U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers

US Consumer Confidence falls to a new all time low

The Conference Board Consumer Confidence Index™, which had increased moderately in November, declined to a new all-time low in December. The Index now stands at 38.0 (1985=100), down from 44.7 in November. The Present Situation Index plummeted to 29.4 from 42.3 last month. The Expectations Index decreased to 43.8 from 46.2 in November.

The Great Depression has reached Detroit. The average price of a home is now $18,513 and unemployment has reached 21%, and it’s expected to get worse. Detroit is facing a crisis of epic proportions that officially puts Detroit statistically (and real term) on par with the great depression.

Bloomberg: Toyota Forecasts Its First Operating Loss in 71 Years

“The environment we’re in is extremely tough,” President Katsuaki Watanabe told reporters today in Nagoya. “We’re facing an unprecedented emergency situation. Unfortunately, we can’t see the bottom.”

AFP: World faces “total” financial meltdown: Bank of Spain chief

The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.

NY Times: We’re in for an Ecomomic Hell

The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the pre-crisis years isn’t coming back either.

NY Times:  Spam sales soar as Economy sinks

As consumers are cutting back on all sorts of goods, Spam is among a select group of thrifty grocery items that are selling steadily

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

Reuters: Americans rich and poor pawn more to pay bills…

Whether it’s a Tiffany diamond or a three-year-old lawnmower, more and more Americans from all social classes are pawning their possessions to make ends meet. Pawn shop owners see strong business across the country, even in unexpected locales like Beverly Hills, the mecca of luxury living and shopping.

Boston Globe: Athens Greece plunges into caos as riots spread in protest of corrupt government, job losses and frustration with the elite

On the night of Saturday, December 6th, two Special Guards of the Greek police clashed with a small group of young men. The exact details of what took place are still unclear, but it is known that one of the Guards fired three shots, and one of those bullets caused the death of 15-year-old.

Bloomberg: Chrysler, Ford Idle Plants; GM Halts Engine Factory

 The cutbacks showed how far automakers are going to save money and prune output in a year in which industrywide U.S. sales are poised to fall to their lowest levels since 1991. GM and Chrysler say they may run out of operating funds in just weeks without emergency U.S. aid.

From Karl Denniger over at the Ticker Forum:

From 1980 The Federal Reserve has defined “economic growth” as “borrow faster than you grow output.”  This, as I have repeatedly shown, leads to declaring growth that never really happened.

Bluntly - Bernanke and the rest of the FOMC need their lithium dose increased.

Retail sales fell for the fifth straight month in November as mounting job losses last month curbed consumers’ ability and willingness to spend money in stores….

November is a crucial sales month for retailers since it marks the start of the important holiday shopping season. Combined sales for November and December can account for as much as 50% of merchants’ annual profits and sales.

Economic Times:  Investor Jim Rogers calls  most US big business “Bankrupt”

Jim Rogers, one of the world’s most prominent international investors, on Thursday called most of the largest US banks “totally bankrupt,” and said government efforts to fix the sector are wrongheaded…. “Governments are making mistakes,” he said. “They’re saying to all the banks, you don’t have to tell us your situation. You can continue to use your balance sheet that is phony…. All these guys are bankrupt, they’re still worrying about their bonuses, they’re still trying to pay their dividends, and the whole system is weakened.”

Economic Times:  IMF cheif warns finiancial crisis will worsen in 2009

“I want to tell you that 2008 was a difficult year in the world economy but in no way can we expect 2009 to be better,” the IMF managing director said during a joint news conference with President Oscar Arias.  “This is true anywhere, all around the world, in the United States, in Europe. The IMF is expecting negative growth next year.”

The federal government ran a record budget deficit in November, putting Uncle Sam on track to post an all-time high annual shortfall of $1 trillion or more.

In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.

Finiacial Sense:  The Demise of the Middle Class is now Complete

The struggles of the American middle-class since 1970 become very clear when looking at the next two charts. Their buying power has plunged when you factor in the massive loss of buying power of the US dollar. Over this 35+ year period, both spouses were forced into the workplace to keep the family afloat. It also explains the massive growth in consumer debt and lack of personal savings. The middle-class was not necessarily acting irresponsibly. It was acting out of desperation and necessity.

Telegraph UK: Deflation Virus is moving the policy test beyond the 1930′s Extremes

We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking…..  Once the killer virus becomes lodged in the system, it leads to a self-reinforcing debt trap – the real burden of mortgages rises, year after year, house prices falling, year after year. The noose tightens until you choke. Subtly, it shifts wealth from workers to bondholders. It is reactionary poison. Ultimately, it leads to civic revolt. Democracies do not tolerate such social upheaval for long. They change the rules.

CNN Money:  ”Wanted: Bank failure specialist”

The FDIC is looking to hire about 125 new workers in order to cope with more bank turmoil in 2009. Starting salary? $156,000 per year:

Over the next three months, the agency plans to add about 125 new employees, according to a FDIC spokesman. The majority of those positions are aimed at dealing with struggling or failed institutions in Western states…. “[The FDIC is] fully expecting, over the course of the next 12 to 18 months, [that] there is going to be a rash of failures,” said Nick Ketcha Jr., a former director of supervision at the FDIC who now serves as a managing director at the New Jersey-based financial services consulting firm FinPro.

When was the last time you invested in something that you knew wouldn’t make money? ……  In the market equivalent of shoveling cash under the mattress, hordes of buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return.

Fortune Magazine: 8 really, really scary predictions: 

Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening.

Wall Street Journal:  Fed Weighs Debt Sales of Its Own for first time in History

Just exploring the idea underscores many challenges the ongoing problems are creating for the Fed, as well as the lengths to which the central bank is going to come up with new ideas….

Some private economists worry that Fed-issued bonds could create new problems. Marvin Goodfriend, an economist at Carnegie Mellon University’s Tepper School of Business and a former senior staffer at the Federal Reserve Bank of Richmond, said that issuing debt could put the Fed at odds with the Treasury at a time when it is already issuing mountains of debt itself.

I have spoken to a couple of pretty senior bankers in the past couple of weeks and their story is rather different. They don’t refer to the looming problems as being like 1992 or even 1929. They talk about a total financial meltdown. They talk about the End of Days….

the system will reboot itself, but for a while there will be absolute chaos: riots, lynchings, starvation. It’ll be a world without power or fuel, and with no fuel there’s no way the modern agricultural system can be maintained. Which means there will be no food either. You might like to stop and think about that for a while.

London Times:  “Most of us planning for the next few months are building the equivalent of an economic bomb shelter…. 2009 will be treacherous.

Capitalism is changing in fundamental ways. What’s happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies for many years to come. Arguably the crisis will turn out to be more significant for us and other developed economies than the collapse of communism

Despite months of rescue efforts, hundreds of billions of dollars in government spending and an avant-garde apparatus of financial tools, the American economy has only worsened, and at a faster rate than nearly anyone predicted.

CNN:  “The economy is now deteriorating with frightening speed..”  CNNMoney.com — In November, the U.S. economy shed jobs at the fastest rate in 34 years – and experts say December could be even worse.

Money Week: “How many bailouts before the Us defaults…”

As Randall W Forsyth points out in Barron’s, all these bail-outs don’t come for free. “What happens if the requests begin to strain the credit line of the world’s most creditworthy borrower, the US government itself?”

Forsyth points out that the yield curve is getting steeper. All that means is that the yield on short-term US government bonds is much lower than that on long-term US government bonds. This would normally suggest that investors expect a recovery in the future, as economic growth picks back up again and interest rates start to rise to more normal levels. But at the same time, the cost of insuring the US Treasury’s debt via CDS has also risen sharply, which in short, means that investors are getting worried that the US may not be able to repay its debt.

Bloomberg: “53% of all modified loans re-defaulted in first 6 months…”

Most U.S. mortgages modified by lenders to help keep struggling borrowers in their homes fell back into delinquency within six months, the chief regulator of national banks said.

Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department’s Office of the Comptroller of the Currency, said today at a housing conference in Washington.

California, the world’s eighth-largest economy, may pay vendors with IOUs for only the second time since the Great Depression, the CA State Finance Director Mike Genest said.  In a letter to legislative leaders Dec. 1, Genest said California “will begin delaying payments or paying with registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may runout of cash by March, state officials say.  Governor Arnold Schwarzeneggerwarned that the state may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow. California is reeling more than any otherstate from budget woes that pushed the nation’s governors to seek helpfrom Congress. States say federal money is needed to ease the pain from spending cuts and tax increases that would be an even  further blow to an economy in the throes of a recession.  The warrants would be given to landscapers, carpet cleaners, construction firms, food-service companies and other vendors. They would pay an interest rate of as much as 5% . . .

Yahoo News:  Obama Economy “a big problem and it is going to get worse”

Obama, speaking to Tom Brokaw on NBC’s “Meet the Press,” used some of his starkest language yet to underscore the severity of the challenge he’ll face upon taking office next month.

“If you look at the unemployment numbers that came out yesterday, if you think about almost 2 million jobs lost so far, if you think about the fragility of the financial system and the fact that it is now a global financial system so that what happens in Thailand or Russia can have an impact here, and obviously what happens on Wall Street has an impact worldwide, when you think about the structural problems that we already had in the economy before the financial crisis, this is a big problem, and it’s going to get worse,” he said in the interview taped Saturday.

Market Watch:  “Nearly 10% of Homeowners Delinquient or in Foreclosure”

The percentage of U.S. mortgage holders who were behind in payments soared to a record 6.99% of loans outstanding in the third quarter, the Mortgage Bankers Association said Friday, and the number of mortgages somewhere in the foreclosure process was also at a new high. Mortgages entering the foreclosure process fell to 1.07%, from 1.08% in the second quarter but were up from 0.78% a year ago. The delinquency rate for
mortgage loans on one- to four-unit properties was a seasonally adjusted 6.99% of all loans outstanding at the end of the third quarter. That’s up from 6.41% at the end of the second quarter and 5.59% a year ago…