- The Washington Times - Thursday, October 16, 2008

In what passes for good economic news these days, panic gave way to uncertainty as Wall Street investors tried to digest a string of new reports on the health of the U.S. and world credit markets.

After a string of almost daily triple-digit swings, including a near-record 733-point drop Wednesday, the Dow Jones index was down just 50 points shortly after noon, amid new government reports suggesting inflation has fallen sharply as the nation’s industrial production posted its largely monthly decline in September in more than 30 years.

America’s seniors, many of whom have seen their retirement funds plummet in the global crisis, got a bit of good news Thursday as the government announced a 5.8 percent increase in Social Security payments starting in January. The percentage increase, done to offset higher energy and food costs in 2008 after years of low price inflation, was more than double the previous increase and the highest bump in payments since 1982.

The typical retiree’s monthly check would rise from $1,090 to $1,153, the government said.

Treasury Secretary Henry M. Paulson Jr. said in a television interview that he was less focused on the stock market gyrations than on the world’s frozen credit market. There were signs the Bush administration’s decision this week to pump $125 billion into nine major U.S. banks had helped, he said.

“You don’t want to react too much to the equity market any single day,” Mr. Paulson said in an interview with Bloomberg Television. “But if you look at the credit spreads, if you look at some of the indicators that I look at every day, there’s no doubt in my mind we’ve done the right things.” While U.S. markets were in a holding pattern, leading Asian and European markets earlier continued the global slide Thursday.

The FTSE 100 index of leading British shares closed down 218.20 points, or 5.4 percent, at 3,861.39, while Germany’s DAX was 238.82 points, or 4.9 percent, lower at 4,622.81. The CAC-40 in France was 200.07 points lower, or 5.9 percent, at 3,181.00.

The losses were even worse in Asia, as Tokyo’s benchmark Nikkei 225 stock average slid 906 points, or 9.5 percent, to 8,641. South Korea’s Kospi was down 8.4 percent, Australia’s benchmark was off almost 7 percent and Singapore’s index lost about 6 percent.

New Japanese Prime Minister Taro Aso blamed the market’s slide on what he called the “insufficient” U.S. plan to provide up to $700 billion to rescue Wall Street and get banks lending again.

The White House announced that President Bush would make his first extended public remarks on the new bailout strategy with a speech Friday morning to the U.S. Chamber of Commerce — before the U.S. markets open.

The new government numbers indicate that the financial crisis had already begun to take its toll on the larger economy. But traders said the bad news came with a silver lining, in that it may give the Federal Reserve more leeway to cut interest rates again in a bid to jump-start the economy.

The Labor Department reported that the key inflation indicator, the Consumer Price Index, was flat for September, following up on August’s 0.1 percent decline. Federal Reserve Chairman Ben S. Bernanke said inflation fears appear to be receding, and economists say that gives the central bank more operating room on interest rates.

The weak economy also produced some good news on the energy front, as sagging global demand pushed oil prices to a 14-month low, despite fears that the OPEC cartel of oil-producing nations may try to cut back production to shore up prices.

Many in the market are already banking on another rate cut when the Federal Reserve governors gather late this month.

In other news, the Federal Reserve reported Thursday that U.S. industrial production in September posted its sharpest monthly decline since 1974. The 2.8 percent drop was substantially higher than forecasters had expected.

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