t the end of last week, I woke up to hear the shocking news of continued massive plunge in Asian and European stock markets. Today, I am happy that the overseas markets are gradually bouncing back. I expect a bounce for USA stock market, which has been in doldrums for the past 8 days - On Friday, the Dow ended its worst week ever and capped a staggering eight-session trading loss of 2,400 points, or 22% which connotes a loss of dollar value of stocks to the tune of nearly $3 trillion! We already know the number of financial corporations that have failed.

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Yes, President Bush, his cabinet (Federal Reserve and the U.S. Treasury) and US Congress have demonstrated seriousness in stopping the plummeting economy but every step taken so far has not yielded any significant success. The downturn seems to defy all probable economic logic, why? Simply because the investors appear not to be very confident that money from the right hands will go to the right place. To make matter worse, major banks around the world are quick to cut back on their lending, making world's central banks and governments look like financial dwarfs despite their economic muscle. The sentiments are very high, only trust can suppress it, but where is the trust? Is it in the brains of man or in the hands of God?

In the USA, critical and fundamental economic solutions have been introduced, yet the battered financial market refused to even crawl away from its ebb. Take a look at economy tools kit below:

1. A pledge of $200b Fannie Mae and Freddie Mac: Bail-out package to Fannie Mae and Freddie Mac in a bid avoid a complete mortgage meltdown.

2. $29b Guarantee to JP Morgan: Government engineered JP Morgan's purchase of Bear Stearns with $29b guarantee.

3. $85b to AIG: To buy an 80% stake in the company to avoid a collapse (AIG has $1.1trillion in assets and 74 million clients in 130 countries) a collapse of AIG may endanger the credit market and possibly hurt consumers. Yet, AIG was booted out of Dow Jones Industrial Average and replaced with Kraft Foods, Inc.

4. Emergency Economic Stabilization Act of 2008: A $700b bail-out legislation that would allow government to inject liquidity in to the already strangled credit market and to buy troubled mortgage assets, the result? Not readily noticeable for now.

5. Additional $38b to AIG: To increase stakes, the result for the combined efforts? Not felt

6. Commercial Paper: In a move to encourage lending between companies, the US Government unveiled a plan to lend directly to the nation's major companies by buying up an unlimited amount of the $1.3 trillion in commercial paper, short-term loans that businesses use to operate day-to-day, on the market. The news did not do much to unfreeze the credit market. The Dow, S&P as well as NASDAQ all fell the more!

7. Damaged Assets Buy-Out: Despite the US Government plan to buy short-term debt needed to finance daily operations directly from businesses. It also said it will make $300 billion available to banks in return for damaged assets, on top of $300 billion already available. What is more? Market is still at a free fall!

8. Interest Rate Reduction: Cut interest rate by 0.5%, Interest rate is now 1.5%. The reduction means that the prime rate will fall to 4.5% from 5%. Variable-rate credit cards and home equity lines of credit are linked to the prime rate, so consumers will see a drop in the rates on those kinds of debt in the coming week. Yet, no result because of large difference in the LIBOR rate. My guess is that there might be agitations for more cuts in interest rate until it reaches 0.50%.

9. Auction Facility: The US Government also announced it would double the size of its term auction facility, a program the government created last year to lend banks money for up to 85 days at a time, to $300 billion. The government added it was prepared to boost the term auction facility to $900 billion by year's end. The result? The world market plunged universally!

10. Equity Purchase: The U.S. government announced on Friday, steps that include taking direct investments in banks, (buying equity stakes in order to inject capital directly into the trouble financial system) as well as guaranteeing their debt and insuring all deposits. Yet, Dow still fell.

Banks still appear to be reluctant to lend money and stock markets around the globe have continued to fall. On Thursday, the Dow industrials plunged nearly 700 points to a five-year low and markets worldwide plunged. One of the Brains- Federal Reserve chairman Ben Bernanke, vowed that the Fed would do whatever it takes to try to fix the credit crunch. He said "The Federal Reserve will continue to use the tools at its disposal to improve market functioning and liquidity." I believe he is correct as long as time is on our side.

More Brains are suggesting simple, yet futuristic ideas for which they are not sure if these ideas would work.

1. US Government could become a Clearing House (guaranteeing that institutional transactions clear) for trades of a variety of exotic and arcane financial instruments such as collateralized debt obligations or credit default swaps. These have traditionally been traded directly between two firms rather than in an open market.

2. US Government may supplement its efforts to help larger firms by starting to lend money to small and medium sized businesses as well.

3. US Government could agree to buy small business loans from banks that are backed by collateral, such as inventories or equipment. Such loans, says the Brains, could be purchased on a non-recourse basis, meaning the US Government, and not the bank, assumes the risk if the loan goes bad.

To be fair to US Government, this downturn has made the government very inventive and steadfast, yet the slide in the financial market had not stopped, not even for the fact that U.S. light crude oil for November delivery as at Friday fell to $77.49 a barrel from an all-time high of $147.27 a barrel on July 11. OPEC is not happy for the fall of crude oil but we are happy since we will pay less at gas pumps. But if stocks regain its level, the price of crude oil will rise again!

All the Brains hope that Capitalist Economy has a way of bouncing back whenever there is a recession. The informal recession, as it were, now puts more banks, more corporations like auto giants - GM and Ford on either merger & acquisition talks or death watch, meaning more job cuts, loss of homes, loss of businesses (big or small) and eventually an ugly dawn of Economic Depression which we do not pray for, not even for our great grand children!

As a buff of global politics & economy, my hope is that only TRUST & TIME will eventually stop the economic bleeding but TRUST & TIME is in the hands of God.

RECESSION IN U.S.A ECONOMY AND THE GLOBAL ECONOMIC CRISIS - VOL. 2

In volume 1, I appraised the concerted efforts the US government has carried out to normalize the plummeting financial market and its attendant slim results that were manifested from its ever increasing economic tools kit. As I predicted in Vol. 1, US has cut the interest rate to 1.0%, yet, no tangible results. Even, President Bush has made 34 public statements on the economic crisis since the collapse of Lehman Brothers in mid-September. Volume 2 looks at how USA economy impacts the global economy.

The philosophical ramifications of the present global economic woes are a pointer to attest the limitation of humans to any known economy system. Whether socialism or capitalism - even with regard to their merits or demerits; thesis or anti-thesis; counterfeit or genuine - there are still some logical imperfections. To put in a better perspective, I must state that the basic principle of most world economies including USA is the empirical formula "demand breeds supply", unfortunately, the pace of financial and economic globalization appear to have outstripped the pace of the theory and institutions that underlie it. Who would ever think of an economy system in which mass production of goods and services can make a massive supply to breed its own demand? The moment this system repeats itself with a seemingly uncontrollable economic momentum, the result is likely going to be a continuously outgrown economic system, so complex that if resources run out, the system may collapse.

It is a known fact that American system of economy secures high living standards for Americans; there are many opportunistic mechanisms that are put in place to underpin the drive for an "ownership society" in which banks and stock markets became the heart of the economy. Many Americans are quick to borrow money through the financial institutions; the money are being used to buy cars, homes, health insurance, education, vacation and all sorts of consumer goods or services. How many borrowers would bother to know the sources for the "cheap money" when lending companies are happy to give credit for the sake of over-indulgence in profits with little or no emphasis on income level of borrowers? Today, an average American has now realized that the so called "cheap money" did not actually come from America but from foreign investors. There are many countries supplying USA goods and credits, especially China and many Asian and European countries. The financial crisis has suddenly led to sharp decline of demand in the USA resulting in overproduction crises in the countries whose economies are tied to USA, thereby causing the fall of stock market in these countries that supply goods and credits. This is the present dilemma facing the world economies today!

The dilemma is still raging, hitting world markets with a category 5 hurricane speed. Beginning from USA, the Dow Jones trading has been extremely volatile and fluctuating. It dropped a total of 14.1% (1526 points) for the month of October 2008. On Oct 16, In Asia, Japan's Nikkei index fell 11% - the second worst performance in its history. Other markets in Asia and the Pacific region were lower. Australia's All Ordinaries index fell 6.7%. In Seoul, South Korea's KOSPI dropped 9.4%. Hong Kong's Hang Seng slumped nearly 5%. The Taiwan Weighted slipped 3.3% and Singapore's Straits Times index gave back 5.3%. On Oct. 24 in Europe, all major exchanges traded lower. London FSTE dropped 7%, CAC-40 Paris was down 7.9% and Frankfurt's DAX plunged to 9.6%. No wonder, Art Hogan, Chief Market Strategist at Jefferies & Co. said October 2008 will be remembered as "stunning on the magnitude of volatility and the magnitude of market capitalization that was lost".

However, contrary to standard economic theory of the interplay of forces of demand and supply, Wall Street, not technology or consumer market or government became the main economic agents; as a result, there was a boom in the financial component of US economy such that it became very profitable to make money out of money. A system where profit does not depend on real production but is a result of sophisticated financial transactions, said Vlad Grinkevich, a RIA Novosti economic commentator.

The $700 bilion bail-out was a mixed deal, without the bail-out, it means America cannot convince the world that a free-market economy works! Socialism did not work in defunct Soviet Union, now Capitalism seems to be schizophrenic in the USA, so what is the best economy system for the world? It is indeed true that the claims of economics are true only ceteris paribus - that is, they are true only if there are no interferences or disturbing causes. USA budget has become a vehicle for one-sided cash flow with funds in the bubble surpassing the real economy yet with huge trade deficit of about $59.1bilion as at August 2008. On 30 September 2008, the total U.S. federal debt passed the $10 trillion mark for the first time! - An acidic heritage for the next president.

Today's presidential election is to prepare Americans for the challenges on how best to adaptively tessellate the economy system with socio-political schisms.

RECESSION IN U.S.A ECONOMY AND THE GLOBAL ECONOMIC CRISIS - VOL. 3

In the previous volumes, I discussed the US bailout efforts on the plummeting economy and its impact on world financial markets. This volume discusses the present state of the US economy since the collapse of Lehman Brothers in the middle of September 2008.

The economy today: The present state of the economy in US appears to be in a scientific laboratory in which everything and anything could be used as a tool for experimentation. Rather than wait for the outcomes of all the experiments, the scientific lab is now virtually turning into a casino where the flummoxed government players can bet on anything with the hope of striking an economy jackpot!. The government has done just about everything it can do to provide liquidity into the economy, treading a gyratory path from the policy room to a scientific lab and then to a casino and possibly back to the policy room. With much avuncularity, government has up till this day spent, lent, committed or guaranteed $7.8 trillion dollars to rescue Wall Street, to save Main Street and to support Corporations, yet the economy recovery is too slow for comfort.

Auto bailout loan: Even, the US Congress was almost turned into a boardroom; some Legislators lectured the CEOs of private auto companies (Ford, GM and Chrysler) on how to run their companies, the CEOs, acting like advertising executives, presented their corporate strategies or plans to the Lawmakers - pledging to sell cars that are not yet manufactured! Why? because they did not want to file for bankruptcy but they begged the government for at least $34 billion of tax payers' money in aid to rescue their struggling industry-up from an initial request of $25 billion last month. The U.S House approved the auto bailout bill 237-170 but on December 11, 2008 the Senate rejected the bill 52-35 on a procedural vote. Succor finally came on December 19, when President Bush announced a $13.4 billion rescue plan for GM and Chrysler in form of loan with some conditions attached to it. Ford seems not to be in a hurry to obtain loan from the government for now.

Economic indicators: In a report released on December 1, 2008, the National Bureau of Economic Research (NBER) based in Cambridge, Massachusetts confirmed what many have long believed; that U.S.A is in a recession. According to NBER - an Agency that calls economic cycles, the U.S. has been in a recession since December 2007. NBER also released another report on December 23, 2008 that the Gross Domestic Product (GDP), the broadest measure of the U.S. economy, fell by the annual rate of 0.5% in the summer. What is more, every other economic indicator gives a bleak future; retail sales falling for the 5th straight month, unemployment rate reached 6.7% (1.9 million jobs lost as at November 2008). The Consumer Price Index (CPI), a key inflation reading, fell 1% in October 2008. In the same October, consumer confidence was at its lowest level in 41 years! Good enough, the National Retail Federation (NRF) has seen the clear signal, they have proposed to the next administration three national tax-free shopping holidays in 2009. The three tax holidays are to be held during March, July and October 2009, each lasting 10 days. NRF represents an industry with more than 1.6 million U.S. retail companies; they understand what it takes to build consumer confidence. Consumer spending is vital since it fuels two-thirds of U.S. economic activity. Another indicator is the Manufacturing Index which fell to a 26-year low in November 2008. Motorola, Inc. has announced its plan to permanently freeze employee pension plans and stop matching 401(k) contributions as a result of the economic crisis. Also, FedEx and Unisys will no longer match 401(k). I am sure more companies will follow suit in 2009.

Interest rate cut: Government recently cut the interest rate to 0.25% which is the 10th cut since September 2007. The cut means that the previous cuts failed to stimulate the economy as intended. While I agree that rate cuts typically help the economy because they lead banks to drop their prime rates, which influence the rates set for credit cards, home equity lines of credit and other personal loans as well as business loans. However, this new move gives more economic burdens on the Federal Reserve Bank in its effort to get the economy out of recession. Once there is a rate cut, there is that tendency for government to become more creative and forward looking otherwise, more rate cuts would ensue until it gets near to 0.0%. If rates get down to zero, it is hard to move off from zero. Japan learned the lesson the hard way in 2002. The underlying strategy for low interest rate is to pave way for stimulus package expected in 2009 which may be close to $1trillion; the idea is to ensure that such fiscal stimulus percolates the economy at the time of very low interest rates.

National debt: It is pertinent to note that government solutions so far have been to unfreeze the credit market, little or nothing is being done to relief USA of its current debt. While more liquidity is envisaged for the credit market, the debt portfolio still remains so huge - as at June 2008, all the interest-bearing debts in the USA were about $52 trillion! These debts include credit card debt, corporate debt, mortgage loans, municipal debt, state debt and federal debt. At this moment, the country is both addicted to debt as well as credit but the credit part is in coma; if USA has plenty of cash alongside with the heavy debts, it may not be such a problem as long as borrowers have the income. Now there is a glitch in the flow of money; income and prices may fall leading to deflation. However, deflation can be too much of a good thing, the current widespread fall in prices might make most consumers cheer, e.g. gas prices, home prices and other consumer goods, all the same, I see it as another raison d'�tre to fret on the economy. Dr. Martin Weiss, founder and president of Weiss Research, Inc. and a leading advocate for investor safety explained in one of his articles that the vicious cycles of debt and deflation in America "are in full motion and gaining momentum". He is absolutely correct. Businesses and Government establishments may be caught in the downward spiral; they may cut spending, cut jobs, dumb assets, lose profits or revenues even some corporations may liquidate. If for any reason the debts and deflation jointly dictate the economy, then the nation may be heading for depression as it happened in 1930s.

Therefore, there must be a way out of the present economy doldrums whether to follow free market principles or to abandon such principles - time is of the essence, something must be done to bailout the fee market system at least to avoid a total collapse of it. At this moment, we only have a looming combination of economic and financial crisis currently devoid of political imbroglio, social uprising and moral degradation - thankfully, America is still together. No doubt, these are distressing times, no matter how painful we feel the effects of the crunchy economy; we must bear it and cooperate with the government as it continues to find a way out of this dire economic situation.

RECESSION IN U.S.A ECONOMY AND THE GLOBAL ECONOMIC CRISIS - VOL. 4

There is no doubt; it is vivid that this present turmoil in the global economic system cannot be solved through any form of solution at each national level. Incontrovertibly, it does require globally coordinated efforts among countries. Unlike volumes 1, 2 and 3, this volume shall look into how some of the world industrialized countries - working in tandem, are making swift decisions to stem the tide of the looming global recession.

World governments are not keeping silent; many have introduced drastic and rapid economic solutions to curtail the financial crisis, yet, the crisis seem unabated - there is global increase in unemployment rate, global decline in exports, unprecedented fall in consumer confidence, and global decrease in growth rate as well as fluctuations in global stock markets. Indeed, world economies are going through their historia calamitatum (Latin), translated in German, Geschichte der Ungl�cke; in English, history of calamities; in Dutch, Geschiedenis van ellenden; in Russian, ??????? ????????; in Japanese, ??????; in Chinese, ?????; and in Spanish it is la historia de calamidades.

Please, look at some bailout highlights from some countries I monitored strictly in English.

United Kingdom: The British government has pumped �37 billion pounds ($63 billion) into three of its major banks - Royal Bank of Scotland, HBOS and Lloyds TSB. The aim, according to Secretary of Exchequer "is to help them through the first financial crisis of the global age". In addition, on November 26, 2008, UK government announced plans to cut value-added tax (VAT) on consumer goods from 17.5% to 15% effective December 1, 2008 through December 31, 2009; as part of a massive fiscal and financial package worth �20 billion ($30 billion) to stimulate the economy out of recession. BBC reported that the temporary cut in value-added tax (VAT) is expected to put �12.5 billion in consumers' pockets during the Christmas holiday season. In addition, some British newspapers wrote that the Bank of England slashed interest rates to 2% in December; their lowest rate since late 1951, itself the lowest since the bank was founded in 1694 and is reportedly considering another cut when its board meets in January 2009.

Germany: Listening to radio Deutsche Welle, I learnt that the German government had declared her economy to be in "technical recession" because the GDP shrank for a second consecutive quarter. (A technical recession is defined as two consecutive quarters of negative growth). In order to overcome the liquidity shortages and strengthen the stability of the German financial market, the Europe's biggest economy and world's third largest - assembled a rescue package worth as much as �500 billion Euros (about $671billion), to shore up the country's financial system as part of a coordinated European bailout effort. The package foresees up to �400 billion Euros, or $536.7 billion, in guarantees for banks, plus up to �100 billion, or $134.2 billion to recapitalize banks and back up the guarantees. There is also an additional �32 billion economic rescue plan involving tax cuts, infrastructure projects and cheap corporate loans. The deal equates to roughly 1.3% of German GDP.

Switzerland: The Swiss government injected $54 billion into its banking system, joining global capitalization move and also to raise depositor protection in bid to deal with crisis. It was reported in the news that the measures will allow Swiss biggest bank - UBS to dispose of about $31 billion in high-risk papers linked to the U.S. subprime market and $18 billion in non-U.S. securities, by handing them over to a specially-created vehicle whose sole purpose is to sell off the stock. UBS will also have the opportunity to pass a further $9 billion in other securities to this vehicle, including the $5 billion worth of auction rate securities the bank was recently forced to buy back from U.S. investors.

France: Despite �8 billion Euros ($11 billion) of tax cuts garnered this year, French's economy did not see much growth due to surging inflation and decline in global demand. In a bid to counter a potential credit crunch, Radio France International (RFI) reported that President Nicolas Sarkozy has unveiled measures to boost loans to small and medium-sized companies by �22 billion ($30.4 billion) by the end of 2009. France will enter into recession in 2009. Insee, the French's statistics agency says the economy has shrunk by 0.8% in the last three months of 2008 and will contract by another 0.4% in the first quarter of 2009.

Nigeria: Fortunately for Nigeria (West Africa's largest economy and third in Africa), she had consolidated her banking sector three years ago with about $15 billion injected into the system, she had secured an external debt relief of about $30 billion in 2006 (Nigeria now has only about $3 billion external debt), now maintaining a robust external reserve of about $52.745 billion as at December 29, 2008, and with the saving of excess crude earnings currently standing at about $21.15 billion, and an average growth of 6.2% in five years. All these have helped to reduce the current global financial meltdown on the Nigerian economy. However, Nigeria is still vulnerable to future crunchy effects due to fall of oil price especially if it falls below $35.00 per barrel. The main source of revenue in Nigeria is through export of crude oil and natural gas which provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of government revenues.

Japan: The world's second largest economy on November 7, for the first time in more than seven years, its apex bank voted to cut its key interest rate to 0.3% from 0.5%. The Bank of Japan policy board voted in a rare 4-4 split decision. Interestingly, news reports said that the Bank's Governor, Masaaki Shirakawa, who has the final say in the event of a tie, voted in favor of a rate cut. Again on December 19, Japan lowered the interest rate from 0.3% to 0.1% - lowest among major economies, thereby joining central banks around the world in trimming borrowing costs to cushion the impact of the global financial crisis. In addition, Voice of America news (VOA) reported that Japan has announced a $255 billion stimulus package, including loans for small and medium-sized businesses, as well as tax rebate checks to households. Japan has officially slipped into recession.

China: Readers must be aware that China seems ready to take over USA as world largest and richest economy any sooner than later. China's economy is not all that weakened, although the economic down turn in the United States and Europe has caused China to see a decrease in the average percentage of growth of the GDP. In spite of this, the 2008 GDP was at an average of 9.9% growth, which equates to about $3.7 trillion US dollars! Yet, China does not want to take the current financial Tsunami for granted, a 4 trillion Yuan ($586 billion) stimulus measures was announced on November 9, aimed at shielding the world's fourth-largest economy from the global downturn by boosting domestic consumption with higher spending on construction and social programs. What is more, On November 26, Chinese government slashed a key interest rate for the fourth time in three months from 6.66% to 5.58% in a new move to boost credit. The government aims to reduce reliance on exports by encouraging the country's own consumers to spend more. Retail sales have been growing at annual rates of over 20%, but are still small as a share of the economy.

Other countries, according to many news reports, also took fresh action to support their economies. Australia, Spain, Holland, New Zealand, the United Arab Emirates and Saudi Arabia, have all reportedly moved to guarantee bank deposits.

Despite the global efforts, the global economy remains sticky and defiant of any known economic model or theory. The biggest problems currently facing the market are trust and confidence - two observable facts that underscore the pulse of financial transactions yet not underpinned by any composite economic model. Despite the avalanche of liquidity pumped into the economy, there is still a significant credit-freeze. Investors do not trust government, government does not trust borrowers, borrowers do not trust traders, traders do not trust bankers, bankers do not trust manufacturers, manufacturers do not trust consumers and consumers do not trust themselves!

Who says the gods are not to blame when confidence among all these stakeholders is gradually ebbing into a black hole? So, if human beings and their gods cannot find solutions to the ravaging economic problems, then it is time to seek God's intervention, yes the critical time to put confidence in Him. For America, it is that simple, the solution to the economic problems is already imprinted in her powerful US dollar bills and coins - IN GOD WE TRUST. If truly the God referred to in the currency is the same biblical God of Abraham, Isaac and Jacob, then the time is now, and the year 2009 is here, for America and Americans to put all trust in that same God and not in the gods of dollar or Wall Street.

Coming soon: Recession in USA Economy and the Global Economic Crisis - Vol. 5

Nester is a staff of the University of Illinois at Chicago.