Global Banking Meltdown

Today Monday October 6th 2008, we as a global economy continue our downward spiral. Even as the word of the passing of a $700 Billion dollar bail out with an additional $150 Billion earmarked on the fringes have yet to leave the halls of Washington’s Senate and House buildings. The global crisis has now spread and is engulfing Europe and its markets. There has been a frantic sell off of market based assets and holdings world wide that has sent stocks plummeting downward in the U.S., Europe and Asia.

Russia shut down both its stock markets after they fell more than 15 percent.

Germany’s DAX was down 410.02, or 7.1 percent

Great Britain’s FTSE 100 index lost 391.06 points, or 7.9 percent

France’s CAC-40 dropped 368.77 points, or 9.0 percent

The only bright side to this bleak picture is that the fears of a global recession have caused oil to fall below $90 a barrel. A place that it has not been in almost a year. How soon will gas prices at the pump reflect the barrel price of crude? I would guess that it could take weeks. They crank the gas price up the next morning when crude spikes, but they hold out to the breaking point before they reluctantly reduce the cost at the pump.

Talk of coordinated interest rate cuts from the world’s leading central banks has begun to swirl about. Analysts said they wouldn’t be surprised if the U.S. Federal Reserve, the European Central Bank and the Bank of England instigate the first joint action on interest rates since the 9/11 terrorist attacks on the U.S. in 2001. All three have been dumping Billions of dollars into the financial systems hoping to maintain liquidity.

The current wisdom of the economist mind is that we are going into or are in a recession that will out last the previous two recessions. They seem to agree that it will last about 1 year and be global in scope however will be mild in it’s overall effect. Smart money says buy gold.

The European Union (referred to as the EU) is grinding it’s way deeper into trouble as it’s main financial countries Germany, France, Britain and Italy can not find common ground to get out of this latest problem. Negotiations fell apart when the German Chancellor Angela Merkel announced Sunday that all $786 billion dollars worth of private deposits held in Germany would be guaranteed along with a new $69 billion dollar bailout package for Hypo Real Estate, Germany’s second largest mortgage lender. Additionally Germany has stated that they have no interest in pooling financial resources to serve the EU or offer to take part in a unified plan to insure all of the deposits in the banks of the EU. Of the 27 governments that make up the European Union, Germany is the largest economic power. In direct response to the German Chanellor’ statement, the Danish Economy Ministry said commercial lenders have agreed to contribute up to 35 billion kroner, or about $6.4 billion dollars, over two years to a fund that will help insure account holders from losses. Austrian officials have indicated that they might join in with a contribution as well.

What do you think the debate will be about on Tuesday night?

Gas supply still stalled in the southeastern US

Some panicked drivers in the Southeast are still waiting in long lines to top off their tanks at the few gas stations that still have fuel. The shortages have hit Atlanta Georgia, Nashville & Knoxville Tenn, the Asheville N.C. and Spartanburg S.C. areas the hardest. Most drivers have been avoiding the use of there cars to keep from running out of gas. However there are reports of cars that have run dry while sitting in lines at stations all about these areas.

The supply disruptions have taken place along two major pipelines that have operated at well below capacity since the hurricanes knocked offshore oil production and several refineries out of service along the Gulf of Mexico.

One of the pipelines is based in Alpharetta, Ga., the Colonial Pipeline delivers a daily average of 100 million gallons of gasoline, home heating oil, aviation fuel and other refined petroleum products when running to capacity.

The Plantation Pipeline, which is partially owned by Kinder Morgan. Plantation Pipeline delivers over 600,000 barrels per day of gasoline, jet fuel and diesel through its network which serves Atlanta, Charlotte, Washington, D.C., and other destinations in the southeast United States when running to capacity.

Five of the major refineries in the US that supply nearly 5% of the nations gasoline supplies still remain closed. Currently it is reported that only 4 of the 17 refineries in the Houston area are still off line. In fact nearly two thirds of the refineries that were knocked off line by Ike are back on line. However the refineries that have come back on line are not operating at 100% capacity so gas supply will still remain somewhat limited. Gas should be in route to the areas now however it could be a few days before the pumps are actually back in use.

The gas shortages have sparking panic buying, long lines and high prices. Price gouging is the biggest problem during a gas supply shortage. At current the state of Georgia has subpoenaed sales records from approximately 130 gas stations after complaints of price gouging. One station reportedly charged almost $9 a gallon for regular grade gas.

If you suspect a station of gouging, take a picture of the posted prices on the sign as well as on the pump and contact the local police and the local Department of Energy  office and fill out this on line form.