From Newsday…

Proposals to shave pension entitlements for new employees emerge in every fiscal crisis, prompting resistance from public-service unions and from the lawmakers responsive to them. Each pension tier marks an effort at what policy-makers call fiscal reform. Over the years the state has had four such tiers. The constitution bars cutting pensions to those already on the job or retired.

Earlier in the decade, calls for a fifth tier for rookies failed. But this new push could carry unusual momentum. The clearest reason is the severe fiscal crisis fueled by Wall Street’s collapse and the search for savings in every corner. But also, a certain political wind is blowing. Mention public pensions these days and scandalous abuses come to many local minds such as school board pensions for non-employees or hearty Long Island Rail Road retirees collecting for phantom disabilities. Into all that figures the decline and thinning of pensions in the teetering auto industry and other businesses.

New York State is actually in a fairly good position in regards to its pension. At least, compared to many other states.

But local governments all over NY state are getting killed by pension costs. The problem is that they will go bankrupt long before this fifth tier has any effect on pension costs. It will be at least 10 years before the state realizes any savings from this “fifth tier” and many local governments are going to be killed by pension costs in the next 10 years.

From the Houston Chronicle….

An insurance company with a potential $25 million liability from a 2007 Houston office fire is claiming smoke that killed three people was “pollution” and surviving families shouldn’t be compensated for their losses since the deaths were not caused directly by the actual flames.

Great American Insurance Company is arguing in a Houston federal court that the section of the insurance policy that excludes payments for pollution — like discharges or seepage that require cleanup — would also exclude payouts for damages, including deaths, caused by smoke, or pollution, that results from a fire.

I don’t see how arguments like this can be appear in court with out the judge laughing them out of court. The fire caused the smoke. If you cover damages as a result of a fire, that covers the damages caused by smoke. End of story.

From the Reuters….

U.S. crude prices dropped more than 9 percent to $36 a barrel Thursday as slumping demand and swelling U.S. inventories offset OPEC’s record supply cut agreement.

The Organization of the Petroleum Exporting Countries on Wednesday agreed to cut output by 2.2 million barrels per day from January to counter oil’s collapse from record highs above $147 a barrel in July.

From Macro Man….

People who are acquainted with Macro Man, either personally or virtually, will know that he is very rarely lost for words. This morning, however, he has reached that milestone, as he’s watched prices flicker on his screen in slack-jawed silence.

Policymakers often reference a desire to avoid “excessive volatility” and the proper functioning of markets. Suffice to say that that we are now firmly in the presence of the former, with an utter absence of the latter. Regardless of your market view, right or wrong, you want to have a market in which to transact. The past couple of weeks, and the past couple of days in particular, has seen complete implosion of the market’s ability to reflect transaction flows and fundamentals.

This morning, for example, the German ifo survey printed a lower-than-expected 82.6, it’s worst reading since…err…ever. Regardless of what you think about the dollar, it would seem to be an excessive response for EUR/USD to rally 3 big figures in the ensuing hour.

Brad Setser spells it out a little more concretely…..

Only a few days ago, so it seems, it took about $1.25 to buy a euro. Now it takes closer to $1.45 (it was more earlier today, but the dollar subsequently rallied). And — as Macro Man notes — the dollar’s move pales relative to the recent slide in the pound. Not so long ago a pound bought 1.5 euros. Now it buys a euro and change. The Anglo-Saxon currencies haven’t had a good two week run.

Both the US and the UK had housing and finance centric economies. Both have significant external deficits. And both are inclined to use monetary and fiscal policy aggressively to combat a downturn.

Maybe this has something to do with the Fed telling everyone who will listen that they are going to print dollars until all their problems go away.

Macro Man argues other wise. He points out that Euro moved high against everything so he does not think that this move should be considered some kind of reaction against the dollar.

But a good part of the dollar’s recent strength has been the desire for a safe haven. Maybe a lot of people decided they wanted a new safe haven. I don’t see why that would not drive the Euro up against everything

From Calculated Risk…..

Just checked some money market funds, and for a few of them the expenses are now greater than the yield – so you’d do better with a mattress.