From Volume 7, Issue 39 of EIR Online, Published Sept. 23, 2008

U.S. Economic/Financial News

U.S. Industrial Production Plummets Again in August

Sept. 15 (EIRNS)—According to the Federal Reserve today, U.S. industrial output plunged 1.1% in August, the biggest drop since Hurricane Katrina three years ago. The decline was much worse than the 0.3% decline expected by "economists." Industrial production has fallen 1.5% in the past year and 2% since the peak in January. Declining motor vehicle production accounted for about half the drop in output in August, MarketWatch reported. Manufacturing output declined 1% in August. Capacity utilization—"a gauge of inflationary pressures stemming from industrial bottlenecks"—dropped by a full percentage point to 78.7%, the lowest in nearly four years.

LaRouche on Pelosi Auto Plan: 'Dracula Rides Again'

Sept. 18 (EIRNS)—Nancy Pelosi, Speaker of the U.S. House of Representatives, said that she plans to unveil a $25 billion loan package to U.S. automakers next week, according to Dow Jones wires. The package had been urged upon her yesterday in a meeting with the CEOs of Detroit's "Big Three" automakers—the rocket scientists who have largely destroyed one of America's premiere industries. The program likely will be added next week to a stopgap government funding bill.

Lyndon LaRouche commented: "Dracula rides again. What is needed is what I proposed earlier. Stop this crap and get on to it. Where were they in the year 2006? Where were they when the auto industry was still alive? What they are doing is seeking a bride in the undertaker's parlor."

The program embraced by Pelosi includes nothing which would make the auto industry profitable by strengthening the American economy, like converting its machine-tool design capacities to rebuild railroads and infrastructure—the program posed to Congress by LaRouche PAC. Dow Jones reports that the Pelosi loan program, to be included in a 2008 energy bill, authorizes Congress to provide $25 billion in low-cost loans for retooling older plants to make hybrids and other fuel-efficient vehicles; cars built at a retooled plant must be 25% more fuel efficient than the vehicles previously built there.

U.S. Commercial Lending Seizes Up

Sept. 18 (EIRNS)—Yesterday saw a record $90 billion net withdrawal from U.S. money market funds, bringing the total volume from $3.44 trillion in nominal assets, down to $3.35 trillion, as investor/speculators sought flight into safer bets. Putnam Investments LLC closed its $12.3 billion institutional Putnam Prime Money Market fund yesterday and plans to return all cash to investors, after they besieged Putnam to redeem their money. Putnam was valued yesterday at $1 a share, below which, investors are losing. Also this week, Bank of New York/Mellon Corporation had to inject money into its Dreyfuss money market fund, to stay above $1; and Bank of America Corp did likewise for its subsidiary Columbia Management. The losing funds each had some loser positions in Lehman Brothers Holdings, but money market funds are losing overall. There is nowhere in the crash to "make money."

Money fund marketeers are the biggest players in commercial paper—three-month or shorter-period loans to commercial borrowers—which itself saw a drop in volume over the week ending Sept. 17, of $52.1 billion, out of a total U.S. commercial paper volume in the range of $1.76 trillion; this is the biggest percentage drop in 26 years. Yesterday, commercial lending all but seized up. A few big operations, e.g., Ford Motors, and Sears, managed to borrow, but only at a premium. Ford paid 7.5% yesterday for a short-term loan, which until recently, would have been 3.3% or less.

Not just Wall Street, but "Main Street" is finding no availability of loans. Small businesses are in a jam for "normal" loans to bridge payroll, rent, etc.

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