"THE INDUSTRY IS DOWN 20 PERCENT. It's by far the worst environment we've ever seen and we'll see a lot of funds going out of business," said Evan Rapoport, co-founder of HedgeCo Networks, which services hedge funds and organized the party. "A lot of people are looking for a job," said Nicole Alexander from Ovation Group, a corporate travel company. "THE JOKE IS THAT THE NEW STATUS SYMBOL, INSTEAD OF A PORSCHE OR FERRARI, IS HAVING HEALTH INSURANCE AND A DESK."

Job losses across Wall Street are forecast by New York state accountants to hit 48,000 by the end of next year. Hedge funds, which have long prided themselves on their resilience, are reeling. A new study by Morgan Stanley predicts assets under hedge fund management globally will drop to 900 billion dollars by the end of 2009, half the peak valuation earlier this year.

To admirers, hedge fund traders are risk-taking, profit-hauling buccaneers who can afford to bet big because they deal only with big players. Detractors say HEDGE FUNDS EMBODY UNDER-REGULATED, OVER-LEVERAGED AND GREED-DRIVEN BUSINESS PRACTICES RESPONSIBLE FOR THE US FINANCIAL CRISIS.

Nikhil Khandelwal, who raises money at ThornWood Capital, gleefully described his company's ability to charge clients sharply increased interest on loans that banks now refuse. "It's a sad reality but we make money when others lose it," he said, not sounding sad. Khandelwal had no sympathy for those in the mayhem. "YOU COME TO A HEDGE FUND TO MAKE EXCESSIVE MONEY, SO YOU KNOW THE RISKS."

Additionally, if Gov. Arnold Schwarzenegger and lawmakers fail to close the current fiscal year's budget shortfall soon, California, the most populous U.S. state, may in March delay payments to its vendors or hand them notes promising payment, (IOU's) according to a December 1 letter to top lawmakers from the director of the Department of Finance, Michael Genest. A copy of the letter was obtained on Friday by Reuters.

Governor Arnold Schwarzenegger warned that the state may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

"IT'S GETTING WORSE VERY QUICKLY," Schwarzenegger, a 61-year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. "IT'S LIKE AN AVALANCHE IN THAT IT GAINS MOMENTUM AND THAT'S WHAT WE'RE IN RIGHT NOW, SO IT'S A REAL CRISIS."

"To reduce this threat, the administration is also proposing legislation to increase internal borrowable cash resources," Genest added. "However, even with this cash solution the state will not be able to pay all of its bills in the absence of quick action on the budgetary solutions." The last time California, THE WORLD'S EIGHTH BIGGEST ECONOMY and the largest issuer of U.S. public debt, issued payment promises to vendors was in the early 1990s.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, BOTH ALL-TIME HIGHS in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

"Until we see a turnaround in the job situation, we're not going to see these numbers improve," said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. "We're seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures."

THE U.S. ECONOMY HAS SHED 1.91 MILLION JOBS THIS YEAR, while falling home prices have made it difficult for people who can't pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money. The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession. "You have all these people who have local currency, and they're going to spend it at local stores," said Sura Faraj, a community organizer who is helping spearhead the plan. "They can't spend it at the Wal-Mart or the Home Depot, but they can spend it at their local hardware store or their local grocery store."

Incentives could be used to entice consumers into using the new money. For example, perhaps they could trade $100 U.S. for $110 local, essentially netting them a 10 percent discount at participating stores. It's not a new concept — experts estimate there are at least 2,000 local currencies all over the world — BUT IT IS A PRACTICE THAT TENDS TO BURGEON DURING ECONOMIC DOWNTURNS.

During the Great Depression, scores of communities relied on their own currencies. And it's completely legal. As long as communities don't create coins, or print bills that resemble federal dollars, organizations are free to produce their own greenbacks — and they don't even have to be green.

Drought has become a regular occurrence in South Australia, which already receives the least rainfall of any Australian state. Lack of rainfall and a sharp reduction in the amount of water flowing into the Murray River meant the state could not guarantee water levels for 2009.

The state's water security minister, Karlene Maywald, said she had purchased 61 billion gallons (231 gigaliters) of extra water for 2009. Water levels in the vitally important Murray Darling basin - WHICH PRODUCES 40% OF THE COUNTRY'S FRUIT, VEGETABLES AND GRAIN - have fallen to critically low levels.

Mr Rann defended his minister's move. "We've been buying water for years, but this is water that's being bought as back-up water for critical human needs," he was quoted by ABC News as saying. "I think what she's done is absolutely prudent and sensible in THE WORST DROUGHT IN A THOUSAND YEARS ACCORDING TO THE SCIENTIFIC EXPERTS."

This pesticide had been applied to rapeseed and sweet cornseeds in the Rhine River Valley. Piles of dead bees were discovered at the entrance of hives in early May 2008. Clothianidin was found in the tissues of 99% of the dead bees. This is the time when corn seeding takes place according to Walter Haefeker, president of the European Professional Beekeeping Association. The Julius Huehn Institute(federal agricultural research agency) stated "IT CAN BE UNEQUIVOCALLY CONCLUDED THAT POISONING OF THE BEES IS DUE TO A RUB-OFF OF THE PESTICIDE INGREDIENT CLOTHIANIDIN FROM CORNSEEDS." This chemical is estimated to have killed two-thirds of the bees in this state.

Clothianidin is widely used insecticide marketed in Europe under the brand name Poncho. This insecticide is a derivative of nicotine which acts systemically as a neurotoxin which poisons the nervous system of insects. AFTER APPLICATION TO THE SEEDS OF PLANTS CLOTHIANIDIN SPREADS THROUGHOUT ALL PLANT TISSUES. The U.S. Environmental Protection Agency has classified clothianidin as "highly toxic" to honeybees. This chemical was approved for U.S. use in 2003 and German use in 2004.

Beekeepers and pesticide critics rejected this explanation and called for Germany to join France in banning this chemical and other nicotine based insecticides. Philipp Mimkes, spokesman for the Coalition Against Bayer Dangers, stated "We have been pointing out THE RISK OF NEONICOTINOIDS for almost 10 years now. This proves without a doubt that that the chemicals can come into contact with bees and kill them. These pesticides shouldn't be on the market."

In July 1993, U.S. counterterrorism agents arrested eight individuals later convicted of plotting an elaborate, multistage attack on key sites in Manhattan. The militants, who were linked to Osama bin Laden's then-relatively new group, al Qaeda, planned to storm the island armed with automatic rifles, grenades and improvised explosive devices (IEDs). In multiple raids on key targets combined with diversionary attacks, they aimed to kill as many people as possible.

The planned attack, which came to be known as the "Landmarks" plot, called for several tactical teams to raid sites such as the Waldorf-Astoria, St. Regis and U.N. Plaza hotels, the Lincoln and Holland tunnels, and a midtown Manhattan waterfront heliport servicing business executives and VIPs travelling from lower Manhattan to various New York-area airports. The militants carried out extensive surveillance both inside and outside the target hotels using human probes, hand-drawn maps and video surveillance. Detailed notes were taken on the layout and design of the buildings, with stairwells, ballrooms, security cameras and personnel all reconnoitred.

ULTIMATELY, THE BIGGEST DIFFERENCE BETWEEN THE LANDMARKS PLOT AND THE MUMBAI ATTACK IS THAT THE MUMBAI ATTACK SUCCEEDED. The failure of the Landmarks plot probably provided key lessons to the planners of the Mumbai attack, who were able to carry out the stages of the attack without detection and with the full element of surprise. GAUGING BY THE SUCCESS OF THE MUMBAI INCIDENT, WE CAN EXPECT SIMILAR STRATEGIES AND TACTICS IN FUTURE ATTACKS.

They are demanding to know whether a move to sell out Britain to Brussels and adopt the euro was on the agenda. The controversy followed the confession by the president, Jose Manuel Barroso, that he has talked to "the people who matter in Britain" about the country joining the European single currency.

As anger intensified about the threat of another Labour surrender to Brussels, Mr Brown was given a stark warning of the degree of public hostility. An exclusive poll for the Daily Express was deluged with thousands of votes yesterday, WITH 94 PER CENT SAYING BRITAIN SHOULD KEEP THE POUND. Only six per cent were in favour of switching to the euro.

Tory frontbencher William Hague promised to raise a series of Parliamentary questions designed to expose the full extent of Mr Brown's involvement. The Shadow Foreign Secretary said: "Mr Barroso's meeting with Gordon Brown raises some very interesting questions. "The president is an intelligent man. HE WOULD NOT HAVE SAID WHAT HE DID IF THE PRIME MINISTER HAD TOLD HIM THERE WAS NO WAY THAT BRITAIN WAS GOING TO JOIN THE EURO."

The proposal was revealed on Monday in the Israeli daily paper Haaretz, though officials from the office of the Palestinian President in Jerusalem said the EU had been in touch with the President's office on the issue for years, and continuously indicated their support for the re-opening of the Palestinian institution.

The Haaretz report said Israeli officials were "deeply concerned" over the proposal's suggestion, and presumed THE IDEA OF REOPENING THE INSTITUTION WOULD CAUSE A "CLASH" BETWEEN THE EU AND "WHATEVER NEW GOVERNMENT ISRAELIS ELECT IN FEBRUARY." In previous years the United States looked for ways to secure the opening of the Orient House offices, but without satisfactory results.

The Orient House has been the center of government and diplomatic activity for Palestinians for over a century, and is recognized internationally as the headquarters of the Palestinian Liberation Organization (PLO) in East Jerusalem. The building was occupied by the Israeli army and shut down in 2001 on order from the Israeli Minister of Security.

Former US-national security advisors Brent Scowcroft and Zbigniew Brzezinski reportedly endorsed the strategy in recent days. Meanwhile, Obama's nominee to head the National Security Council, Gen. James Jones, apparently favors the idea, all according to Newsweek, a weekly American newsmagazine. "A PRINCIPLE THAT APPEARED TO BE OUT OF BOUNDS I THINK IS NOW IN BOUNDS," said Tony Blair, the Middle East envoy from the International Quartet countries.

Israel has long argued that the country cannot deal with Palestine until the Palestinian Authority (PA) manages to control militants. And Palestinians complain that they cannot consciously ask militias to disarm so long as Israel continues to occupy the West Bank and East Jerusalem. But a NATO force, Obama's advisors argue, would bridge the impasse on both sides.

"BUT THEN IT'S NOT CLEAR HOW NATO COULD PREVENT THE ISRAELIS FROM TAKING MATTERS INTO THEIR OWN HANDS," according to the Newsweek report, if Palestinian fighters began "picking off" NATO soldiers. "And should all-out fighting resume - this is, remember, one of the world's most intractable conflicts - NATO could be drawn into the middle," the article goes on to say.

As expected, Mr Paulson urged Beijing not to abandon efforts to let the renminbi appreciate, said US officials, amid fears China might want to let its currency weaken to help local exporters weather the global slowdown. But Mr Paulson also found himself facing calls for the US to address its own economic problems. Wang Qishan, a vice-premier and leader of the Chinese delegation at the two-day talks, called on the US to take swift action to address the crisis.

"We hope the US side will take the necessary measures to stabilise the economy and financial markets as well as guarantee the safety of China's assets and investments in the US," he said. The dialogue was dominated by the global crisis. Zhou Xiaochuan, governor of the Chinese central bank, urged the US to rebalance its economy. "OVER-CONSUMPTION AND A HIGH RELIANCE ON CREDIT IS THE CAUSE OF THE US FINANCIAL CRISIS," he said. "As the largest and most important economy in the world, the US should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits."

Although China also faces a rapidly slowing economy and rising unemployment, the tone of the comments reflected an underlying shift in power. Eswar Prasad, a senior fellow at the Brookings Institution, said: "ONE RESULT OF THE CRISIS IS THAT THE US NO LONGER HOLDS THE HIGH GROUND TO LECTURE CHINA ON FINANCIAL OR MACROECONOMIC POLICIES."

GM lost 16 percent after a person familiar with the matter said the largest US automaker is exploring a reorganization with workers, creditors and lenders. Southwestern Energy Co, EOG Resources Inc and Exxon Mobil Corp slumped, sending the Standard & Poor's 500 Energy Index to a 6.2 percent decline. Apple Inc slipped 4.7 percent as Nokia Oyj said the global mobile-phone market will shrink 5 percent or more next year.

The S&P 500 lost 2.9 percent to 845.22. The Dow Jones Industrial Average fell 215.45 points, or 2.5 percent, to 8,376.24. Indexes also dropped after the Labor Department said more Americans are collecting jobless benefits than at any time since 1982. Economists estimate a report tomorrow will show the unemployment rate increased to 6.8 percent, a 15-year high.

"AS BAD AS YOU THINK IT IS, IT'S WORSE," said Diane Garnick, who helps oversee about $500 billion as an investment strategist at Invesco Ltd in New York. "The chances of the economy turning around in the first half of 2009 are declining rapidly because unemployed people can't spur economic growth. Businesses are battening down the hatches," Stuart Hoffman, chief economist at PNC Financial Services Group Inc in Pittsburgh, said in a Bloomberg Television interview. "JOB LOSSES ARE GOING TO CONTINUE TO ACCELERATE."

Prime Minister Gordon Brown has urged lenders to pass on the cut to homeowners and business. So far, only a handful of lenders have said they will pass on the cut in full to standard variable rate mortgages. There has been no news yet for savers, with banks and building societies saying their savings rates are "under review".

"If the banks pass the interest rate reduction on, and I hope and believe that they should do so, then it's of benefit to homeowners and businesses right across the country," Gordon Brown told BBC Radio 5 Live. HSBC, Bristol & West, and Lloyds TSB, which also owns Cheltenham and Gloucester, have said their standard variable rate (SVR) mortgages would be cut by the full one percentage point cut. Earlier, there was further evidence of the rapidly slowing economy in the UK:

• House prices fell 2.6% between October and November - their sharpest monthly drop since the housing market crash of the 1990s - according to the Halifax.

• New car sales in November fell 36.8% on the year before - the steepest decline in nearly three decades according to the Society of Motor Manufacturers and Traders.

Honda, which spent more than £300m a year on F1, said it would no longer supply the sport with engines. "Honda Motor Co. has come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season for participation," said Honda president Takeo Fukui at an emotional press conference.

"This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry... and THE SUDDEN CONTRACTION OF THE WORLD ECONOMIES," he added. Honda were the lowest-placed of the points-scoring teams in 2008 "Honda must protect its core business activities and secure the long term as widespread uncertainties in the economics around the globe continue to mount."

Max Mosley, president of world motorsport governing body the FIA, recently urged teams to find ways to reduce costs. "Formula One is becoming unsustainable," said Mosley in July. "The MAJOR MANUFACTURERS ARE CURRENTLY EMPLOYING UP TO 1,000 PEOPLE TO PUT TWO CARS ON THE GRID. This is clearly unacceptable at a time when all these companies are facing tough market conditions."

John Fox, an Asia expert at the European Council on Foreign Relations, writes that the snub is a brutal, and unprecedented warning of how little Europe means to China. We certainly mean less than the US, to whom this action was also in part meant as a warning shot. And, depressingly, we mean less to China as a Union than punishing France, a single member state, for transgressions with the Dalai Lama.

Europe is supposed to have a "comprehensive strategic partnership" with China. But this move shows that we have nothing of the sort, certainly in China's eyes. China would never behave this way with the US, or Russia. Japan regularly gets the melodramatic treatment, but China would never cancel an East Asia Summit meeting or an ASEAN+3 meeting, because its neighbourhood matters to it.

With a new administration about to take office in Washington, there is plenty of manoeuvring over international relationships at the moment. This seems a good time for Europe to take stock of its ties to China and, if they are indeed found lacking, figure out how to become more relevant. The question is how to best do so.