New Programs to Ease Credit,Barack Obama

The federal government unveiled $800 billion in new loans and debt purchases on Tuesday, hoping another infusion of cash can help unfreeze troubled credit markets and make borrowing easier for homebuyers, small businesses and students.

The Federal Reserve said that it would buy up to $600 billion in mortgage-backed assets from the government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. The agency would also buy up to $100 billion in debt directly from the companies and up to $500 billion in mortgage-backed securities.

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Federal Reserve said in a statement.

Separately, the Fed and Treasury Department announced a $200 billion program to ease commercial lending on debts like student loans, car loans or business loans. The Fed would lend up to $200 billion to holders of asset-backed securities supported by car loans, credit card loans, student loans, and business loans guaranteed by the Small Business Administration.

The action by the Federal Reserve on buying mortgage-backed securities brings the full force of monetary policy to bear on the credit markets. Having already reduced the benchmark federal funds rate to just 1 percent, the central bank is now effectively using what economists call “quantitative easing” to reduce the costs of money.

Instead of trying to reduce overnight lending rates in the hope of influencing longer-term interest rates for things like mortgages, the Fed is directly subsidizing lower mortgage rates. It is doing so by printing unprecedented amounts of money, which would eventually create inflationary pressures if it were to continue unabated.

For the moment, Fed and Treasury officials made it clear that the sky was the limit.

Treasury Secretary Henry M. Paulson Jr. emphasized Tuesday that the $200 billion was just a “starting point” for a program that could become substantially larger, possibly including other assets like commercial mortgage-backed securities.

“It’s going to take awhile to get this program up and going and then it could be expanded and increased over time,” he said at a news conference. “The first thing is to get it up and going.”

The program would be seeded with $20 billion in “credit protection” from the Treasury Department, which is drawing the money from the original $700 billion bailout.

“It gives institutions liquidity and it’s clearly direct lending that will help consumers,” Mr. Paulson said. The announcements came one day after President-elect Barack Obama unveiled his economic team and tried to assure Americans that he was seeking to fill any leadership vacuum, and said his advisers would begin working “today.”

The advisers include Timothy F. Geithner, his choice for Treasury secretary. Mr. Paulson said that because Mr. Geithner is the president of the New York Federal Reserve Bank, he had been intimately involved in the latest rescue planning, and he vowed to continue cooperating “seamlessly” with Mr. Geithner in his new role, and with other members of the Obama economic team.

“We will obviously work seamlessly with the next administration on a first-rate transition, and we will discuss with them very, very carefully any programs that we are developing and any programs that we implement,” Mr. Paulson said. “Tim is very well-positioned for that because he understands everything that we have in place today.”

As if to underscore the transfer of power now under way, Mr. Obama introduced his economic team at a news conference in Chicago on Monday shortly after Mr. Bush made brief remarks outside the Treasury Department.

Mr. Obama expressed support for the Citigroup plan and urged Congress to adopt swiftly a major plan to stimulate spending and to reverse job losses.

“The news this past week, including this morning’s news about Citigroup,” Mr. Obama said, “has made it even more clear that we are facing an economic crisis of historic proportions. If we do not act swiftly and boldly, most experts now believe that we could lose millions of jobs next year.”

Democratic leaders in Congress are gearing up to move quickly on an economic recovery package that aides said could cost more than $500 billion. The goal is to have a legislative package approved by the House and the Senate and ready for Mr. Obama to sign, perhaps on his first day in office, in January.

“We have to make sure,” Mr. Obama said, “that the stimulus is significant enough that it really gives a jolt to the economy.”

The president-elect declined to estimate the size or scope of such legislation, but he said, “We are going to do what’s required.”

In addition to Mr. Geithner as his nominee for Treasury secretary, Mr. Obama also named a former Treasury secretary, Lawrence H. Summers, to head the White House Economic Council and described Mr. Summers’s experience as essential to “navigate the uncharted waters of this economic crisis.”

The selections of Mr. Geithner, who played a large role in the Citigroup rescue plan as president of the Federal Reserve Bank in New York, and Mr. Summers, now a Harvard economist, signaled that Mr. Obama intended to pursue aggressive, yet centrist policies, in finding ways to help jump-start the economy.

Over the next four weeks, Mr. Obama intends to announce most of his cabinet.

While he has already settled on most of the key members, including Gov. Bill Richardson of New Mexico as commerce secretary, the president-elect made certain that his first formal cabinet selections dealt with the economy rather than national security, which more often is given first mention.

Mr. Obama also announced Monday that he had chosen Christina D. Romer to head his Council of Economic Advisers and Melody Barnes as director of his White House Domestic Policy Council. Ms. Romer is an economics professor at the University of California, Berkeley; Ms. Barnes is a longtime aide to Senator Edward M. Kennedy, Democrat of Massachusetts.

Mr. Obama, who has largely been secluded from public view since being elected three weeks ago as the 44th president, is taking steps to be more visible in the next phase of his transition. He is scheduled Tuesday to name his budget director, Peter R. Orszag, who held the job under President Bill Clinton, and is expected to outline new budget reforms that will call on Americans to make sacrifices.

“Right now, our economy is trapped in a vicious cycle,” Mr. Obama said at the news conference.. “The turmoil on Wall Street means a new round of belt-tightening for families and businesses on Main Street, and as folks produce less and consume less, that just deepens the problems in our financial markets.”

As a presidential candidate, Mr. Obama criticized the Bush administration tax cuts for upper-income Americans. On Monday, he declined to say whether he would seek to repeal the tax cuts immediately or rather wait for them to expire in 2011. His advisers have said that his January economic stimulus plan will not include tax increases, for fear of upsetting the economy.

Mr. Obama noted that he still intended to pursue a middle-class tax cut. “The very wealthiest among us,” he said, “will pay a little bit more in order for us to be able to invest in the economy and get it back on track.”

He also said the struggling domestic automobile industry could not be allowed “simply to vanish.” But he also said that companies should not get “a blank check” from taxpayers and that he was surprised the auto companies’ chief executives were not better prepared with specific recovery proposals when they visited Capitol Hill last week.

“My attitude is that we should help the auto industry,” Mr. Obama said. “But what we should expect is that any additional money that we put into the auto industry, any help that we provide, is designed to assure a long-term, sustainable auto industry and not just kicking the can down the road.”

Under the new financing program that Treasury Secretary Henry M. Paulson Jr. plans to announce on Tuesday, the Federal Reserve would create a new special-purpose entity that would buy a wide range of consumer and business debt. The Treasury would contribute the “equity” part of the fund, which would absorb most of the losses that might occur. The Fed would then pump in as much as 95 percent of the money that would be used to purchase assets.

The new fund would, in effect, close the circle in the chaotic evolution of the Treasury rescue effort, officially known as the Troubled Asset Relief Program, or TARP. Under the new version, the government would once again plan to buy assets, including some troubled ones. The Fed would provide most of the money and buy comparatively healthy debt, like bundles of car loans, that private investors have stopped buying in recent weeks.

Laurence H. Meyer, vice chairman of Macroeconomic Advisers, said the new program would give the Federal Reserve a new way to reduce borrowing costs at a time when its standard tool, the overnight federal funds rate, is already close to zero.

“This approach,” Mr. Meyer wrote in a note to clients on Monday, “would allow the Fed to buy private assets that are now very illiquid and trading at distressed levels.”

Mr. Obama offered few specific details of his economic program but suggested that he would include an array of his campaign proposals into his opening legislative package. Rebuilding the economy, he said, “will require action on a great variety of fronts, from education and health care to energy and Social Security.”

Throughout the news conference, which was televised by all the cable and broadcast networks, Mr. Obama spoke in serious tones. There were no bursts of laughter or light-hearted moments, which punctuated his first postelection news conference more than two weeks ago. Instead, he described the financial outlook in some of the bleakest terms he has used.

“The economy’s likely to get worse before it gets better,” Mr. Obama said. “Full recovery will not happen immediately. And to make the investments we need, we’ll have to scour our federal budget, line by line, and make meaningful cuts and sacrifices.”

The announcement of Mr. Obama’s economic team, as well as the broad outlines of his recovery plan, was met by positive reviews from Congressional leaders. But few details have been worked out for how such a sweeping proposal could be ready in time for Mr. Obama’s swearing in.

Microsoft’s ‘Cyberchondria’,New Threat,Microsoft Updated

If that headache plaguing you this morning led you first to a Web search and then to the conclusion that you must have a brain tumor, you may instead be suffering from cyberchondria.

On Monday, Microsoft researchers published the results of a study of health-related Web searches on popular search engines as well as a survey of the company’s employees.

The study suggests that self-diagnosis by search engine frequently leads Web searchers to conclude the worst about what ails them.

The researchers said they had undertaken the study as part of an effort to add features to Microsoft’s search service that could make it more of an adviser and less of a blind information retrieval tool.

Although the term “cyberchondria” emerged in 2000 to refer to the practice of leaping to dire conclusions while researching health matters online, the Microsoft study is the first systematic look at the anxieties of people doing searches related to health care, Eric Horvitz said.

Mr. Horvitz, an artificial intelligence researcher at Microsoft Research, said many people treated search engines as if they could answer questions like a human expert.

“People tend to look at just the first couple results,” Mr. Horvitz said. “If they find ‘brain tumor’ or ‘A.L.S.,’ that’s their launching point.”

Mr. Horvitz is a computer scientist and has a medical degree, and his fellow investigator, Ryen W. White, is a specialist in information retrieval technology.

They found that Web searches for things like headache and chest pain were just as likely or more likely to lead people to pages describing serious conditions as benign ones, even though the serious illnesses are much more rare.

For example, there were just as many results that linked headaches with brain tumors as with caffeine withdrawal, although the chance of having a brain tumor is infinitesimally small.

The researchers said they had not intended their work to send the message that people should ignore symptoms. But their examination of search records indicated that researching particular symptoms often led quickly to anxiousness.

They found that roughly 2 percent of all Web queries were health-related, and about 250,000 users, or about a quarter of the sample, engaged in a least one medical search during the study.

About a third of the subjects “escalated” their follow-up searches to explore serious illnesses, the researchers said.

Of the more than 500 Microsoft employees who answered a survey on their medical search habits, more than half said that online medical queries related to a serious illness had interrupted their day-to-day activities at least once.

Mr. Horvitz said that in addition to his interest in creating a Web search tool that would give more reliable answers, the research was driven by clear memories from his medical school education of what was often referred to as “second-year syndrome” or “medical schoolitis.”

He said he remembered “sitting on a cold seat with my legs dangling off the examination table,” convinced that he was suffering from a rare and incurable skin disease.

While the doctor was out of the room, Mr. Horvitz said, he took a look at his medical chart and saw that the doctor’s notes read, “Eric is in medical school, and he has been reading a lot.”

The researchers said that Web searchers’ propensity to jump to awful conclusions was basic human behavior that has been noted by research scientists for decades.

In 1974, the psychologists Amos Tversky and Daniel Kahneman wrote a seminal paper about decisions that are based on beliefs about the likelihood of uncertain events, like the outcome of an election or the future value of the dollar.

They said that people usually employ common sense rules to aid in decisions. The rules can be quite useful, but they also frequently lead to systematic errors in judgment.

The Microsoft researchers noted that reliance on the rankings of Web search results contributes a similar bias to the judgments people make about illness.

At the same time, Mr. Horvitz said he believed that the Web would evolve to offer more reliable information.

In the 1990s, Microsoft researchers built a health advisory system for pregnancy and child care. Mr. Horvitz said that in the future it would be possible to create search engines that were able to detect medical queries and offer advice that did not automatically make Web searchers fear the worst.

UK Suffer ‘Severe’ Recession:WorldWide Slowdown

The Organisation for Economic Co-operation and Development (OECD) has warned of a “severe” economic downturn in the UK in 2009.

The Paris-based body has predicted that economic output in the UK will fall by 1.1% next year, more than any other major G7 country.

Unemployment in the UK is predicted to rise significantly to over 8% by end of 2009 from 5.5% in 2008.

The US economy is forecast to decline by 0.9% in 2009, and Germany by 0.8%.

Economic growth in the 30 countries of the OECD is forecast to fall by 0.4%, before growing by 1.5% in 2010.

As well as the UK, the OECD identifies Hungary, Iceland, Ireland, Spain and Turkey as being the countries most affected by the economic slowdown.

“These economies are most directly affected by the financial crisis, which in some cases exposed other vulnerabilities, or by severe housing downturns,” it says.

In the pre-Budget report, the chancellor accepted that the UK economy would decline by 0.75% to 1.25% next year, but said that the UK was “better placed” than other countries to cope with the downturn.

Government spending

The OECD has endorsed the need for government spending in affected countries to boost growth, because it says that interest rate cuts are no longer effective.

“Against a background of deep economic downturn, additional macroeconomic stimulus is needed,” it says.

“Current conditions of extreme financial stress have weakened the monetary transmission mechanism. In this unusual situation, fiscal policy over and above the support provided through automatic stabilisers [such as unemployment benefits] has a role to play.”

But it warns that “the scope for easing is limited in countries that start from a weak fiscal position,” and warns of the risk of “adverse financial market reaction” unless there is a credible framework for reducing budget deficits in the medium-term.

It forecasts that budget deficits throughout the OECD area will widen from 1.4% of GDP in 2007 to 3.8% in 2009.

In the UK, the OECD says that the fiscal risks are greater because of the costs of the bank bail-outs.

Worldwide slowdown

The OECD warns that any recovery in the US is likely to be “languid” as consumption is held back by the large losses in household wealth.

And it says that the risks are still on the downside, suggesting that economic conditions could worsen significantly.

These risks include “further failures of financial institutions,” a “longer period before financial conditions normalise,” and the possibility that emerging market countries such as China will be harder hit by the downturn in global trade.

And it adds that when downturns are caused by banking crises, “the recovery is typically more anaemic than usual.”

The OECD says the downturn is the “most severe since the early 1980s” and is likely to lead to a “sharp rise in unemployment” with growth not returning to trend before the second half of 2010.

World trade growth will also slow sharply, from 4.8% this year to 1.9% in 2009, which will hit many major developing countries.

However, the slowing economy, and the effect of lower commodity prices, will bring about a sharp slowdown in inflation, leaving space for more cuts in interest rates.

Christmas Season:Retailers Nervous

Be careful whose gift cards you buy this season. As retailers struggle with recession, debt-laden consumers, unfriendly bankers and declining property values, fewer of them will be around next year. “By the end of 2009 the number of retail players will be down by at least 25% and could be down by as much as 40%,” says Britt Beemer, chairman of America’s Research Group, a consumer research and marketing firm based in Charlotte. “I expect the number of bankruptcies next year to be more than we’ve seen in the last five years combined.”

Already some 20 retailers have sought bankruptcy protection this year, with household names like Circuit City, Steve and Barry’s, Linens ‘n Things and Mervyns going under. Of those four, only Circuit City is attempting to restructure its business, closing 155 stores by the end of the year in an effort to emerge as a leaner operation. The other three plan to liquidate altogether, a trend that is on the rise due to the lack of potential buyers for troubled assets and a tightening of credit offerings by banks. “The days of restructuring are gone,” says Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment-banking firm. “No one will give you the financing.”

For store owners big and small, ’tis the season of sweating brows. U.S. retail sales dropped a record 2.8% last month, just the latest in a string of bad months. By the end of 2008, 148,000 retail establishments will have closed, the largest number since 2001, according to the International Council of Shopping Centers. A rough holiday season will produce another 73,000 store closings by the first half of 2009, the Council predicts. “In the first six months of next year there will be a lot more retail museums than retail stores,” says Beemer.

Regional department store chains in smaller to mid-size cities are already under pressure, but some have an extra heap of woe. Women’s retailer Bon-Ton faces a double challenge due to softening sales and a mountain of debt resulting from its $1 billion buyout of 142 stores from Saks two years ago. Even powerhouse Dillards, with stores spread across 29 states, is raising anxiety due to weakening sales, down 10% for the quarter. In early November Standard & Poor’s lowered its corporate credit rating on Dillards to B+ from BB-, citing the “deepening spending pull-back by consumers.” Adding to the drama, hedge fund investors Barington Capital Group LP and Clinton Group Inc called for William Dillard II, the chain’s CEO, to step down amid declining revenue and a stock price that has lost more than 70% of its value. The good news: “They aren’t leveraged like other stores are,” says Beemer. “But if you look at mall-based apparel stores, any of them could be in trouble except for Victoria’s Secret, which has a good customer base.”

Hopes for upscale retailers are fading fast. The high-end customer is cutting back spending 9 percentage points more than the overall consumer, according to America’s Research Group. One victim of the trend: Saks Fifth Avenue saw a devastating 16.6% sales plunge in October, coming on the heels of a 10.9% drop in September.

Other specialty merchants in troubled waters include Talbots, the conservative woman’s clothing boutique, whose same-store sales plunged by 14% in the third quarter. “In their case it might be an overexpansion problem as they got into men’s and children’s clothing and then made the acquisition of J.Jill, which wasn’t smart,” says Neil Stern, senior partner at McMillan Doolittle, a Chicago-based retail-consulting firm. That half-billion acquisition is currently up for sale, but no one is biting. Meanwhile, outdoor apparel shop Eddie Bauer emerged from bankruptcy in June 2005 with a $450 million bank loan, which left it highly leveraged and low on cash. “While their same-store sales are down only 1.1% and they’re performing pretty well compared to the rest of apparel retailers, it’s difficult to do a turnaround in a bad market,” says Stern.

Still, there are a few bright spots this Christmas season. Urban Outfitters Inc. has distinguished itself with stylish merchandise that stands out, while teen retailers Aeropostale and Buckle have posted positive same-store comparisons by offering good value. Says Davidowitz, “You have to be either really cheap or really different and really right to do well in this market.”

WWE:Armageddon 2008,Voting Started.,.,.,.

Chris Jericho spent months kicking, clawing and cheating his way toward the World Heavyweight Championship.

Then, at Survivor Series, a booming John Cena FU took it all away.

With such a heartshattering loss, a conniving Jericho will likely stop at nothing to feel the gold once more in his hands. There’s little doubt that the man who first came to “Save Us” and now needs saving himself has already begun plotting his resurgence at Armageddon.

For Cena, a man who feels so passionately about competing, watching from the sidelines must have made three months ooze along like syrup in Siberia. That long, lengthy wait makes it impossible to think that Cena will give up at Armageddon without the fight of his life.

When these two diametrically opposed individuals – a man who feels he owes the WWE Universe everything and a man who feels he owes the WWE Universe nothing – clash in the ring, each is guaranteed to expend 100 percent to prove that he was right all along

Vote For Ur Favourite Star To Win At Armageddon And World Heavyweight Champion

Tiger Woods,No More GM

General Motors is bailing out on Tiger Woods.

Woods, a global icon in sports with his 14 major championships, has been carrying the Buick logo on his golf bag for the last nine years and still had one year left on his contract.

But General Motors Corp. was looking to cut costs and hoard cash while trying to survive the worst sales downturn in a quarter-century. And it said Monday the world’s No. 1 golfer wanted more time for himself, especially with a second child on the way.

“Timing is everything,” said Larry Peck, golf marketing manager for Buick. “We’ve had such a great partnership with Tiger. It’s hard for us to walk away from that. But this frees up time for him. And it sure frees up a lot of money for us.”

The endorsement deal, believed to be worth at least $7 million a year, was to expire at the end of 2009.

Woods has endorsed GM products around the world and mainly has been seen in Buick commercials as the company tried to give the nameplate a more youthful image. Peck said during the launch a few years ago of the Enclave that its research showed 78 percent of consumers who bought the SUV previously had not been Buick owners.

“We attribute awareness of our product to Tiger,” he said.

Buick’s U.S. sales have dropped 54 percent from 2000, the first full year Woods worked with GM, to 2007, according to Ward’s AutoInfoBank. The brand’s global sales, however, rose 17 percent during that span, according to GM. Buick is particularly popular in China.

The average age of the brand’s buyers also dropped. Around 2001, the average age was in the low 70s, but it has since fallen to 66 for Buick sedans and 53 for the Enclave.

GM has been making dramatic cuts in advertising as it tries to conserve cash. The nation’s largest automaker spent nearly $7 billion more than it took in last quarter and has warned that without federal help, it may reach the minimum amount of cash required to run the company by the end of the year.

Mark LaNeve, GM’s vice president for North American marketing, said GM and Woods started discussing an end to the deal earlier this year, and it had nothing to do with the Detroit Three automakers’ quest for $25 billion in federal loans.

But GM’s statement said the decision was made as part of “the search for budget efficiencies during a difficult economy for General Motors.”

Woods’ agent at IMG, Mark Steinberg, said the decision to end the relationship one year early was “absolutely mutual.”

“It was a combination of things,” Steinberg said. “Tiger was looking to gain some more time, and certainly it was an opportunity for GM to reduce its spending with everything going on.”

Buick said last week that it would be cutting back on its deal providing courtesy cars at PGA Tour events.

GM is so concerned about costs that it cut advertising during the 2009 Super Bowl, although it still plans to sponsor the NFL and likely air ads before and after the game. GM also has pulled out of the Oscars and Emmy Awards in 2009 — the first time in more than a decade it is not running ads right before, during or after the two events.

U.S. automakers, the single largest category of advertisers, cut their ad spending 18 percent to $1.37 billion in the second quarter compared with the same period in 2007, according to TNS Media Intelligence in New York.

Foreign automakers also are trimming their spending on advertising in U.S. markets, with a 5.4 percent cut in the second quarter, for an overall 11 percent drop in U.S. auto ad spending to $3.27 billion, the 12th quarterly dip in a row.

Woods has carried only two logos on his bag since he turned pro in August 1996. He was with Titleist through 1999 until Buick won a bidding war for its brand on a bag that gets more television time at tournaments than any other golfer.

Woods has not played since season-ending knee surgery after winning the U.S. Open, and he is not expected to return until next year, most likely in early March, depending on his recovery.

Steinberg said he would “expect there to be some exposure on the bag” when Woods next plays.

“I’ve got a few ideas, and we’re in the process of working through that,” he said.

Buick remains the title sponsor of two PGA Tour events — the Buick Invitational at Torrey Pines, which Woods has won six times, and the Buick Open outside Detroit, which Woods has won twice.

Black Friday Is Looking Blue:Global Financial Crisis

Here’s how worried consumers are this year: retailers have already started promoting what would have usually been their best holiday deals–and have been greeted with collective indifference. The response: Is that all you’ve got? “The deals aren’t that amazing, and the Best Buy circular in particular was so disappointing,” says Jon Vincent, founder of BlackFriday.info, an online deal site. “Shoppers expected a lot more with the economy hurting.”

Oh, they’ll get it, as retailers cave in to the pressure to attract sales dollars. But price alone might not get shoppers in the door, so this could be the season of extreme retailing, with stores offering even more carrots to drive sales in this dreary economic climate. As of Nov. 11, 72% of consumers had completed less than 10% of their shopping, according to the National Retail Federation’s (NRF) 2008 survey by BigResearch of holiday consumer intentions and actions. “They know the longer they wait, the better off they are, so there’s no reason to rush,” says Marshal Cohen, chief industry analyst at the NPD Group, a market-research firm.

So expect a little bit of everything. Sears has quadrupled the number of items in its sales flyer to 677 this year, from 165 last year. Power discounter Wal-Mart launched Operation Main Street, presenting a new round of markdowns every week until Christmas. Mattel will give a $50 Visa card to those who spend $100 on select Barbie toys. Sears and Radio Shack are urging eco-conscious consumers to dump their power-sucking old equipment, offering gift certificates for the trade-in value. Likewise, Staples offers $30 toward the purchase of a new camera or laptop for buyers who recycle an old one.

Layaway programs–plans with roots in the Great Depression–are back at Sears, Kmart and TJ Maxx. Merchandise stays at the store as people pay it off little by little, interest-free. No credit card required. Tired of dry-cleaning bills? Ann Taylor Loft promotes the fact that most of its clothes are now washable. And if you suffer buyer’s remorse, more than half of retailers say their holiday return policies will be more lenient than usual, up from 35% who said so last year, according to NRF’s return-fraud survey.

Adding to the pressure on retailers is a shorter window to shop and a suddenly thrift-minded shopper. Black Friday–when the holiday shopping season traditionally begins, the day after Thanksgiving–falls on Nov. 28, far later than usual. Compared with last year, stores now have five fewer shopping days and one less weekend between Thanksgiving and Christmas. Looming layoffs and tightening credit have crushed consumer confidence, making shoppers more discerning than ever. Before buying a gift, 71% of shoppers ask themselves, Is this a smart use of my money? according to an October survey on how America shops, conducted by WSL Strategic Retail, a New York City consultancy. Deloitte’s annual holiday survey showed that almost 60% of consumers expect to reduce their spending and that people are planning on buying fewer gifts–21.5 on average, compared with 23 in 2007.

Stores have to figure out how to tap into this recalibrated value system–one based on caution rather than the branded excess of Christmas past. “The American consumer is trading downward in the most dramatic fashion ever seen,” says Howard Davidowitz, chairman of Davidowitz & Associates, a retail-consulting firm. What’s more, the thrift mind-set has seeped into all income levels. Saks Fifth Avenue, for instance, had a 16.6% drop in sales in October. “Saving is cool right now,” says Candace Corlett, president of WSL. “Conspicuous consumption is out, and people have lost their passion to buy.”

That’s bad news for retailers, which traditionally get up to 40% of their annual revenue from holiday shopping. Still, there are some bright spots. The Internet should outdo the sidewalk: online retail sales this holiday season are expected to grow 12% over last year, to $44 billion, predicts Forrester Research. And discount chains like TJ Maxx, Wal-Mart, Costco and BJ’s Wholesale Club should see strong sales as they hammer away at prices. BJ’s third-quarter merchandise comparable sales were up 7% vs. 2007’s. “Our position is serving us well in this economic environment,” says Laura Sen, BJ’s president.

The key to success for most retailers will be managing inventory and staff levels smartly–these are the few areas where stores can make significant adjustments. Because of the steady sales decline over the year, most shops had trimmed inventory levels at least 10%, conserving cash. Many stores have gone further, lowering inventory levels as much as 18%, says Cohen. That’s nearing the danger zone. “If they cut any more, they won’t have enough to even come close to making their number,” he says. “They have to sell enough to pay the electric bill.” Likewise, retailers are ratcheting down staffing. College kids might have to look for jobs outside the retail sector to generate extra Christmas cash. Best Buy is bringing in 16,000 to 20,000 holiday hires this season, down from 26,000 in 2007. (The good news for hopeful or clueless males: Victoria’s Secret and Toys “R” Us say they’ll keep last year’s levels to ensure top-notch service.)

Yes, there is going to be a Christmas. Americans buy gifts even in trying times. How much they’ll spend remains the big question. Says Bill Martin, a co-founder of ShopperTrak, a retail-information company: “Consumers are going to want to have their Christmas this year with all the bad news they’ve had.”

Best Crime Of The Century:3 of 25

THE FAKE APE-MAN, 1912

Eoanthropus dawsoni was the scientific name of this alleged missing link, and it would have been an extremely early example of a creature showing both human and apelike qualities. At 375,000 years old, it put England in contention for a cradle of humankind, being found in the Sussex town of Piltdown. The “first Englishman” he was proudly called when the anthropologist Charles Dawson found him in 1911. For decades, Piltdown Man was cited along with Neanderthal man and Heidelberg man as an example of early hominid life in Europe. Then in 1953, the fragments, including a jawbone, were tested: they did not contain enough fluorine to be the age that Dawson claimed; worse, the jawbone was that of a 10-year-old orangutan, its teeth ground down to simulate age, and a crude chemical wash applied to the bone to make it appear ancient. No one knows who perpetrated the hoax: Dawson had died in 1916. Very quickly, however, Piltdown became a synonym for phony; and England’s claim to antiquity was cut short by several hundred thousand years.

Michael Jackson Settles Out of Court with Sheik

Michael Jackson avoided a much-anticipated appearance in London’s High Court by reaching an out-of-court settlement with Sheik Abdulla bin Hamad Al Khalifa, the prince of Bahrain, who was suing him for $7 million

“As Mr. Jackson was about to board his plane to London, he was advised by his legal team to postpone his travels since the parties had concluded a settlement in principle,” Celina Aponte, Jackson’s London-based spokeswoman, said late on Sunday.

Michael Jackson, left, wearing an abaya, a traditional women’s veil and gown, on a visit to Bahrain in 2006

Jackson was scheduled to testify this morning. The reclusive pop star originally asked to appear by video link from Los Angeles, citing an unspecified illness, but agreed to travel after doctors gave him the all clear. Court officials anticipated so much interest in Jackson’s appearance that they took the unusual step of issuing admission tickets to media outlets that hoped to cover the case.

The courtroom thriller began last Thursday. Al Khalifa, 33, testified that Jackson, 50, reneged on a contract for a new album, an autobiography and a stage play after accepting millions of dollars in advances. The sheik said that in addition to covering Jacko’s living and travel expenses during his year-long stay in Bahrain, he built the singer a recording studio, spent more than $300,000 securing him a “motivational guru” and gave him $250,000 in cash so Jackson “could entertain his friends at Christmas.” Jackson has maintained that these were gifts from the Arab prince, an interpretation Al Khalifa denies. “Many times he confirmed that he would pay me back,” the sheik said.

The two men’s lives became intertwined in June 2005 after Jackson was cleared of charges that he molested a 13-year-old boy in California. That trial left Jackson, once one of the world’s wealthiest entertainers, in financial tatters. Al Khalifa offered Jackson refuge in his oil-rich Gulf state and, the sheik’s lawyer said, footed Jackson’s $2.2 million legal bill.

Al Khalifa, who fancies himself an amateur songwriter, also said the two men moved into the same palace to collaborate on music together.

In court on Thursday, Jackson’s lawyers argued that the sheik’s case was based on “mistake, misrepresentation and undue influence” and in their defense planned to demonstrate that Al Khalifa exploited Jackson’s vulnerability and lack of business sense.

“Michael is an individual who is very switched-on,” Al Khalifa told the court. “He is a fantastic intellectual.”

“There’s nothing unusual about him?” asked Robert Englehart, Jackson’s attorney.

“No,” Al Khalifa said.

History suggests otherwise. Last week, Jackson defaulted on the $23.5 million he owes for Neverland, the ranch he bought in 1988 and named after the mythical realm of Peter Pan, the boy who never grew up. Jackson has said the ranch was intended to recreate the magical childhood experiences that stardom denied him. “It’s like stepping into Oz,” he once said. “Once you come in the gates, the outside world does not exist.”

The defense also called upon Grace Rwaramba, nanny to Jackson’s three children, to demonstrate that the sheik was a generous benefactor who was eager to lavish Jacko with gifts.

“He would say, ‘What can I do for my brother? What can I give the children?’ ” Rwaramba said. She also testified that she was “flabbergasted” when the sheik wired her $35,000 because Jackson was so broke that he did not even have a bank account. She claims the sheik apologized for what he considered a paltry sum of money and said that “next time it would be more.” Jackson reportedly used the money to pay his utility bills at Neverland.

In the face of his financial and legal battles, Jackson has reportedly made moves to find peace by converting to Islam, according to British tabloid the Sun. It reports that ahead of the court case last week, Jackson went through the shahada, the Muslim declaration of belief, in the Hollywood Hills home of Steve Porcaro, the man who composed music on Jackson’s Thriller album. Jackson has reportedly taken the name of Mikaeel, one of Allah’s angels.

U.K. Report,Cuts VAT But Signals Future Tax Rise

Chancellor Alistair Darling has cut VAT but taken borrowing to record levels in moves he says are needed to save the UK from a deep and long-lasting recession.

Top earners also face more tax and all National Insurance contributions will rise, he said in his pre-Budget report.

Mr Darling said “exceptional measures” were needed with the economy set to shrink next year – but the Tories said he had “mortgaged” Britain’s future.

Alcohol, tobacco and petrol duty rises to offset the 17.5% to 15% VAT cut.

Shadow chancellor George Osborne, for the Conservatives, accused Mr Darling of “bringing this country to the verge of bankruptcy” by doubling the national debt, which is set to reach £118bn next year.

Mr Osborne accused the government of creating “a huge unexploded tax bombshell timed to go off at the time of the next economic recovery”.

He said Mr Darling had offered “temporary tax giveaways paid for by a lifetime of tax rises on the British people” and he said the country’s future had been “mortgaged to bail out the mistakes of the past”.

Lib Dem treasury spokesman Vince Cable said VAT cuts would not be enough to boost consumer spending and “it would be much more sensible to put money directly in the pockets of low paid workers by cutting their income tax”.

See how government deficit will evolve

In his Commons statement, Mr Darling slashed economic growth forecasts for next year from 2.75% to between minus 0.75% and minus 1.25% – the biggest downward revision on record.

But he said the government would inject an extra £20bn into the economy, or 1% of GDP, in a bid to get it moving again funded in part by an extra £5bn in efficiency savings and a big increase in government borrowing.

There would also be a dramatic cutback in government spending – with it being projected to rise by just 1.2% a year, less than the normal growth rate of the economy and down from the already tightened plans for 1.8% spending increases.

The most expensive stimulus measure is a temporary cut in VAT from 17.5% to 15% aimed at getting consumers spending again.

Mr Darling says the cut – which comes into effect on Monday in time for the peak Christmas shopping period – will put £12.5bn into the pockets of consumers over the course of the 13 months it will last.

Pensioners will also be given a one-off payment of £60 – £120 for couples – in January on top of their £10 Christmas bonus.

But the rise in duty on alcohol, tobacco and petrol, to ensure they do not benefit from the cuts in VAT, will be permanent.

And in measures aimed at clawing back the VAT cut and other measures, top rate tax will increase to 45% from 2011, for people earning more than £150,000 a year and from April 2011 all rates of National Insurance (NI) contributions will be raised by 0.5% for employees and employers.

The starting point for NI will be brought into line with that of income tax so that no-one earning under £20,000 would pay any more contributions as a result, the chancellor said.

On borrowing, Mr Darling said it would be “perverse and damaging” to stick to government rules in the current crisis so they would be temporarily suspended.

‘Extraordinary circumstances’

Government borrowing would more than double to £78bn this year and £118bn next year, before starting to come down, with the books not to be balanced again until 2015/16.

“If we did nothing we would have a deeper and longer recession that would cost the country more in the long term,” Mr Darling told MPs.

“In these extraordinary circumstances allowing borrowing to rise is the right choice for the country.”

He added: “Taken together these steps will ensure that there is extra money flowing into the economy when it is needed most, but we can reduce borrowing when growth returns.”

In other measures, Mr Darling speeded up the introduction of planned rises in child benefit and measures aimed at helping small businesses hit by the credit crunch.

And he softened the blow for drivers by announcing a more gradual introduction of new vehicle excise duty, with rates only going up £5 per vehicle in 2009.

Work to upgrade motorways, refurbish schools and repair council houses is also to be speeded by bringing forward £3bn of state spending.

And there will be more help for home owners, with the scheme which covers mortgage interest payments for those who have lost their jobs doubled to cover mortgages of up to £200,000.

This year’s increase in the income tax personal allowance of £120 a year for basic rate taxpayers will be made permanent and increased to £145 in April, helping 22 million basic rate taxpayers – another 500,000 households not just this year but for good.

The 45% top rate will not come into effect until after the next general election, meaning Labour will not break its 2005 manifesto commitment on not raising income tax.

Mr Darling’s Commons statement heralds the biggest shake-up of Labour’s economic policy since it came to power in 1997.

Giving his reaction to the Pre-Budget report, the SNP’s Treasury spokesman, Stewart Hosie, said: “We welcome the VAT cut, the vehicle excise duty changes but question why on earth he wants to put petrol up at this point.”

Plaid Cymru’s Adam Price said Mr Darling’s stimulus package did not go far enough and did not offer “the kind of economic leadership we were hoping for”.

The FTSE 100 Index of leading shares rose by a record 9.8% or 372.1 points at 4153, although market watchers said this was largely down to the rescue of banking giant Citigroup which helped ease some of the uncertainty seen the previous week.