cash, for cash is king.
  
• Cut base salaries on sales people and leverage them with upside.
  
• Most importantly, be true to yourself.
  

Liquidity Troubles, Volatility Bedevil Currency Markets

http://online.wsj.com/article/SB122398875123732433.html Liquidity Troubles, Volatility Bedevil Currency Markets     

We begin by pointing out the obvious. A bounce in a bear market does not give cause for celebration. It gives cause for selling. Sell the rallies, buy the dips. Buy low, sell high, in other words. We're selling stocks, generally. And this bounce is a good occasion to do so…because we think this market could go a lot lower. Dow 5,000 is our target. When the Dow gets below 5,000 we might be tempted to buy. Until then, it's sell…sell…sell...... http://www.dailyreckoning.com/

State-controlled enerprises, the present owners and creditors of which will receive income bonds . . . . There is no real difference between being a yes-man official of a billion dollar bank and being an official of a State bureaucracy . . ."

From the pro-fascist American author Lawrence Dennis, in his 1936 book, The Coming American Fasicsm, p. 176, in the chapter entitled "Why Fascism Instead of Communism?".    http://www.lewrockwell.com/blog/lewrw/archives/023506.html

Perhaps the time for self-delusion is passed. The grand new plan, just replaced the $700 billion plan, that replaced the $80 billion plan to bail out AIG, that replaced the Bear Stearns bailout which was just pocket change.

Forgive me for being skittish but it seems like every time you blink the number goes up by a factor of ten. The way it looks now is that combined USA , Europe and UK , the damage could easily be $7 trillion. http://www.marketoracle.co.uk/Article6811.html

Fed announces unlimited supply of Dollars

http://money.cnn.com/2008/10/13/news/economy/central_banks_dollar_funds/?postversion=2008101309 NEW YORK (CNNMoney.com) -- The Federal Reserve announced Monday it will offer an unlimited amount of dollars to three other central banks in an unprecedented move to provide liquidity to the global banking system.

You say the dollar has been soaring recently? Well, yes, it has. But that doesn't mean it is worth anything. In fact, the dollar is valueless, and the $1 bills in your wallet are worth no more intrinscially than the $100 bills. Those who do not understand why this is so or who would argue otherwise are simply ignorant or delusional. As we explained here a couple of weeks ago, the dollar is rallying because it is caught in a short squeeze. Short-term borrowers, unable to keep rolling their loans, have been forced to settle up in cash. This has created a made scramble for cash dollars, as opposed to credit dollars. And although the Fed has attempted to keep the system liquid with unprecedented infusions of new cash, the amounts pale in comparison to a global financial deflation that has already caused tens of trillions of dollars worth of financial and real estate assets to vanish from the economy.    http://news.goldseek.com/RickAckerman/1223913742.php

There are no attractive options, but compulsory adjustment might not be the most unattractive option. If it worked, it might at least offer greater certainty. Already US Treasury bond yields are RISING as the market fears a future flood of issuance and holders scramble for cash. The other alternative, of course, is a big burst of inflation to erode the real value of the claims surreptitiously, and offer debtors relief.

Inflation has been the solution to widespread over-indebtedness in the past for many countries. But even if the Fed COULD generate inflation amid a contracting economy, that would simply expropriate creditors in a different fashion.    http://ftalphaville.ft.com/blog/2008/10/12/16931/kemp-the-united-states-is-now-in-some-very-general-sense-bankrupt/

Tobin tax on FX?

Finally, instead of tax incentives and tax cuts many see that what is desperately needed at this point in time is the introduction of a new tax. This tax would be a tax on investments, akin to the Tobin tax. The Tobin tax is the suggested tax on all trade of currency across borders. Named after the economist James Tobin, the tax is intended to put a penalty on short-term speculation in currencies. The original tax rate he proposed was 1%, which was subsequently lowered to between 0.1% and 0.25%. http://www.heise.de/tp/r4/artikel/28/28896/1.html

In a sign of how worried companies have become about getting credit, General Electric Co (GE.N: Quote) considered seeking a bank charter that would give it access to government lending channels, sources familiar with the company's thinking told Reuters last week. http://ca.reuters.com/article/businessNews/idCATRE49B30P20081012?sp=true

Now we are starting to get anecdotal evidence that this extremely vital market is also freezing up. If you think the problems stemming from a meltdown with the commercial paper markets are threatening to the world economy, they are small potatoes when compared to a seizure in the letter of credit markets..... "'There are all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit,' said Bill Gary, president of Commodity Information Systems in Oklahoma City. 'The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy.'...... That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begin to show up. THE CENTRAL BANKS CAN'T LET THAT HAPPEN OR WE HAVE NO ECONOMY, LET ALONE A CREDIT SYSTEM."..... http://www.marketoracle.co.uk/Article6745.html

http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=77687 China stiffing America for $100 billion in debt

Yet U.S. taxpayers helping Beijing as part of trillion-$ credit bailout

Dow drops 600 points at open

DOW DROPS 600+ AT OPEN; OFF LOWS...

EUROPE STOCK ROUT...
London shares bloodbath...
Carter slams Bush on market crisis...
WASH POST: The End Of American Capitalism?

Big discounts fail to lure shoppers and other articles

"In 2005, my wife and I retired," Carl says. "We went to a Merrill Lynch financial advisor and had about $200,000 to put away for our retirement. We told them at the time that this was all the money we had for retirement and we wanted it to be secure. We didn't want risk. ... http://www.lawyersandsettlements.com/articles/11343/stock-market-losses-3.html

"Big discounts fail to lure shoppers," reports the Wall Street Journal . Restaurants are empty. Shopping malls are not even attracting strollers and gawkers – let alone people with money to spend. Auto lots are so quiet the salesmen take turns pretending to be customers – just to keep their skills at-the-ready. Even the private jet business is in a tailspin." (The Daily Reckoning)    http://www.marketoracle.co.uk/Article6710.html

The US and advanced economies' financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.

On the real economic side all the advanced economies representing 55% of global GDP (US, Eurozone, UK, other smaller European countries, Canada, Japan, Australia, New Zealand, Japan) entered a recession even before the massive financial shocks that started in the late summer made the liquidity and credit crunch even more virulent and will thus cause an even more severe recession than the one that started in the spring. So we have a severe recession, a severe financial crisis and a severe banking crisis in advanced economies.

http://www.rgemonitor.com/roubini-monitor/253973/the_world_is_at_severe_risk_of_a_global_systemic_financial_meltdown_and_a_severe_global_depression

We are in the midst of an unfolding debacle. It is happening about us. I am not sure how or when it ends, but the end, when it arrives, will radically alter the way we live for a long time.

Whoever wins the US election and takes office in January will need prayers and divine intervention.    http://www.nakedcapitalism.com/2008/10/dow-tanks-680-to-below-9000-investors.html

This article by Stratfor founder and Chief Intelligence Officer George Friedman accompanies an upcoming series on the geopolitics of the global financial crisis. Here, he discusses Stratfor's geopolitical method for analyzing economic issues, which has a different focus and purpose from the models used by economists.    http://www.stratfor.com/analysis/20081009_international_economic_crisis_and_stratfors_method

Canada's Banking System World's Soundest http://www.shortnews.com/start.cfm?id=73925

Roubini: At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally include:
1) another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
2) a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
3) a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
4) massive and unlimited provision of liquidity to solvent financial institutions;
5) public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
6) a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
7) a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
8) an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

U.S. President George Bush will take the unusual step of meeting at the White House on Oct 11 with G-7 finance ministers and the heads of the International Monetary Fund and the World Bank. 

Current EU President Sarkozy: ``Only coordinated action by central banks and governments is able to stop the systemic risk and ensure the financing of economies,'' said Sarkozy, who now holds the EU's rotating presidency. 

IMF Global Financial Stability Report, October 2008 (GFSR):

- total U.S.-originated assets loss estimate increased to $1.4 trillion, an increase April number of $945bn;
- over the next few years, five years, around $675 billion of additional capital is needed to keep credit growing, even modestly, in the face of the current shocks [as of October, global bank writedowns have reached $592bn vs. $442bn fresh capital raised of which in the U.S. $340bn ($245bn), and Europe $227bn ($175bn) and Asia $25bn($23bn)]
- the restoration of financial stability requires a decisive and internationally coherent set of policies in 3 areas: 1) strengthening the capital base of viable institutions, 2)  buttressing troubled assets by using public sector balance sheets; and 3) improving funding availability, mainly term funding, to stabilize bank balance sheets.
- orderly resolution of nonviable financial institutions;
- reduce counterparty risks through centralized clearing organizations
--> The most significant risk remains a worsening of the adverse feedback loop between the financial system and the real economy.

World Economic Outlook, October 2008:

- global response needed to global problem;
- The IMF now expects the world economy to grow 3.9% pace in 2008, down from the last estimate of 4.1% in July. It also cut expected 2009 growth from 3.9% to 3%, which would be the weakest level since 2002;
- effects of rate cuts are limited in the current crisis (i.e. pushing on a string). Monetary policy needs to be combined with fiscal policy.
- The U.S. 2008 forecast edged up to 1.6% from 1.3% in July. However, the U.S. economy is expected to contract in the fourth quarter of 2008 and early 2009, prompting the fund to downgrade next year's growth estimate to 0.1% from 0.8%. A U.S. recovery is expected to begin in the second half of next year as housing prices bottom out.
- IMF expects a "a significant slowdown in activity across western Europe followed by a very gradual recovery beginning in the second half of 2009.". The 2008 forecast for euro-zone growth was cut to 1.3% from 1.7% in July, and to 0.2% from 1.2% in 2009. Italy's economy is expected to contract this year, and it will be joined by Spain in 2009
- The U.K. economy is also expected to go from 1.0% growth in 2008 to a 0.1% contraction next year.
- the 2008 forecast for Japan was cut to 0.7% from 1.5% in July, with the 2009 estimate lowered to 0.5% from 1.5%. Canada's 2008 estimate was cut to 0.7% from 1.0%, and its 2009 forecast fell to 1.2% from 1.9%.
- Emerging and developing economies as a whole are still expected to expand at a solid 6.9% clip this year, though the IMF trimmed its 2009 forecast to 6.1% from 6.7%.

Police will not enforce foreclosures in Chicago area

http://apnews.myway.com/article/20081008/D93MFL900.html CHICAGO (AP) - Residents of foreclosed properties in Chicago and other parts of Cook County don't have to worry about deputies forcing them out. Sheriff Tom Dart says that starting Thursday his office won't take part in evictions.

Dart says he's concerned that many of the people being evicted are renters who were unaware that their landlords have been failing to pay their mortgages. He says his deputies have no way of knowing whether they're removing someone who has defaulted on a loan or someone who has been faithfully paying rent.

Dart says he thinks he's the first sheriff in a major metropolitan area to stop such evictions during the ongoing foreclosure crisis.

Dart says the number of mortgage foreclosures in Cook County has skyrocketed and will probably keep rising.