Washington: December 2, 2008 -   IR Summary/NYT – It’s over a year when the US economy went into recession, probably it was December.  If the circumstances are accounted for, there does not seem to be any substantial relief or big change in its reversal, the recession is very serious this time, occurred for the first time at such a high scale after World War II.  

Even though  National Bureau of Economic Research has confirmed that great many Americans are badly affected by such a heavy recession,  some private forecasters warned that this downturn was likely to set a new postwar record for length and likely to be more painful than any recession since 1980 and 1981.

“We will rewrite the record book on length for this recession,” said Allen Sinai, president of Decision Economics in Lexington, Mass. “It’s still arguable whether it will set a new record on depth. I hope not, but we don’t know.”

As if adding a grim punctuation mark to what could become the worst holiday shopping season in decades, the Dow Jones industrial average plunged nearly 680 points, or 7.7 percent, to 8,149.09.

Part of the drop may have reflected profit-taking after last week’s surge in stock prices, but it also came in response to new data showing that manufacturing activity dropped to its lowest point in 26 years.

Both the chairman of the Federal Reserve, Ben S. Bernanke, and the Treasury secretary, Henry M. Paulson Jr., vowed to use all the tools at their disposal to restore a measure of normalcy to the economy.

Mr. Bernanke, speaking to business leaders in Austin, Tex., said it was “certainly feasible” to reduce the Fed’s benchmark overnight lending rate below its current target of 1 percent, signaling that the central bank would lower the rate at its next policy meeting in two weeks.

And in an unusually explicit follow-up, Mr. Bernanke said the central bank was also prepared to use the “second arrow in our quiver” if policy makers have already reduced that rate, called the federal funds rate, to nearly zero.

Among the options, he said, the Fed can start aggressively buying up longer-term Treasury securities. That would have the effect of driving down longer-term interest rates. The Fed is already doing something of that sort, by buying up commercial debt from private companies as well as mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

Investors reacted to Mr. Bernanke’s remarks by pouring money into longer-term Treasury bonds, which briefly pushed already-low yields on 10-year and 30-year Treasuries to new record lows. Investors appeared to be reacting mainly to the clear signal from Mr. Bernanke that the Fed was preparing to pump money into the economy by buying up longer-term bonds.

The yield on 30-year Treasuries declined 0.23 percentage points, to 3.21 percent, and briefly touched a record low of 3.18 percent. The yield on 10-year Treasuries fell 0.19 percentage points, to 2.73 percent.

In normal times, those kinds of yields would automatically mean lower interest rates on mortgages, automobile loans and other forms of consumer debt. But the credit markets have been stalled by continued fears among financial institutions about who can be trusted for even short-term transactions, so the effects on home loans and other purposes could remain modest. More