New York (freemarketnews.com) - "In two October articles, FMNN predicted a coming Chinese dollar dump. The UK Telegraph has confirmed it (see below). And yesterday Bloomberg ran the news as well.

=====

Bloomberg story as follows:

      The dollar slid to record lows against the euro and the Canadian dollar after a Chinese government adviser said plans to diversify foreign-exchange reserves will involve buying better-performing currencies.

      The currency slumped to a 26-year low against the pound and a 23-year low against the Australian dollar. Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing the country ``will favor stronger currencies'' when adjusting its $1.43 trillion of reserves. He later added that doesn't mean buying more euros.

      "We're likely to see further pressure on the dollar,'" said Thomas Harr, senior foreign exchange strategist in Singapore at Standard Chartered Plc, a U.K. bank that makes most of its profit in Asia. "The potential for diversification is quite big. This a structurally negative story for the dollar."

http://www.bloomberg.com

=====

      The UK Telegraph is reporting that Asian dollar outflows are exceeding expectations, led by China and Japan. This confirms recent stories here at FMNN, including this one, now updated.

1. Original Title: Chinese $ Sell-Off Rumors Triggers Concern, Rash of Conspiracy Reports (2)

See also:

2. http://www.freemarketnews.com
China $200 Bil 'SuperFund' Set to Drain American Dollars

=====

Today, the Telegraph reports:

http://www.telegraph.co.uk

      Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields. The US requires $70bn a month in capital inflows to cover its current account deficit. Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.

      Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said. The release comes a day after the IMF warned that the dollar was still overvalued and likely to face "some depreciation in the medium term".

      Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

=====

Previous FMNN report continues here:

      In its ongoing struggle to disinflate its own economy and drain some of the trillion-plus devaluing American dollars that it holds, China's leadership has apparently authorized the hush-hush creation of a US$200 billion "super fund" that will purchase raw materials around the world, according to FMNN sources close to the Chinese top leadership. The report comes on the heels of a previous FMNN report that Chinese banks have begun to cautiously trade down China's horde of American dollars via international currency markets

      In its ongoing struggle to disinflate its own economy and drain some of the trillion-plus devaluing American dollars that it holds, China's leadership has apparently authorized the hush-hush creation of a US$200 billion "super fund" that will purchase raw materials around the world, according to FMNN sources close to the Chinese top leadership.

      The so-called superfund will consist of assets of Chinese institutions whose investments will be swapped out for mostly for American dollars that will then be re-invested in foreign assets, the kinds of commodities that China needs to fuel its roaring economy.

      China is awash with cash - dollars, euros, etc. - and the amount of cash in the country is inflating its stock market and causing interest rates to plummet despite the efforts of the leadership to slow the country's tremendous growth rate - which some believe is approaching a classic "bubble."

      By re-exporting the dollars and euros that are flooding in, China can likely remove some inflationary pressures and have a positive effect on real interest rates as well. Additionally, China will be realizing ownership of assets around the world, and doing so in a non-controversial way as the ownership will not be obvious.

      China previously was subject to a spate of bad publicity when it tried to take over large raw material companies in Canada - a move that was ultimately rejected amidst a chorus of indignation from Canada's political leadership and business community.

      While the move may be positive for China's currency position and guarantee an increased exposure to commodities, it will likely put more pressure on the struggling American dollar..."

      The Bottom Line:  Yep, it's that bad.

      U.S. crude settled up 86 cents at $96.32 a barrel, off earlier highs of $96.68. London Brent crude climbed 39 cents to $93.18.

      Oil struck a record $98.62 a barrel on Wednesday as falling inventories in consumers nations stirs worries of a supply shortage during the Northern Hemisphere winter.

      Support has also come from a large volume of options positions for $100 oil on the New York Mercantile Exchange still open despite the expiration on Tuesday.

      Experts said that with 42,000 options contracts to buy oil at $100 still open, financial players may try to push oil into triple digits ahead of the expiration.

      "I think the one thing that people are continuing to eye is the options expiration," said Eric Wittenauer, analyst at AG Edwards in St. Louis. "I think people would be hesitant to sell into this market."

      Oil prices could tumble though once the options expire, Lehman Brothers said in a research note.

More:

The End of Oil is Upon Us.  We Must Move On - Quickly

      TOKYO (Reuters) - "The dollar hit a record low against the euro on Friday as fears grew that more U.S. financial firms will be hit by credit market turmoil and reinforced expectations that the Federal Reserve will cut interest rates further.

      The U.S. currency dropped to a 26-year low against sterling and a 12-year trough against the Swiss franc as a report which said a unit of State Street Corp. (SST.N: Quote, Profile, Research) may be getting rid of asset-backed securities reinforced worries that more asset write-downs at U.S. banks may surface.

      A collateralized debt obligation (CDO) managed by State Street Global Advisors may have started selling off it assets, ratings agency Standard & Poor's said in a release late on Thursday.

      A downbeat economic forecast from Federal Reserve Chairman Ben Bernanke on Thursday also cemented market views that the Fed will cut interest rates more and further eroded the greenback's yield appeal.

      "The market grew worried on rumors that more U.S. banks will be hurt by additional losses and sold the dollar," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.

      "The euro seems to be hitting its peak. But the dollar's slide may have another chapter if more unexpected bad news surfaces and triggers expectations for further Fed rate cuts than the market now sees."

      The euro rose 0.3 percent from late U.S. trade on Thursday at $1.4730, after jumping earlier to an all-time high of $1.4739 on electronic trading platform EBS.

      The Bottom Line:  Damage done; how much worse can it get?.

      SYDNEY (Reuters) - "Oil rebounded as much as $1 on Friday, restarting a drive toward the $100 watershed after two days of losses as the dollar touched new lows and supply disruptions raised the risk of a winter supply crunch.

      U.S. crude for December delivery rose as much as $1.02 cents to $96.48 a barrel in electronic trading by 0208 GMT, reversing the previous day's 91-cent drop.

      Oil fell for a second day on Thursday after U.S. Federal Reserve Chairman Ben Bernanke highlighted the twin threats of slower growth and inflation for the U.S. economy, spurring profit-taking that pulled oil further back from a record $98.62.

      But Wall Street curbed late losses and the dollar hit yet another low against the euro on Friday, maintaining the allure of oil for financial investors and speculators who have helped lift oil by 40 percent since mid-August.

      The closure of 540,000 barrels of oil equivalent per day of production in the North Sea due to an approaching storm coupled with a weeks-long outage at a diesel refinery unit in Texas added a fundamental element to the gains.

      "There is still a lot of bullish news out in the market and I think investors are returning their focus on the short-term supply concerns now," said David Moore, a resource analyst in the Commonwealth Bank of Australia..."

More:

Oil discovery rocks Brazil

      "Scenarios of apocalyptic nature are not, let's say, likely, but they might happen. They are not ... impossible," said Mario Raviglione, director of the World Health Organization's Stop TB department.

      "Globally speaking about 96 percent of all TB cases are still treatable with the four drugs that we use in the standard regimen, 4 percent are multi-drug resistant ... but the worst case scenario is when this 4 percent becomes 50, 60, 70, 80 percent," he told reporters at a conference in Cape Town.

      Raviglione said a worst-case scenario would see multi- and extensively drug-resistant TB overtake cases of ordinary TB, which can still be cured with older but effective drugs.

      Multi- and extensively drug-resistant TB (MDR-TB and XDR-TB) are mutations of common TB virtually immune to all treatments.

      Raviglione said some countries in the former Soviet Union were showing an MDR-TB incidence of up to 20 percent, while some European states showed resistance to all second-line TB drugs — the most powerful in an increasingly ineffective drug arsenal.

      New York (worldnetdaily.com) - "Even as the stock market is hitting new record highs almost every day, the Federal Reserve and Treasury Department are quietly coordinating a devaluation of the dollar that the Bush administration hopes will be a slow decline rather than a dollar collapse.

      This week, in an unusual move, the Bush administration is sending virtually the entire economic "A-team" to visit China for a "strategic economic dialogue" in Beijing Dec. 14 and 15.

      Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are leading the delegation, along with five other cabinet-level officials, including Secretary of Commerce Carlos Gutierrez. Also in the delegation will be Labor Secretary Elaine Chao, Health and Human Services Secretary Mike Leavitt, Energy Secretary Sam Bodman, and U.S. Trade Representative Susan Schwab.

      The Bush administration wants to get China's cooperation in preventing a dollar collapse. That's the conclusion of John Williams, an experienced professional econometrician, who writes the "Shadow Government Statistics" blog.

      Williams has re-created M3, a money-supply measure whose data the Federal Reserve simply stopped publishing after issuing a technically worded March 2006 announcement.

      Williams reports M3 is currently growing at close to a 9.6 percent rate and trending higher, compared with an 8 percent rate early this year, when the Fed quit reporting the measure.

      "The Fed is pumping liquidity into the U.S. economy," Williams told WND, "and the Fed evidently did not want the markets to follow too closely what the Fed was doing with the money supply."

      China today now is holding a historically unprecedented $1 trillion in foreign exchange reserves. During the Thanksgiving holiday, an announcement by China that their central bank planned to diversify foreign-exchange holding away from the dollar caused the dollar to drop in value on international currency markets. Since then, the dollar has hit a 20-month low against the euro.

      "This was almost an orchestrated announcement," Williams claimed. "Around Thanksgiving the markets were thinly traded. I'm not sure who was playing games there, but the signal was clearly heard."

      "You're dealing with mass psychology here," Williams argued. "The central bankers around the world know they are going to take a hit on their dollar holdings. None of the central bankers want to start a dollar panic, but none of the central bankers want to be the last out of the dollar, either."

      Williams explained that the Federal Reserve is in a bind..."

      The Bottom Line:  Read 'em and weep.

      NEW YORK (BBC) -- "The ever-weakening dollar and worries about winter fuel supplies sent US oil prices to a peak at $98.62 a barrel.

      But prices later fell back sharply after US crude inventory figures showed a smaller than expected weekly fall.

      US light, sweet crude settled down 33 cents at $96.37 while Brent closed at $93.24, down from a high of $95.19.

      In recent sessions, record levels have been followed by falls of at least $1, and analysts say that prices are still on their way to $100 a barrel.

      The weaker dollar has been driving up oil prices as investors have been using the commodity as an alternative to holding dollars, and crude prices have also been lifted in recent days by bad weather hitting North Sea oil rigs.

$100 a barrel 'inevitable'

      Oil prices have now risen by 60% this year and some analysts say that $100-a-barrel oil is inevitable.

      "We're going to get $100 before too long," said Kevin Norrish of Barclays Capital.

      "I think we'll get there," said Dariusz Kowalczyk at CFC Seymour. "The factors that have been driving the recent trend are still in place."

      A big fall in US crude inventories might have been enough to push the price over $100 a barrel, but in the event the figures from the Department of Energy showed a smaller than expected drop.

More:

Consumers face long-term energy price squeeze

Rising cost of oil threatens vulnerable economy

      Parliament's lower house, the Duma, unanimously agreed to temporarily abandon the 1990 Conventional Forces in Europe treaty (CFE).

      The bill still faces approval in the upper house in December before President Vladimir Putin can sign it.

      The CFE is one of many issues recently putting Moscow at odds with the West.

      The Duma approved the bill in the 418-0 vote.

      In the motion, MPs said the CFE treaty "no longer responds to the security interests of the Russian Federation" in light of Nato expansion and other factors in Europe.

      The vote amounted to legislative confirmation of a decree signed by President Putin in July.

      The CFE was one of the most significant arms control agreements of the Cold War years.

      It set strict limits on the number of conventional weapons - battle tanks, combat aircraft, heavy artillery - that the members of the Warsaw Pact and Nato could deploy in European territory stretching from the Atlantic coast to the Urals.

      In the wake of the collapse of communism, the treaty was revised in 1999, in part to address Russian concerns.

      Russia ratified the 1999 revised version, but Nato has not done so.

      Nato states are first demanding the withdrawal of Russian forces from Georgia and Moldova, but Moscow says the issues are not linked.

      The Kremlin has also voiced concern over US plans to station part of a missile defence shield in Poland and the Czech Republic..."

      SINGAPORE (Reuters) - "Gold hit its best level in nearly three decades on Wednesday, silver roared to a 27-year high and platinum set another record as investors turned to precious metals as a hedge against inflation and a tumbling dollar.

      In addition to record-high oil, expectations the U.S. Federal Reserve will slash interest rates further and uncertainty in the U.S. credit market spurred buying. Gold is eyeing an all-time high of $850 reached in January 1980.

      "Maybe we will see $1,000 sometime. It's a matter of time," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

      "There's short-covering by investors because they think there's still a chance the Fed will reduce interest rates in December," he said.

      Spot gold hit a bid high of $835.90 an ounce, its loftiest level since January 1980, before sliding to $834.90/835.70 an ounce, still higher than $820.90/821.70 an ounce late in New York on Tuesday.

      Oil raced to all time-high of $98 a barrel on Wednesday on fears that falling world oil stocks and a North Sea production outage would strain supplies this winter.

      Silver was catching up with gold and rallied to its highest level since January 1981. Spot silver hit an intraday high of $15.88 ounce, before dipping to $15.84/15.91 an ounce, still higher than $15.37/15.42 an ounce.

      The Bottom Line:  You don't need to fast forward to see how this movie is going to end.

      NEW YORK (CNNMoney.com) -- "Oil prices set another record high Tuesday, jumping over $2 on fears of dwindling supplies in the United States, projections for strong worldwide demand and a falling U.S. dollar.

      A suicide bombing in Afghanistan that killed at least 35 people and a pipeline attack in Yemen also helped push prices higher.

      U.S. light crude for December delivery gained $2.72 to settle at $96.70 a barrel on the New York Mercantile Exchange, surpassing the previous closing high of $95.93 set Friday. Crude hit an intraday high of $97.07, surpassing the previous intraday record of $96.05, also set Friday.

      Crude, already up more than $2 in morning trade, rose further after the Energy Information Administration issued a report showing worldwide demand unchanged, despite high prices.

      EIA said the forecast for oil use growth worldwide in 2008 was unchanged at 1.5 million barrels per day. This was despite the fact prices have risen 20 percent.

      The agency said world oil use would grow by 1.8 million barrels per day in the current quarter, slightly below previous estimates due to a drop in U.S. demand.

      The world currently consumes about 85.6 million barrels of oil a day.

      Total U.S. petroleum consumption is expected to increase by 0.5 percent in 2007 and 1 percent in 2008, despite the higher oil and petroleum product prices. Continued economic growth and forecasted colder average temperatures this winter than last winter could combine to push demand higher.

      The rising demand's impact on prices was noted..."

More:

Oil, platinum at record high

Oil races to fresh high above $97

      NEW YORK (Reuters) - "Citigroup's bombshell that it faces as much as $11 billion more in credit losses has made one thing clear. No one really knows what's hidden in the subprime bond basement.

      JPMorgan thinks the financial services industry is sitting on $60 billion in undisclosed losses. Bill Gross, manager of PIMCO, the world's biggest bond fund, characterizes the U.S. subprime issue as a "$1 trillion problem."

      Whatever the number, the lack of clarity is raising worries that Wall Street and investors don't have the basic information to judge the severity of the current crisis.

      Two massive write-downs by Citigroup since early October and a rash of related losses for Merrill Lynch, the world's biggest brokerage, illustrate how difficult it is to evaluate risky debt tied to subprime mortgages.

      Analysts and investors expect the situation to worsen as banks reveal more losses and rating companies continue to downgrade some top bonds that trade like junk.

      The bigger write-downs stem from banks' exposure to giant, complicated bonds. Many investors didn't realize they could lose their entire investments due a decline in subprime loan values that was largely masked by the repackaging of the bonds and opaque accounting.

      "We will see a train wreck happening if the industry does not get together to develop a systematic way to deal with these distressed loans," Sheila Bair, chairwoman of the Federal Deposit Insurance Corp, said in an interview on Monday.

      The Bottom Line:  How deep does this rabbit hole go?

      SINGAPORE (Reuters) - "Oil bounded back toward $95 a barrel on Tuesday, gaining almost 1 percent as Asian stock markets steadied and traders bet that falling U.S. inventories and the approaching winter could help restart oil's rally.

      U.S. light crude for December delivery rose 81 cents to $94.79 a barrel, climbing back toward the record high $96.24 a barrel touched last week after tumbling on Monday on the prospect of more fallout from the U.S. subprime crisis.

      London Brent crude rose 81 cents to $91.30 a barrel.

      Asian stock markets eked out gains early on Tuesday after tumbling world markets dragged oil $2 lower a day ago, with traders fearing the subprime crisis could temper economic growth and oil demand in the world's top consumer.

      Citigroup (C.N: Quote, Profile, Research), the largest U.S. bank, said it was unable to assure investors a potential $11 billion write-down for subprime mortgages will not increase.

      Tokyo's Nikkei stock market average (.N225: Quote, Profile, Research) climbed 0.5 percent on Tuesday, steadying from a 1.5 percent slide, while U.S. markets had clawed back some losses late on Monday.

      "Today the stock market is steady, which is supporting NYMEX," said Ken Hasegawa, commodity derivatives sales manager of Fimat Japan Inc.

      Oil's surge from below $70 in mid-August has been aided by the weak dollar and speculative inflows into oil and other commodities, and extended lately by a renewed focus on signs of thinning oil supplies ahead of peak winter demand.

      HONG KONG (Reuters) - "Asian stocks eased on Monday with financial shares extending their slide as persistent credit worries offset a positive U.S. employment report, which showed twice as many jobs as expected were added last month.

      Investors scurried to the relative safety of government bonds, driving yields lower, and pinned the dollar near a record low versus the euro on worries about losses at big U.S. financial firms.

      U.S. banking giant Citigroup (C.N: Quote, Profile, Research) said it may suffer an $11 billion write-down for subprime losses and that its Chairman and Chief Executive Charles Prince had resigned.

      "That is why the market is very dubious today. Everyone is focusing on what is going to happen to Citigroup tonight (in U.S. trade)," said Juliana Roadley, market analyst at CommSec in Sydney.

      The announcement came just five days after Merrill Lynch (MER.N: Quote, Profile, Research) ousted its own chief executive, Stanley O'Neal, following an $8.4 billion write-down.

      Both gold and oil took a breather after their recent surges, with bullion <XAU=> trading near $800 an ounce, just off Friday's peak of $807.70. U.S. crude was at $95.03 a barrel, within sight of a record high $96.24 set on Thursday.

      At 0223 GMT, Tokyo's Nikkei average (.N225: Quote, Profile, Research) had fallen 0.9 percent while MSCI's measure of other Asia Pacific stocks (.MIAPJ0000PUS: Quote, Profile, Research) declined 0.4 percent.

      The Bottom Line:  It unravels even further.

      BOSTON (Reuters) - "As oil heads toward $100 per barrel, Corporate America is scrambling to offset the cost by cutting back on energy use where it can and pushing through higher prices where it can't.

      Higher oil prices drive up corporate expenses from running factories to making petroleum-based chemicals. Companies in energy-intensive industries such as mining have also warned that oil prices are eroding their profits.

      And they burn through consumers' spendable income as it costs more to run cars, heat homes and to buy airline tickets.

      "There is a fascinating aspect of the extent to which we are still able to absorb these very sharp rises in price without any evident weakening. Now, eventually, that has got to stop," former Federal Reserve Chairman Alan Greenspan said in a speech here this week.

      "If we go to a significantly further rise, it's going to impact," Greenspan said. "It's not possible that it will not because the sheer absorption of purchasing power ... will drain the American economy significantly. But we're not there yet."

      On Friday, U.S. light crude oil futures were trading at $95.15 a barrel, up about $16 over the past month and up about 55 percent so far this year.

UP, UP AND AWAY

       NEW YORK (Reuters) - "There is a lot of uncertainty in financial markets, but there is one bet that almost everyone seems to be making: sell the dollar.

      The U.S. dollar fell again on Friday against a basket of six major currencies (.DXY: Quote, Profile, Research), hitting levels not seen in that index's 30-year plus history. It has fallen more than 7.0 percent since the summer's financial ruckus started.

      It is an unusually strong consensus, which is often an indicator to go the other way, but, well, there is a lot not to like.

      The U.S. economy is likely to slow, if not contract, hurt by a deflating housing bubble, an excess of debt and a financial system that is hitting the lending brakes hard.

      And while the Federal Reserve seemed to signal that this week's cut in rates might be the last for a while, if anything U.S. interest rates may decline faster and farther than those of most other major currencies, undermining support for the greenback even more.

      This may be especially true if you believe, as do a vocal minority of analysts, that the U.S. will slide into recession, forcing the Fed to cut rates aggressively.

      Others fear the reverse, that rising prices of energy, and the new phenomenon of inflation in China driving up prices at Wal-Mart, will drive up U.S. inflation, tying the Fed's hands and causing an unattractive mix of low growth and inflation, or stagflation.

      The Bottom Line:  It's coming folks.

      NEW YORK (mg.co.za) - "Empty shelves in Caracas. Food riots in West Bengal and Mexico. Warnings of hunger in Jamaica, Nepal, the Philippines and sub-Saharan Africa. Soaring prices for basic foods are beginning to lead to political instability, with governments being forced to step in to artificially control the cost of bread, maize, rice and dairy products.

      Record world prices for most staple foods have led to 18% food price inflation in China, 13% in Indonesia and Pakistan, and 10% or more in Latin America, Russia and India, according to the United Nations Food and Agricultural Organisation (FAO). Wheat has doubled in price, maize is nearly 50% higher than a year ago and rice is 20% more expensive, says the UN. Next week the FAO is expected to say that global food reserves are at their lowest in 25 years and that prices will remain high for years.

      Last week the Kremlin forced Russian companies to freeze the price of milk, bread and other foods until January 31, for fear of a public backlash with a parliamentary election looming. "The price of goods has risen sharply and that has hit the poor particularly hard," said Oleg Savelyev, of the Levada Centre polling institute.

      India, Yemen, Mexico, Burkina Faso and several other countries have had, or been close to, food riots in the last year, something not seen in decades of low global food commodity prices. Meanwhile, there are shortages of beef, chicken and milk in Venezuela and other countries as governments try to keep a lid on food price inflation.

      Boycotts have become commonplace. Argentinians shunned tomatoes during the recent presidential election campaign when they became more expensive than meat. Italians organised a one-day boycott of pasta in protest at rising prices. German left-wing politicians have called for an increase in welfare benefits so that people can cope with price rises.

      "If you combine the increase of the oil prices and the increase of food prices then you have the elements of a very serious [social] crisis in the future," said Jacques Diouf, head of the FAO, in London last week.

      The price rises are a result of record oil prices, United States farmers switching out of cereals to grow biofuel crops, extreme weather and growing demand from countries India and China, the UN said on Friday.

      "There is no one cause but a lot of things are coming together to lead to this. It's hard to separate out the factors," said Ali Gurkan, head of the FAO's Food Outlook programme, on Friday.

      He said cereal stocks had been declining for more than a decade but now stood at around 57 days, which made global food supplies vulnerable to an international crisis or big natural disaster such as a drought or flood.

      "Any unforeseen flood or crisis can make prices rise very quickly. I do not think we should panic but we should be very careful about what may happen," he warned.

      Lester Brown, president of the Washington-based Worldwatch Institute think tank, said: "The competition for grain between the world's 800-million motorists, who want to maintain their mobility, and its two billion poorest people, who are simply trying to survive, is emerging as an epic issue."

      Last year, he said, US farmers distorted the world market for cereals by growing 14-million tonnes, or 20% of the whole maize crop, for ethanol for vehicles. This took millions of hectares of land out of food production and nearly doubled the price of maize. United States President George Bush this year called for steep rises in ethanol production as part of plans to reduce petrol demand by 20% by 2017.

      Maize is a staple food in many countries which import from the US, including Japan, Egypt, and Mexico. US exports are 70% of the world total, and are used widely for animal feed. The shortages have disrupted livestock and poultry industries worldwide..."

More:

The Coming U.S. Drought (Is Here)

Atlanta Water Shortage Latest

      "The timing is not that good," he said.

      High wind warnings were in effect for coastal New Jersey, the eastern tip of New York's Long Island, Rhode Island, Massachusetts and Maine.

      Although the center of the storm was expected to pass about 175 miles east of Long Island, wind was already affecting that area Saturday morning, with the Long Island Power Authority reporting more than 400 customers blacked out.

      NEW YORK (Reuters) - "The U.S. Federal Reserve added a total of $41 billion in temporary reserves to the banking system on Thursday, the biggest single day of such injections since September 2001.

      The Fed's infusions may reflect the central bank's efforts to bring the federal funds rate down nearer to its target just one day after a widely expected rate cut.

      Fed funds last traded at 4.625 percent on the open market, above the Fed's target rate of 4.50 percent.

      A Fed spokesman would not comment on the total size of the operations, but did say it was the largest single day of operations since a total of $50.35 billion was injected on Sept. 19, 2001, following the Sept. 11, 2001, attacks on the World Trade Center.

      On Thursday, the central bank conducted $8 billion of 14-day repurchases, $21 billion of seven-day repurchases and $12 billion of overnight repurchase agreements.

      The total on Thursday surpassed the $38 billion the Fed injected on Aug. 10, which was generally seen as the beginning of a global credit crisis. At the time, the Fed and the European Central Bank ramped up temporary liquidity operations with the intent of alleviating strains in short-term lending markets.

      The Bottom Line:  Juggling numbers is never fun, especially when those numbers have Dollar signs involved.

      NEW YORK (Reuters) - "Oil surged 2.5 percent on Friday, nearing a fresh peak as strong economic data reignited a rally that has added more than 40 percent to prices since August.

      U.S. oil settled up $2.44 to $95.93 a barrel, close to the record $96.24 hit earlier in the week, while Brent crude rose $2.36 to $92.08 a barrel.

      "Today's rebound is a continuation of the major bull trend, said Andy Lebow, broker at MF Global in New York.

      Pakistani Chief Justice Iftikhar Mohammed Chaudhry was expelled from his post, not long after the state of emergency was declared, the justice's office announced. Musharraf removed Chaudhry from his post in May, prompting massive protests and leading to the justice's reinstatement.

      The Supreme Court has declared the state of emergency illegal, claiming Musharraf had no power to suspend the constitution, Chaudhry told CNN earlier.

      In Islamabad, troops entered the Supreme Court and were surrounding the judges' homes, according to CNN's Syed Mohsin Naqvi.

      Earlier, private networks had reported the declaration was imminent as top officials huddled at Musharraf's residence in Rawalpindi. Shortly after that report, most media channels went off the air in an apparent blackout, although some flickered off and on.

      The declaration could potentially delay approaching parliamentary elections, according to CNN's Nic Robertson. It also could provide Musharraf with a reason to continue serving as the nation's military chief, although he has pledged to step down from that post..."

More:

Musharraf imposes emergency rule

      PALM SPRINGS, Calif. (PRNewswire) -- "Fearing a stock market crash worse than 1929, Charles Merrill of Palm Springs, cousin to the founder of the Merrill/Lynch dynasty, is quickly converting to gold coins.

      "Merrill Lynch is crashing, due to the ineptness of the CEO. No matter who is running Merrill Lynch & Co., it's going to need a regimen of restraint and recuperation after getting badly bruised by the global credit market shakeout. I predict a house of dominos, and the whole stock market is going to crash," stated Merrill.

      The world's largest brokerage took a $7.9 billion writedown for subprime mortgages and asset-backed bonds whose values went sour. Many on Wall Street believe there's more where that came from - maybe another $4 billion - and Merrill Lynch's leadership will need to reduce risk and rebuild morale among its ranks.

      Merrill stated in a Palm Springs interview with Michael L. Grace, "There is going to be a major stock market crash, so protect your assets. Buy physical gold and hide it."

      Grace is a writer in Palm Springs completing a book titled "The Final Great Depression." Grace currently has a novel titled "Murder At The White Party" about corruption in the desert resort ready for publication and was one of the creators of the International award-winning musical SNOOPY, based on PEANUTS by Charles M. Schultz. He has written for television and films.

      Merrill said, "There is so much wealth in Palm Springs ... from inherited to funny money, and I'm advising all my friends to buy gold. Grace's book on the 'final depression' sounds like a novel or fantasy but unfortunately it is a picture of our horrible future here in America. My cousin Charlie (founder of Merrill Lynch) must be turning over in his grave."

      Merrill had met Grace when Merrill lived in Palm Beach, Florida and was married to the late Evangeline Johnson (heiress to the Johnson & Johnson Pharmaceutical Company)..."

      The Bottom Line:  Death-throes of the U.S. Economy.

      With a twist of the wrist, he releases the tank's meager water supply, and suddenly this sleepy town is alive with activity. Washing machines whir, kitchen sinks fill and showers run.

      About three hours later, Reames will return and reverse the process, cutting off water to the town's 145 residents.

      The severe drought tightening like a vise across the Southeast has threatened the water supply of cities large and small, sending politicians scrambling for solutions. But Orme, about 40 miles west of Chattanooga and 150 miles northwest of Atlanta, is a town where the worst-case scenario has already come to pass: The water has run out.

      The mighty waterfall that fed the mountain hamlet has been reduced to a trickle, and now the creek running through the center of town is dry.

      Three days a week, the volunteer fire chief hops in a 1961 fire truck at 5:30 a.m. — before the school bus blocks the narrow road — and drives a few miles to an Alabama fire hydrant. He meets with another truck from nearby New Hope, Ala. The two drivers make about a dozen runs back and forth, hauling about 20,000 gallons of water from the hydrant to Orme's tank..."

      Although the storm is predicted to remain well off the U.S. coast, residents "from North Carolina northward" should pay attention to it, forecasters said.

      Noel triggered flooding and landslides that killed at least 64 people in the Dominican Republic and Haiti this week.

      "Global model guidance suggests that Noel will become an extremely large and powerful" storm that could cause high winds from coastal North Carolina northward, forecasters said.

      BEIJING (Reuters) - "If the United States slides into recession, don't count on China to save the world.

      The fastest-growing major economy for two decades straight, China looks resilient enough to withstand a serious U.S. slowdown and still expand at close to 10 percent a year.

      Yet that would be a slight let-up from the scorching pace to which the world has become accustomed. There would be no extra pop and fizz from China to fill in for the United States, many economists say.

      "What China has already contributed to global growth and whether China could offer extra momentum are two separate issues, said Dong Tao, chief China economist at Credit Suisse in Hong Kong. "The question is, will China offer the additional orders in case U.S. consumption sees incremental decline? I doubt that."

      The International Monetary Fund says 2007 will mark the first year that China contributes more to global growth than any other country, measured according to market GDP weights.

      And it forecasts that China will steam further ahead as the main engine for expansion next year. Tellingly, however, the fund projects a dip in Chinese growth to 10.0 percent in 2008 from a 13-year high of 11.5 percent this year.

      "It's not that China is accelerating, it's just decelerating less", Tao said.

      The Bottom Line:  Hyper-inflation, here we come.

      SYDNEY (Reuters) - "Oil leaped nearly 2 percent to top $96 for the first time on Thursday, extending the previous day's 5 percent surge after an unexpected sharp fall in U.S. crude stocks and data showing strong economic growth.

      The rise toward oil's inflation-adjusted peak of $101.70 from April 1980 was also supported by a drop in the U.S. dollar, which fell to record lows against the euro after the U.S. Federal Reserve cut rates by a quarter percentage point.

      U.S. oil for December delivery rose as high as $96.24 a barrel in electronic trade. By 0302 GMT it was up $1.57 at $96.13. December Brent crude (LCOc1: Quote, Profile, Research) also hit its record high of $91.63, up $1 on the day.

      Oil soared $4.64 or over 5 percent on Wednesday, its biggest one-day gain in 10 months, after U.S. data showed an unexpected 3.9 million barrel drop in crude stocks last week, most of it at the Cushing, Oklahoma, delivery point.

      "The U.S. inventory report has reaffirmed the belief that market conditions are tightening and oil prices are ratcheting up higher on that basis," said David Moore, a resource analyst at the Commonwealth Bank of Australia (CBA).

      Two rate cuts by the Fed to stave off fears of recession also have added liquidity to financial markets by making it cheaper to borrow, and some analysts say the extra cash has been drawn to energy markets.

      Oil prices have surged more than 50 percent since the start of the year, and have risen about 18 percent in the past month alone on winter supply worries, speculative buying and a succession of record lows in the U.S. dollar.

      Scientists have cited those and other theories in their decades-old debate about why mammoths, mastodons, sloths, saber-toothed cats, camels, horses and other large creatures disappeared from North America at the end of the last ice age.

      Now a research group that includes two University of Oregon scientists is proposing a more dramatic cause for the extinctions: A 3-mile-wide comet or asteroid exploded over Canada or slammed into the continent about 13,000 years ago.

      The researchers say the impact also may have wiped out or fragmented the prehistoric Clovis people who flourished in North America at the time.

      UO archaeologists Douglas Kennett and Jon Erlandson are among about two dozen scientists who say the impact also could have led to the abrupt cooling known as the Younger Dryas, which lasted 1,200 years.

      "I initially thought this idea for a comet impact was preposterous," Erlandson said. "But as I started reviewing the data from multiple locations, the concept began to capture my imagination. There was dramatic change going on at that time. A comet contributing to that change is just a hypothesis at this point, and it's probably going to take at least 10 more years of research to figure out if that occurred."

      The researchers laid out their proposed theory recently in the Proceedings of the National Academy of Sciences. They say the evidence is in a 2-inch-thick carbon-rich black mat found in about 50 sites across North America.

      Their article says the layer contains grains with iridium, carbon spherules and fullerenes packed with concentrations of helium 3 -- "all of which are evidence for an extraterrestrial impact" about 12,900 years ago and the raging wildfires that followed.

      The scientists studied samples of black mats from 10 Clovis archaeological sites in Canada, California, Arizona and South Carolina. Evidence of mammoths and other animals and early human hunters are found beneath the black mat but are missing within or above the strip..."