Monday, October 13, 2008

13 Things Your Bank Won't Tell You

Also see: 7 More Secrets from Your Bank

1. Just because you deposited a check today doesn't mean you can start living it up tomorrow. It takes us three days on average to post the money to your account. (And why should we hurry? If you bounce a check, we collect around $30.)

Financial Advice for Banking Customers
Why tell you about checking accounts with higher interest rates when you're already willing to sign up for an account that pays less?
2. Yes, we know the line is long and only one teller window is open, but no, the guy in the cubicle can't come over to help out. He may not be allowed to do a teller's job.

3. Call or visit in person to resolve a problem. Filling out online forms will usually get you the by-the-book reply, but a rep will often forgive a fee over the phone so we can all just get on with our lives.

4. Unless you're Wolfgang Puck, our loan officers have pretty much decided before you walk in that you're not getting a loan for your dream bistro. But they'll let you apply for one anyway. We're not crazy about lending to nonprofits and houses of worship either. We don't want the bad publicity when we go after them.

5. Our tellers routinely press you into opening new accounts because their jobs depend on it. Banks hire “mystery” customers who secretly test whether a teller is cross-selling services.

6. Don't blame us -- it's not our fault you can't control your spending. "The bank didn't make you swipe your card or write a check that you didn't have money for," says one teller in Akron, Ohio.

7. Postdating a check rarely works. With stacks of deposits to process, we look at account names, not dates. If the check bounces, you're liable.

8. Please don't haul in plastic bags of loose change. We really don't have the time or manpower to count it. Ask for free wrappers and bring in rolled coins next time.

9. Keep receipts for every ATM transaction -- and please don't feed cash directly into the machine without first putting it into an envelope (yes, people actually do this).

10. A consumer's brain registers an immediate "Ouch!" whenever he's hit with an itemized penalty, such as a bounced-check fee, so most people keep a much higher balance in their checking accounts than necessary, says personal-finance writer Jason Zweig. "Banks make a ton of money off this mental quirk since they would have to pay interest on the money if we left it in our savings accounts, where it belongs."

11. Banks don't always promote their checking accounts with the highest interest rate. Why tell you about those when you're already willing to sign up for an account that pays less?

12. A bank has the right to pay itself back out of your next deposit for any fees or overdraft loans that you owe.

13. Sorry, we can't afford to give out free toasters anymore to new customers. Business is brutal.

Interviews by Neena Samuel

Original here

The Harder They Fall, the More I Smile


THINGS are bad. Very, very bad. The markets are still seesawing crazily, and financial institutions are folding and being taken over so quickly they’ll have to replace their signs with Jumbotrons to keep up with the name changes. Our own president noted last month that “If money isn’t loosened up, this sucker could go down,” meaning — I think — the economy. But nobody seems to know if the huge bailout plan will work.

How does all of this compounded badness make me feel?

Not so bad, surprisingly.

You see, I was never able to make much money in the markets. I agree with Daniel Waterhouse, a character from the 17th century in “Quicksilver,” Neal Stephenson’s brilliant novel, who says that even though he is a knowledgeable “natural philosopher,” or scientist, he has given up on understanding money. “If money is a science,” he states, “then it is a dark science, darker than Alchemy.”

I couldn’t agree more. My own 401(k) plan has already slipped so far that I might have invested more productively over the last few years by burning the cash for heat. Meanwhile, to hear the financial press and the cable channels describe it, everybody but me — especially in the financial industry — was getting rich.

Now we’re even.

There is, of course, an element of schadenfreude at play, but it’s not simply that I’m happy because others are sad. That’s sick; I would never rejoice at the suffering of my poor and middle-class countrymen who have fallen on hard times, or of the retirees looking at dwindling investments at the moment they need them most. True joy, my friends, is the feeling that comes from knowing that the right people are sad.

If you became obscenely rich riding this bubble, I’m taking pleasure in your fall. Of course, you are still undoubtedly richer than I will ever be. But it’s also clear that being rich means much more to you than it has ever meant to me, so I know you’re in pain. Which is good.

I’m not the only one who feels this way. I recently received a note from Dr. Michael Stone, a psychiatrist in Manhattan who is a professor of clinical psychiatry at Columbia University. “In America it’s every boy’s dream to one day become a millionaire,” he wrote, adding that the subprime mortgage craze and debacle have “made that dream come true for more people than we could ever have imagined before.” He continued: “Only yesterday, it seems, Maurice R. Greenberg, ex-C.E.O. of A.I.G., saw the value of his holdings in his former company change — in one day — from $15.8 billion to $911 million. Where else but in America can even a billionaire become a millionaire?”

The upside of this financial crisis, then, is that everybody and his uncle are beginning to investigate what went wrong. Some of them even have subpoena power. Delicious.

ANOTHER group that I don’t mind seeing break out in a sweat are the stock market analysts who claim that the news industry is dying because the corporate leaders were too stupid to meet the challenge of the Internet. Admittedly, I have a personal bias here. But guess what, guys? Change comes to every industry; it’s how you react over time that makes the difference.

The story of newspapers is undoubtedly grim. Now that many of the analysts’ own shops are being put in a blender, though, would it be unkind to point out that those at the helm of the newspapers didn’t play in the subprime securities market and thus drive their companies off a cliff? Hope you like dealing with change, baby!

Then there are the people whose judgment is so horrifyingly bad that those of us who have honed our sense of schadenfreude must stand back in awe, as if we have been presented with a kind of once-in-a-lifetime performance art. That artist, that visionary, is Gabriel Nathan Schwartz, a lawyer from Denver who had a bit of trouble in August at the Republican National Convention. Mr. Schwartz — no relation — seems to have met a nice lady at a bar during the convention and taken her back to his hotel room.

Here’s what happened next, according to The St. Paul Pioneer Press, in a report that reads like blank verse:

“Once there, the woman fixed the drinks and told him to get undressed.

“And that, the delegate to the Republican National Convention told police, was the last thing he remembered.”

According to the initial police report, when Mr. Schwartz, who is 29, woke up, he was $120,000 poorer. He had been relieved of a great deal of cash plus a $30,000 watch, a $20,000 ring, a $5,000 necklace and a belt worth $1,000. Prada.

In a statement he released once the story of his misadventure started making the rounds of the Internet, Mr. Schwartz said, “I used poor judgment.” A spokeswoman for Mr. Schwartz said that his losses actually amounted to $63,050, and that he has worked with the police to correct the misunderstanding.

In his statement, he said he was “joking around” when he proclaimed during an interview earlier in the convention that he wanted “less taxes and more war,” and that the United States should “bomb the hell” out of Iran.

I might not have the kind of money that gives me expertise in this area, and I don’t own any Prada. But I feel I know a thing or two about wealth. And let me tell you that anybody who wears a $30,000 watch can afford to lose $30,000. Prada goeth before a fall.

Still, let’s not be small about this. It’s easy to joke about a guy who gets himself into a mess, but Mr. Schwartz has ascended to the level of a metaphor. Look at it this way: perhaps he was actually visited by Fortuna, the goddess whose bailiwick includes the realm of investing.

The Romans saw Fortuna as the goddess of luck, but she was also the goddess of fate. Maybe she was giving Mr. Schwartz a preview of the economy to come. Maybe what she put in his drink was a little dose of irrational exuberance — the thought that meeting a woman in a bar and taking her back to a hotel room is a perfectly reasonable thing to do. What could possibly go wrong?

AS a nation, haven’t we been on a somewhat similar misadventure? The nation’s financial institutions smiled at the nice lady in the bar and invited her up to their collective hotel room, hoping for the best. And they got rolled. And, by extension, so did we.

The difference between Mr. Schwartz and the financial institutions is that he didn’t expect the government to bail him out.

The rest of us, clearly, just need to get too big to fail.

Original here

Productivity 2.0: How the New Rules of Work Are Changing the Game

For years, books and articles and blogs on productivity have been showing us how to be more productive: crank out the tasks, multi-task, work faster, be organized.

In short, they’ve taught us to be a good part of a corporation that wants more out of us. But that’s old-school productivity, or Productivity 1.0.

Today let’s take a look at Productivity 2.0: a new set of rules have changed everything for the workers of the world. Don’t crank out tasks — learn to work with a deeper focus. Don’t plan and hold meetings and form committees — just launch the software or product or service and keep improving it. Don’t spend time organizing — you’ve got more important things to worry about.

A little while ago I talked about the New Rules of Working … and today we’ll look at how those new rules have changed the game for productivity. Now, these ideas aren’t actually new, but they’re being newly adopted by many, and will be adopted increasingly as workplaces change in the coming years.

Please note that, as always, your mileage may vary — these new rules of productivity won’t work for every single worker in every single office situation. Certain jobs have different requirements. But more and more, these trends are emerging and changing the way we look at productivity.

1. Don’t Crank - Work With Deeper Focus.

Old School: Crank It Out. The old school of productivity taught us how to crank out the tasks. Each task is a widget that needs to be cranked, and the more we crank out, the better. Speed is important, and cranking out more tasks is the ultimate criteria. How many tasks can you finish in a day?

Productivity 2.0: Deep Focus. The new worker isn’t as obsessed with speed. He allows himself to slow down and work at a more leisurely pace. He clears away distractions and allows himself to focus on the task at hand. He gets passionate about important and exciting tasks and gets into Flow. This allows for a new kind of productivity — one where quality matters, where amazing things are produced at an intense rate, where there is a passion and satisfaction in completing a task.

2. Minimize Out Meetings and Planning — Just Start.

Old School: Lots of planning is important. Hold numerous planning meetings, draw up specs or detailed timelines, make sure things are well planned out before committing resources. This, however, meant that things took time. That was fine when the world moved at a slower pace.

Productivity 2.0: Just Start. Forget all the detailed planning. Meetings are a waste of time, usually. Instead, figure out the minimum requirements to launch, get those done as quickly as possible, and launch in beta mode. Improve as you go along. Things don’t have to be perfect at launch. Google exemplifies this philosophy — did it wait until it had a better email program than Microsoft Outlook to launch Gmail? Heck no — it just launched to a small group of users and used their feedback to improve the service, expanding its group of users as it went along. Now it’s the best online email program. Same thing with Google Chrome — was it better than Firefox when it launched in beta? Nope (although it’s better than IE in my opinion) … but you can bet that it will continue to improve with all the feedback it gets. Edit: I changed the title of this point to reflect that some planning is necessary — “overplanning” is not.

3. Paperwork is out — automate with technology.

Old school: Crank through tons of paperwork. The old productive worker had tons of incoming papers, and lots of paperwork to fill out. And productivity methods taught him how to crank through that paperwork.

Productivity 2.0: Automate with technology. Many workers are learning to go paperless. And because everything is becoming digital, you can use technology to process it faster. People can fill out online forms instead of paperwork, and computers can pull the data in the forms into databases that can be manipulated in many ways. There’s no need for photocopying, scanning, faxing, filing, collating, hole punching, printing, or any of the many other office tasks that are associated with paper. People can buy something online and it can be produced and shipped to their door with no need for paperwork — it can all be automated. Many little tasks that used to be performed by humans can now be automated through computers.

4. Don’t multi-task — multi-project and single-task.

Old school: Multi-tasking is productive. Juggling tasks shows how productive you are, says old school productivity. I’ve written enough about multi-tasking for you to know where I stand on that.

Productivity 2.0: Multi-project and single-task. While I won’t go on once again about single-tasking — focusing on one task at a time to be more effective — I will say that multi-projecting has its uses. Let’s say you’re working on Task 1 of Project A — you should single-task while working on Task 1. But when it’s done, you might need to wait for a response from your boss before moving on to Task 2. In that case, while you’re waiting, you can work on Task 1 of Project B, single-tasking while doing that. When you’re done with that, you might need to hear back from a client before moving on to the next task of Project B — in which case you can either return to Project A if your boss responded, or move on to Project C. Single-task while working on any one task, but working on different projects to make your time more efficient can be a useful skill.

5. Produce less, not more.

Old school: Produce more. Again, the idea was to crank out as much as possible. Good managers tried to get as much productivity out of their workers as possible. Good workers produced more.

Productivity 2.0: Produce less. More isn’t necessarily better. The old thinking can lead to a big pile of crap. Instead, focus on quality, on innovation, on creativity. Focus on the important stuff. Let’s take a software engineer as an example: one engineer can write tons of code, knocking out one program after another. But a second engineer can focus on a really innovative program, and though he has produced much less code and fewer programs and has spent more time on a single program … his software can change the industry. It can win awards and recognition. It might even be the company’s main source of income if it catches on. Produce things that change the world, with a long-lasting impact.

6. Forget about organization — use technology.

Old School: Be organized. The productive worker of the past had drawers full of files, all organized thoroughly so that nothing would ever be lost. He had a Filofax full of contacts and appointments. He organized his computer files into folders and sub-folders and sub-sub-folders and on and one. It took a lot of time, but it was worth it.

Productivity 2.0: Tag, archive and search. With technology, that’s not necessary. Tag a file with a certain label, archive it, and find it later through its label or through search. This approach saves a lot of time, a lot of effort, and a lot of headaches. You can spend your time on more important tasks.

7. Out with hierarchies — in with freedom.

Old School: Hierarchy. The old way of thinking is that hierarchies are more efficient. After all, in a dictatorship, the trains run on time, no? Well, that’s not always true. Hierarchies require a lot of top-down decision-making, and a lot of up-and-down communication. The bottom level is often left powerless to act until the top level makes decisions, and the top level is often left without important information necessary to make those decisions, because they aren’t down at the bottom in the trenches. As a result, there’s a lot of inefficiency.

Productivity 2.0: Independence, freedom, and collaboration. Hierarchies are being flattened out. In fact, whole new forms of organization and collaboration are being created all the time. People more and more are working independently, either within a company or as freelancers and consultants. They take on jobs as they like, and collaborate with others at will. Workers are empowered to make decisions, communication is more efficient, and people with freedom are generally happier with their jobs and more passionate about the work they produce.

8. Work fewer hours, not more.

Old School: Work longer hours. Work long and hard! Be a top producer! Burn out by age 40! Working long hours earned you points with your boss, and there was a competition to see who worked the most and the hardest.

Productivity 2.0: Work fewer hours. With more freedom, workers are realizing that work isn’t everything, and that it’s more important to be happy, to produce important work, to have the freedom to be creative and innovative, to be passionate about your work … than to give everything you have for something you don’t care about. As a result, more people are working from home. More people have flexible working hours, working early and leaving early or coming in late and leaving late. More people take naps in the afternoon, when their productivity normally flags, and wake up refreshed and ready for a productive round 2. More people are setting limits to their working hours, and realizing that with those limits they actually make better use of the fewer hours they work.

Original here

Pound 'will keep falling' against the dollar

STERLING will continue to slide against the dollar as long as financial turbulence persists, analysts say, as international investors dump the pound and euro.

The pound fell to a five-year low against the dollar last week, briefly dropping below $1.70 before closing the week at $1.71. The Bank of England, in common with other central banks, cut interest rates by half a point last week, reducing Bank rate to 4.5%.

However UK interest rates are seen by currency dealers as having further to fall than those of other countries, with several economists predicting a drop to as low as 2.5% next year. Analysts surveyed by Ideaglobal, a financial-research firm, expect a drop from the current 4.5% to 4% by the end of the year.

Economists at Barclays Capital say sterling could remain under pressure as long as the financial panic persists, but predict that it will climb back to $1.88 against the dollar in the coming months. However, other experts believe sterling will continue to fall.

Original here

Palin Accidentally Reprimands Her Own Supporters

Posted by Scott Conroy

From CBS News' Scott Conroy:

(RICHMOND, VA.) - Protesters at Sarah Palin’s rallies can always expect to be shot down with some choice words from the candidate. But at a rally here today, the confused Alaska governor mistakenly issued a stern rebuke to her own supporters.
he outdoor crowd was so massive that many were unable to hear Palin speak, so about midway through the Alaska governor’s remarks, some of them tried to take matters into their own hands, shouting in unison, “We can’t hear you!”

When that didn’t get the candidate’s attention, they tried a new tactic.

“Louder!” they shouted.

Palin appeared flustered as she stopped reading from the prepared remarks, which were coming across her teleprompter.

“I would hope at least that those protesters have the courage and the honor of thanking our veterans for giving them the right to protest!” she admonished the confused crowd.

Palin’s husband Todd tried to put an end to the awkward episode by approaching his wife on stage and telling her, “They just can’t hear you back there. That’s it.”

Palin responded, “OK. I’m doing that,” and then continued with her stump speech.

Original here

A £516 trillion derivatives 'time-bomb'

By Margareta Pagano and Simon Evans

The market is worth more than $516 trillion, (£303 trillion), roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb".

It's a market in which the lead protagonists – typically aggressive, highly educated, and now wealthy young men – have flourished in the derivatives boom. But it's a market that is set to come to a crashing halt – the Great Unwind has begun.

Last week the beginning of the end started for many hedge funds with the combination of diving market values and worried investors pulling out their cash for safer climes.

Some of the world's biggest hedge funds – SAC Capital, Lone Pine and Tiger Global – all revealed they were sitting on double-digit losses this year. September's falls wiped out any profits made in the rest of the year. Polygon, once a darling of the London hedge fund circuit, last week said it was capping the basic salaries of its managers to £100,000 each. Not bad for the average punter but some way off the tens of millions plundered by these hotshots during the good times. But few will be shedding any tears.

The complex and opaque derivatives markets in which these hedge funds played has been dubbed the world's biggest black hole because they operate outside of the grasp of governments, tax inspectors and regulators. They operate in a parallel, shadow world to the rest of the banking system. They are private contracts between two companies or institutions which can't be controlled or properly assessed. In themselves derivative contracts are not dangerous, but if one of them should go wrong – the bad 2 per cent as it's been called – then it is the domino effect which could be so enormous and scary.

Most markets have something behind them. Central banks require reserves – something that backs up the transaction. But derivatives don't have anything – because they are not real money, but paper money. It is also impossible to establish their worth – the $516 trillion number is actually only a notional one. In the mid-Nineties, Nick Leeson lost Barings £1.3bn trading in derivatives, and the bank went bust. In 1998 hedge fund LTCM's $5bn loss nearly brought down the entire system. In fragile times like this, another LTCM could have catastrophic results.

That is why everyone is now so frightened, even the traders, who are desperately trying to unwind their positions but finding it impossible because trading is so volatile and it's difficult to find counterparties. Nor have the hedge funds been in the slightest bit interested in succumbing to normal rules: of the world's thousands of hedge funds only 24 have volunteered to sign up to a code of conduct.

Few understand how this world operates. The US Federal Reserve chairman, Ben Bernanke, tapped up some of Wall Street's best for a primer on their workings when he took the job a few years ago. Britain's financial regulator, the Financial Services Authority, has long talked about the problems the markets could face on the back of derivative complexity. Unfortunately it did little to curb the products' growth.

In America the naysayers have been rather more vocal for longer. Famously, Warren Buffett, the billionaire who made his money the old-fashioned way, called them "weapons of mass destruction". In the late 1990s when confidence was roaring in the midst of the dotcom boom, a small band of politicians, uncomfortable with the ease with which banks would be allowed to play in these burgeoning markets, were painted as Luddites failing to move with the times.

Little-known Democratic senator Byron Dorgan from North Dakota was one of the most vociferous refuseniks, telling his supposedly more savvy New York peers of the dangers. "If you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you," he said. He was ignored.

What is a Derivative?

Warren Buffett, the American investment guru, dubbed them "financial weapons of mass destruction", but for the once-great-and-good of Wall Street they were the currency that enabled banks, hedge funds and other speculators to make billions.

Anything that carries a price can spawn a derivatives market. They are financial contracts sold to pass on risk to others. The credit or bond derivatives market is one such example. It is thought that speculation in this area alone is worth more than $56 trillion (£33 trillion), although that probably underestimates the true figure since lax regulation has seen the market explode over the past two years.

At the core of this market is the credit derivative swap, effectively an insurance policy against the default in the interest payment on a corporate bond. One doesn't even need to own the bond itself. It is like Joe Public buying an insurance policy on someone else's house and pocketing the full value if it burns down.

As markets slid into crisis, and banks and corporations began to default on bond payments, many of these policies have proved worthless.

Emilio Botin, the chairman of Santander, the Spanish bank that has enjoyed phenomenal success during the credit crunch, once said: "I never invest in something I don't understand." A wise man, you may think.

Simon Evans

Original here

GM, Chrysler in merger talks: source

By Kevin Krolicki and Jui Chakravorty Das

DETROIT/NEW YORK (Reuters) - General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1 and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.

Separately, Ford Motor Co, plans to sell shares from its $1.4-billion stake in Japan's Mazda Motor Co, a second source said.

Barron's reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money from the central bank's discount window because of the logjam in credit markets that has shut it out of other borrowing.

The moves come as all three Detroit-based automakers are struggling with a plunge in U.S. sales to 15-year lows and facing tough questions from investors and creditors about whether they have the cash to ride out a deepening downturn.

Analysts said urgent steps by all three U.S. automakers to shore up cash could be expected as the global financial crisis begins to dampen auto sales in what had been fast-growing markets in Europe, Asia and South America.

But they also questioned whether an outright merger with Chrysler could serve GM's interests.

"On the surface, it frankly doesn't make sense," said Aaron Bragman, an analyst with Global Insight. "The acquisition of Chrysler wouldn't solve and problems GM has and would only make some existing ones worse."

Representatives of Cerberus Capital Management, the private equity firm that owns an 80.1-percent stake in Chrysler, were not immediately available for comment.

Chrysler declined comment. GM declined to comment on whether it had any talks with Chrysler but said talks with other automakers were a routine part of business.

"GM officials routinely discuss issues of mutual interest with other automakers," said GM spokeswoman Renee Rashid-Merem. "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases, do not lead anywhere."

Cerberus is also in exploratory talks with other parties, including Renault-Nissan, to sell Chrysler, the source said.

But any deal would hinge on the completion of the sale of Daimler AG's remaining 19.9-percent stake in Chrysler to Cerberus, the source said. Cerberus last month said it had approached Daimler to buy that remaining stake.

Chrysler's private owners and GM have had "very early" and "very exploratory" talks about a merger, the source said.

The talks between GM and Cerberus, first reported by the New York Times and the Wall Street Journal, began more than a month ago and are not certain to produce a deal.

The Journal said that Cerberus had proposed a swap of assets with GM that would give the private equity firm full ownership of finance company GMAC.

In exchange, GM would get the loss-making auto operations of Chrysler, the newspaper said.

Cerberus currently owns 51 percent of GMAC, GM's former captive finance company which has been hobbled by its exposure to the U.S. mortgage market. GM owns the remainder of GMAC.

Global Insight's Bragman said a deal structured in that way would benefit Cerberus since the private equity firm would end up with GMAC just as a $700 billion U.S. government bailout fund to buy up distressed debt begins operations.

"They would get rid of an auto company that has weighed on their results and they would get full control of GMAC just as the government is about to come to the rescue," Bragman said.


The reported talks between the two sides would revive discussions between Chrysler and GM about a potential merger in early 2007 when Germany's Daimler AG began the process of selling off Chrysler that culminated in a deal later that year to sell the automaker to Cerberus.

GM Chief Executive Rick Wagoner also said last year that he saw some potential for Cerberus to combine GMAC with Chrysler Financial, the finance company affiliated with the No. 3 automaker.

Analysts have questioned Chrysler's ability to survive as a stand-alone automaker, given its reliance on sales to North America for some 90 percent of its revenue.

But a combination with GM would match two companies with overlapping weaknesses, analysts said.

For one thing, both GM and Chrysler have been hurt by their reliance on sales of trucks and SUVs. For another, both have been struggling to cut union-represented production jobs in reaction to weaker U.S. sales.

"It would be taking two cash-burning companies and putting them together so they burn cash faster," said Erich Merkle, an auto industry consultant with Crowe Horwath.

Chrysler, which no longer discloses results as a private company, has also had discussions about a tie-up with India's Tata Motors and Italy's Fiat in recent months.

GM shares fell to near a 60-year low this week on fears the global financial crisis could derail its turnaround plans.

GM and Ford both ruled out on Friday seeking bankruptcy protection.

Original here

European Union Bans Incandescent Light Bulbs

Is Cheaper Oil A Good Thing?

By Vivienne Walt / Paris

How far can it fall? People have been anxiously wondering as they watch the plunging stock market. But increasingly the same question is being asked about another crucial figure: the price of oil. It has plummeted nearly 40% in just three months, from about $147 a barrel in July to below $83 on Friday, with no obvious bottom in sight. If that sounds good, you are probably a driver who winces these days at filling your gas tank. But the downward spiral could mean trouble for oil-rich countries and for the environment.

Oil analysts admit that most of them failed to predict how fast oil prices would drop. Just a few months ago, some were saying oil might reach $200 a barrel by year's end. "The analysts have been quite surprised by the pace and volatility of the decline," says David Fyfe, senior oil analyst for the International Energy Agency in Paris, which as a rule does not predict oil prices. "The volatility has been quite marked."

This year's sky-high oil prices are partly responsible for the drop. Since oil hit $100 a barrel for the first time early this year, Americans (who consume one-quarter of the world's energy) began cutting back. When gas began selling above $4 a gallon, American consumers made "a psychological shift into the sense of crisis and a sense of permanence," says Greg Priddy, oil analyst for the Eurasia Group in Washington. Instead of believing that gas prices would finally fall again, many began changing their daily habits — they started driving the smaller car in a two-car garage or consolidating shopping trips. That has meant a huge slump in Americans' gas use. Even before the market meltdown, Americans consumed 800,000 barrels of oil a day less during the first half of this year than the same period last year. As demand fell, so did prices, and as prices have fallen, investors have begun pulling money out of the oil market, fearing a collapse, says Leila Benali, an expert on Middle East oil for the Cambridge Energy Research Associates in Paris, adding: "People are getting nervous about demand next year. There is talk of a global recession."

For oil-rich countries the slump has come at a bad time. As the oil price began rising during the past few years, governments and big oil companies plowed billions into exploring and developing new fields in Russia, Angola, Mexico, Brazil and Saudi Arabia — projects whose costs have more than doubled in the past few years, in part because soaring steel prices drove up drilling equipment costs and oil-rig rentals. Just as global demand has begun to slow, millions more barrels of oil a day from new fields have hit the world market.

The big oil producers have good reason to be nervous. Many are still haunted by a disastrous error made at an Opec meeting in Jakarta in 1999, when the cartel — which produces more than a third of the world's oil — opted to raise its production levels. Within weeks Asian stock markets tumbled, driving world oil prices down to $11 a barrel. Oil officials in Saudi Arabia and elsewhere have cited that price crash as the reason they've rebuffed pleas from President Bush to pump more oil. Says Benali: "Countries have learned the lessons of the past."

Though oil-producers and environmentalists rarely agree about anything, both groups have done extremely well from sky-high oil prices during the past year. The high price at U.S. gas pumps has pushed both Barack Obama and John McCain into making the development of alternative fuels and electric cars key elements of their campaign platforms. But if gas prices continue to drop, those initiatives might begin to seem unnecessarily costly to many Americans. (Time's Bryan Walsh reported this week that some countries are already reviewing environmental initiatives as gas prices fall.) "If gas prices drop under $3 a gallon, it will be interesting to see whether it saps the political will," says Priddy. "Americans like their sprawl and generally don't like to give those things up."

If oil producers have their way, oil prices could start rising again. Their growing anxiety erupted early this week, when Iranian and Venezuelan officials warned that if Opec waited much longer before cutting its output, it could face another massive price collapse. On Thursday, Opec officials scheduled an emergency meeting in Vienna for Nov. 18 rather than wait until the cartel's scheduled summit in Algiers in early December. In the meantime, the world's biggest oil producer, Saudi Arabia — which increased production in the summer — has already begun loading less oil on its tankers, according to global oil figures.

For some countries there is a fear far greater than an economic recession: political turmoil. Iran, which earns 80% of its revenues from oil exports, set this year's budget on the assumption that oil would trade at $90 a barrel — a figure which seemed conservatively low until recently, but which is now above the world price. "If the price stays there a while Iran would cut spending," Priddy says. That might include cutting heavy gas subsidies for Iranian drivers, who have rioted in the past when the government tried to ration gas or raise the price at the pump. Hugo Chavez could face similar problems in Venezuela if oil prices drop below $75 a barrel — the rate at which the country calculated this year's budget. The problems lower prices could cause in those countries could be more visceral than those posed so far by the current financial upheaval.

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