Maybe we should pay attention to Ted Forstmann's warnings about the credit crisis.

Twenty years ago, Forstmann warned us of the rapid end to the junk bond frenzy. Now he is even more worried about the economy. "We are in a credit crisis the likes of which I've never seen in my lifetime," said Forstmann in an interview with Wall Street Journal columnist Brian M. Carney.

As Carney reports:

Forstmann is most concerned with a different, more subtle effect of the oversupply of money. When it becomes too plentiful, bankers and other financial intermediaries end up taking on more and more risk for less return.

Forstmann was right before, maybe his warning will ring true again.

Many General Motors manufacturing jobs has moved overseas. Photo: ifmuth (flickr)

Guess which media outlet is offering an insightful "We the People" series covering unemployment in the Midwest and other pressing U.S. election-year issues? The Kansas City Star? Perhaps the Chicago Tribune or the New York Times? Try Al Jazeera.

In "Jobs," the Dubai-based publisher examines how Dayton, Ohio is dealing with unemployment after losing more than 250,000 jobs in the last eight years. Dayton has been hit hard by outsourcing of manufacturing jobs, rising employment and increased home foreclosures. As one person put it, "the people are here but the jobs are not."

Watch part one of Jobs: End of the Line on YouTube

Watch part two of Jobs: End of the Line on YouTube

Confused about the housing crisis, the falling dollar, the credit crunch or the securities problem "that nearly brought down the global financial system?"

Last week, This American Life took it all on in "The Giant Pool of Money". In one hour, This American Life breaks down the most complex financial problem in recent U.S. history, and does it better than anyone I've come across.

The Federal Reserve cut interest rates again on Wednesday in an attempt to stimulate the domestic economy. While the combined impact of another rate cut and the impending arrival of stimulus checks in taxpayers' bank accounts may bode well for American retailers, the rate cut may also exacerbate the global food crisis.

That same day, Soledad Requena was one of 1,000 women banging pots and pans outside Peru's Congress, protesting soaring food prices. If the government can't increase subsidies on products like rice, bread and meat, she asked, "Where will we go to eat?"

How does cutting short term interest rates effect international food prices? Read more...

What impact is the U.S. economic slowdown having on developing countries? Matt Homer of the World Politics Review writes that the weakening U.S. dollar is having an adverse effect on individuals in developing countries relying on remittances for large parts of their income. A bigger problem, however, is that the negative impact of the declining dollar is likely to go beyond the individual level. For a number of developing countries, remittances make up a significant percentage of total GDP, and several countries are already expressing concern that a decrease in remittances could hurt their entire economies.

In Tonga, for example, remittances account for just over 32 percent of the country’s total GDP. Yet because up to 80 percent of all remittances come from sources in the U.S., there is concern that continued declines in the U.S. economy “will hit Tonga extremely hard.” Economists in Nicaragua are also predicting that “any decline in the amount of remittances will undoubtedly affect consumerism within the Nicaraguan economy.” While around 40 percent of Nicaraguans receive remittances, most of which come from the U.S., economists estimate that almost 90 percent of remittance money sent to the country is spent in the local consumer economy.

Photo: kaysha (flickr)

As Haitians take to the streets over rising food prices and Americans fret at the gas pump, South Americans seem to be weathering the hemisphere's economic storm fairly well.

According to The Economist, on the whole, South American economies are doing better now than at any time since the 1960s, growing an average of 5 percent a year since 2004. So far, the U.S. credit crunch has had little noticeable affect on South America's economy. In fact, some investors are buying even more South American bonds than ever due to declining U.S. interest rates. And with their expanding economies and low cost of living, South America is becoming more popular for North American property investors.

In the near future, The Economist says, it's expected that the mild U.S. recession and slowing world economy will curb South America's economic growth only slightly. But some economists attribute the past years' steady growth to global economic conditions which may not be so favorable in the future. The real concern is what happens in 2009, when decreased remittances and decreased demand for exports take their toll.

Our economy is shrinking, inflation is increasing, and it looks like it's time to tighten our belts and settle down for the worst. But were the times we are leaving really so great to begin with?

For the first time since we've been paying attention to such numbers, the median family income (from 2000 to 2007) has actually decreased during a period of economic growth. Real median family income more than doubled from the late 1940s to the late ’70s. It has risen less than 25 percent in the three decades since.

According to New York Times writer David Leonhardt, "the larger point is still crucial: the modern American economy distributes the fruits of its growth to a relatively narrow slice of the population."

A responsible economy wouldn't allow this to happen. What's going wrong?

A recent article in The Economist explored the role financial illiteracy played in the subprime crisis and a growing global movement to improve financial education. Among projects mentioned in the article are Aflatoun, an Amsterdam-based program that attempts to "equip children with the knowledge and skills to become economically self-reliant citizens and empowers them to break the cycle of poverty through financial education." Another project discussed in the article was The President's Council on Financial Literacy, created by President Bush this past January.

John Hope Bryant, one of the vice chairman of the President's Council, is the founder of Project HOPE. Project HOPE has worked since the early '90s to use financial education as a way of alleviating poverty in urban communities.

At the Davos conference in January, Bryant summarized how financial education — what he calls the "Silver Rights Movement" — can reduce poverty.

Photo: Thatcher Cook for Mercy Corps

Will America's economic troubles spill over to South Asian markets?

India, because of its close economic ties to the U.S., could get caught up in the downdraft. Rising inflation rates are causing the country's conservative commercial bankers to squirm in a country usually considered the poster child for modernization. India ships more of its goods to the U.S. than to any other country — so if Americans curtail their spending in an economic slowdown, Indian businesses could lose big.

How can India maintain its high rate of economic growth despite the U.S. slowdown?

The Brookings Institute calls for India’s government to economically reform by addressing its major inefficiencies in connecting the rural poor with the mainstream economies. BusinessWeek points out the need for reforms in agriculture, infrastructure, health care and education. But it adds that reform "is the last thing" on the mind of India's ruling Congress Party.

For the first time in more than five years, the average household income is declining in the U.S., reports the Financial Times.

Joseph Stiglitz, John Edwards and anti-war group MoveOn.org all blame the Iraq War for triggering a U.S. recession. While the connection is politically attractive to some, President Bush — and even some of his critics — argue that this simply isn't true.

When President Bush said last week that "spending in the war might help with jobs" and that "this economy is down because we built too many houses and the economy’s adjusting," even well-known Bush-basher Paul Krugman had to concede the point. In a blog post, he wrote, "Hate to say this, but he’s right."

Yesterday Foreign Policy took a look at who is expected to win and lose as a result of a falling dollar. You may be surprised that the United States appears on the winning list.

The BBC is featuring a diary written by a woman living and working in Zimbabwe in which she describes the challenges of living a normal day-to-day life in the face of economic crisis and rampant inflation.

Today the Christian Science Monitor posted an article about how the declining dollar is affecting migrant workers in the United States:

Across the US, the falling dollar value has sent ripples through immigrant communities that send money to family overseas. As some currencies for developing countries have risen substantially against the dollar, many immigrant workers are increasing their workweek by up to 20 hours or taking second jobs. If the dollar's slide continues, the US may become less attractive to migrant workers, analysts say.

Most assume that China will experience a significant downturn in growth as a result of the recent scare in the US economy. But on January 3rd The Economist published an article suggesting that growth of GDP in China is less dependent on the export of cheap goods to Western consumer markets.

The headline ratio of exports to GDP is very misleading. It compares apples and oranges: exports are measured as gross revenue while GDP is measured in value-added terms…
Once these adjustments are made, Mr Anderson reckons that the "true" export share is just under 10% of GDP. That makes China slightly more exposed to exports than Japan, but nowhere near as export-led as Taiwan or Singapore.