The World's Economy is Worsening & Plunging Deeper into Unprecedented Recessions!

This unique Global recessions will be the worst and it happens probably once in 100 years! Surely it will be the longest & deepest! Many governments are just cover-up the FACTS! Hence, be prepared for the worst! Today, the 2nd of March 2009, stocks plunging into sea of reds (bloodbath) from Tokyo to New York!!!

U.S. futures slumped and Treasuries rose as Warren Buffett said the economy is in a “shambles” and American International Group Inc. announced a $61.7 billion loss.
HSBC Holdings Plc tumbled 20 percent in London, the biggest drop since at least 1992, after saying it plans to raise 12.5 billion pounds ($17.7 billion) in a rights offer, increasing concern that financial firms need more capital. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, retreated 6.8 percent as the nation’s wage declines accelerated. BHP Billiton Ltd., the world’s largest mining company, lost 5 percent as oil fell more than 5 percent and copper, nickel and aluminum dropped.

“Things are getting worse,” said Alex Crooke, portfolio manager at Henderson Global Investors in London, which has about $125 billion. “The economy is still deteriorating and bad debts are still going to appear,” he said

The MSCI World Index of 23 developed countries sank 2 percent to 736.08 at 12:20 p.m. in London, extending its 2009 decline to 20 percent, the worst start to a year since the gauge was created in 1970. The MSCI Emerging Markets Index slid 3.6 percent, while Hungary’s forint fell after European Union leaders spurned aid pleas for eastern Europe.

Worst ‘Freefall’
Futures on the Standard & Poor’s 500 Index expiring this month dropped 2.5 percent, while Dow Jones Industrial Average futures suggested the 30-stock gauge will fall below 7,000 for the first time since 1997. Buffett, chairman of Berkshire Hathaway Inc. said in his annual letter to shareholders that the U.S. economy will be a “shambles” this year and perhaps longer, before recovering from the reckless lending that caused the worst “freefall” he ever saw in the financial system!

U.S. futures extended their drop after AIG posted its record loss. The S&P 500 slid to a 12-year low last week as the U.S. Treasury agreed to convert as much as $25 billion of Citigroup Inc. preferred shares into common stock in a third rescue attempt for the lender. Well, i wonder when is the fourth rescue are on the way or perhaps fifth or sixth? :-)

American International Group Inc., the insurer deemed too important to fail, will get as much as $30 billion in new government capital in a revised bailout after posting the worst loss by a U.S. corporation.

The fourth-quarter loss widened to $61.7 billion from $5.29 billion in the year-earlier period, the New York-based insurer said today in a statement. The government relaxed terms of its bailout package to reduce pressure on AIG and stabilize the financial system.

The insurer, first saved from collapse in September with a package that grew to $150 billion last year, had to ask for help again after failing to sell enough subsidiaries to repay the government. Banks relied on AIG to back more than $300 billion of assets through derivative contracts as of Sept. 30, making the company a “systemically significant failing institution” that has to be propped up, according to the Treasury.

“The government has accepted all the downside with little chance of upside,” said Phillip Phan, professor of management at the Johns Hopkins Carey Business School in Baltimore, before the announcement. “They are trying to protect the global financial system from a complete meltdown.”

AIG will pay down the federal loan, valued at about $38.9 billion on Dec. 31, partly by turning over its two largest international life insurance units, which will be put in trusts. The company will also give the government rights to the cash flow from tens of thousands of life insurance policies.

AIG is winding down the trades and closing the unit that sold the swaps. The unit is under investigation by the U.S. Department of Justice, the Securities and Exchange Commission and U.K.’s Serious Fraud Office. The U.S. probes involve how AIG executives valued its swap portfolio and disclosed information about the contracts to investors, AIG said in a November regulatory filing.

AIG, once the world’s largest insurer, operates in more than 100 countries, providing protection to individuals and businesses. It insures against some of the biggest risks, covering planes and commercial shipping and providing protection against terrorist attacks.

The biggest insurers in North America posted more than $150 billion in writedowns and unrealized losses linked to the collapse of the mortgage market from the start of 2007, with AIG representing more than a third of that total. The company has units that insure, originate and invest in home loans.

The U.S. Senate’s banking committee has scheduled a hearing for March 5 to discuss AIG’s bailout and the government involvement. New York Insurance Superintendent Eric Dinallo and Donald Kohn, vice-chairman of the Federal Reserve Board of Governors, were scheduled to testify

Help on the Way
The company may warrant “possibly further government support, if markets do not stabilize and improve,” the Treasury and Federal Reserve said in a separate statement.
The insurer gained 11 cents to 53 cents at 7:07 a.m. in early New York trading. AIG has plunged 99 percent in the past 12 months. I repeat, 99 percent!!!

In an era when we’ve all become interventionists -- when doing something, anything, is preferable to doing nothing and risking being blamed for any outcome, it’s good to hear a few voices pointing to the danger of government overreach.

Historical evidence suggests that “bad government policies are responsible for causing great depressions,” write Timothy J. Kehoe, professor of economics at the University of Minnesota, and Gonzalo Fernandez de Cordoba, professor of economics at Universidad de Salamanca in Salamanca, Spain, in “The Current Financial Crisis: What Should We Learn from the Great Depressions of the Twentieth Century?”

Future Shock
It turns out the source of the shock, be it internal or external, that triggers a depression “is less important than the reaction to the shock by the economy and, in particular, the government,” the economists write.

Before you dismiss Kehoe’s views as those of a card- carrying libertarian, consider that he was trained as a Keynesian, is a “lifelong Democrat, voted for Obama,” and believes in universal health care.

He’s opposed to rewarding people who made bad investments. “The TARP money disappeared; it was scandalous,” Kehoe says, referring to the Treasury’s Troubled Asset Relief Program. “It went to people who made bad investments to try to pull them out.”

The economists’ findings in their February 2009 paper are based on a study Kehoe and Edward Prescott, recipient of the 2004 Nobel Prize in economics, have been running at the Minneapolis Fed, analyzing depressions in North America and Western Europe in the 1930s, Latin American in the 1980s and isolated examples elsewhere.

Good vs. Bad
They differentiate good outcomes to financial crises (Chile, Finland) from bad outcomes (Mexico, Japan) and find productivity plays an important role.

“All these depressions are associated with bad policies that depress the efficiency of production,” Prescott says in a phone interview. “The focus should be on productivity. History provides no support for stimulus.”

The current crisis and recession may be different than previous ones in terms of their size and scope, but that does nothing to contradict Kehoe’s belief that the financial system needs to be “cleaned out.”

In the early 1980s, Chile took control of ailing banks, liquidated the insolvent ones and re-privatized the solvent ones. “The short-term costs of the crisis and the reform in Chile were severe,” Kehoe writes.

By 1984, the economy had started to grow. And Chile has been the fastest-growing country in Latin America since then.

Pain Therapy
It’s worth the cost to sort things out as quickly as possible, he says. “If you postpone short-term pain, you end up with long-term pain,” which is what happened in Mexico and Japan.
Fed Chairman Ben Bernanke said in congressional testimony last week that key to stabilizing the economy is stabilizing the financial system.

If that’s the case -- and policy makers of all stripes seem to agree that it is -- why a $787 billion fiscal stimulus bill filled with political priorities and a budget that increases domestic spending by 8 percent?

Well, you can’t force-feed someone who’s in the middle of hanging on and depending on life support in Emergency Room!

Better to make the treatment fit the disease. Revamping the health-care system won’t fix the banks. Raising the price of carbon-based fuels and force feeding the nation alternative sources of energy won’t loosen up lending. And higher taxes on the wealthy, and inevitably the not-so-wealthy, won’t enhance bank solvency.

Doing so many things at once means a reduced focus on the root of the problem.

So what does Kehoe recommend for the current crisis?
“We need to avoid implementing policies that stifle productivity by providing bad incentives to the private sector,” he says. “Unproductive firms need to die.” Maybe then the rest of us can start to live

I wonder whether a reasonable wise man will still invest their money on Citibank or would continue to pour more money into the insurance premium of AIG and it's subsidiary AIA :-) Well, some may says, "don't worry, see..AIG gets more aid after record $61.7 billion loss". Well, i do hope that the generous government will forever be there to bailouts and give aid (which is taxpayers money) to those ailing companies. Just pray that the government itself won't fell into financial ills as a result of bad financial management & budgeting!!! or else, who's gonna treat or nursing those ailing companies? haha.. Well, in the coming days or months, i bet you'll see more insurance, bankings, automakers, aviation, manufacturings & reputable retailers asking for bailouts & aid or fall into bankruptcy or wiped out from history! Unbelievable? Believe It coz Ripley's Believe It or Not had prove those things which are unbelievable to be believed! With the facts, figures & evidence clearly laid out in front of our eyes, i'm sure you, me and ordinary reasonable sound man can foresee (envisage) what will happen next! Wondering who are those so called smartest guys who create this "superb" economy system which has now broken into pieces of mess? :-) Well, don't forget to thanks those people who had brilliantly break and manipulate the economy system for their own benefits :-) Hope they themselves won't get boomeranged ;-) haha