CBO forecasts $1.2 Trillion Budget deficit!  And we can expect more!  ADP shows job losses mounting big time!  Brazil’s real reverses course… And Now… Today’s Pfennig! Well… There are two major things on the docket for the front and center piece today, both tell us a lot, but I think I’m going to go with the announcement of the Congressional Budget Office (CBO) yesterday afternoon as the lead story, and the ADP jobs report as the second story… So, let’s go to the tape!

The CBO announced yesterday that they are forecasting a $1.2 Trillion Budget Deficit for 2009! Uh-oh! This is scary folks, and there’s plenty more where that came from! This “forecast” doesn’t even

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Another week and another batch of fascinating video clips about bailouts, economic woes and other crisis-related matters. As to be expected, the good-news videos are in rather short supply. A number of the more interesting clips that have attracted my attention are shared below.

Some of my favourites included in this compilation are: “Peter Schiff uses analogies to describe crisis” (first one up) and “Dr Doom [Marc Faber] - Buffett’s approach to investing is dead” (further down). If you want to view only two of these clips, make sure to see these two.

Please post any interesting video links that you would like to share with the Investment Postcards community, in the comments section.

YouTube: Peter Schiff uses analogies to describe crisis “Ron

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A spree of economic props dominoed across Europe today (Thursday) all sharing the same theme - stopping the global financial crisis from getting worse. The European Central Bank took a drastic step to protect the Eurozone economy from shrinking further by lowering its benchmark interest rate by three-quarters of a percentage point to 2.5%.

As ECB President Jean-Claude Trichet announced the largest cut in the Eurozone’s 10-year history, he said that the region is bracing for negative growth next year.

“Global and euro-area demand are likely to be dampened for a protracted period of time,” Trichet said at a press conference in Brussels today, Bloomberg reported.

The ECB estimates average annual real gross domestic product (GDP) growth to be between 0.8% and 1.2% in 2008, between -1.0% and 0.0% in 2009 and between 0.5% and 1.5% in 2010.

The ECB’s rate reduction followed two other huge central bank cuts

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Dollar rises vs euro as risk aversion persists…  Yen supported on persistent global economy fears…  Euro zone inflation plunges

The dollar rose against the euro on thin trade on Friday, as weak equities markets and fears of a deepening global recession led investors to seek the U.S. currency as a haven.

Worries about consumer spending helped weigh on U.S. and European shares, while the low-yielding yen gained ground.

Extreme risk aversion and repatriation flows have been supporting the U.S. currency recently.

The euro weakened against the yen and sterling on growing expectations that slowing euro zone inflation may lead the European Central Bank to cut interest rates more aggressively next week from the current benchmark rate of 3.25 percent.

Trading volumes were lower than usual as U.S. markets reopened for only half a day after Thanksgiving Holiday.

“Trading is very thin,

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Currency Volatility!  Trading Theme creeps back!  ADP indicates a bad Jobs Jamboree…  Putting on my thinking cap…  And Now… Today’s Pfennig!Well… What a volatile day in the currencies yesterday (Wednesday)! WOW! Running up and down the dial, all day long! At one point yesterday morning, the euro looked to be in the driver’s seat, ooh, ooh, ooh ooh, driver’s seat, yeah… Stop it Chuck, this is supposed to be a serious commentary! Yeah right! Well, at least seriousness is sprinkled in from time to time, eh? Anyway… What I was getting at before slipping off into a song by Sniff-n-The Tears, the euro was moving higher and higher, and was making the 1.29 and 1.30 handles

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Contrasting monetary policy moves from the Bank of England (BoE) and European Central Bank (ECB).

The BoE stunned the markets with a 1.5% rate cut, taking its benchmark rate to 3.0%, the lowest in over half a century. The ECB, meanwhile, met expectations with a 50 basis-point cut. The Eurozone’s policy rate now stands at 3.25%.

This from Bloomberg:

The Bank of England is working with the government to limit the fallout from what it calls the worst global banking crisis in almost a century. Prime Minister Gordon Brown was forced last month to broker a takeover of HBOS Plc and Bank of England figures show financial institutions in the U.S. and Europe have already suffered $2.8 trillion in securities losses from the crisis.

“They’re admitting that this recession is going to be very painful and have a huge impact on inflation,” said George

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With an estimated $4 trillion daily, forex trading dwarfs other markets in terms of volume. And stock market chaos is driving more investors to the currency markets. Frank Hemsley says forex trends are prone to overshoot. That means the British pound could fall much further against the US dollar in the coming months. It may be a bold call, but Frank says pound-dollar parity by the end of the year is a real possibility.

This from Fleet Street Daily:

Investors tend to fixate on the stock market as a way to make money. When stock markets are in chaos, they see no way out. I’m surprised that so few investors pay attention to the currency markets. After all, in terms of volume and value, the Forex dwarfs the equity markets. But I get the feeling that’s going to change.

Currency stories are all over the financial pages at the moment — and investors

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The U.K. government yesterday (Wednesday) announced its own banking bailout package with an $87 billion (50 billion pound) recapitalization plan for the ailing British financial sector. “The global market has ceased to function,” British Prime Minister Gordon Brown said yesterday at a press conference in London. “The banking system must be sounder, and that is why we are putting the capital in.” Under the plan, the U.K. Treasury will provide $43.5 billion (25 billion pounds) to recapitalize banks and boost their Tier 1 capital ratio. A bank’s Tier 1 capital ratio is a key indicator of the firm’s financial strength. An additional $43.5 billion (25 billion pounds) will be available if needed. In addition, the Bank of England, the nation’s central bank, will increase the amount of funds available for short-term lending to $346 billion (200 billion pounds). The plan ...

-- As rumored, the world's central banks have announced a coordinated rate cut to try to juice up the frozen credit markets. The Fed has cut its key lending rate by a half point to 1.5%. The European Central Bank trimmed cut its key rate to 3.75% from 4.25%. The Bank of England cut its key rate to 4.5% from 5%.

-- According to a  joint statement by the participating banks, "inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices," while "the recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability." 

Lehman Brothers Holdings has declared Chapter 11 Bankruptcy. Any potential bidders have fled the scene and so far the Treasury doesn’t plan on bailing them out.

Bank of America, however, has agreed to acquire Merrill Lynch for $50 billion.

AIG is in rough shape and their fate hangs in the balance as this week opens up.

The Bank of China has decided to cut short-term rates to encourage liquidity and support economic growth in the face of increased market risk flowing from the US.

The Bank of England and the European Central Bank have pumped additional funding (5 billion pounds and 30 billion euros of loans) into their respective markets in an effort to shore up confidence and avoid panic in the face of the US banking fiasco.

The Bank of Australia joined the money party and unleashed a few billion into their markets, an amount more than they originally estimated

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