Music Industry Wants Restrictions On Personal Use.

Music lovers had better be careful.Even if you purchase your favorite CD legally you may not be able to transfer it onto your computer, that is, if the music industry has its way.

The Recording Industry Association of America has taken an Arizona man to court for keeping about 2,000 music recordings on his personal computer for this reason.They maintain that the MP3 files Jeffrey Howell made on his computer from legally purchased CD's are 'unauthorized copies' of copyrighted recordings.

The music industry has undoubtedly been encouraged to take this extreme view by the judgment in the case of Jammie Thomas, who was ordered by a Minnesota jury to pay $220,000 to record companies for the 24 songs she shared online, that is about $9,250 for each song she shared. This decision had surprised music fans who were used to settling lawsuits with music companies for a few hundred dollars.

In spite of the thousands of lawsuits filed against music fans who find and download free music online, digital music sharing is increasing and the sales of recording companies have been dipping. Clearly theirs is a business model which has failed to keep pace with the technological advances in the field.Nevertheless the RIAA persists in going around threatening students and teenagers with lawsuits unless they settle by making payment.The RIAA claims that more than half the college students download music illegally. They claim that making a single copy of a song even for personal use amounts to stealing one copy.

The lawsuit is unlikely to succeed because lawyers for consumers point to a series of court rulings that have found no violation of copyright law in the use of VCR's and other devices to record TV programs which enable portability of a legally obtained recording. They say that to be guilty of copyright law you have to distribute actual physical copies. Obviously copies for personal use would not be a violation of these laws.

The music industry on its part is unwilling to see reason. They don't understand that they will not be able to control the digital revolution. They need to innovate and find new business models instead of clinging to outdated practices. They have to move towards offering music online and at cheaper prices. Increased sales will definitely make up for reduced profit margins.Dragging teenagers to court won't get them anywhere.

Did Benazir Bhutto Have To Die?

Ms. Benazir Bhutto returned home to Pakistan a few months back after almost a decade in luxurious exile spent mainly in London.She went back under a deal brokered by the US with Pakistan President Mr. Musharraf which would have almost certainly seen her back in office for a third time as Prime Minister of Pakistan.She must certainly have been aware of the dangers surrounding her, but seemed to feel secure amongst her millions of supporters and because of the assurances given by both the US and Pakistan governments.Soon after her arrival a bomb exploded at one of her meetings killing over a hundred people.It is hard to tell whether she was the target or it was meant to scare her away.Ms. Bhutto continued with her election campaign little realizing that somebody had decided that she was not to be allowed to run for office.On the 27th of December a group of assassins waited for her in the garrison city of Rawalpindi. As she was about to leave after an election meeting she was shot by one or more snipers who were lying in wait and also targeted by a suicide bomber.This was no hit or miss attempt.Clearly, barring a miracle, she was not to be allowed to leave the place alive.The complete breakdown of her security apparatus and the failure of US intelligence has unnerved Washington which has no alternate plan in place.

Ms. Bhutto's death leaves the US strategy for Pakistan in tatters, that is if they had a strategy in the first place. All they seem to have had was a fond hope that by having a US backed civilian Prime Minister and an ex-military General as President they would be able to convince the increasingly restless population of Pakistan that democracy had been restored. The stability of a nuclear armed Pakistan is of vital importance to the US. Added to this is the fact that Pakistan is a front line state in the war against the Taliban and Al Qaeda. Perhaps it this latter fact that prompted Washington to turn a blind eye to what was going on in Pakistan for the last several years.They suddenly woke up to the fact that the billions of dollars sent to Pakistan to finance the fight against international terror were being used elsewhere, and that despite Mr. Musharraf's assurances to the contrary the fundamentalist forces were making important gains in Pakistan, both in military terms and also in winning over the hearts and minds of the people. The US administration took a predictably simplistic view of the situation.They set out to destabilize Mr. Musharraf.They struck a deal with Ms. Bhutto.Mr. Musharraf was compelled to hand over command of the army to a general perceived as pro-Western in outlook, and accept the post of President.He also announced general elections in January next year.Ms. Bhutto was allowed to return to Pakistan to contest elections while her fellow politician Nawaz Sharif was deported again after his return.

Now there is a big question mark hanging over the elections.Is the postponement indefinite, will it lead to more violence which may lead to further postponement.Has the postponement been prompted by fear of a pro-PPP sympathy wave in the wake of Ms. Bhutto's killing or a genuine fear of massive violence.

The time available to the Bush administration is clearly very short.It remains to be seen whether they insist that Nawaz Sharif be allowed to return and fight the elections or they would prefer to do business with Ms. Bhutto's successor in the PPP.For the time being at least the US does not appear to insist that the Supreme Court judges sacked recently be re-instated, a factor behind the current unrest in Pakistan.The time available to Ms. Bhutto's PPP is also short.The party is certain to be swept to power by a sympathy wave even though the intensity may be slightly diminished by the postponement.They will have to put aside their internal squabbles and elect a suitable leader.Of course Ms. Bhutto's charisma will be difficult to match.

There are many unanswered questions at the moment.What was the deal that Ms. Bhutto had struck with the US.Why did Mr. Musharraf allow her to stay while deporting Mr. Nawaz Sharif.Most importantly, did she die because she was increasingly being viewed as an alternative to the present regime or because she appeared to be even more pro-West than the present government. The answers will have to wait for some time. What looks certain though is that the US will have to continue doing business with Mr. Musharraf in the foreseeable future.

Nokia delays launch of gaming service N-Gage

Nokia has once again delayed the launch of its N-Gage gaming service due to problems in software testing. Nokia says that it has to "address an issue" but has refused to provide further details.

N-Gage is a a combination of the mobile telephone and the handheld game system. It is an attempt to persuade users to switch from the Game Boy Advance by offering the cell phone functionality. However, the earliest version released in 2003 failed to make an impact because the buttons designed for a phone were not suited for gaming.

The latest version consists of software enabled S60 based handsets, games and a full featured community based service to link it together. Nokia plans to offer tournaments, global rankings and other events related to gaming on this platform.

Even the pre-release version for the N-Gage has pushed back to 2008.

Toyota to become No.1 in 2008

Toyota announced on Tuesday that it planned to sell 9.8 million vehicles in 2008. This is an ambitious target keeping in mind the worries about a slowing car market in the United States. However, this would cement Toyota's place as the world's number one car maker, ahead of General Motors.

The company said that it would try and produce 9.95 million vehicles next year, up by 5% from this year. The company said that it was expecting a corresponding rise in its sales.

Soaring gas prices have bolstered the appeal of small and fuel efficient cars which are Toyota's main strength. The Camry, Corolla and the Prius are among the popular cars.

The company has seen huge growth in the Russian and Chinese markets where it expects combined sales of around 900,000 cars a rise of nearly 40%.

However the company is cautious is the US where the recent financial crisis and soaring gas prices have hit the consumers hard.

The company has also predicted sales of 10.4 million for the year 2010. This would make it the first automobile company ever to reach the milestone of selliing 10 million vehicles.

China Buys Its Way Into Wall Street

After Abu Dhabi Investment Authority, which made news last year for picking up a 4.9% stake in Citigroup for $7.5 billion, it is now the turn of the Chinese government owned Chinese Investment Corporation to get into the act.

Eager to cash in on the opportunity thrown up by the debt crisis the Chinese Investment Corporation has ploughed billions of dollars into the best known names on Wall Street. In control of almost $100 billion of China's huge forex reserves it has pumped in close to $5 billion into Morgan Stanley in a deal announced at the end of 2007. This means that China has ended up with almost as much as 9.9% of one of Wall Street's most powerful banks. This is the latest in a string of high profile investments made by the Chinese. The CIC already has a stake in the US private equity firm Blackstone and the Chinese Development Bank owns 3% of Barclays.

The deal only serves to highlight how things have changed over the last few moths, all due to the credit crunch. Two years ago a Chinese oil company wanted to buy the small US oil group Unocal. US politicians cutting across party lines asked that the plan be dropped and demanded that China open up its economy and protect intellectual property rights. Likewise when Dubai Ports World took over strategically important US ports last year, it kicked up a political storm which ended only when the bidder agreed to sell off the US ports.

Till now it was the US banks which were keen to acquire stakes in Chinese banks in a bid to gain a foothold in China to tap into the growing wealth of its population. Now it seems to be the other way round. China not only holds a stake in Barclays but also has a director on its board. Morgan Stanley for its part has made it clear that CIC will not have a representative on its board. This may well have been a condition imposed by the White House, one readily accepted by China after its Unocal experience.

Such investments by China in the capitalist world would have been unthinkable a few years back. Indeed there are many who view them with suspicion, as having been prompted by other than purely business considerations. The Chinese had clearly anticipated this problem and have constituted CIC as an independent company with its separate board of directors. They are at pains to point out that it is free from any state control whatsoever and argue that it is necessary to develop institutions to manage the $1.3 trillion worth of forex reserves they presently hold.

With its economy unaffected by the current financial crisis, the Chinese look set to follow the oil rich nations of the Middle East as big investors in the US economy. In a way it may be good for the global economy. Once the largest economies of the world are more closely interconnected and interdependent it would be less likely that any one of them would want to spoil the party.

How You Can Get Good Credit?

Good credit is a necessity. Obtaining good credit can be incredibly easy or extremely difficult. But once you have established good credit it can open doors of opportunity you have never considered before. You can dream of buying yourself a luxury car, take a dream vacation, dress in the latest fashions, or start your very own home business.

In today's society having a good credit is just as important as having money. Without a good credit rating a lot of basic privileges you enjoy may not be available to you or they are available at higher prices.

Unless an individual knows how to repair his own credit he will have to face many obstacles.

There are some steps you can take to improve your credit rating. It won't happen overnight but it can be improved over a period of time.

1. Study your credit report and make a note of all inaccurate entries that you find. You will then have to work with your creditors to eliminate these entries.

2. Get on a budget

3. Stop using your credit cards. This will prevent you from getting more credit established. Try using your debit cards instead.

4. Pay off all your bills on time each month.

5. As you pay off your bills, get a letter from your creditor saying that you have zero balance.

Most importantly don't despair, but start taking care of your credit - your future depends on it.

Least Expensive Cars To Insure In 2008

Auto Insurance is the insurance purchased for cars, trucks and other vehicles. It protects the insurer from the damages incurred as a result of an accident.

The cost of insuring your ar depends on a variety of factors such as liability, medical coverage, bodily injury, collision coverage and property or rental coverage just to name a few.

However, the most important factor which affects the cost of insuring your car is the car itself. Different cars have different rates.

The least expensive cars to insure are:
Least expensive autos to insure in 2008
Average premium
Chrysler Town & Country
Ford Escape
GMC Sierra pickup
Chevrolet Impala
Ford Econoline Club Wagon
Ford Fusion
Ford F-series pickup
Honda Civic
Toyota Camry
Toyota RAV-4

Is The U.S. Consumer Going Broke?

Consumers put aside worries about soaring food and fuel prices and a housing slump and headed to the malls in November, pushing spending up by the largest amount in 3 1/2 years.

Consumer spending rose 1.1% last month. However, some of the spending was forced as people had to spend more on food and gasoline.

US Commerce Department reported that the personal consumption rose 1.1%, which was the highest increase since May 2004 and was significantly above 0.7% which analysts had expected.

The jump came at a critical time for retailers - the start of the holiday season. But recent signs show that the spending has reduced in December.

Consumer spending is closely watched because it accounts for about 72% of the economic activity.

The department said that real incomes rose 0.4% but the savings rate was minus 0.5 percent, meaning that Americans not only spent all of their after tax income but also part of their previous years' savings or increased borrowings.

Reactions to this news by experts is mixed. Critics argue that this trend of very low or even negative savings cannot be sustained for ever and inevitably the day will come when consumers are forced to cut back on spending, sparking a recession. Others however feel that too much is being read into the figure of the savings rate. They argue that it does not take into account the money going into banks, mutual funds and retirement plans. Nor does it measure equity built into people's homes and other assets. They point out that the net worth of people is growing despite the fall in savings and that is a positive sign. Although the fall in housing prices will definitely cause a slow down in spending if it persists long enough, it is not likely to have a significant impact in the short term as people's attitudes towards spending and saving are somewhat slow to change.Moreover the housing sector only accounts for about 5% of the US economy.If Bernanke manages to prevent the crisis in the housing sector from spilling over to the other parts of the economy there is no reason to be worried about any temporary slowdown next year as it is likely to be only temporary.

iRobot To Clear Landmines In Iraq And Afghanistan

The iRobot Corporation designs robots for businesses, homes and the military. The company's best known products are the Roomba, a vacuum cleaner and the Scooba which is a floor washer.

The company also has a division which is devoted to designing government and industrial robots. The division has made the iRobot Warrior x700. The Warrior x700 is one of the several bomb disposing robots the company has designed.

The company announced that it had been awarded a $286 million Army contract for robots that disarm explosives.

The company will provide the army with up to 3,000 robots and spare parts and also provide training. iRobot says that the army is now using bots on a much larger scale. Earlier their use was limited because earlier robots were bulky and less sophisticated.

Enhanced maneuverability of modern robots is leading to increased application in various areas. They are expected to be particularly useful in Afghanistan and Iraq where landmines are used on a large scale and are responsible for numerous as well as civilian casualties.

How To Improve Grades? Hack The School Computers

Two Kentucky High School students and a former high school student are in trouble after they were caught hacking into their school's system.

It started in October at the Manual High School. The students did more than just change their grades. They altered their attendance and even hacked into individual teachers' computers and created their own website -

The school authorities have no idea how many grades have been changed. It could have been as low as 15 students or as high as 200. The problem is made even worse by the fact that teachers don't keep hard copies of the grades. They just keep them on the computers.

Students have been asked to go home and bring back all their homework to prove what grade they should be receiving.

The two students are not in trouble because they disrespected a teacher, got caught with drugs, or fought with other students. They are in trouble because they figured out how to beat the system. The students may face expulsion from the school and may even face jail term if the school authorities decide to press charges.

The school authorities are still at a loss as to how the students managed to enter into the school's system. But they say that the security will be improved when they find out.

Gift Cards As Christmas Presents Make Sense.

Christmas shopping is fun but it can often be a frustrating and stressful experience, particularly if you are not being able to decide what gifts to give your family and friends or are simply having a tight budget.

Gift cards are again one of the most popular gifts this season. Consumers are set to spend huge amounts of money this holiday season on gift cards.The total gift card business is expected to be about $80 billion this year. Of this the coming season is estimated to be worth about $26.3 billion as against $24.8 billion last year, an increase of about 6%. The average consumer will spend about $122.5 on gift cards this year as against $116.5 last year.

Gift cards not only help you save time and avoid the physical strain of shopping, but are also ideal if you are not sure what the other person would like to get for Christmas. Gift certificates ensure that your loved one ends up with a gift that he likes and one which he will use. Moreover you can stick to a budget. A gift certificate can be purchased for for almost any dollar amount. Some stores allow you to choose the dollar amount while others have preset gift certificate amounts.

The flexibility that these certificates give the recipient is tremendous. He can not only wait to pick up a bargain but can also combine several certificates to buy something expensive, which he or she may not normally get as a gift. No wonder these cards are becoming increasingly popular, especially among the younger generation which is more concerned about freedom of choice.

Critics argue that gift cards look impersonal and are not somehow in keeping with the Christmas spirit that you love and care for someone. There is a simple solution. Give gift cards with some effort. Instead of giving a gift card to a store that sells everything, try to make it personal. If your friend loves reading gift him a card of a bookstore, or a sporting goods store if he is the outdoor type. There's a very wide range of cards available these days covering almost everything you can think of. If you have to gift a card to a store that sells everything it is good to send a note suggesting to the recipient what to do with it, like ' didn't know which toy you wanted this year, so pick your own.' You could also make them part of a floral arrangement or some such thing or gift a set of different cards. It is a sensible idea to send the receipt along with it. It may be needed to replace a stolen or lost card and also gives information about its terms and conditions.

Often gift cards get tucked away at the bottom of a drawer with the idea to be used later at leisure. Many of them are then simply forgotten. About $8 billion worth of gift cards were unused last year because they were not used, lost or expired. Consumer Reports says according to a survey carried out by it 27% of those surveyed had not used their 2006 Holiday Gift cards so far. Out of these 51% had two or more unused cards. This may not be a clever thing to do as some cards have a 'dormancy charge' on them which makes them worth less month after month. Some also have an expiry date after which they become worthless. You would do well to read the rules on your card and use it as soon as you can. Enjoy it, don't leave it around the house. Retailers make extra profits from 'breakage,' the unspent balance on gift cards, which may be then tucked away in your drawer or your wallet and forgotten. Many of these are unfair practices and consumer advocacy groups are up in arms against unfair expiration dates and dormancy fees. Some cards, usually those which you buy from a bank, also have an upfront fees for buyers, which reduces the value of your gift. Fortunately it is expected that such charges will soon be a thing of the past.

In some states, unclaimed property rules called escheat laws give state governments a legal claim to the unspent money. Retailers are therefore moving their operations to states like Ohio and Washington where escheat laws are more favorable.

Often cards are not used because they are for something which you may not be particularly fond of. There is a simple way around this problem. There are several sites on the internet where you can simply swap such cards with someone for cards of your choice. In case you prefer cash you can sell them as well, but at a discount.

Gift cards overall are a great way to let the recipient choose what he wants and it's an easy way to stick to a budget.

Death Penalty Scrapped In New Jersey.

Lawmakers in the state of New Jersey have approved a bill abolishing the death penalty. It is proposed to replace the death penalty with life in prison without parole.The bill was passed by the Democrat run state assembly by a comfortable majority of 44 to 36 votes. The Senate had approved it by 21 to 16 votes earlier.The Democratic Governor Jon Corzine is expected to give his assent to the bill.

If the bill becomes law,New Jersey will become the first state to abolish the death penalty after the US Supreme Court reinstated it in 1976, after having abolished it four years earlier in 1972 on the ground that it was unconstitutional.

Presently the death penalty is on the statute books of 37 states including New Jersey. It is believed that once it becomes the law in New Jersey other states may follow. New Jersey has not executed anyone since 1963. The number of executions has been declining all over America, and there has been a de-facto moratorium on executions since the US Supreme Court announced that it would be considering a legal challenge against the use of lethal injections as being a cruel and unusual punishment.

The new law, once it comes into force will spare the lives of eight men on the state's death row.These men are convicted of some of the most sensational killings the state has witnessed. They include Jesse Timmendequas, a repeat sex offender convicted of the rape and murder of seven year old Megan Kanka in 1994.The case led to Megan's Law, which requires authorities to notify the public about convicted sex offenders living in their communities.These convicts will have the option to choose between execution and life in jail without parole within 60 days of the bill becoming law.

Opponents of the death penalty argue that it is barbaric and inhuman. They point out that the homicide rate in states having the death penalty is not noticeably different from the states which don't have it.Countries like Canada and many countries in Europe also don't have have the death penalty but still enjoy lower homicide rates than state's having the penalty.It is claimed that retaining the death penalty tarnishes the image of the US in such countries and in the past they have refused to extradite criminals to the US if it was felt that they may face the death penalty.Not only is execution considered more expensive than jailing someone for life , there is also the risk of executing an innocent man. With advances in DNA technology dozens of convicted murderers have been proved innocent in recent years.

These claims are bitterly contested by supporters of capital punishment.They claim it is the deterrent effect of such punishment which is behind the decline in violent crime in recent years.Besides, society has a right to make such people pay for their deeds. The cost of locking up a person for tens of years is also certain to exceed the cost of execution, they argue.Opinion polls on the subject are misleading as most of those polled have not been affected by extreme violence.It is unfair to consider the opinions of those who have not lost a loved one to violent crime. In fact they want it to be used more often.

Most of the opposition to the death penalty is due to the fact that convicts often spend tens of years on death row while their appeals are pending.Media reports of the mental torture such people undergo while awaiting execution is largely responsible for the calls to repeal capital punishment.It is also felt if justice was swifter and more certain, people may have a different opinion.There is no simple answer and the debate is likely to continue.

Is The U.S. Fed Sensing Trouble?

The world's most influential central banks took concerted steps to improve the liquidity situation in the market, Wednesday. The unprecedented move was co-ordinated by the US Fed Reserve and included the European Central Bank as well as central banks of Great Britain, Canada and Switzerland.

It is the business of these banks to lend money to banks when there is a shortage of funds in the market and short term interest rates move up. What has surprised people is the Fed using auctions ' to inject term funds through a broader range of counter parties and against a broader range of collateral than open market operations.' The Fed says the move could ' help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress.' The Fed says, 'This is not about particular financial institutions, with particular problems. It is about market functioning.'

In practice what this means is that the Fed will lend money to banks against almost any collateral which they may offer. This would certainly include the highly illiquid CDO's and other similar instruments most of them are saddled with. The problem with these illiquid assets is that no one knows their true market value. The truth is that banks may get more by pledging such assets than by selling them in the market.

Although many banks, brokerages and investment companies have written down the value of such assets at the end of the 3rd quarter and reported large declines in profits, it is widely believed that the entire losses have not been reported and more are to follow.This is the biggest problem facing the market. No one knows exactly who stands to lose and how much. In this atmosphere of uncertainty banks and institutions are wary of lending to one another, which leads to an increase in short term interest rates.The various Central banks have sought to tackle this situation by improving liquidity. They hope that people will be reassured by their actions that everything is all right.

But everything is clearly not OK. There seems to be an air of desperation about the Fed's moves which is hard to ignore. The Fed has limited options if it wants to correct the situation merely by fiddling with interest rates. If it cuts too far it raises the risks of inflation and a decline in the value of the dollar which cannot be ignored.

The similarities between the US situation today and what happened in Japan in about 1989 are striking. In 1989 the Nikkei was at about 39,000 and real estate prices were at record highs. Share prices increased because the giant Japanese conglomerates bought shares in each other's companies, setting artificial values. Banks lent recklessly to people to buy these inflated shares and properties.Like all bubbles the Nikkei bubble also burst in 1989-1990 when the BOJ was forced to raise interest rates.The Nikkei declined to a low of about 8,000 in 2003 and even today trades at around 16-17,000. Property prices fell for 14 straight years and are showing signs of life only today.

In the US as well, loose credit has fueled the rise in real estate prices. Share buybacks by companies and a host of mergers and acquisitions has set artificial values for financial assets. The party is in danger of coming to a messy end. It is this situation that the Fed is obviously trying to avoid.It is haunted by the fear of recession and deflation if the economy cannot be turned around quickly enough.

So who foots the bill for this exercise. So far no public funds have been committed to the bail out. The Fed is hoping that it will be able to restore confidence among people and it will be back to
business as usual. If this happens there will be a gradual recovery in the housing market also, allowing banks and financial institutions to recover their money. If such a thing happens it is fine because the banks and institutions then simply redeem their CDO's which they have pledged with the Fed.But if this doesn't help and the government has to write off the debts in the end , it is the common people who will have to foot the bill. The government may have to raise taxes to make good the budget deficit. On the other hand banks,mutual funds, pension funds and other financial institutions who are managing public money may default on their obligations. This scenario is frankly quite terrifying to visualize and one sincerely hopes that Bernanke succeeds in what he is trying.

The Great Dollar Decline: Is It Cause For Worry?

The dollar has fallen in the last few weeks to record lows against the euro and now fetches less than even the Canadian dollar. Currency experts have predicted that the euro will hit $1.50 by the year's end. The rise and fall of the US dollar traditionally reflects both the strength of the US economy as well as the confidence international investors have in its future.

The seriousness of the impact of the falling dollar depends on how far apart currencies drift and whether things are "under control." This is very important and people would do well to remember that the most significant movements on Wall Street have occurred not because of growth rates of the US economy but because of currency movements. Of course the two are linked to a large extent but not completely.

Causes for decline in the value of the US Dollar

1. The most important reasons for the decline in the US dollar are the consistently increasing budget and trade deficits.The US has been funding a part of these deficits by simply printing more money and a situation has been reached where the demand for the dollar has fallen. This is putting pressure on the dollar.

2. Interest rates: Interest rates have a direct impact on the value of the dollar. If interest rates fall, investors who have bought US treasuries get a lower return. This reduces the demand for these instruments, and therefore the dollar, leading to a decline in the dollar's value.

3.The central banks of countries who have extensive trade relations with the US, and have large dollar holdings such as China, Japan and oil rich Arab states had traditionally been ploughing back their trade surplus into US treasuries. This created a demand for the dollar and prevented the dollar from declining too far.Now things are slightly different.Given the uncertainty surrounding the US economy and increasing investment opportunities around the world the demand for the dollar is simply not what it used to be. In fact there is speculation that these nations may in fact be diversifying from the dollar into other assets. Although there is no sell off of US dollar denominated assets as yet, fresh demand is declining.

Impact of the low Dollar

1.The decline of the dollar is not all bad news though. The fall in the value of the US dollar has a very important trade benefit for US companies. It makes their products cheaper as compared to those of other countries which gives a boost to the US economy.

2. On the flip-side it raises the cost of the goods purchased by the Americans. This can contribute to inflation and may affect the finances of the American consumer. Fortunately this has not hapened as yet because except prices of oil, the manufacturers of other goods have been reluctant to pass on the increase in prices to the US consumer in order to retain market share.

3. The weak US dollar also drives up the prices of commodities which are priced in dollars such as crude oil. Demand for commodities is relatively less elastic and the impact of higher prices almost invariably gets pased on to the consumer.

4. The businesses which are impacted the most are travel and transportation, because of the increase in oil prices. Americans who travel abroad should also be prepared to pay more as the dollar will now buy less than it used to previously.

If the scenario is so bleak then what is preventing a much sharper slide in the value of the dollar? The answer is fairly simple. Those very countries which not only have large dollar holdings but also continue to add to them, cannot afford a sharp fall in the dollar's value as it will cause great losses to the value of their accumulated assets. No wonder then that the US simply dismissed China's warning that it might be forced to liquidate its dollar holdings.

For its part the US Federal Reserve seems to be content to let the dollar slide. They are unlikely to be worried if the dollar fluctuates within a broad band and if the decline is orderly.Once the economy starts growing again and the various crises are behind us the dollar is likely to regain its former strength.

10 Reasons to Upgrade to McAfee Internet Security 2008

McAfee Internet Security Suite 2008 pulls together Site Advisor, VirusScan, Anti Spyware, Firewall, Spam Killer, Privacy Service, System Mechanic, Easy Recovery and PC Confidential products.

McAfee says that the Internet Security Suite 2008 offers its users a 10 in one protection.

1. Surfing: McAfee has a site advisor installed in the new Internet Security Suite 2008 which automatically patrols websites, download files and sign-up forms. McAfee creates a list of harmful sites and advises you about the safety of these websites by a colored button in your browser toolbar.

2. Protection against viruses: McAfee Internet Security Suite has the VirusScan which automatically blocks, cleans and removes viruses from your computer.

3. Protection against spyware: McAfee has built a powerful ant spam software in its Internet Security Suite. It constantly detects and removes spyware. Moreover, it also prevents unwanted and offensive pop-ups.

4. Firewall: McAfee protects your computer from hackers and protects your computer's identity.

5. Spam: McAfee's anti spam filters filter out all the junk email that you get.

6. System Backup: McAfee keeps running automated system backups and has an easy to use interface to restore lost or corrupted files.

7. Parental Control: McAfee also has built a parental control system in its Security Suite to filter out all the offensive content, pictures and websites.

8. Protection against phishing: McAfee protect you from online fraud scams and identity thieves.

9. PC maintenance: McAfee keeps getting rid of the clutter on your computer and improves its efficiency.

10. McAfee also keeps delivering the latest software updates so that the computer is capable of dealing with the latest security threats.

The use of the Internet Security Suite will cause a significant decline in the speed of the computer. But with the number of attacks on a person's computer increasing every year due to various reasons, installing the product might not be a bad idea after all.

McAfee: Cyber Warfare Biggest Threat to America in 2008

Cyber-warfare is the use of computers and networking in war. A recent study conducted by McAfee found that international cyber spying will be the biggest security threat faced by the US in 2008.

Some of the findings from the study are:

1. The governments are using the internet for cyber crimes and cyber attacks. Many of the attacks are originating from China. The Chinese government has publicly announced that it is pursuing activities in cyber espionage.

The Chinese government has been accused of attacks in India, the US and Germany. James Mulvenon, the director of the Center of Intelligence and research said that the Chinese were first to use cyberattacks for political and military goals.

2. About 120 countries are now using the world wide web for war espionage.

3. Electricity, air traffic control, financial markets and government computer networks will be the focus of all attacks.

4. Due to the advances in technology, cyber attacks have become more sophisticated, and are able to evade government defenses.

The study is a wake-up call for the US government to shore up its defenses against attacks on its infrastructure.

14 Steps to Winterize Your Car

Winter is here and one must make sure that their vehicle is properly winterized before they venture out. Here are the steps one must follow to make sure that their vehicle is winterized:

1. Make sure that your car is serviced and tuned and that there are no leaks.

2. Make sure that there is plenty of anti-freeze in the windshield washer tank.

3. Make sure that your windshield wiper blades are of good quality.

4. Install snow tires for your car and keep checking their tread regularly. It will give you a greater amount of traction and control for driving in winter conditions.

5. Keep checking the tire pressure of your car regularly.

6. Make sure that you use the same make and size for all of your winter tires.

7. Check the battery of your car.

8. Inspect the brakes of your car.

9. Check the head and signal lights.

10. Ensure that all the engine belts and hoses are in good condition.

11. Make sure that the heater and the de-froster are working properly.

12. Keep your gas tank full to prevent ice from forming around the edges.

13. Keep spare flashlights with you at all times.

14. Keep an auto emergency kit in the car.

It is also a good idea to check the weather conditions before driving. This way one can be mentally prepared to face harsh conditions.

Sub Prime Bailout: Who Foots The Bill?

In the fall of this year the Bush administration finally realized it was time to act on the unfolding sub prime crisis. After a careful analysis of the economic data available they concluded that the bottom had probably been reached and all that was required was to restore sufficient liquidity in the system as well as some words of reassurance that things would soon be looking up. 'Helicopter Ben' Bernanke lived up to his nickname. Billions of dollars were pumped into the system and interest rates were slashed. President Bush announced that his government would try to ensure that people got to keep their homes, other than speculators and those who had made wrong decisions and overextended themselves. But the housing crisis continued to worsen and the third quarter ended with record foreclosures and mortgage payments behind schedule, and the end was nowhere in sight. It was estimated that the crisis had reduced the economic growth rate by one percentage point. The slowdown was threatening to spread to the other sectors of the economy and maybe cause a recession. The political risks of continuing with a 'laissez faire' approach in an election year were by now unacceptably high. So setting aside its economic convictions, the Bush administration prevailed upon the mortgage industry and the investment firms to sit down with federal government officials to hammer out a rescue plan.

The plan announced earlier this week is a five year freeze of the interest rates on sub prime loans as long as the borrowers are not behind on mortgage payments and continue to live in their homes.Borrowers are also encouraged to avail of refinancing options and move to reasonable fixed rate loans offered by the Federal Housing Authority under its FHASecure program.

The plan invited instant criticism.Some felt that the plan would only help people who made wrong decisions and also those who were in a position to pay. They felt that the correct approach would be to restructure debt on a case to case basis. It was also argued that the plan would benefit only a limited number of people, estimated at about 400,000, and did precious little for the others.Stock market analysts pointed out that the plan would impact earnings of the companies which had invested in this sector and affect their share prices, causing losses to investors.Some pointed out that the modification of existing loan contracts, which the plan would require, was illegal.

These arguments are not very sound. The plan is aimed at a particular subset of borrowers who pose the greatest risk of default. It is quite clear by now that if their problems are ignored then the entire financial system is threatened.This problem has by and large been addressed.Experience tells us that once the entire system is threatened an across the board approach, instead of a case by case approach, works better as it is faster and doesn't cause confusion. Imagine what would happen if millions of loans were to be re-examined and revised agreements were attempted to be worked out in every single case.As far as the mortgage companies are concerned they should be happy because they were in danger of losing even the principal amount they had lent, what to talk of interest thereon.It must be remembered that they had taken a calculated risk while advancing these loans. What is more, they were fully aware of the risks involved, which was reflected in the premium returns they were getting. Suddenly things have gone sour. True, some may have come through better off than under this plan, but it must be remembered that even a giant like Citigroup had to raise additional funds in the Middle East in order to stay afloat. Another wave of foreclosures would not have done anybody any good. Defaults and foreclosures cost a lot of money, and financial institutions are not in the business of repossessing and selling homes on a large scale. Investors are also likely to be better off as financial markets appreciate certainty and are afraid of uncertainty. The certainty of recovering the loans advanced by the mortgage companies is bound to have a positive effect on the share prices of the investment firms involved.

The plan has been largely welcomed by everybody including the Democrats whose only criticism has been that the President has not gone far enough.Sen. Hillary Clinton said that along with home rates , foreclosures should also have been frozen for 90 days. Sen. John Edwards was of the view that loan rates should have been frozen for seven years instead of just five.

The rescue plan is a private sector initiative which helps homeowners at risk of losing their homes. No public funds are involved as yet. The reasoning that lower interest rates would mean lower profits for companies,leading to lower tax payments by them ,and therefore an increased burden on everybody is a bit too far fetched.

Those who advocate a free market and are opposed to any kind of government intervention whatsoever must understand that a crisis as widespread as this one is unlikely to be resolved by people or institutions acting alone, each in his own self interest. Whenever an entire system is at risk government intervention is perhaps both necessary and unavoidable.

In America Who Gives To Charity And Why.

Then Center of Philanthropy at Indiana University released a study Tuesday in which they have analyzed the factors which motivate people to be charitable.The study covered 8,000 households. The families were visited every two years in 2000, 2002 and 2004, in order to map their behavior pattern regarding charity.The study found that about 67 to 69% of the households contributed to charity. The latest figures available, which are for 2004, indicate that about 68% of the donors gave $ 25 or more. The average total amount given was $2,o45. But all people are not charitable consistently with nearly 29% donating in some years and not donating in others. However 56% of the households studied were regular donors and donated in each of the three years studied. Only about 15% did not donate in any of the three years, data for which was gathered. It was also seen that that the average donor did not give to only one charity but to two or three different charities. 45% of the donors gave to religious organizations and 60% to secular ones and 37% gave to both types.

The study also covered some of the richest households, having a net worth of over a million dollars and discovered distinct behavior patterns among donors divided into 12 categories.

They found that those who inherited wealth gave the most to arts and cultural organizations. These people wish to set an example for others to follow. Since they tend to build long term associations with the institution to which they donate, they often include their children or other family members in their decisions.

The wealthiest people donate the most and to every type of charity.They desire to leave behind a legacy, and they also also keep track of whether their largess is having the desired results or not.

Entrepreneurs donate the most to educational and international organizations.They follow the use of their gifts closely. They donate because it makes good business sense and is also expected in their social circle.

Many donors do not fall into any category. They donate because of some event, usually tragic, which has a decisive influence on their lives. Losing a loved one is the usual reason. They often develop a missionary zeal in promoting the objects of the charity to which they have donated. The less wealthy are more likely to donate because of their religious beliefs as compared to the richer households. As people become richer they are finding more innovative ways to donate instead of following the beaten path.

The study aimed at finding out the reasons for changes in the desire to donate.This will allow the recipients of charity to shape their policies so as to attract the maximum number of donations. It would also enable philanthropists to take informed decisions regarding the charities they wished to support.

Credit Card Industry Threatened With Regulation.

Americans collectively owe almost $850 billion in credit card debt. This is what is driving the thriving credit card industry in the US. An average American family owns about five credit cards. The credit card business is dominated by five companies who between them control 80% of the US market. They are Discover, JP Morgan Chase &Co., Capital One, Citigroup and Bank of America. This business is extremely profitable for these companies not just because of the size of the market but also because of the practices followed by them.

It is not uncommon for even those customers who have paid their credit card bills on time to be hit by arbitrary increases in interest rates charged. The reason usually given, if at all one is given, is that their credit rating has fallen simply because of opening another credit card account. The fine print in the contract which you sign when applying for a credit card usually contains clauses for charging penalty interest rates and various kinds of fees. The language used is complicated and difficult to understand even if you take the trouble of reading the entire contract. With complaints about unfair card practices on the rise a Senate committee was asked to look into the matter.

Sen. Carl Levin, Chairman of the Senate Homeland Security and Governmental Affairs Permanent Sub committee on investigations had this to say, 'The bottomline for me is this: when a Credit card issuer promises to provide a card holder with a specific interest rate if they meet their credit card obligations, and the card holder holds up their end of the bargain, the credit card issuers should have to do the same.' The committee has already proposed legislation which would prevent card companies from raising interest rates charged from persons who have paid their debt on time. The maximum rate increase permitted is also sought to be fixed.

The common forms of extra charges a card holder may have to pay include over the credit-limit fees from those customers who have been in an over-limit position for a particular period of time, usually 90 days. Another practice followed is called 'universal default.' This simply means that when a person defaults on even one of the cards that he owns then the interest rates go up on all the cards even though he may be making timely payments on them. The committee also noticed a practice that customers who had charged close to the limit on their cards for a length of time, but were making at least the minimum payment regularly, were also likely to be penalized by a hike in interest rates. The committee found that the card companies were justifying their actions by claiming that the credit score of the customer had fallen.

Although such practices cannot be called illegal, they are certainly unethical and it is likely that with the Democrats in control of Congress they may place this important consumer issue on the legislative agenda.Credit card companies claim that unless they continuously monitor every individual and take timely action to compel him to reduce his debt they may find themselves in a situation where it may become difficult for them to recover their loans. But the Senate committee does not seem to buy this argument. The message for now seems to be that if such practices are not ended voluntarily then legislation may become necessary to correct the situation.

U.S. Gives Clean Chit To Iran On Nuclear Weapons Issue.

The most welcome news, Monday, was a major US Intelligence report that Iran was not currently trying to develop nuclear weapons. The National Intelligence Estimate reported that Tehran halted its nuclear weapons program in 2003, but continues to enrich uranium. Enriched uranium is used in nuclear bombs but Tehran maintains its nuclear activities are for peaceful purposes. The report which draws together information from 16 Intelligence agencies of the US, says with 'high confidence' that Iran stopped its nuclear weapons program in 2003 'in response to international pressure.' The assessment says with 'moderate confidence' that the program has not restarted. This marks a turnaround from previous assessments, where US Intelligence agencies believed Iran was trying to build a nuclear weapon. Sanctions have already been imposed on Iran by both the UN Security Council which is demanding that Iran stop uranium enrichment, and unilateral US sanctions.

The timing of the release of this report is significant. It is almost impossible to accept that President Bush was unaware of the findings of NIE on October 17th when he said at a press conference ' If you're interested in avoiding World War III, it seems like you ought to be interested in preventing them (Iran) from having the knowledge necessary to make a nuclear weapon.' The obvious benefit to President Bush after the release of this report is that he now has an excuse for a graceful climb down from the extreme posture that he had adopted and any change in which would have meant a tremendous loss of face for the US. It also seeks to reassure the world that the various specialized agencies of the US government are independent and impartial bodies , free from political influence, an image the US is anxious to project after the fiasco over the alleged weapons of mass destruction in Iraq. Another possible reason for this abrupt about turn could be the growing realization that all this saber rattling was was only serving to strengthen the position of President Mahmoud Ahmadinejad in Iran. In fact Iran appears to be happy with a few sanctions as they serve to divert the attention of its people from the failures of their government.US actions have in fact only served to marginalize the moderate faction, led by Khatami, in Iranian politics. Added to this is the realization that presently the US is in no position to take on Iran in a conventional war as the conflicts in Iraq and Afghanistan are still to be concluded.The US is also anxious to hold on to the tenuous military gains it has made in Iraq over the past few months. It is also concerned at reports of the Taliban regrouping in Afghanistan. They now seem to be making their presence felt across the entire country, outside their strongholds of southern and south-eastern Afghanistan.Iran shares an extensive common border with both countries and Iranian assistance would be crucial in prolonging the duration and intensity of the insurgencies in both the countries.Iran has long been suspected of aiding anti US forces in both countries. With elections round the corner the US government is keen to bring some troops back home as evidence of the success of its current policies, especially in Iraq.The perceived failure of US policies in Iraq threatens to be a major issue in next year's US presidential election.

Whatever be the real reason,the report has certainly eased tensions significantly as it rules out any possibility of a military strike on Iran in the near future.In fact Russia and China may even oppose further sanctions against Iran. Most importantly it serves to reinforce confidence in diplomacy and international pressure as a means of solving international crises in future.

Climate Change Talks Begin In Bali.

Delegates from almost 190 countries have gathered in Bali, Indonesia, for talks on climate change. The talks started today and will last two weeks. The aim of the UN led talks is to work towards a new global pact by 2009, to fight climate change.There is an added urgency to these talks since on February 2nd The United Nations Scientific Panel studying climate change declared that the evidence of a warming trend is 'unequivocal,' and that human activity has 'very likely' been the driving force in that change over the last 50 years.

There is now mounting scientific evidence that the release of carbon dioxide and other greenhouse gases from various sources has contributed significantly to raising the earth's temperature by more than 1 degree Fahrenheit since 1900. The debate now is not whether the earth is getting warmer or not, but what to do about it. Just how important the issue is right now can judged by the fact that former US Vice President Al Gore shared the Nobel Peace Prize for his work on climate change. He went on to win an Oscar for his documentary 'An Inconvenient Truth.' The significance attached to his contribution and his resultant popularity led to serious speculation that he may be the Democratic party's candidate in next year's US Presidential election.

The original treaty on climate change signed in 1992 set voluntary targets for curbing emissions of greenhouse gases, and was signed by almost all nations. Realizing that stricter action was needed, the Kyoto Protocol in 1997 set mandatory limits on emissions. It was ratified by 36 industrialized nations and is due to expire in 2012. It was not ratified by the US which is the largest producer of greenhouse gases.The US position is unlikely to change in Bali. President Bush remarked last week,'Our guiding principle is clear: we must lead the world to produce fewer greenhouse gas emissions, and we must do it in a way that does not undermine economic growth or prevent nations from delivering greater prosperity for the people.'

Developing nations, including China, which is set to become the biggest polluter, are also opposed to accepting any limits on greenhouse gas emissions, as they claim it will affect their growth plans which in turn will affect their fight against poverty.

The conference however got off to an auspicious start with Australia ratifying the Kyoto Protocol. This leaves the US as the only industrialized nation which has not ratified it.

The European Union, which is alarmed by the Arctic ice melt this year, and also recognizes the vast business opportunities thrown up by the trade in carbon credits under the so called cap and trade system, has pledged to cut emissions to 20% below 1990 levels by 2020.

Although different nations have so far taken different stands depending upon their perceived self interest, it is time they got together and viewed things from a global perspective before it is too late.

Risks of FOREX Trading

Despite the claims you may see on some FOREX web sites, FOREX is not risk-free. You are trading with substantial sums of money and there is always a possibility that trades will go against you. There are several trading tools, however, that can minimize your risk, and with caution, and above all education, the FOREX trader can learn how to trade profitably and while minimizing losses.


Forex scams were fairly common a few years ago. The industry has cleaned up considerably since then, but you still need to exercise caution when signing up with a FOREX broker. Do some background checking – reputable FOREX brokers will be associated with large financial institutions like banks or insurance companies and they will be registered with the proper government agencies. In the United States brokers should be registered with the Commodities Futures Trading Commission (CFTC) or a member of the National Futures Association (NFA). You can also check with your local Consumer Protection Bureau and the Better Business Bureau.


Assuming you are dealing with a reputable broker, there are still risks to FOREX trading. Transactions are subject to unexpected rate changes, volatile markets and political events.

Exchange Rate Risk – refers to the fluctuations in currency prices over a trading period. Prices can fall rapidly resulting in substantial losses unless stop loss orders are used when trading FOREX. Stop loss orders specify that the open position should be closed if currency prices pass a predetermined level. Stop loss orders can be used in conjunction with limit orders to automate FOREX trading – limit orders specify an open position should be closed at a specified profit target.

Interest Rate Risk – can result from discrepancies between the interest rates in the two countries represented by the currency pair in a FOREX quote. This discrepancy can result in variations from the expected profit or loss of a particular FOREX transaction.

Credit Risk – is the possibility that one party in a FOREX transaction may not honor their debt when the deal is closed. This may happen when a bank or financial institution declares insolvency. Credit risk is minimized by dealing on regulated exchanges which require members to be monitored for credit worthiness.

Country Risk – is associated with governments that may become involved in foreign exchange markets by limiting the flow of currency. There is more country risk associated with 'exotic' currencies than with major currencies that allow the free trading of their currency.

Limiting Risk

FOREX trading can be risky, but there are ways to limit risk and financial exposure. Every FOREX trader should have a trading strategy – knowing when to enter and exit the market and what kind of movements to expect. Developing strategies requires education - the key to limiting FOREX risk. At all times follow the basic rule: Do not place money in the FOREX that you cannot afford to lose.

Every FOREX trader needs to know at least the basics about technical analysis and how to read financial charts. He should study chart movements and indicators and understand how charts are interpreted. There is a vast amount of information on FOREX trading available both on the Internet and in print. If you want to be successful at FOREX, know what you are doing.

Even the most knowledgeable traders, however, can't predict with absolute certainty how the market will behave. For this reason, every FOREX transaction should take advantage of available tools designed to minimize loss. Stop-loss orders are the most common ways of minimizing risk when placing an entry order. A stop-loss order contains instructions to exit your position if the currency price reaches a certain point. If you take a long position (expecting the price to rise) you would place a stop loss order below current market price. If you take a short position (expecting the price to fall) you would place a stop loss order above current market price.

40% Hike In Auto Fuel Efficiency Likely By 2020.

After months of wrangling Democrat lawmakers wrapped up a deal on fuel efficiency standards Friday.Significantly the deal has been approved by John D. Dingell the auto industry's Congressional ally.As per the final version of the Bill the new auto fleet has to achieve average fuel efficiency of 35 miles per gallon by 2020, about 40% higher than current averages.At Dingell's insistence it has tougher standards for cars than light trucks. Fuel efficiency standards, known as corporate average fuel economy standards or CAFE were adopted in 1975 following the Arab oil embargo of 1974 and had set an efficiency standard of 27.5 mpg which has remained unchanged so far.

Democrats plan to make these proposals a part of the wider energy bill that the House of Representatives is expected to take up next week.The Bill is expected to contain a provision that would require the country's major utilities to generate at least 15% of their electricity from renewable sources like wind and solar power. This measure looks set to be opposed by the utilities who say this will cause a sharp increase in power prices in some parts of the country. The Bill also seeks to provide subsidies for biofuel production, a move opposed by the oil industry.

In a statement Saturday, Alliance of Automobile Manufacturers chief Dave Mc Curdy said 'Upon adoption of this legislation, Congress will have established aggressive, nationwide fuel economy requirements, concluding a long standing debate.' The Alliance is the voice in Washington for the top automakers including Toyota.

Rick Wagoner CEO of General Motors said the new rules would ' Pose a significant technical and economic challenge to the industry.' He said GM would tackle the changes ' with an array of engineering, research and development resources.'

The bill is expected to boost plans by automakers to adopt more fuel efficient technologies for conventional engines and alternatives such as gas-electric hybrids and vehicles running on biofuels. Manufacturers are set to receive credits for vehicles running on biofuels for the first time.

Interestingly a bill containing similar standards approved in June by the Senate was opposed by automakers who said that it would restrict the choice of vehicles, threaten jobs and push up costs. The companies had suggested a standard of 32 mpg by 2022 instead. Chrysler had estimated that it could add $ 6,700 to the cost of each Chrysler vehicle.

But the new plan gives the industry more flexibility to plan new vehicles. It contains separate standards for cars and trucks, extends credits for producing vehicles running on biofuels, and allows automakers to receive separate credits for exceeding the standards which can be applied to other model years.

Dingell also secured extension of the 1.2 mpg credit for the production of each flexi-fuel vehicle which can run on ethanol blends of 15% gasoline and 85% ethanol till 2020. They were due to expire by 2010.

The deal is expected to keep the United Auto Workers union happy as well because it discourages the shifting of production of small cars overseas as the fuel economy credits could be applied to larger, less efficient models.

The flexibility provided in the Bill seeks to set at rest concerns about safety standards as it was feared that rigid efficiency standards would not only restrict the choice of vehicles but also compromise safety, as automakers shifted to lighter materials in an attempt to maintain fuel economy.

Environmental groups estimate the new standards would save 1.2 million barrels of oil per day by 2020 besides reducing pressure on gasoline prices. It seems to be a win-win situation for everybody if it goes through.

U.S. Government Set To Intervene In Sub Prime Crisis.

Before the 1992 Presidential campaign began President George H.W. Bush was considered almost unbeatable. Successful foreign policy developments such as the end of the Cold War and the Persian Gulf War had given him an approval rating of almost 80%. Then James Carville, Clinton's campaign manager, in a moment of inspiration came up with the slogan,'The economy, stupid.' Within a short span of time the attention of the voters was successfully turned towards the economic recession gripping the US at that time, and Bush lost the election.

This time round the outgoing President, the son of George H.W. Bush faces an uphill task to put another Republican in the White House when he leaves.Unfortunately for him the US seems to be stuck in two wars, in Afghanistan and in Iraq, which it is nowhere near winning, although things seem to be improving.Added to this he has an approval rating of 32%.The attention of the American people is once again focussed on one major headline grabbing issue, that is the sub prime crisis and its likely impact on the economy.The government has belatedly woken up to the hard realization that it has allowed matters to drift for too long and that the crisis is going to cast its shadow on the coming elections.

Lawmakers have been facing political pressure to take action.But in September this year the Fed Chairman Ben Bernanke and the Treasury secretary Henry Paulson warned that some solutions could end up perpetuating unhealthy lending practices that created the whole mess in the first place.However some initiatives were taken, such as making more money available in the system to ease the credit crunch,giving borrowers greater protection against predatory lenders and encouraging homeowners to call their banks in order to discuss their problems and find a solution so that they could retain their homes.It was also announced that while the government will try to ensure that people got to keep their homes it would do nothing to bail out speculators or those who were plain greedy.This stand of the government was probably prompted by the assumption that the crisis was nearing an end.But things have simply got worse and there is no immediate end to the crisis in sight. It is now expected that the meltdown will continue well into next year at the very least.

The government had also assumed that the crisis will remain remain confined to the housing sector which accounts for just 5% of GDP and any slowdown there would by itself not affect the economy as a whole.But economics has never been an exact science, although it is good at offering explanations in hindsight. Declining home values seems to be having a wealth effect and Americans seem to be cutting other expenses in order to both make up their losses and also in order to be able to make higher mortgage payments. This is reflected in declining auto sales and even in manufacturing. Consumer expenditure accounts for 72% of US GDP and a slowdown here could tip the economy into a recession.

The Bush administration and the mortgage industry are finally hammering out a proposal to temporarily freeze interest rates on certain stressed sub prime mortgages. If it goes through it will be the biggest action to handle the worsening crisis. The proposals could be in place as early as next week. Talks have involved all the federal banking regulators and major players in the mortgage industry such as Citigroup, Wells Fargo and others. The attempt is to extend for several years the introductory 'teaser' rates that were offered on sub prime mortgages. Such a scheme would however mean losses for investors who have purchased mortgage backed securities as it would reduce the rate of return on their investments. Companies apprehend shareholder lawsuits if they permit modifications in original agreements which are not in the best interest of the shareholders.

Government intervention in times of crisis is not new.People would do well to remember that in 1998, in the aftermath of the Asian flu, when Long Term Capital Management was in danger of going under, it was Alan Greenspan who organized a bail out for it.The economy has grown at a surprisingly strong 3.9% in the 3rd quarter although it is expected to slow in future. Food and fuel prices are at record highs and inflationary pressures are clearly visible.Although interest rate cuts are probably round the corner there are clearly limits to how low Bernanke can go without raising inflation to unacceptably high levels.Moreover he cannot allow the dollar to fall much further else foreign investors may start bailing out of US stocks and treasuries, triggering off a deflationary spiral in the economy.A widespread collapse in asset prices would have a disastrous impact on the economy.These considerations will have to be borne in mind by the mortgage companies and their shareholders alike while considering the proposals put forward by the government.