Freedom Lawyers of America

April 17, 2003 INSIDE THIS SPECIAL ISSUE ...

==> FEDERAL RESERVE: WEALTH IS COLLAPSING ... AND THE US ECONOMY IS
SUFFOCATING ON DEBT!

==> IMF: GLOBAL ECONOMY AT RISK OF DEEP PLUNGE!

The bear market is ravaging the value of US household balance sheets.

According to the Federal Reserve's fourth quarter "Flow of Funds" report,
the value of household financial assets like stocks, bonds, and deposits
plunged an amazing $2.3 TRILLION in 2002. That's the worst annual plunge
since 1930!

On top of that, the national savings pattern is a disgrace. As a percent
of the country's gross domestic product (GDP), America is saving barely 15%
-- the lowest savings rate since the 1940s, and the lowest of all
industrialized countries.

But it's not just the bear market and low savings that are eating up
household net worth. Another huge problem is the mountain of debt families
are racking up against their homes.

According to the Federal Reserve report, in 2002, homeowners borrowed
nearly $800 billion against the equity in their homes -- the largest annual
increase in home mortgage borrowings on record. Even worse, for every $1
that real estate values increased in 2002, homeowners borrowed
65 cents. With that level of indebtedness, how vulnerable to a decline is
the real estate market? Quite literally, it's a house of cards!

Corporate sector debt is also at record high levels. According to year-end
2002 data, publicly traded corporations have hocked 76 cents of every
dollar of corporate net worth -- the worst debt-to-net worth ratio in the
history of the data.

Huge debts are now jeopardizing the corner store, too.
Privately held businesses are in debt to the tune of a record $3.1
trillion, with most of the borrowings racked up against real estate and
business assets. These businesses have hocked
56.2% of their tangible assets, their most indebted level on record.

All told, the economy is now nearly $32 TRILLION in debt -- nearly 3.1
times the nation's GDP. And that's strictly interest- bearing debt. It
doesn't include $56 trillion in derivatives (also a form of debt). Nor
does it include trillions in contingent obligations like Social Security,
Medicare, and debt guarantees by Ginnie Mae or Fannie Mae.

INTERNATIONAL MONETARY FUND RELEASES SOME OF THE GRAVEST WARNINGS WE'VE
EVER SEEN ...

According to its World Economic Outlook report, the IMF sees many of the
same problems the Fed does: Deflating global stock markets that are
crushing savings and net worth in virtually every country across the globe
... causing mountains of debt to pile up around the world ... and
threatening to turn that debt into trillions in losses for creditors.

But it's not just the stock markets that have the IMF worried.
The agency is also deeply concerned over three forces that put the global
economy at risk of a very deep and prolonged plunge ...

FORCE #1:
GLOBAL REAL ESTATE BUST COULD EASILY SET OFF A WORLDWIDE DEPRESSION In its
report, the IMF shows how a bursting real estate bubble can trash an
economy and send it into a recession ... and, in some cases, such as
Japan, even a profound depression.

And the IMF reached these conclusions before the latest data came out
showing that real estate prices could ALREADY be cracking, especially in
the US and Britain, the two most inflated property markets in the world.

Indeed, commercial properties in the US are already getting hit. Vacancies
are soaring around the country ... and in cities like San Francisco, New
York, Chicago, and Boston, rental rates are starting to plummet.

Residential real estate is also showing signs of cracking. In London,
prices have declined for the first time in years. Here in the US, the
high-end, million-dollar-plus homes are showing declines of as much as 20%
in the past year.

If real estate cracks wide open -- as we expect it will, and so, apparently
does the IMF -- you could be staring down the throat of a global depression.

FORCE #2:
RISING SECURITY COSTS WILL NEGATIVELY AFFECT ECONOMIES FOR DECADES As if
the lousy state of global stock markets and the looming real estate
disaster weren't enough, the IMF is also on pins and needles about high
security costs worldwide.

And it should be. The fact is that higher security costs are NOT something
that is going away, that they could continue to be a drag on the global
economy for DECADES -- shaving AT LEAST a half point annually off of any
growth.

Here's the kicker: There is probably not ONE single economist or insurance
actuary in the world today who has the faintest clue as to how much to
factor security costs and terrorism risks into their models.

It's a big, big wild card. And that fact alone -- the huge UNCERTAINTY of
it all -- is having a negative impact on business decision-making.

FORCE #3:
BUDGET DEFICITS ARE THE KISS OF DEATH The IMF's final worry is huge -- and
it's very close at hand.
According to the IMF ...

Soaring budget deficits in nearly all industrialized countries threaten to
send interest rates sharply higher, no matter what central banks do.

With the fragile shape of global economies, these budget deficits are the
last thing they need. In fact, these budget deficits are a noose hanging
around their necks, just waiting to be pulled tight.

LATEST ECONOMIC DATA PROVES FEDERAL RESERVE AND IMF'S WARNINGS ARE COMING
TRUE Almost half a million jobs vanished into thin air in the US over the
past two months. That shows just how lousy the economy's fundamentals
really are.

The job cuts aren't isolated to a particular sector. They're stretching
across the board, from services to manufacturing to transportation -- which
makes them even more damaging.

And the labor market isn't going to get better anytime soon.
For example, in spite of normal week-to-week fluctuations, unemployment
claims are still over the critical 400,000 level after eight consecutive
weeks! That means it's increasingly difficult for laid-off workers to find
work ...

(CHART NOT AVAILABLE IN TEXT FORMAT)

But that's not all. Temporary help hiring -- which is a leading indicator
of where the labor market is going -- declined for five of the last six
months. That tells us that businesses are planning for no growth or
expansion in the days and weeks ahead.

US FACTORIES ARE SLOWING TO A CRAWL!

It's not just labor that's in big trouble. The Federal Reserve just
released its March industrial production and capacity utilization figures
-- and they're downright awful. In fact, the latest results are
symptomatic of an economy that is rotting away beneath Wall Street's
feet. Take a look ...

(CHART NOT AVAILABLE IN TEXT FORMAT)

Industrial production fell by 0.5% in March -- much worse than
expected. As bad as that is, capacity utilization is worse. In March,
manufacturers used less of their available capacity (74.8%) than at any
time since mid-1983. Awful!

Now, we know you're going to hear plenty of blather about how this is all
related to Iraq. But that's a bunch of hogwash.
Corporate America built capacity during the roaring '90s to satiate huge
growth in demand -- growth that has now evaporated.

But that's not all ...

PRODUCERS' COSTS ARE SOARING!

No wonder manufacturing is headed into a ditch. Producers are getting
pummeled by enormous cost increases -- and the prices they are able to
charge are NOT keeping up ...

(CHART NOT AVAILABLE IN TEXT FORMAT)

Over the past three months, producers' core and finished prices for goods
rose at an annualized rate of 4.6% and
17.4%, respectively. At the same time, their costs skyrocketed an
astonishing 159.9%! That crushes their bottom lines.

So, is it any surprise the "war relief" rally lasted only 8 trading
days?! Soon, stocks will start careening south again. Stick to your guns
and be on the lookout for our next update.