Who should take the call?

It’s 3 a.m., a few months into 2009, and the phone in the White House rings. Several big hedge funds are about to fail, says the voice on the line, and there’s likely to be chaos when the market opens. Whom do you trust to take that call?

I’m not being melodramatic. The bailout plan released yesterday is a lot better than the proposal Henry Paulson first put out — sufficiently so to be worth passing. But it’s not what you’d actually call a good plan, and it won’t end the crisis. The odds are that the next president will have to deal with some major financial emergencies.

Read all of Paul Krugman's analysis.

US's National Innovation Deficit

Though Ms. Estrin, the former chief technology officer of Cisco Systems, generally is not an alarmist, she has become more and more concerned about the state of her country and its innovation. Vint Cerf agrees: “There is a remarkable telescoping in of vision and an unwillingness to make long-term bets,” and Robert Compton, a venture capitalist and entrepreneur, feels that the United States is losing its innovation edge to China and India.

Read Another Voice Warns of an Innovation Slowdown.

Economic slowdown weighs on oil market

Oil prices dropped below $114 a barrel as investors speculated slowing economic growth in the world's largest economies will continue to undermining global crude demand.

Europe's biggest economies -- Germany, France and Italy -- all contracted in the second quarter. Japan said this week its gross domestic product also shrank in the April-June period. The U.S. Energy Information Administration reported a bigger-than-expected drop in gasoline supplies, but also said U.S. demand for refined fuel products continues to fall.

Read this Businessweek article.

Germany's Sinking Economy

After three years of economic growth and job creation, the Germany economy is starting to upend. Although the industrial sector may still have orders to fill, there is a dearth of new orders coming in at the moment, turnover is declining and profits sinking.

The speed with which the economy is deteriorating is almost unprecedented -- with economists not having seen it go down this fast in years. During the second quarter, Germany had shrinkage of between 0.7 and 1.5 percent, government experts estimate. If the trend continues during the current quarter, then Germany will meet the technical definition for a recession.

Source: Der Spiegel.

Thinkernet Launched

The Thinkernet is Internet Evolution’s moderated blogosphere, where the leading minds of the Internet blog and exchange opinions – as well as interacting with registered members of the Internet Evolution site via message boards.

More than 60 of the Internet’s leading luminaries have signed on to blog on the Thinkernet – including world famous authors, entertainment executives, economists, politicians, CIOs, investors, activists, and Internet entrepreneurs.

Shades of the 1930s

It certainly seems like 1933. As happened 75 years ago, Wall Street—after two terms of a business-friendly Republican president—self-immolated on a pyre of greed, incompetence and excessive optimism. The troubles thought to be contained to a particular sector (stocks then, subprime mortgages now) spread throughout the entire financial system. And with confidence shattered, the federal government stepped in with unprecedented efforts.

The New Deal left behind plenty of important landmarks, from the Appalachian Trail to Hoover Dam. But its financial infrastructure has proved just as important. The Banking Act of 1933 created the Federal Deposit Insurance Corporation and forced member banks to submit to regulation. The Securities and Exchange Act (1934) brought forth a body to oversee the nation's stock exchanges. Later in the decade, Fannie Mae was established to revive the dormant mortgage market.

Fannie Mae and Freddie Mac play a huge role in the mortgage business by lending cash and guaranteeing loans made by others. But with the spread of the mortgage crises their stocks have plummeted in recent weeks, and questions have been raised as to whether the government would do what it implied it would all along when it established the two government sponsored organizations: stand behind their debt. Federal reserve chairman Ben Bernanke, a scholar of the epic financial meltdown of the Great Depression, and Treasury Secretary Henry Paulson gave an emphatic "yes," as they described to occasionally hostile Congress members their plans to allow Fannie and Freddie to borrow money from the Federal Reserve, and to empower the Treasury Department to buy (and buoy) the companies' stock and stand behind their $5.2 trillion in debt.

Read the whole Newsweek article here.

Infectious Exuberance

America, from its inception, was a speculation,” begins the historian Aaron M. Sakolski’s 1932 classic, The Great American Land Bubble. George Washington himself was a land speculator, Sakolski notes, and by Washington’s time it was widely perceived that America would eventually be populated much more densely by vast numbers of immigrants, leading many investors to dream of rapidly rising land prices. Waves of speculative mania swept towns, cities, and regions from the 18th century onward, even along the vast and empty frontier. Up, up went the prices. And then, inevitably, down.

Read Robert J. Shiller's article in The Atlantic: "Financial bubbles are like epidemics— and we should treat them both the same way."

An Amazing 60-90 Billion Euros

European banks may find it necessary to raise between 60 and 90 billion euros (94-141 billion dollars) to shore up their finances in the face of a nearly year-long credit crisis.

The Secret of Bill Gates' Success

Nice homage from the BBC. And by all means also check Fortune, as well as the Reuters coverage of the moment supreme of Bill actually saying goodbye on Friday, Jun 27, 2008. Plus the hilarious official "leaving" video featuring Bono, Clooney, Hillary, Obama and others.

Less jobs & surging fuel prices . . .

. . . they may just be the beginning of bigger problems for the US and global economy.

Rising oil prices combined with falling wages will force governments and citizens to tighten their belts. If inflation strikes, governments and citizens will have little choice but adapt by purchasing smaller cars or bicycling, adjusting eating habits and pursuing a simpler lifestyle.

Whole story here.

New Oil Price Shock

Energy ministers are meeting in Japan a day after a record one-day jump in the crude oil price, to $139 a barrel.

Under pressure from the US, Japan, China, India and South Korea have agreed on the need to end fuel subsidies, blamed for boosting demand.

US energy secretary Samuel Bodman said the price surge was a "shock" but not a crisis, amid fears the oil price spike could help tip some of the world's economies into recession.

Some suggest crude oil could reach $150 a barrel by July.

The Mutually Reinforcing Housing and Oil Shock

The twin shocks from housing and oil have become mutually reinforcing, potentially turning what may be a mild recession into something more threatening. Even those economists who think the U.S. might dodge a recession are concerned.

Crazy prices at the pump are pushing even the survivors over the edge. "They're asking, 'Do I put gas in my car or do I pay this utility bill or do I pay the mortgage?'

Read this BusinessWeek article.