World Economic Forum

Sounds like kind of a glum gathering so far.

On the first day of this conference, a parade of bankers, economists, and political officials expressed deep fears about the faltering American economy, peppered with blunt criticism of its institutions, chiefly the Federal Reserve, which some accused of sowing the seeds of today's crisis.

George Soros, the financier who made a fortune betting against the pound, went so far Wednesday as to say that the downturn would put an end to the long status of the dollar as the world's default currency.

"The current crisis is not only the bust that follows the housing boom," Soros said. "It's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency."

But George Soros is an eeeeeevil activist Democrat, so we can disregard whatever he says. Carry on:

Signs of a new economic order abounded in this Swiss ski resort: the minister of commerce and industry of India, Kamal Nath, noted that China had overtaken the United States as India's largest trading partner - buttressing his view that India could largely sidestep an American recession.

The head of the National Bank of Kuwait, Ibrahim Dabdoub, said Americans who opposed sovereign wealth funds like the one run by his government needed to come to terms with the new reality.

In other words, Kuwait thinks we should get used to the idea of being the world equivalent of a kept woman. Hmmmm.

One of my favs, Nouriel Roubini, had this to say:

Completing the role reversal, Nouriel Roubini, an American economist, said, "the United States looks like an emerging market," with large budget deficits and a swooning currency. By contrast, he said, Brazil, an actual emerging market, had done a better job of overhauling its economy.

Roubini, whose frequent predictions of a downturn have made him something of a soothsayer in Davos, predicted the United States would suffer a recession lasting at least a year. He foresees a flood of defaults on car loans and corporate bonds, as well as a prolonged bear market.

"The debate is not whether we're going to have a soft landing or a hard landing," he said. "The question is only how hard the hard landing will be."

That doesn't sound good. So what about pulling out our handy dandy economy fix-all, the rate cut??

Several economists said the Federal Reserve seemed to have lost control of events since the subprime crisis erupted last summer. Some criticized its steep cut in interest rates Tuesday as a knee-jerk reaction to calm the markets rather than a sound response to a deteriorating situation.

"Policy makers are reaching back into the same playbook that got us into this mess in the first place," said Stephen Roach, an economist who recently became the chairman of Morgan Stanley Asia.

By signaling that it is ready to cushion the stock market from the ravages of the credit crisis, Roach argued, the Federal Reserve risks creating conditions for a new round of inflation in asset prices.

The Federal Reserve "made bad judgments," said Joseph Stiglitz, the Nobel Prize-winning economist. "It looked the other way when investment banks packaged bad loans in non-transparent ways."

Ding ding ding ding!!!