The Cynical Economist

“Well, you know, I was a human being before I became a businessman.”

“The worse a situation becomes the less it takes to turn it around, the bigger the upside.”

“The financial markets generally are unpredictable. So that one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.”

“Markets are designed to allow individuals to look after their private needs and to pursue profit. It’s really a great invention and I wouldn’t under-estimate the value of that, but they’re not designed to take care of social needs.”

“A full and fair discussion is essential to democracy.”

George Soros quotation

From Daily Mail
by KARL WEST

A secretive group of Wall Street hedge fund bosses are said to be behind a plot to cash in on the decline of the euro.

Representatives of George Soros’s investment business were among an all-star line up of Wall Street investors at an ‘ideas dinner’ at a private townhouse in Manhattan, according to reports.

A spokesman for Soros Fund Management said the legendary investor did not attend the dinner on February 8, but did not deny that his firm was represented.

At the dinner, the speculators are said to have argued that the euro is likely to plunge in value to parity with the dollar.

The single currency has been under enormous pressure because of Greece’s debt crisis, plus financial worries in Portugal, Italy, Spain and Ireland.

But, it has also struggled because hedge funds have been placing huge bets on the currency’s decline, which could make the speculators hundreds of millions of pounds.

The euro traded at $1.51 in December, but has since fallen to $1.34. Details of the secretive dinner emerged days after Mr Soros, chairman of Soros

Fund Management, warned in a newspaper article that the euro could ‘fall apart’ even if the European Union can agree a deal to shore up support for stricken Greece.

From ABC News

Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.

“That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now,” he said in a speech on the future mandate of the 186-nation Washington-based lending organization.

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF’s special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar “would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country.”

Strauss-Kahn, a former finance minister of France, said that during the recent global financial crisis, the dollar “played its role as a safe haven” asset, and the current international monetary system demonstrated resilience.

“The challenge ahead is to find ways to limit the tension arising from the high demand for precautionary reserves on the one hand and the narrow supply of reserves on the other,” he said.

Several countries, including China and Russia, have called for an alternative to the dollar as a reserve currency and have suggested using the IMF’s internal accounting unit.

Strauss-Kahn said the IMF also needs to do a better job of tracing how risk percolates through the global economy.

“Here it will be essential to improve our ability to monitor several dozen large complex financial institutions that make up the `plumbing’ through which global capital flows,” he said, while leaving national regulators the job of monitoring the solvency of individual institutions.

FDIC to test principal reduction for underwater borrowers – The Federal Deposit Insurance Corp. is developing a program to test whether cutting the mortgage balances of distressed borrowers who owe significantly more than their homes are worth is an effective method for saving homeowners from foreclosure.

Economist Johnson says NY will lose 150K jobs in ‘10 – Albany economist Hugh Johnson expects New York state to lose 150,000 jobs this year, a slightly smaller decline than what happened in 2009.

U.S. in slow recovery, but debt crisis looms – The U.S. is in the early stage of a slow economic recovery, but even as GDP begins to grow, the looming problem of an increased budget deficit threatens the country in the not-too-distant future, said a chief economist at the Federal Reserve Bank.

Housing market shows weakness for 2nd month – Big drop in January home sales show housing market could falter after federal support ends

Housing Recovery Is Looking A Lot Shakier Than Expected - The recent slump in housing is making some analysts uneasy about a recovery that many thought sustainable just a couple months ago and comes at a time when the Federal Reserve is nearing the end of a critical, year-long program to support the mortgage market.

AIG Reports $8.9 Billion Quarterly Loss, Shares Stumble – The ailing insurer, which has already received $85 billion in government assistance, said in aSecurities and Exchange Commission filing that without additional aid, “there could exist substantial doubt about AIG’s ability to continue as a going concern.”

The Case Against College Education – Our high college drop-out rate — 40% of kids who enroll in college don’t get a degree within six years — may be a sign that we’re trying to push too many people who aren’t suited for college to enroll

Obama May Prohibit Home-Loan Foreclosures Without HAMP Review – That is some stupid idea. I agree with this …You Should Intentionally Default: President Obama

Greece angers Germany in gold row – Greek Deputy Prime Minister Theodoros Pangalos has accused Germany of failing to compensate Greece for Nazi occupation during World War II.

The holes in Goldman’s Greek defence – What holes? Goldman is in effect saying that banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it’s naive to expect them to do the “right thing”, in a nebulous ethical sense, unless they are obliged to do that right thing.

Fed to look into insurance contracts on Greek debt – Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the central bank is looking into the use by Goldman Sachs and other Wall Street firms of high-risk financial instruments to make bets that Greece would default on its debt.

Banks bet Greece defaults on debt they helped hide – Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin

Asia’s Latest Export: Recovery - The global recession was made in America. The recovery is being made in Asia. Too bad USA is not invited to participate

Montgomery sees huge decline in taxable income – Montgomery County is losing its share of millionaires, causing a sharp decline in income tax revenue. County officials estimate next year’s budget deficit will be more than $761 million. Much of the shortfall is tied to a few residents who have either lost money in the economy, died or fled Maryland’s new millionaire tax.

But in other news…

Montgomery County public employees may get raises – Montgomery County Executive Leggett has not ruled out $30 million in pay raises for most county employees, although the county faces a budget gap of more than $760 million

Bernanke delivers blunt warning on U.S. debt – With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

Study: NY, NJ To Pay 25% Of New Obama Health Tax – Suckers…President Barack Obama’s new health care plan really socks it to New York taxpayers and its bad news for residents of New Jersey and Connecticut, too.

Private Accounts the Only Answer on Social Security, Pensions – Americans have been so bombarded with the word “crisis,” it appears to have lost all meaning. But distinguished scholar the Cato Institute, there is a real, serious crisis pending in America’s addiction to entitlement programs, government-dependence, and imaginary “rights” to live off future generations.

CBO Report Was Pre-Ordained to Show the Stimulus Succeeded – The CBO’s calculations are not based on actually observing the economy’s recent performance. Rather, they used an economic model that was programmed to assume that stimulus spending automatically creates jobs — thus guaranteeing their result.

Energy Secretary Chu Says U.S. Must Decrease Energy Use - U.S. energy secretary Steven Chu said Wednesday that the U.S. must decrease its energy use to allow developing nations the room to grow, while emphasizing that prosperity doesn’t have to come with a large carbon footprint.

But in other news….

China says no emissions cap for now – China’s top climate change negotiator has said the world’s biggest carbon polluter has no intention of capping greenhouse gas emissions for the time being

CIA: America Brokest Country on Earth…- we are first from the bottom up

As Moody’s Targets Japan, The Sovereign Debt Crisis Moves Closer To The US – While Moody’s and its peers have spent the last several months concentrating on the debt of troubled southern European nations, they have dropped hints more frequently about the health of the financial systems in Japan, the UK and the US

Faber: 30 Percent Chance China Will Crash And Burn – He thinks “there is 99 per cent possibility that China will slow down considerably and I would say there is 30 percent chance that it will crash.”

Caught on Tape: Selling America’s Secrets – “60 Minutes” has obtained an FBI videotape showing a Defense Department employee selling secrets to a Chinese spy for cash...but,but I thought they are our friends

NAR to Congress: Turn Fannie and Freddie into Non-Profits – LOL they already are non profits

Geithner: No change to Fannie, Freddie until 2011 – The Obama administration will wait until 2011 to propose an overhaul of mortgage giants Fannie Mae and Freddie Mac

Factory orders, jobless claims show continued weakness – The government said orders to factories for big-ticket manufactured goods shot up in January by the largest amount in six months, but the strength came from a surge in demand for commercial aircraft. And new claims for unemployment benefits rose unexpectedly in the latest week.

Bernanke: Unsustainable Debt Could Hurt Dollar, Interest Rates – “There are a number of different channels through which large deficits, or unsustainable deficits, could affect the current economy,” Bernanke told the House Financial Services Committee.

Jobless claims rise due to weather-related factors - New claims for unemployment benefits jumped unexpectedly last week, mostly because state agencies processed a backlog of claims caused by snowstorms the previous week. Yeah blame it on climate change

China’s military warns Washington, denies hacking – China’s military warned the United States on Thursday to “speak and act cautiously” to avoid reigniting tensions between the two powers, denying the People’s Liberation Army played a part in Internet hacking.

Duck! Watch out for falling home prices – Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.

US-Sino tensions “dangerous game,” U.S. panel told – China’s belief it now has the upper hand in the global economy creates a risky dynamic that makes it urgent the United States cut its mammoth debt, a former International Monetary Fund official said on Thursday.

Muni Bond Flashpoint – The new Great Depression is far from over, especially for municipalities.

Daube Says an EU Bankruptcy Ends ‘Euro Experiment’ – The bankruptcy of a euro-region country would spell the end of European monetary union, said Carl Heinz Daube, the head of Germany’s debt agency.

Italy masked finances worse than Greece – Pangalos – Italy did more than Greece to mask the state of its finances to secure euro zone entry, Greek Deputy Prime Minister Theodoros Pangalos said, adding that Germany’s history made it ill-placed to criticize his country.

West Not Recovering, Bond Crisis on the Way: Strategist - The economies in the West are not actually recovering, Martin Hennecke, associate director at investment and financial advice firm Tyche, said Tuesday. He foresees high or even hyper inflation going forward in the West and a potential crisis in the bonds market

Commercial Mortgage Default Rate in U.S. More Than Doubles – The default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may reach a peak of 5.4 percent at the end of next year, according to Real Capital Analytics Inc.

World trade suffers biggest drop since 1945 – World trade fell by 12 per cent last year — the biggest drop since the Second World War — according to the World Trade Organisation (WTO)…Yeah? Dont worry Bernanke is optimist. He said in his testimony today that : “And international trade–supported by a recovery in the economies of many of our trading partners–is rebounding from its deep contraction of a year ago”

Los Angeles’ credit rating downgraded due to excessive spending – A Wall Street rating agency on Tuesday downgraded Los Angeles’ credit rating, a move that will cost the city millions of extra dollars down the road.

‘Death of American Capitalism:’ The 10 final scenes – Good news, Americans are “downbeat about today. Upbeat about tomorrow,” says the latest USA Today/Gallup Poll. “Americans feel battered by hard times, record home foreclosures, stubbornly high unemployment rates and war.”

Treasury to TARP Inspector General: Drop Dead -The special inspector general for the TARP program, Neil Barofsky, has made a reputation for himself by issuing tough assessments of the troubled federal program for troubled assets. It’s been a problem for Tim Geithner’s Treasury Department. No one, after all, wants a watchdog at their heels. Treasury’s solution: muzzle the dog.

Specifically, Treasury is considering excluding the special Inspector General — known as “SIGTARP” in bailout circles — from the new $30 billion small-business lending program announced by President Obama in his state of the union address.

CalPERS loses $475 million on investment that paid controversial placement agent millions – The deal yielded Villalobos his biggest commission yet recorded, according to CalPERS records: $13.2 million.

Junk Debt ‘Wall’ to Trigger U.S. Defaults, Bank of America Says - A “wall” of junk debt maturing in the next four years will increase the risk of corporate defaults in the U.S., according to Bank of America Merrill Lynch.

24% of All U.S. Residential Mortgages Now Underwater, Says CoreLogic Q-4 Report - Together, negative equity and near-negative equity mortgages accounted for nearly 29 percent of all residential properties with a mortgage nationwide.

Bullish a Year Ago, Robert Prechter Now Sees “the Biggest Bubble in History”

Consumer confidence, job programs, Greenspan