Queues grow at US soup kitchens

One of America's largest food companies, Kellogg's, is asking for donations from the public to help fight hunger - not in the developing world, but in the heart of the US, where handouts from "food banks" are catering for a growing number of families struggling to make ends meet.

The charity, Feeding America, says demand at its 63,000 soup kitchens and food pantries is 30 per cent higher than at the end of 2008, as spiralling unemployment and repossessions increase the demand for extra help for Americans who would otherwise go hungry. Kellogg's is offering breakfast cereal coupons to consumers who donate money to Feeding America.

The spectre of growing queues at soup kitchens evokes the hardship of the Great Depression, and underlines fears that the credit crunch is exacting a painful toll on American society.

While there have been tentative signs in recent weeks that the economy is starting to strengthen, there are also growing concerns that the US could be on the brink of a "double dip" into a new downturn.

With the housing market still plunging, long-term mortgage rates have risen in response to rising bond yields on the financial markets. The Federal Reserve will meet this week to discuss monetary policy, and Ben Bernanke, its chairman, is under pressure to take action to bring mortgage rates back down.

John Richards, of RBS, said the meeting would be "exceptionally interesting", adding: "Changing the policy rate is not the issue; instead, the meeting will be the first chance for the Fed to officially consider what, if anything, it wants to do about the danger posed by rising Treasury yields to the recovery."

With rates already at zero, and the Fed buying back billions of dollars of government bonds, few options are available, but Bernanke is thought to be considering making a public commitment to keep rates low for a long time, in the hope of influencing investors and bringing long-term rates back down.

Graham Turner, of GFC Economics, said unless the Fed could reverse the rise in rates, there was a risk the economy would slide into freefall.

With foreclosures still increasing, Turner added that a growing number of desperate or disheartened borrowers were simply walking away from their near-worthless properties, risking "a complete breakdown of the social contract between banks and homeowners".

As Treasury Secretary Tim Geithner struggles to sell Washington's plan for re-regulating the banking sector to a sceptical Congress, a New York Times opinion poll last week showed the American public are less confident in Obama's handling of the economy than his wider record, during his first few months in the White House.

While 63 per cent approved of the way he is handling his job as President, more than half said he should focus on reducing the deficit, instead of spending money to kick-start the economy.

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