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  • March 6, 2008 -- OPEC, rebuffing calls from U.S. President George W. Bush to increase oil output, cited "mismanagement" of the American economy as a major factor driving prices up.

    Record prices are suddenly creating the sharpest tensions in years between the oil cartel and the United States, the world's largest oil consumer. Two days after the president called for more oil on the global market, OPEC members, meeting in Vienna, Austria, chose to leave their production levels unchanged, declaring that the market has plenty of oil already.

    The cartel's president on Wednesday blamed financial speculators and American economic problems, which have helped lower the value of the dollar, for the high oil prices. After the meeting, oil prices settled above $104 a barrel, a record.

    Bush, who had said this week it would be a mistake for the Organization of the Petroleum Exporting Countries not to raise production, was disappointed by the outcome of Wednesday's meeting, according to the White House.

    It is the second time this year that OPEC ignored public calls from the United States to boost supplies. In January, Bush traveled to Saudi Arabia and urged producers to open their taps. But the plea failed to sway OPEC. When the group met in February, it kept its production level unchanged.

    The rally in oil prices on Wednesday was prompted in part by tensions on the border between Venezuela, a major oil exporter, and Colombia, as well as by government data in the United States showing a drop in stockpiles of oil and some of the fuels made from it.

    Oil prices settled at a record of $104.52 a barrel on the New York Mercantile Exchange, a gain of $5. Prices, which have risen 73 percent this year, have settled above the $100-per-barrel mark for seven of the past 12 trading sessions.

    While OPEC members chose not to boost supplies, they were not entirely oblivious to the political and economic impact of $100 oil. Gasoline prices have been rising rapidly in the United States in recent weeks, hitting a nationwide average of $3.18 a gallon Wednesday. That is only 5 cents below the all-time record set last May.

    The sharp surge in oil prices in recent days has deterred the group from cutting its production, a move that some members like Algeria and Iran were seriously contemplating a few weeks ago.

    With the U.S. economy slowing down, oil prices have risen as investors flee the stock market and seek refuge in hard assets like commodities. The fall in the value of the dollar gives OPEC an incentive to keep prices high: Since oil is sold in dollars, petroleum producers see the value of their exports decline any time the dollar drops.

    The dollar has lost 17 percent of its value against the euro this year. On Wednesday, it fell to a new low against the euro, trading at $1.53.

    "OPEC is angry that President Bush wants them to increase production while the dollar is sinking and the administration is doing nothing about that," said Fadel Gheit, an oil analyst at Oppenheimer in New York. "It's really not surprising that they have ignored him."

    The falling dollar has complex economic effects in the United States, not all of them bad. The drop is helping to fuel a surge of American exports, one of the few bright spots in a struggling economy.

    Higher energy prices, which have been rising relentlessly for nearly a decade, are creating tensions between consuming nations and producers around the world. Oil-rich countries like Russia and Venezuela have become more demanding in their dealings with foreign oil companies, often restricting access to prime drilling locations.

    In the United States, rising energy costs are weighing on an economy that is struggling with a housing slump and a credit crisis.

    As a sign of growing impatience, Bush criticized OPEC producers this week for not boosting supplies.

    "I think it's a mistake to have your biggest customer's economy to slow down" because of high energy prices, he said.

    Most energy analysts dismissed the call for additional supplies as political rhetoric. In comments on Wednesday, the president said the United States needs to reduce consumption.

    "America's got to change its habits; we've got to get off oil," Bush said at a conference on renewable fuels in Washington. "Until we change our habits, there's going to be more dependency on oil."

    Bush's earlier comments echo remarks he made more than eight years ago, while running for president. Then, the one-time Texas oil man said that if prices rose, he would not hesitate to call OPEC producers and persuade them to increase supplies.

    "I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply," Bush said at the time. "Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot."

    But OPEC members are proving difficult to sway. Chakib Khelil, Algeria's oil minister and OPEC's president this year, said Wednesday that the high price of oil was due not to a lack of supplies, but instead resulted from the "mismanagement of the U.S. economy" that has helped send the dollar tumbling.

    "If the prices are high, definitely they are not due to a lack of crude," Khelil said in Vienna. "They are due to what's happening in the U.S."

    He added: "There is sufficient supply. There's plenty of oil there."

    Most energy analysts agree there is no shortage of oil. Commercial oil inventories are high, and refiners are not lacking oil.

    "The market continues to be well supplied," Rex Tillerson, the chairman and chief executive of Exxon Mobil, said at a conference in New York. "There has been no interruption of supplies." Still, OPEC recognizes the threat posed by a slowing economy on its business. In its final statement, the group said that the U.S. economic slowdown and housing crisis could dampen global oil demand this year.

    Ali al-Naimi, Saudi Arabia's oil minister, said there was no need to increase supplies by "even one barrel of oil." But he stressed that Saudi Arabia, the world's top exporter, would keep oil markets well supplied. As a sign of how seriously it sees its role, Naimi told reporters that the kingdom was pumping 9.2 million barrels, "day in, day out," or roughly 300,000 barrels a day above its formal OPEC target.

    The oil cartel, which is next scheduled to meet in September, indicated it might call for an emergency meeting earlier depending on "market conditions."

    OPEC producers account for about 40 percent of the world's oil exports. Some of its members, like Saudi Arabia and Kuwait, are U.S. allies; others, like Iran and Venezuela, are political foes.

    "OPEC's biggest fear is that this is a bubble and that prices will drop by $30 a barrel," said Roger Diwan, a managing director at PFC Energy, who was in Vienna to attend the meeting. "So they keep tightening supplies and prices keep going up."

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    • March 13, 2008 -- The dollar fell below 100 yen for the first time in 12 years today and hit a new record low against the euro amid fears in currency markets that the US financial system is vulnerable to the recession spreading from the crisis-hit housing sector.

      Less than 48 hours after America's central bank, the Federal Reserve, sought to shore up banks with a $200bn (£100bn) package of emergency fundings, analysts warned the decline in the greenback was entering a new and dangerous phase.

      "We are entering dollar crisis mode," said Derek Halpenny, currency economist at BTM-UFJ.

      "Looking at the markets there is a complete loss of confidence and that's because the markets are concerned over the US financial sector and ultimately what the Fed will be forced to do to support that sector," he said.

      The FTSE 100 index lost 2% in the opening minutes of trading. By 9.45am the index of Britain's largest companies was 113 points lower at 5,663.4, more than wiping out yesterday's gain of 86 points. Every share was down, with blue chip firms such as British Airways and Barclays among the big fallers. Markets in Germany and France also fell by over 2%.

      Dealers were selling dollars aggressively in expectation that the Federal Reserve will ignore the threat of rising inflation and cut interest rates by a further 0.75 percentage points next week. Borrowing costs have already been cut by 1.25 points this year and currently stand at 3%.

      The dollar fell across the board on foreign exchange markets, losing more than 1.5% against the Japanese currency to trade at ¥99.57. It was trading at just above $1.56 against the euro and was close to a record low against the Swiss franc. The pound also gained ground at the dollar, moving up to $2.0360 in early trading.

      With the dollar weakening, other financial markets were also jittery. Gold was poised just below the $1,000 per ounce level, while crude oil was changing hands at more than $110 a barrel - adding to inflationary pressures in the global economy.

      Analysts said the problems emerging in US hedge funds and private equity firms as a result of the losses made on investments based on sub-prime mortgages were the reason the impact of the Fed action this week on the dollar had proved short-lived.

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      • March 14, 2008 -- American consumers are steering clear of shopping centres, as home repossessions and surging household bills hit them in the wallet, according to dismal high-street spending figures that sent the dollar and Wall Street stocks tumbling yesterday.

        As the treasury secretary, Henry Paulson, attacked banks for creating obscure financial instruments that exacerbate market turmoil, analysts reacted gloomily to a 0.6% drop in February retail sales - far worse than the widely forecast 0.2% rise.

        Mark Vitner, senior economist at the US bank Wachovia, said soaring oil and food prices were leaving shoppers with little spending money. "High gasoline prices have pushed consumers to breaking point," he said, adding that a recession had become undeniable.

        "Once the economy slides into recession, my experience from history is that things tend to get worse faster than anybody's expecting," he said.

        Scores of major shopping chains, including Wal-Mart, Nordstrom and Abercrombie & Fitch, have reported disappointing takings so far this year. Even luxury boutiques such as Tiffany are suffering from the downturn.

        Dean Maki, chief US economist at Barclays Capital, said: "We're seeing softer spending in the first quarter. Inflation is rising significantly, especially for oil and food. On top of that, the softer labour market is holding back income growth."

        Pessimism is taking root in boardrooms: a Duke University survey of 475 chief financial officers found the worst level of sentiment in the study's six-year history: 54% believe the US is already in recession and a further 24% think there is a high risk of one shortly.

        The Wall Street Journal's economic forecasting survey showed 71% of respondents putting the US in recession, and 48% of the 55 responses said a 2008 recession would be worse than the last two.

        The Bush administration has set out reform proposals which are intended to tackle the credit meltdown through better regulation of mortgage companies, tightening credit-rating procedures, and higher capital ratios for the banking sector.

        In a speech to the National Press Club in Washington, Paulson accused financiers of devoting too much energy to inventing esoteric securities that leverage mortgages and other debt, making it impossible to find where ultimate risks lie.

        "Some financial products have become overly complex," he said. "Excessive complexity is the enemy of transparency and market efficiency. Investor sentiment has swung hard to risk-aversion, and now the markets are punishing not only complex but non-complex products as well."

        A working group set up by George Bush has proposed strengthening Basle II - the international agreement setting minimum capital requirements for banks. The group also recommends cracking down on firms that "shop around" among rating agencies for lenient treatment.

        "Market participants' behaviour must change," Paulson said. Although he was not interested in finding excuses and scapegoats, he said the financial sector's turmoil was partly self-inflicted: "Poor judgment and poor market practices led to mistakes by all participants."

        Homeowners in the US heartland are still struggling to make repayments on risky subprime mortgages, which sparked the downturn last year. The property firm RealtyTrac calculated that foreclosure papers were filed on 223,651 properties in February - one in 557 households.

        The figure was slightly lower than in January but Realty Trac's chief executive, James Saccacio, said the dip was seasonal: "We have still not reached the peak of foreclosure activity in this cycle."

        The worst-hit areas include Cape Coral, Florida and Stockton, California. Arizona and Texas also saw a big increase in their rates of repossession. Among those served with foreclosure documents was the singer Aretha Franklin, who is at risk of losing her $700,000 (£350,000) mansion in Detroit over back taxes of $19,192.

        Less dough

        Even America's pizzas are set to shrink as the nation grapples with a toxic recipe of weak consumer spending and surging prices.

        The delivery chain Domino's Pizza is drawing up plans for a "value menu" likely to involve smaller sizes. The move is in response to customers' thrifty mood, as well as pressure from rising wheat costs.

        "We're going to try to take an approach where you still see the same product quality," said chief executive Dave Brandon. "But perhaps a different size and perhaps a different bundle so you won't disappoint the customer."

        Reflecting America's tradition for enormous helpings, Domino's Pizza sizes are half an inch larger in its home market than in Britain. Michigan-based Domino's has already laid off 50 staff in response to America's economic slowdown.

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        • March 14, 2008 -- The future of the Wall Street investment bank Bear Stearns is hanging in the balance after the firm was forced to ask the US Federal Reserve for an emergency injection of cash to cope with a liquidity crisis.

          Bear Stearns revealed today that its financial position had "significantly deteriorated" in the last 24 hours. The Fed stepped in by arranging for a rival bank, JP Morgan Chase, to provide short-term capital.

          Founded in 1923, Bear Stearns employs more than 14,000 people including a significant presence in London's Docklands. But its speciality in credit products such as mortgage-backed securities left it struggling to cope with last year's crisis in American sub-prime homeloans.

          Just two days ago, Bear Stearns vehemently denied Wall Street rumours that its liquidity was deteriorating. But today, Bear Stearns' chief executive Alan Schwartz suggested that unjustified speculation had damaged confidence in the firm.

          "Bear Stearns has been the subject of a multitude of market rumours regarding our liquidity," said Schwartz. "We have tried to confront and dispel these rumours and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position over the last 24 hours had significantly deteriorated."

          Acknowledging that the situation threatened Bear Stearns' ability to stay in business, Schwartz continued: "We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."

          On the New York Stock Exchange, Bear's shares dived by 50% to $28.59. Among the biggest investors in the bank is the British-born billionaire Joe Lewis, who bought a stake of 8% in September and is now sitting on losses estimated at $750m (£375m).

          JP Morgan's aid is guaranteed by the Fed and will initially last for 28 days. In a statement, JP Morgan said it was working closely with Bear Stearns on securing permanent financing or "other alternatives for the company". This was widely interpreted as meaning that a takeover was a possibility.

          The Fed has no statutory obligation to prop up Wall Street banks. But the central bank is understood to be nervous about the inter-linked nature of instruments such as credit default swaps which are traded between big financial institutions. Experts fear that the failure of one big bank could have a knock-on effect which reverberates around the financial system.

          The announcement sent the Dow Jones industrial average sharply into negative territory. The blue-chip index was down more than 300 points at one point. By 6.30pm it was still 245 points lower on the day at 11,900. The FTSE also lost its earlier gains to close down 60.7 points at 5,631.7.

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            • Originally posted by Al-khiyal View Post

              WASHINGTON, March 14, 2008: How low can the dollar go?

              Battered by bad news and mounting fears over the U.S. economy, the dollar plumbed new depths in the past week, helping to drive up oil prices to record levels.

              On Friday, the dollar traded at a new low, with the euro at $1.5651, while oil prices traded around $110 a barrel, just off a record. The dollar also sank below ¥100, a level not seen since 1995, for the second consecutive day.

              The dollar has been declining in value against the euro and several other currencies since 2002, slamming Americans traveling to Europe and other countries, and Americans buying imported goods. Politicians are deploring the weak dollar as a sign of American economic decline and influence.

              Policy makers and business executives outside the United States are worrying about their economies and the sale of their goods in international markets because the weak dollar makes their products relatively more expensive in the United States.

              To make matters worse, many economists say that the problems of a sagging dollar are feeding off each other. As the dollar weakens, holders of dollars, especially those overseas, are aiming for better returns on their assets by diversifying their portfolios toward other currencies, sending the dollar into further decline.

              "If we look forward, we are going to see the U.S. economy weakening more and interest rates cut more," said Desmond Lachman, a resident fellow at the American Enterprise Institute, a private conservative research group in Washington. "The immediate prospects for the dollar don't look encouraging."

              The huge American trade deficit, while shrinking somewhat, continues to generate more dollar reserves for countries exporting to the United States at a time when it is less attractive for them to keep those reserves in dollars. Some Middle East countries are hinting that they may move away from pricing their oil entirely in dollars, which would cause further downward pressure.

              And as the Federal Reserve Board cuts interest rates to jolt the American economy, investors are more likely to move money to securities in other currencies to get higher returns.

              The main forces behind the dollar's fall are declining U.S. interest rates and the continuing trade imbalance, said Kenneth Rogoff, a Harvard economist.

              "This was coming eventually with or without a recession," Rogoff said. "I think every big player - including central banks, the pension funds and funds outside the United States - has been looking to diversify out of dollars gradually over a long period. They are not doing it all at once, but the process has accelerated."

              The speed of the dollar's decline is raising concerns among international policy makers. Japan, which relies on the United States as a market for its cars and electronic goods, has been particularly vocal.

              "We are watching currency moves with great interest," Finance Minister Fukushiro Nukaga said Friday. "Excessive moves are undesirable for global economic growth."

              The dollar's decline is stirring some fresh tensions with Europe, which is keeping interest rates steady even as it experiences a drop in exports to the United States and other countries whose currencies are more closely aligned with the dollar.

              Yet Europe also has a silver lining. It has not been hit by skyrocketing oil prices because oil is priced in dollars and the dollar's decline has kept oil prices down when translated into euros.

              In the past week, in a widely noticed comment, Jean-Claude Trichet, president of the European Central Bank, said that "we are concerned about excessive exchange rate moves" and that "excessive volatility and disorderly movements" of currencies were "undesirable for economic growth."

              Lachman, of the American Enterprise Institute, said Trichet's comment sent signals that if the dollar continued to plummet against the euro, the United States might well agree with European finance ministries to some kind of intervention to keep it from falling further.

              While the Reagan administration once helped arrange currency deals when the dollar was too strong, the Bush administration has sent every signal that it does not believe in such interventions. Not only are President George W. Bush and Treasury Secretary Henry Paulson Jr. opposed philosophically to trying to influence currency markets, there is also the concern that any overt support for the dollar might backfire, igniting a panic sell-off of more dollars.

              Paulson repeatedly states that "a strong dollar is in America's interest" and the best way to keep the dollar strong is to have a strong American economy. In November, he said that the robust fundamentals of the economy will eventually "shine through," attracting investors and pushing the dollar back up.

              But many experts scoff at Paulson's pronouncements as happy talk.

              Warren Buffett, the financier, said recently that "the government can talk about how it's in our interest to have a strong dollar," but it is not following policies that would help.

              The trade deficit, he argues, means that "we force-feed a couple of billion dollars a day to the rest of the world" - namely to those countries that export to the United States.

              Lately the administration has been pointing to trade figures showing that the American trade deficit is declining. Exports grew more than 12 percent last year, and they grew more than 13 percent in the 12 months that ended in January. The trade deficit was more than 5 percent smaller for that time period as a result.

              Commerce Secretary Carlos Gutierrez hailed the latest trade numbers as a reflection of improving American competitiveness. What he and other administration officials never say - indeed, they have been apparently instructed not to say it - is that the improvement is a result of the dollar's decline, which makes American exports cheaper.

              The reason for the apparent ban, administration officials say, is that they do not want to be accused of "talking down the dollar" and undercutting Paulson's "strong dollar" mantra.

              The administration's situation has resulted in an even more contorted set of policies relating to energy.

              Bush has appealed to oil-producing countries to increase the flow of oil to put a damper on oil prices. He has been repeatedly rebuffed, however, as oil ministers from the Gulf assert that rising oil prices result more from American economic mismanagement than from constricted supplies of oil.

              Many oil experts agree. According to Daniel Yergin, who runs Cambridge Energy Research Associates, the price of oil for Europeans is still roughly what it was last year. What is causing oil prices to surge, he said, is low American interest rates that are being pushed down in hopes of avoiding a recession. While global demand has indeed grown, those low rates have also spurred an investor rush to commodities, especially oil contracts.

              "There's a new player in the oil market - the Federal Reserve," Yergin said. "Not because it wants to push up oil prices, but as a consequence of its lowering interest rates to stimulate the U.S. economy."

              How much further will the dollar plunge? The consensus is that it has a way to go, in part because China and other Asian exporters are still buying dollars to suppress the value of their own currencies, so they can continue pumping out exports to the United States.

              The International Monetary Fund, which monitors currency fluctuations at the behest of its 185 member countries, rates both the dollar and the euro as on the "strong side" because of Chinese currency practices keeping the value of the yuan low.

              The fear of some economists is that as the dollar declines further, there could be a panic sell-off. But most experts still doubt that such a panic would occur, because it would be in nobody's interest, least of all investors who continue to hold dollar-based investments.

              For all its problems, the dollar is still widely seen as the world's safest currency.

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                • WASHINGTON, March 16, 2008: As chairman of the Federal Reserve, Ben Bernanke has long argued that a central bank should base its policies as much as possible on consistent principles rather than seat-of-the-pants judgment.

                  But now, as the meltdown in credit markets threatens major institutions on Wall Street and a recession appears inevitable, Bernanke is inventing policy on the fly.

                  "Modern monetary policy making puts a lot of weight on rules, but there is no rule book for an economic crisis," said Douglas Elmendorf, a senior fellow at the Brookings Institution and a former Fed economist.

                  On Friday, the Federal Reserve seemed to toss out the rule book altogether when it assumed the role of white knight, temporarily bailing out Bear Stearns, one of Wall Street's biggest firms, with a short-term loan to help avoid a collapse that might send other dominoes falling.

                  That move came just days after the Fed announced a $200 billion lending program for investment banks and a $100 billion credit line for banks and other financial companies. In a move that would have been unthinkable until recently, the central bank agreed to accept potentially risky mortgage-backed securities as collateral.

                  On Tuesday, the central bank is expected to reduce short-term interest rates for the sixth time since September. The Fed has already lowered its benchmark federal funds rate to 3 percent from 5.25 percent, and investors are betting that it will cut the rate to just 2.25 percent on Tuesday.

                  The mounting crisis has forced Bernanke, a former professor of economics, to discard the sanguine view of U.S. economic health that he expressed last summer. He has also abandoned his skepticism about the need to calm financial markets and set aside his concerns about the "moral hazard" of bailing out big financial institutions.

                  In Washington and in New York, Fed officials were expected to work through the weekend, analyzing the books of Bear Stearns and trying to prevent its troubles from setting off a chain reaction of failures among its lenders and trading partners.

                  It was 10 months ago that Bernanke, in discussing his reluctance to regulate the booming market for arcane credit instruments, said, "Central banks and other regulators should resist the temptation to devise ad hoc rules for each new type of financial instrument or financial institution."

                  As recently as last summer, Wall Street executives grumbled privately that Bernanke was too disengaged from the real world, too slow to understand the plight caused by bad mortgages and too hesitant about lowering interest rates.

                  But Bernanke has become Wall Street's most important and most powerful friend. Executives are praising him for his creativity and willingness to act boldly. Beyond trying to lower borrowing costs by reducing the federal funds rate, the Fed has adopted a widening array of unconventional tools to infuse money into the banking system.

                  The question now is whether the Fed is already too late and whether it has enough power to stabilize the markets without starting a new round of inflation. With oil and gold prices soaring to new highs and the dollar falling to new lows, investors already appear to be worrying about higher inflation.

                  Most private forecasters contend that a recession is already under way, and even the dwindling numbers of optimists warn that growth will be almost stagnant for the first half of this year.

                  "The self-feeding downturn now in place shows signs of becoming deeply entrenched," economists at Citigroup wrote Friday. They predicted that the Federal Reserve would cut its benchmark federal funds rate a full percentage point on Tuesday to 2 percent.

                  The evolution of Ben Bernanke, who took office in February 2006, began in early August as credit markets were beginning to freeze up in panic over losses from subprime mortgages. The Fed stunned investors by refusing to lower interest rates and even refusing to change its view that rising inflation posed a bigger risk than slowing growth.

                  The Fed's rigidity aggravated fears, and investors suddenly became reluctant to finance a wide variety of short-term commercial debt, known as asset-backed commercial paper. It is used to finance mortgages, credit card debt, automobile loans and business loans.

                  With stock markets plunging and credit availability disappearing, the Fed, along with European central banks, began injecting billions of dollars into financial markets through open-market operations - the buying and selling of Treasury securities.

                  On August 17, 10 days after the Fed refused to lower its key rate, the central bank held an unscheduled emergency meeting and announced that it would cut the rate at which banks could take out short-term loans from its "discount window," a program normally used by banks in trouble, and it said banks would be able to pledge mortgages as collateral.

                  It was the Fed's first step in what quickly became a major course reversal. The central bank signaled that it would probably lower its most important interest rate, the federal funds rate, but the Fed also took its first step toward addressing a cash shortage by lending cash or Treasury securities, backed up by packages of mortgages.

                  Fed officials say they have not changed their basic principles.

                  Rather, they say, they have changed their view of the economy's prospects. Throughout the spring, Bernanke hoped that the economy's problems would be limited to the housing market and that the financial sector's problems would be confined to subprime loans.

                  But by late August, Bernanke had immersed himself in the structural plumbing of financial markets, from inscrutable mortgage securities like "collateralized debt obligations" to the proliferation of "structured investment vehicles" that permitted investors to borrow at short-term rates to buy long-term debt securities like mortgages.

                  Bernanke, working closely with a group of other prominent officials, including Timothy Geithner, president of the Federal Reserve Bank of New York, began looking for new tools, beyond interest rates, that the Fed could use to provide relief. Still, Fed officials found themselves repeatedly startled by the persistence of acute stress in the credit markets. After the Fed lowered the federal funds rate in September and October, the panic appeared to subside.

                  But the panic returned in December and again in January. When Fed officials met December 11 and lowered their key rate an additional quarter-point, the stock market plunged amid widespread disappointment that the central bank had not done more.

                  Fed officials hastily telegraphed that they were planning other measures, and the next morning announced a new lending program called the Term Auction Facility. The program was open to any bank or depository institution, which would be allowed to bid for up to $20 billion in one-month loans. The twist was that banks could pledge mortgage-backed securities as collateral - including securities that could not be traded.

                  Bernanke did not stop there. On March 7, the Fed said it would infuse an extra $100 billion into the financial system through its open-market operations. And on Tuesday, it created the additional $200 billion lending program.

                  But by Friday morning, it became clear that more tools would be necessary. Bear Stearns, which had been one of the most aggressive financiers of subprime mortgages, was on the brink of collapse.

                  Hoping to avoid the collapse of a major trading firm that might set off a chain reaction at other firms, the Fed officials helped work out a deal under which Bear Stearns would borrow money long enough to keep from defaulting on its obligations and either be restructured or sold to its rivals.

                  The bailout had officially begun.

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                  • TOKYO, March 17, 2008 (Reuters) - Oil jumped to a record near $112 a barrel on Monday, as a surprise weekend cut in the Federal Reserve discount rate and the fire sale of stricken U.S. investment bank Bear Stearns sent the dollar to all-time lows.

                    Crude for April delivery was up $1.16 at $111.37 a barrel by 0752 GMT, off a record $111.80 hit earlier.

                    May London Brent crude was $1.30 higher at $107.50 a barrel, after trading as high as $107.97 earlier, near the April contract's record $108.02 peak on Friday.

                    "The recent oil prices have been swayed by the currency moves, including this latest rally to a record," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi. "The dollar weakness is the factor at the moment."

                    The dollar plunged across the board on Monday as the spreading U.S. financial crisis led to JPMorgan Chase acquiring stricken investment bank Bear Stearns, stirring fears that more financial firms may become casualties.

                    The Federal Reserve took more emergency measures to stem the fast-spreading financial crisis, cutting its discount rate on Sunday and opening up discount window lending to major investment banks, a tool not used since the Great Depression.

                    The dollar slid 3 percent against the yen at one point to its lowest since 1995, while the euro hit a freak peak against the dollar, as investors became more convinced that the Fed and other major central banks may have to conduct coordinated dollar-buying intervention to stem the sell-off.

                    The dollar later trimmed some losses after Japanese Finance Minister Fukushiro Nukaga stepped up his verbal warnings on Monday, saying he is watching currency market moves in cooperation with authorities in the United States and Europe.

                    Fed policy-makers are set to meet on Tuesday and are widely expected to lower the benchmark federal funds rate by up to a full-point to try to put a floor under an economy many believe is already in the throes of recession.

                    Crude oil prices have jumped about 16 percent so far this year in part because of a steep decline in the the U.S. dollar - a factor that has supported the nominal value of all commodities priced in the currency.

                    Oil analysts have said they expect oil's inverse relationship with the dollar to last until there are significant signs that underlying commodities demand is eroding because of the U.S. economic slowdown.

                    The Organization of the Petroleum Exporting Countries has shrugged off calls for more supply. Oil markets are rising due to speculation and the U.S. dollar's fall, not on a lack of petroleum production, OPEC President Chakib Khelil said on Sunday, the official Algerian news agency APS reported.

                    Adding support to energy markets, Iraq halted pumping of Kirkuk crude through its northern pipeline to Turkey on Sunday due to a minor breakdown, but pumping was expected to resume soon, a shipping source said on Monday.

                    In Nigeria, an oil workers' union is calling for a strike in the oil sector starting on Wednesday to protest about a labour dispute at the Nigerian arm of ExxonMobil, a union boss said on Monday.

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                          • this araff is making people all around here suffer... big and small.

                            heck - when i'm at school, i have to watch what kind of lunch i buy so i can have enough gas money for that week ...

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