CREDIT

As this is written, the Federal Reserve Bank of the United States has
committed itself to relieve the short-term & other credit of small
businesses. Those ordinarily borrow from the banks of the Federal
Reserve System.
Absent business,and means to pay, and the severe contraction of credit,
those businesses may choke.

Defaults particularly in their employment and business consumption
structures would have material impacton this economy.
Banks have bedded material losses due to the Wall Street drop, and the
real estate devaluation (these are collateral values for the banks) as
well as continuing mortgage maitenance.

The Fed committed its capacity to the entirety of its member banks small
business credit. That creates an immediate relief as a secondary lender
- freeing the banks to continue or restore small business credit.

Credit is what drives any modern economy. Brokerages -- which in the
USA require a fifty percent down payment to purchase a security (50%
margins) finance the rest. They have been battered - those margins
are still being met and the brokerages and their customers owe the
differences. Again, the stock marketis their collateral - its value is
their value

World repurcussions willshow up with the delayed or stalled orders for
automobiles and raw materials and commodities. A flu of the world
varierty and the USA has a dose of it -- and not solo.

The market panic depleted the market's value, and those values deplete
a banks operating strength or capacity. Reserves are commanded and must
be borrowed or a bank must close its doors having devoured all its
capital. It can borrow -- that is credit. Again in the USA all
Federal Reserve System banks insure the first $150000 of each depositor.
Europes banks and nations are discussing that course now. Europe can
lend the lost value to the banks to sustain them, or sustain them, as
the New Deal did with insured deposits.

Credit costs and can get crowded -- particualrly if only one or two
major governments are expanding it. Americans will sustain the first
benefit of the old gold (US Treasury Bonds). The world wants them,and
other than a sharply falling dollar --it is where people can safely hold
& park their spare dollars abroad.
Lets see Europe respond with EURO BONDS to the magnitude needed or at
least unleash, from EMU strictures, the credit capicity of their
national members.
Stock values can be shored up by restored confidence as asset holds --
money runs to safer quarters in a panic.
An elimination of short selling for blue chip stocks and equalling the
American 50% margin for that category of stock will strenghten national
bourses. Governments can lend to replace lsses in the stock
marketstokeepbanks operating (or insure),and bring frightened money back
into hedge funds and other SA investment funds.

That offshore stuff -- not oil-- money will come back with bonds rather
than lay idle; and from bond sales come the money for market
restoration.

Like Murrow might have said--- its credit - - until rapid market
depreciation forces a bottom price in the distress markets.

Correction

-- reference should be P/E ratio (not ration - excuse me)

EUROPE'S CHALLENGE

America has the Federal Reserve Bank and one government ... Europe has
the European Central Bank and today 16?21? governments.
For Europe to sail through todays fiscal and banking crisis, the Council
of Ministers must concur on executive and legislative approaches which
prod the ECB to loosen the EURO and credit.

The COM can do this by further expanding national deficit options (more
than agreed the past weekend), and sustain other nations joint planning
for relief with the North American nations, Japan and theUK (the UKis
not in theEURO pool). G-7/8 approaches & bilateral arrangements.

The ECB may balk on credit (money supply) but would be politically
overruled by the European Union's members. Those deficits will be
incurred for social services and re-capitalization plans.

Should Europe fail to jointly quckly move, those nations must save
themselves and welcome the laggards (and what would be left of the
Union) after.

Insuring bank account deposits saves consumers .. .and joint action
averts the international runs of money - comparable to tariffs and
interest rate wars.

Most stock market activity now is debt consolidation and reading of
forward profits with P/E rations leading stock prices and exchanges.
Banks and governments will forward capitalization with bonds and
partnering in the short term, Weathering the service sector
repurcussions and employmnet fall-offs will be the hardest part of the
crisis -- so will preventing a disaster of it.

Housing markets will lag without forward incomes to purchase - so
willl hard goods. Banks and consumers will consolidate - unless risk
lessens.

ENERGY IMPORT SUBSTITUTION

Costs of oil beyond NAFTA are part of North American trade which its
economy must pay out and recoverby return trade or lose that wealth as
part of its national & trade union wealth.

While some in OPEC see that cartel as a riches re-distribution scheme
(ie a re-dealng of the worl'ds haves and have nots) the USA does not.

Import substitution is the standard address to any growing import which
is not offset by exports.

When the USA's trade imbalance was a small part of her GDP (even today
without oil -- it is a small part of our GDP ) the matter was less
pressing. Today, the consumption of petroleum and gas raise that import
level particularly high. So, the US and similar nations which are net
oil importers, must export more to stay even in their balance of trade.
Japan and the UK are classic examples of high export nations due to
imports .

Were the USA's trade figures reviewed, they would be pretty good without
the oil imports.

That is the problem.

So, import substitution applied to fuel imports, means replacing
imports of oil with something else - and cultivating and giving
breathing room (like an import cartel in Japan's MITI terminology) if
necessary, to develop domestic NAFTA sources of energy.

<a href=http://www.pickensplan.com>The Pickens Plan</a> has made
headlines because of its high capital investment in American domestic
resources- particulary non-carbon -- wind power in particular. It is
worthwhile, and after its investment, wind power could save a constant
of 20 to 30% of today's fossil fuel imports/use.

Americans know what substituting a domestic product for an import is,
and can do it without trade wars or damaging the productivity of our
good return trading partners. (Some of our trading parterns import 10
to 20 timesper capita from the USA & depend on all the export economy
they can muster.)

So without wasting words-- investing in a domestic fuels picture by
favoring import substitution makes sense. Especially given the cost of
carbon fuels and the extraction & transport of them from abroad.

America will never be autarkic nor promote autarchy -- but reducng the
risk of a national security incident over imported fuel and healthening
our economy's domestic production suggest the import substitution road
now.

Oil will always be there for emergency import.

Import substitution is not protectionist is economic health.