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 "The coverage of the market meltdown includes many assurances from the experts that everything is just fine,” writes Dan Baker of the Center for Economic and Policy Research. “I suppose it would be considered rude for reporters to ask why anyone should trust the assessments of people who apparently failed to see the current credit crunch coming.”
 Traders saw the impact of yesterday’s BNP Paribas sell-off yesterday and all but panicked. The sell-off began in Europe Wednesday night, continued into U.S. stocks Thursday, spilled into Asia and then back to Europe overnight. Here’s a wrap-up of the carnage:
- Dow: down 2.8%
- Nasdaq: -2.1%
- S&P 500: -2.9%
- FTSE (England): -3%
- DAX (Germany): -1.6%
- CAC (France): -3.1%
- ASX 200 (Australia): -3.7%
- Nikkei (Japan): -2.4%
- KOSPI (South Korea): -4.2%! (How do you say “ouch” in Korean?)
The Dow opened down almost 200 this morning (Friday). We’ll just have to see if the contagion carries through the weekend.
 Here’s a curious footnote to the story. The Shanghai index lost only 4 points in yesterday’s trading -- barely 0.1%.
 If you would indulge us for a moment, please recall June 20, 2007. The Dow and S&P 500 had just finished a lovely two-month winning streak, both indexes registering about 7% gains since April.
You were writing nasty e-mails to The 5 with phrases like “Chicken Little” and “doom and gloom nonsense” while we were bracing for impact. On that very day, Treasury Secretary Paulson eased your concerns by saying that the subprime fallout “will not affect the economy overall.”
Heh. Yes, we suppose it would be rude to ask him about that statement this morning.
 “The subprime crisis is long from being over,” comments Strategic Investment’s Dan Amoss. “Its aftershocks have irreparably damaged the reputation of the securitization market.
“Oh, and we can expect central banks to solve a problem exacerbated by easy money with even more easy money.” That’s exactly what they did:
 Overnight, the European Central Bank injected a record $130 billion into their lending economy. For the low, low price of 4% interest -- well below the current market rate -- eurozone banks can borrow truckloads of cash to help keep their own desperate loans afloat.
 The Federal Reserve, the Bank of Japan and the Australian central bank followed suit… with $12 billion, $8 billion and $4 billion injections, respectively.
 “As in 1998 at the time of the LTCM crisis,” writes Nouriel Roubini on his blog this morning, “the Fed and global central banks decided to ease monetary policy in between meetings and injected a large amount of liquidity into the system.
Two days after the Fed tried to signal in its FOMC statement they wouldn’t bail out of the financial system, “The Fed actions today are certainly ironic. The current market turmoil is much worse than the liquidity crisis experienced by the U.S. and the global economy in the 1998 LTCM episode.”
 Our boys Mish and Brian at The Survival Report have hit a few home runs in this latest meltdown. Their “put” on Countrywide (CFC) is up 93%. And another put on the Financial Select Sector ETF is up 23% since they traded it less than three weeks ago. See: The Survival Report
 “It is the worrisome aspects of the current market,” advises Doug Casey, writing in Whiskey & Gunpowder, “when you and everyone else are feeling on edge about the risk -- that make this such a good time to invest. People do dumb things when they are scared. Like sell great companies.
“Or sit on the sidelines, keeping their powder dry for a brighter day. And when the brighter day comes, they will do even dumber things, like spend twice, or 10 times, the current ask for the same shares.
“They’ll be buying those shares from me.”
(Doug was a crowd favorite at this year’s Symposium in Vancouver. We captured his presentation, along with all 29 of our venerable speakers. Click here to get your copy of the audio CD set.)
 The dollar gained on most major currencies overnight. Despite that the roots of the sell-off are deep in U.S. soil, both the pound and euro lost ground to the dollar. The euro stands at $1.36 and the pound traded as low as $2.01. To be expected, the yen (now at 119 per dollar) rallied nicely as carry traders took bets off the table.
“While the dollar’s rise seems counterintuitive, there is a fairly good explanation,” reports Chris Gaffney in today’s Daily Pfennig. “With world equity markets falling and risk again becoming a dirty word, investors have moved back into the 'safest' investment in the world: U.S. Treasuries.”
 “It is in the interest of the United States,” declared President Bush yesterday, after Neil Cavuto explained to him what this “nuclear option thing” was all about, “that we encourage the Chinese to go from a savings economy to a consumer economy. And then have access to those markets so that U.S. producers and service providers can expand their businesses and, therefore, create more jobs here at home.”
“A real reporter would have followed up by asking, ‘How?’” calmly explains our in-house encyclopedia Dave Gonigam. Dave left a 20-year career in the TV industry to work with us -- editing The 5, writing various exposes and heading up our in-house blog.
“But Cavuto's not a real reporter,” says Dave. “In his follow-up, he asked Bush what he thought about Barry Bonds’ 756th home run.”
Oy!
“How, indeed?” wrote Dave, following up where Cavuto failed. “The notion that the goal of converting China to a consumer society is achievable, that it's somehow within the power of the U.S. government, is itself breathtaking. I dare say, even more breathtaking than the notion it's within the power of the U.S. government to transform the Middle East into Jeffersonian democracies.”
Incroyable, as the French say. We don’t know if this is as obvious to some folks as it is to us, but sometimes, the president doesn’t seem like the sharpest knife in the drawer. Please comment on this story after reading Dave’s full analysis here.
 “Profits from overseas operations are growing faster than profits at home by a wide margin,” reports Chris Mayer, “which has helped U.S. firms report decent profits even though the U.S. economy is slowing down.”
“That might surprise some people who believe that the U.S. consumer is the end-all of the global economy,” explains Chris. “These numbers seem to indicate that’s not so. Strong growth from China, India, South America and Eastern Europe make them more important markets as each day goes by.”
And by extension, as we pointed out yesterday, less needy of U.S. dollars.
 "There were enough honeybees to provide pollination for U.S. agriculture this year,” said a U.S. Department of Agriculture spokesperson recently, “but beekeepers could face a serious problem next year and beyond."
We wrote to you about “colony collapse disorder” way back on April 30 [LINK] when the world was worried that cell phone towers were killing off bees in vast proportions. While that notion seems a bit unrealistic, the USDA is concerned enough about bee populations to launch a massive case study, which was finalized with a positive response plan late last month.
We’ll spare you the details, but we’ll leave you with these words of assurance from the USDA: "This action plan provides a coordinated framework to ensure that all of the research that needs to be done is covered in order to get to the bottom of the CCD problem.”
The department estimated that honeybees pollinate more than 130 crops in the United States and add $15 billion in crop value annually. Albert Einstein himself once guessed that if honeybees were to become extinct, the world would starve in less than four years.
 Nostradamus, too, predicted World War III would begin with the rising of an Antichrist in the Middle East uniting the region in peace and then attacking the West and ending life as we know it by 2012. According to that medieval prognosticator, Russia is supposed to be on our side, China on theirs.
OK, so this end-of-the-world stuff is a little heavy for The 5 Min. Forecast. But what the heck? It’s Friday.
 “As a once full-time farmer who farmed his way to part-time farming,” writes a reader, “it is becoming boring to read your daily diatribes against the ethanol industry and the resultant so-called high corn prices. Whenever the farmer manages to hit a lick, for a change, the (mostly) city boys set up a horrendous chorus of shrieks and moans. When (most of the time) farmers are suffering low prices, droughts, floods, plagues of disease and insects, government interference, etc., etc., the (mostly) city boys recite that old saw -- it's a jungle out there, survival of the fittest, let 'em fight it out and may the best man win, ad nauseam.
“Give me a major break, guys! While a poor Mexican getting so badly gouged by a multinational corporation that he can't afford his blue corn tortilla evokes a measure of sympathy in me, a city boy (mostly) who can't seem to afford a prime sirloin steak and might have to drive his 'Beemer' downtown and get a crummy hamburger with the rest of us 'don't impress me much'!!!!”
The 5 responds: Ethanol still sucks.
 “I’m not a part of GATA or a conspiracy theorist,” wrote a reader, who certainly seems to be the latter, “but I harbor real doubts about how much gold we actually have.
“For a number of years, we routinely leased out gold to bullion banks such as Goldman Sachs and JPM-Chase for short sales. Those leases provided the U.S. Treasury with a small return on its hoard, and under then current IMF rules, the receipts from the banks could be carried as gold on hand, even though it was not physically present. The short sales also served another purpose, that of depressing the price of gold. This made the Treasury happy by indirectly supporting the value of the U.S. dollar.
“So far, so good.
“But a funny thing happened on the way to the market. Unaccountably, the price of gold kept rising. It would fall briefly after a big sale, and then rise again. This made it hard for the bullion banks to buy back and replace the borrowed gold, as they are required to do under law. That rule is the basis for the old bit of doggerel attributed to Daniel Drew that “He who sells what isn’t his’n, must buy it back or go to prison.”
“The complication is that until quite recently, Americans did not think in terms of buying gold for investment. The leased gold that was sold short mostly went overseas to Asia and the souks of the Middle East. Color it gone. Forcing the bullion banks to cover their shorts could cause the price of gold to spike, which would be a disaster not only for the banks, but also for the U.S. Treasury.
“That leaves us with an unanswered but very pertinent question: Was the physical gold replaced as required by law? Do we have 8,100 tons or some far smaller amount and a lot of IOUs that cannot and will not be honored no matter what the law says? Just a thought.”
Good luck out there,
Addison Wiggin
The 5 Min. Forecast
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Recent guerilla attacks in western Mexico have authorities on both sides of the Mexican border scrambling to protect billions worth natural gas pipelines. Companies such as Hershey’s, Honda, and Kellogg’s are losing up to $7 million a day as local rebels bomb energy sites left and right. Meanwhile, several little known organizations are well positioned to profit from a sudden energy grab... or… worse yet, a full blown U.S. / Mexico Border War. 
