John F. Kennedy meets with Martin Luther King, Jr. and the leaders of the March on Washington in the Oval Office August 28, 1963. With more extensive press coverage than any previous political demonstration in US history, the march and King’s speech were historic moments in the Civil Rights movement. Five score years ago, a great American, in whose symbolic shadow we stand today, signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of their captivity. But one hundred years later, the Negro still is not free. One hundred years later, the life of the Negro is still sadly crippled by the manacles of segregation and the chains of discrimination. One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. One hundred years later, the Negro is still languished in the corners of American society and finds himself an exile in his own land. And so we've come here today to dramatize a shameful condition. I have  a dream speech - - Photo: John Fitzgerald Kennedy Library.

On Monday, the eve of a historic election amidst a severe financial crisis, a Federal Reserve bank loan survey showed that banks have tightened lending standards; US car industry data showed that when adjusted for population, October was the worst month since 1945; Also on Monday, economists at investment bank Morgan Stanley, forecast an EUR/USD rate of 1.15 by the end of 2008.

US banks restricting lending

The Federal Reserve on Monday published its latest survey of banks' senior loan officers, which showed that a large majority of the 76 US and foreign-based survey participants, restricted lending in the past three months on fears of losses and concerns about the economic outlook.

Some 95% of banks in the US said they tightened price terms on commercial and industrial loans to large and midsize firms in the past three months, according to the Fed survey.

A total of 85% tightened lending standards, compared with 60% in the previous three-month period, which ended in July. About 60% of US banks tightened lending standards on credit-card loans and other types of consumer loans, while about half said they raised the minimum required credit scores for such loans.

The survey, which was conducted in October, found that the moves were driven by more pessimistic views on the US economy as well as rising loan defaults in recent months.

Car Industry Woes

US car makers sold 838,186 cars and light trucks in October according to industry research firm Autodata.

"We estimate that industry is going to come in at about 865,000 units, which is a 10.8 million seasonally adjusted annual rate," General Motors analyst Michael DiGiovanni said. "This will be the lowest industry in terms of seasonally adjusted annual rate for any months since 1982."

When adjusted for increases in the US population, last month was "the worst month in the post-World War II era," DiGiovanni said in a conference call. "This is clearly a severe, severe recession."

The annual rate 10.6 million vehicles, compared with 16 million a year earlier, according to Autodata.

GM reported a 45% drop in its US sales for October. Ford Motor October sales fell 30%.

The modest decline in US economic output in the third quarter "is not likely to be the worst we will see in this cycle," Ford Motor economist Emily Kolinski Morris said in a company conference call.

GM's financing arm, GMAC, tightened loan standards in October, restricting credit only to customers with top credit scores. In many areas of the US, only a third or so of all customers would qualify for loans, Michael DiGiovanni said.

US Dollar

On Monday, Morgan Stanley economists Stephen Jen and Spyros Andreopoulos, who are based in London, said that they believe that investors will likely start to assume that the global economy will head into a deeper recession than the economists had envisaged –probably something as severe as the one we saw in 1982, when the world grew by only 1%.  As a result, cross-border risk-reduction is likely to continue. 

"We believe that this trend of general deleveraging will be very powerful for much of the rest of the year and will be positive for the dollar.  Emerging markets (EM) economies will likely be severely stressed, as will their currencies, with negative feedback effects on the developed world, particularly Euroland and the UK.  All of these pressures will, in our view, force the dollar even stronger – the ‘Dollar Smile’ idea," the economists said.

They are forecasting that the EUR/USD rate will reach 1.15 by end-2008 and 1.20 by end-2009 (compared to 1.30 and 1.25 previously), with an intra-2009 low of 1.10. 

"In fact, if the global recession is severe enough, we would not rule out parity for EUR/USD.  USD/JPY will likely remain very heavy as the world slows.  Our new targets are 90 and 100 for the end-years (compared to 96 and 108 previously), with an intra-2009 low of 85," the economists said.