Threats from everywhere in 'cyber storm'

WASHINGTON (AP) - In the middle of the biggest-ever "Cyber Storm" war game to test the nation's hacker defenses, someone quietly targeted the very computers used to conduct the exercise.

The surprising culprit? The players themselves, the same government and corporate experts responsible for detecting and fending off attacks against vital computer systems, according to hundreds of pages of heavily censored files obtained by The Associated Press. Perplexed organizers sent everyone an urgent e-mail marked "IMPORTANT!" instructing them not to probe or attack the game's control computers.

"Any time you get a group of (information technology) experts together, there's always a desire, 'Let's show them what we can do,'" said George Foresman, a former senior Homeland Security official. "Whether its intent was embarrassment or a prank, we had to temper the enthusiasm of the players."

The exercise was a big deal for all concerned.

The $3 million, invitation-only war game simulated what the U.S. describes as plausible attacks over five days in February 2006 against the technology industry, transportation lines and energy utilities by anti-globalization hackers. The government is organizing a multimillion-dollar "Cyber Storm 2," to take place in early March.

Among the mock disasters confronting officials in the previous exercise: Washington's Metro trains shut down. Seaport computers in New York went dark. Bloggers revealed locations of railcars with hazardous materials. Airport control towers were disrupted in Philadelphia and Chicago. Overseas, a mysterious liquid was found on London's subway.

The list of fictional catastrophes — which also included hundreds of people on "No Fly" lists suddenly arriving at airport ticket counters — is significant because it suggests what kind of real-world trouble keeps the White House awake at night. Railway switches failed. Planes flew too close to the White House. Water utilities in Los Angeles were compromised.

The Homeland Security Department ran the exercise, with help from the State Department, Pentagon, Justice Department, CIA, National Security Agency and others.

Imagined villains included hackers, bloggers and even reporters. In one scenario, after mock electronic attacks overwhelmed computers at the Port Authority of New York and New Jersey, an unspecified "major news network" airing reports about the attackers refused to reveal its sources to the government. Other simulated reporters were duped into spreading "believable but misleading" information that confused the public and financial markets, according to the government's documents.

The upcoming "Cyber Storm 2" in March also will simulate electronic attacks against chemical plants and communication lines, and include targets in California, Colorado, Delaware, Illinois, Michigan, North Carolina, Pennsylvania, Texas and Virginia.

"They point out where your expectations of your capabilities may be overstated," Homeland Security Secretary Michael Chertoff told the AP. "They may reveal to you things you haven't thought about. It's a good way of testing that you're going to do the job the way you think you were. It's the difference between doing drills and doing a scrimmage."

The AP obtained the Cyber Storm internal records nearly two years after it requested them under the Freedom of Information Act. The government censored most of the 328 pages it turned over, marked "For Official Use Only," citing rules against disclosing sensitive information. The government is still reviewing hundreds more documents before they can be turned over to the AP.

"Definitely a challenging scenario," said Scott C. Algeier, who runs a cyber-defense group for leading technology companies, the Information Technology Information Sharing and Analysis Center.

For the participants — including government officials from the United States, England, Canada, Australia and New Zealand and executives from technology and transportation companies — the mock disasters came fast and furious: hacker break-ins at an airline; stolen commercial software blueprints; problems with satellite navigation systems; trouble with police radios in Montana; school closures in Washington, Miami and New York; computer failures at border checkpoints.

The incidents, designed to tax responders, were divided among categories: computer attacks, physical attacks and psychological operations.

"We want to stress these players," said Jeffrey Wright, the former Cyber Storm director for the Homeland Security Department. "None of the players took 100 percent of the correct, right actions. If they had, we wouldn't have done our job as planners."

How did they do? Reviews were mixed. Companies and governments worked successfully in some cases. But key players didn't understand the role of the premier U.S. organization responsible for fending off major cyber attacks, called the National Cyber Response Coordination Group, and it didn't have enough technical experts. Also, the sheer number of mock attacks complicated defensive efforts.

The little-known Cyber Response group, headed by the departments of Justice and Homeland Security, represents the largest government departments, including law enforcement and intelligence agencies.

The 2006 exercise had no impact on the real Internet. Officials said they were careful to simulate attacks using only isolated computers, working from basement offices at the Secret Service's headquarters in downtown Washington.

U.S. slump spreading around the globe, IMF warns

HEATHER SCOFFIELD
ECONOMICS REPORTER; With files from Reuters

January 30, 2008

OTTAWA -- Financial turbulence is carrying the U.S. slump to the rest of the world, and now the global economy is in the midst of a serious slowdown, the International Monetary Fund said yesterday.

"It will be very hard for even the most effective countercyclical policy to keep any country from having some slowdown in these circumstances," said the IMF's chief economist, Simon Johnson.

"No one is exempt from a global slowdown. That is why you call it 'global.' "

He was updating the IMF's world economic outlook, which now forecasts global growth of 4.1 per cent this year, after 4.9 per cent for 2007. The forecast is gloomier than three months ago, when the IMF projected global growth of about 4.4 per cent, mainly because the United States is slowing rapidly, and faltering in Europe and Japan.

"The projections for the advanced economies have been reduced significantly," the IMF said.

To drive home its point, the IMF predicted that between the fourth quarter of 2007 and the fourth quarter of 2008, the American economy would expand by just 0.8 per cent, down from 2.6 per cent during the same period a year earlier.

Many economists have sought solace in the strength of emerging markets, but even they won't escape unscathed, the IMF said. As a group, they grew 7.8 per cent in 2007, but will slow down to 6.9 per cent in 2008.

Still, China is expected to remain strong. Growth will decelerate, but from 11.5 per cent in 2007 to 10 per cent in 2008. And that is enough to make sure commodity prices remain buoyant and supportive of reasonable growth in Canada this year, said Stephen Poloz, chief economist at Export Development Canada.

The updates issued yesterday did not go into great detail, giving forecasts only for economic regions. The reports did not mention Canada specifically, but the global and U.S. forecasts would be consistent with Canadian growth of about 2 per cent this year, or less, economists said.

"What we're seeing is the feedback of financial instability into the economy," said Richard Kelly, senior economist at Toronto-Dominion Bank.

Indeed, the IMF warned that if the subprime crisis continues to deepen, things could get a lot worse, both in the United States and in Western Europe.

"A possibly deeper economic downturn in the United States or elsewhere could also serve to widen the crisis beyond the subprime sector, as credit deteriorates more broadly," the IMF said in an update on global financial stability.

The report warned that tight credit conditions will persist, since market players are now worried about far more than structured products wrapped up in subprime loans. Investors are also concerned about the balance sheets of financial institutions and worsening economic conditions, the IMF pointed out. However, the IMF also said it was somewhat comforted by the fact that some banks were raising capital, including from sovereign wealth funds, to bolster their weakened balanced sheets.

The key for countries trying to mitigate the damage is policy, the IMF stressed. Regulators and auditors have to help rebuild confidence among banks. And central banks need to work together more to make sure the liquidity requirements of money markets are met.

"Central banks could usefully review the effectiveness of their tools to reduce market stress - and whether they work globally," the IMF said.

The Bank of Canada joined the U.S. Federal Reserve, the European Central Bank and Switzerland's central bank in injecting liquidity into term money markets in December, to smooth out markets over year-end. But that kind of co-operation has been rare, and is far from institutionalized.

US soldier suicides reach record number

Roxanne Escobales and agencies
Thursday January 31, 2008
Guardian Unlimited

The suicide rate among US soldiers has reached its highest level since records began almost 30 years ago, officials said.

Last year, 121 active members of the army took their own lives, up 20% on the previous year. Thirty-four of last year's deaths happened while the soldier was deployed in Iraq, compared to 27 in 2006.

Also on the rise are attempted suicides and self-harm. The number of soldiers who tried but failed to kill themselves or who deliberately injured themselves rose to 2,100 in 2007, up from 500 in 2002.

The Washington Post today reported on the case of Lieutenant Elizabeth Whiteside, who attempted suicide on Monday night by swallowing pills. She left a note saying: "I'm very disappointed with the army."

Whiteside had been awaiting news on a potential court martial for pulling a gun on a superior officer and then shooting herself after suffering a mental breakdown while working as a medic at an Iraqi prison.

She is now in stable condition, and the charges against her have been dropped.

The Post said studies had found that failed personal relationships, legal and financial problems and job-related stress have been the most common factors in soldiers' suicides.

With the army stretched thin by years of fighting two wars, the Pentagon last year extended normal tours of duty from 12 months to 15. Some troops have been sent back to the frontline several times.

Combat Stress, a British charity that provides care for veterans, said the most common mental illnesses it treats were depression, phobic disorders, obsessive compulsive disorder, substance abuse and post-traumatic stress disorder. It said many of the veterans it treats suffered from more than one of these conditions.

Consumer Spending Falls Off

By MICHAEL M. GRYNBAUM

Published: January 31, 2008

Consumer spending slowed in December and inflation continued to rise, the government said Thursday, leaving the Federal Reserve little leeway as it ponders policy decisions in the months ahead.

Spending by consumers, which accounts for more than two-thirds of the nation’s economic growth, rose by an anemic 0.2 percent in December after jumping 1 percent in November. Adjusted for inflation, spending was flat for the month.

Economists have predicted a significant downturn in spending as consumers grapple with record-high oil and food prices. The report from the Commerce Department reinforces the disappointing holiday sales figures that leading retail chains released in the last few weeks.

“With the labor market weakening and housing remaining a huge weight, the pace of consumer spending growth ought to remain painfully slow in the months ahead,” wrote Joshua Shapiro, an economist at MFR, a research firm.

As spending slows, prices continue to rise, a combination that has some economists suggesting the United States could face a period of stagflation. A closely watched gauge of inflation ticked up last month, to a 2.2 percent annual rate; that figure, the core personal consumption expenditures deflator, excludes prices of food and energy.

Over all, prices in December were 3.5 percent higher than they were a year ago, far above the Fed’s so-called “comfort zone” of 1 percent to 2 percent.

High inflation puts the Fed in a difficult situation. The central bank primarily sets monetary policy by changing a key interest rate. Lowering the rate stimulates growth, but also causes prices to rise, creating an increased inflation risk.

In its most recent policy statement, released Wednesday, Fed officials said they expect inflation “to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.”

The Commerce Department report also showed that personal income levels rose 0.5 percent in December. Disposable income — after-tax salary adjusted for inflation — rose 2.1 percent since December 2006.A separate report from the Labor Department showed that new unemployment claims, a leading indicator of the labor market, increased by 69,000, to 375,000, in the week ended Jan. 26. It was the highest level since October 2005.

Meanwhile, a Chicago-based barometer of business activity fell in January. New orders dropped sharply to the lowest level since May 2003, and the price of production rose, underscoring the impact of high inflation on business owners.

“These numbers are not at recession levels, but they are only one bad month away,” wrote Ian Shepherdson, a London-based economist at High Frequency Economics, in a note to clients. “The manufacturing sector is coming under increasing pressure.”

The report, issued by the Chicago arm of the National Association of Purchasing Management, may not bode well for the ISM manufacturing index, a closely watched indicator of United States business activity. The index for December will be released on Friday.

Employment at Chicago-area businesses also fell this month. Over all, the index dropped to 51.5 from 56.4 in December.

U.S. missile strike in Pakistan hit al Qaeda nest

Thu Jan 31, 2008 8:55am EST

PESHAWAR, Pakistan (Reuters) - A suspected U.S. missile strike that killed up to 13 foreign militants in Pakistan's North Waziristan region this week had targeted second or third tier al Qaeda leaders, according to residents in the tribal area.

Initial reports said 10 people were killed in the attack on Monday on a house in Torkhali village near the town of Mir Ali.

An intelligence official, however, told Reuters on Thursday that based on information gleaned from tribal contacts there were seven Arabs and six Central Asians killed.

He said the attack was believed to have been carried out by a pilotless U.S. Predator aircraft flown across the nearby border with Afghanistan.

"The missile appeared to have been fired by a drone," the intelligence official said.

The Pakistani authorities have not confirmed the attack, and the Pentagon has denied taking any action, but the Defense Department does not speak for the Central Intelligence Agency, which operates Predators that the tribesmen say carried out the attack late on Monday.

Villagers saw two drones flying over the area before the attack. They didn't see the missile being fired but one heard a plane's engine before the explosion.

Intelligence officials said the area is controlled by Islamist militants and too dangerous for security forces to go. After the attack, militants surrounded the area and barred anyone from going near the house.

Ahmed Aziz, a 70-year-old resident, told Reuters that the militants also stopped villagers from attending the funerals, which was a sign that those killed were all foreigners.

"When local people die, they don't stop anyone from attending their funerals," Aziz said.

Tribesmen in the area said a deputy of Abu Laith al Libi, a senior al Qaeda leader, had been staying there and was among the dead, according to the intelligence official.

"The latest information we have from the area is that a second-in-command to al Libi was among those killed," he said.

A leading Pakistani daily, The News, reported that the strike had targeted Libi and another senior figure, Obaidah al Masri, though neither was present at the time of the attack according to a senior Taliban commander quoted by the newspaper.

Libi and Masri were promoted up the al Qaeda ranks due to successful U.S. and Pakistani operations in the past to catch or kill the guerrilla network's second tier leaders.

U.S. forces in Afghanistan have launched similar attacks on al Qaeda targets on the Pakistani side of the border several times in recent years.

If it was a U.S. drone attack, the lack of confirmation is not unusual. Pakistan says it will not tolerate violations of its territorial sovereignty and reports of such attacks are embarrassing for the U.S.-Pakistani alliance.

Fed Reduces Rate by Half-Point; 2nd Cut in 8 Days

NEW YORK TIMES

WASHINGTON — The Federal Reserve reduced short-term interest rates on Wednesday for the second time in eight days, meeting widespread expectations by investors on Wall Street for a big rate cut.

In lowering its benchmark Federal funds rate by half a point, to 3 percent, the central bank acknowledged that it is now far more worried about an economic slowdown than rising inflation, and it left open the possibility of additional rate reductions.

“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the central bank said in a statement accompanying its decision. In addition, it said, recent data indicated that the housing market is still getting worse and the job market appears to be “softening.”

Taken together, the back-to-back rate cuts totaling 1.25 percent amounted to the Fed’s most aggressive effort in years to head off a recession. By comparison, the Fed under Alan Greenspan reduced the overnight rate by only a half-point after the terrorist attacks on Sept. 11, 2001.

The news on Wednesday briefly sent stocks higher on Wall Street. Within minutes after the announcement, the Dow Jones industrial average, which had been down slightly in early afternoon, was up 100 points. But it gave up all those gains and closed down 37 points, or 0.3 percent.

Hours before the Fed announced its decision, the Commerce Department estimated that the nation’s economic growth slowed markedly in the fourth quarter of 2007 to an annual rate of just 0.6 percent from 4.9 percent in the third quarter.

The slowdown was sharper than the already-gloomy forecasts of most economists on Wall Street, where the consensus estimate called for fourth-quarter growth of 1.2 percent.

The Fed’s move on Wednesday came after it electrified investors on Jan. 22 with an even bigger surprise rate cut — three-quarters of a point — at a rare unscheduled meeting.

The Fed cut dovetailed with efforts by Congress and the White House to pass a fiscal stimulus bill that would inject at least another $160 billion into the economy this year in the form of deficit-financed tax rebates for individuals and tax breaks for businesses.

The House passed a measure earlier this week, after reaching agreement with the Bush administration. The Senate Finance Committee began work Wednesday on a bill that would add more money for unemployment benefits, food stamps and potentially other government spending programs.

Though House and Senate lawmakers are expected to haggle over the precise shape of the fiscal package, there is a broad political agreement between Democratic leaders in Congress, President Bush and the Federal Reserve on the need for a stimulus package of some kind.

Taken together, the fiscal package and the Fed’s own rate reductions would amount to a one-two punch aimed at jolting the economy enough to keep it out a recession — or at least mitigate the effects of any downturn that might develop.

Since the Fed reluctantly began reversing course in August, when credit markets abruptly froze in panic as a result of soaring default rates on subprime mortgages, the central bank has slashed the overnight federal funds rate by almost half in a total of five actions thus far.

But policy makers faced difficult questions about how deep to cut rates, and there was widespread uncertainty about whether they would reduce them by a half-percent or by only a quarter-percent.

On Wall Street, where the clamor about a recession remains at a fever pitch, investors had betting heavily on a bigger cut and were poised to send stock prices sharply lower if the Fed moved more cautiously.

Even with the Commerce Department’s preliminary estimate on Wednesday of extremely slow growth in the fourth quarter of last year, the evidence of an impending recession is mixed.

Indeed, many economists estimate that the economy may have added about 100,000 jobs in January — a big improvement from the nearly stagnant pace in December of 18,000 jobs.

Indeed, the ADP monthly survey of job creation, released on Wednesday, estimated that the nation added 130,000 private-sector jobs in January. Though the ADP survey often clashes with the Labor Department’s monthly employment report, which is due out on Friday, the results prompted many economists to raise their estimates of job growth in January.

The Commerce Department reported on Tuesday that orders for all durable goods — big-ticket items like commercial aircraft and auto parts — jumped 5.2 percent last month. Excluding orders for transportation goods, which are volatile from month to month, orders climbed 2.6 percent, the first increase since September.

Ben S. Bernanke, the chairman of the Federal Reserve, and other Fed officials are already under fire from two directions. Many analysts on Wall Street complain that the central bank has moved too slowly in response to signs of a faltering economy. They point to a plunge in housing that does not seem to have hit bottom, slowing growth in retail sales and tight credit.

But a significant minority of economists argues that policy makers have let themselves be unnecessarily alarmed by panicky swings in the stock market. If the central bank props up the economy with easy money, they warn, the result will be higher inflation in the future.

Richard DeKaser, chief economist at National City Corporation, a Cleveland bank, is skeptical that the economy is headed for a recession, despite the common assumption that it is. “Few seem to take seriously the prospect that we are not going into a recession,” said Mr. DeKaser, who cites the latest labor market data, showing fewer weekly claims for unemployment benefits and encouraging layoff numbers, which suggest to him that the nation has added a hefty number of jobs in January.

And despite the huge losses and write-offs stemming from subprime mortgages, he added, many business borrowers have yet to face a credit squeeze.

Members of the central bank’s Federal Open Market Committee, which decides interest rates, have shown clear signs of disagreement among themselves.

Fed officials acknowledged earlier this month that they had lowered their forecasts for economic growth this year, even though their previous forecast had already assumed a slowdown in the first half of this year.

Mr. Bernanke acknowledged on Jan. 10 that the housing market was still in a free fall and that the turmoil in subprime mortgage markets had shaken the broader credit markets.

When the Fed surprised investors by cutting its overnight rate at an unscheduled meeting on Jan. 22, officials left little doubt that they would lower the rate yet again at their regularly scheduled two-day policy meeting this Tuesday and Wednesday.

Fed officials acknowledge that psychology and expectations are playing an important role in the financial markets. To the extent that investors remain fearful about credit risks, markets for mortgage-backed securities are likely to remain dysfunctional and banks will be forced to write down even more of their loan portfolios.

But analysts say Mr. Bernanke faces a difficult challenge in trying to manage expectations. On the one hand, they say, the Fed wants to act decisively enough to reassure investors and the public that it will prevent the economy from sinking. On the other hand, they say, Mr. Bernanke does not want to be seen as panicking in response to a plunge in the stock market.

U.S. Stock-Index Futures Fall; MBIA, Amazon.com, Starbucks Drop

By Michael Patterson

Jan. 31 (Bloomberg) -- U.S. stock-index futures fell on concern that the Federal Reserve's interest-rate cuts will fail to rescue the economy from the collapse of the subprime mortgage market.

MBIA Inc., the largest bond insurer, tumbled after reporting a record loss that put its AAA credit rating further into jeopardy. Citigroup Inc. led banks lower after Standard & Poor's said mortgage-related writedowns at financial companies may exceed $265 billion. Futures extended declines after European markets fell and the Labor Department reported a bigger-than-forecast increase in initial jobless claims.

The S&P 500 is headed for its worst-ever January on concern credit-market losses will cause the world's largest economy to contract. S&P 500 futures expiring in March retreated 17 to 1,333.6 as of 8:55 a.m. in New York. Dow Jones Industrial Average futures decreased 130 to 12,264. Nasdaq-100 Index futures slipped 23 to 1,788.5.

``It's hard to imagine earnings rising across the board in such an environment,'' said Juergen Lukasser, who helps manage the equivalent of about $20 billion as head of equities at Constantia Privatbank AG in Vienna. ``The financial industry is in dark clouds. We're far from being out of the woods yet.''

Profit excluding some items at S&P 500 companies probably fell 18 percent in the fourth quarter, the biggest decline since 2001, according to analysts' estimates compiled by Bloomberg. For the current quarter analysts expect earnings to rise 1.2 percent.

U.S. stocks fell yesterday on concern bond insurers, which combined guarantee $2.4 trillion of debt, will lose AAA credit ratings. The S&P 500 erased a 90-minute, 1.7 percent rally that was spurred by the Federal Reserve's second rate cut in nine days.

Insurance Concern

MBIA lost $1.14 to $12.82. The fourth-quarter net loss of $18.61 a share came a day after FGIC Corp.'s insurance unit became the third company to be stripped of its AAA grade. Without a top-rating stamp, MBIA's business would be crippled and throw ratings on $652 billion of securities into doubt.

MBIA is seeking to convince Moody's Investors Service to retain the highest ranking for its insurance unit as Chief Executive Officer Gary Dunton tries to shore up capital through stock and bond sales.

S&P cut or put on review yesterday the ratings on $534 billion of bonds and collateralized debt obligations tied to home loans made to people with poor credit. Losses from the securities may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of holdings, S&P said.

Citigroup, the biggest U.S. bank by assets, lost 53 cents to $27.35. Merrill Lynch & Co., the largest U.S. brokerage, declined 59 cents to $55.50.

Amazon, Starbucks

Amazon.com dropped $6.24 to $67.97. Fourth-quarter profit margins contracted because of lower prices and changes in the types of products sold, Chief Financial Officer Thomas Szkutak said. The company forecast full-year operating income of between $785 million and $985 million. Eleven analysts surveyed by Bloomberg estimated operating profit of $1.18 billion.

Starbucks Corp. decreased 87 cents to $18.35. The world's biggest chain of coffee shops said it will open fewer cafes this year and forecast annual profit that trailed analysts' estimates.

Procter & Gamble Co. fell 78 cents to $64.31. The largest U.S. consumer-products company said second-quarter profit rose 14 percent on price increases and higher overseas sales. P&G also said it will separate its Folgers coffee business from the rest of the company.

Bristol-Myers Squibb Co. lost 26 cents to $23. The seller of the anti-clotting pill Plavix posted profit excluding some items that trailed analysts' estimates after taking charges on investments backed by subprime securities.

Europe's Dow Jones Stoxx 600 index lost 1.8 percent, dragged down by financial shares including ING Groep NV and UBS AG. Asian stocks rose after Honda Motor Co. raised its forecast and Hyundai Heavy Industries Co. reported a record profit.

Chance of U.S. recession at least 50 pct-Greenspan

Wed Jan 30, 2008 5:51am EST

BERLIN, Jan 30 (Reuters) - The likelihood of the U.S. economy slipping into recession is at least 50 percent, former Federal Reserve Chairman Alan Greenspan was quoted on Wednesday as saying.

"I believe the probability of a recession is at least 50 percent, but up to now there are few signs that we are already in one," Greenspan said in an interview with weekly newspaper Die Zeit published in German. "In my opinion, it will probably happen but the facts suggest we are not there yet."

Asked whether central bankers and financial policymakers could head off a U.S. recession, Greenspan said: "Probably not. Global economic influences today are stronger than almost anything that monetary or fiscal policy can counter them with."

"Long-term real interest rates have significantly more influence on the core of the economy than decisions by national governments," he added. "And central banks have increasingly lost the ability to influence these long-term rates, whereas 20 or 30 years ago they still dominated there.

"So the more important question today is in which direction long-term real interest rates are heading."

The Fed is expected to cut interest rates again on Wednesday as part of its effort to offset the effects of a deep housing slump and credit crunch. This cut would follow a 75 basis point reduction last week to 3.5 percent and mark one of the deepest and fastest rate-cutting episodes since the early 1980s.

The U.S. economy grew at a 4.9 percent annual rate in the third quarter of 2007, but gloomy economic data this month -- notably a report of weak hiring in December -- suggests growth has slowed abruptly. (Reporting by Iain Rogers; editing by David Stamp)

IMF: U.S. economy will avoid a recession

IMF: U.S. economy will avoid a recession

Global economy set to slow in 2008 due to woes in U.S. housing

The Associated Press

updated 11:43 a.m. ET, Tues., Jan. 29, 2008

WASHINGTON - The world economy will slow significantly in 2008 but the United States will avoid recession, the International Monetary Fund forecast Tuesday.

The stimulus package being hashed out between Congress and the White House, along with the Federal Reserve’s recent cut of a key interest rate, should provide a modest boost to U.S. economic growth by the middle of the year, IMF officials said.

“This is actually a good combination of policies for the U.S.,” Simon Johnson, economic counselor and director of the research department at the IMF, said during a press briefing.

Slower U.S. growth and credit market turmoil stemming from U.S. housing market woes also will hinder the global economy, the IMF said.

“The five-year long global expansion has begun to moderate in response to the spreading effects of financial disruptions,” Johnson said.

Rising home foreclosures and falling home prices caused U.S. financial markets to drop steeply in recent months, as major banks such as Citigroup Inc. and Merrill Lynch & Co. Inc. have written down billions of dollars of securities that include bad home loans.

U.S. economic growth will slow to 1.5 percent in 2008, Johnson said, down from an estimated growth rate of 2.2 percent in 2007. The 2008 projection is lower than the IMF’s October 2007 prediction of 1.9 percent.

The IMF now sees world economic growth slowing to 4.1 percent this year, down from 4.9 percent in 2007.

The reduction is the second cut in a row in the IMF’s estimate of global economic growth for this year. Last July, the IMF estimated the world economy would grow 5.2 percent in 2008, and in October the estimate was reduced to 4.4 percent.

The estimates were included in an update of the IMF’s World Economic Outlook, which is issued twice a year. The next update will be issued in April.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/22897398/

Jobless claims tally jumps to two-year high

Jobless claims tally jumps to two-year high

Aid applications rose to a larger-than-expected 69,000 last week

Reuters

updated 8:39 a.m. ET, Thurs., Jan. 31, 2008

NEW YORK - The number of U.S. workers filing new claims for jobless aid jumped by a much larger-than-expected 69,000 last week to the highest in over two years, government data on Thursday showed, but the numbers were likely skewed by the timing of a public holiday.

The Labor Department said that initial claims for state insurance benefit totaled 375,000 in the week ending Jan. 26, the highest reading since October 2005, when claims reached 376,000. It was also the largest weekly increase since September 2005, when claims had mounted by 95,000, the Labor Department said.

Economists surveyed by Reuters had forecast 315,000 claims last week following an upwardly revised 306,000 the week before, previously reported at 301,000 claims.

Copyright 2008 Reuters. Click for restrictions.

URL: http://www.msnbc.msn.com/id/22931307/

Next round of gas hikes won’t be due to oil

Expensive additive alkylate, which replaced MTBE, is in short supply

The Associated Press

updated 4:53 p.m. ET, Wed., Jan. 30, 2008

NEW YORK - Get ready for another surge in gasoline prices.

Experts are predicting pump prices, which jumped by almost a dollar a gallon in each of the last two springs in many parts of the United States, will spike again this year as refiners and gas stations switch from winter- to summer-blended fuels.

The increases, starting as early as February in southern California, could push the average national price to a record $3.50 a gallon or more by June.

That would be 17 percent higher than today's average of just under $3 a gallon, which already is about 80 cents a gallon higher than year-ago levels thanks to the surge of crude oil that took futures prices briefly to $100 a barrel. Prices in urban areas on each coast could approach $4 a gallon.

And the reason for the spring price shocks? Analysts say it's linked to a shortage of alkylate, a little-known and expensive gasoline additive that some in the industry are calling "liquid gold." It has become a must-have ingredient since refiners stopped using MTBE two years ago when the potentially cancer-causing additive was found to be seeping into ground water.

The alkylate shortage has become the most important driver of summer gas prices, said Doug Leggate, an analyst at Citigroup Global Markets. "Supply of (alkylate) will set the price of summer gasoline — not inventory levels," he said.

Oil companies deny they are purposely limiting production of alkylate, which like gasoline, jet fuel and asphalt is a byproduct of the oil refining process. But only recently have some started studying how they can boost output, and alkylate prices today are more than 15 percent higher than spot gasoline prices. That means overall costs will jump when it is added in larger quantities to summer-blend fuel.

Without additives, gasoline doesn't burn completely, increasing tailpipe air pollution. And untreated gas evaporates more quickly in hot weather, potentially causing vapor lock when it changes from a liquid to a gas and blocks fuel lines.

The federal government long ago required refiners to boost the oxygen content of summer-blend gasoline to make it burn more completely, a problem that was solved by adding MTBE and, more recently, ethanol.

But ethanol also has a high evaporation rate, so refiners increasingly have turned to alkylate, which Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., calls the "magic bullet" in making summer gasoline.

Alkylate and other gasoline additives don't raise the same safety issues as MTBE because they don't bond with water as effectively as MTBE did, analysts say.

Demand for alkylate changes with the seasons, falling in autumn and rising in the spring. On average, alkylate makes up about 10 percent of a gallon of gas, though that rises to as much as 15 percent in summer. But making more of it is not as simple as throwing a switch since the underlying chemical properties of oil limit how much of any one refined petroleum product can be produced.

On average, about 44 percent of each barrel of oil ends up as gasoline, 22 percent as diesel fuel and heating oil, 9 percent as jet fuel, and about 4 percent each as heavy fuel oil and liquefied petroleum gas, according to the Energy Department. The remainder is comprised of smaller products and additives.

The refining process is loud, hot and smelly. Boilers separate, or "crack," oil into new substances by subjecting it to high temperatures and pressure. As different products are boiled out, pipes carry them to other boilers or vessels where they're further refined, mixed with other substances or cleaned of pollutants and toxins.

Alkylate is made via a chemical reaction sparked when olefin fluids and isobutane — two of the smaller byproducts of the main gasoline producing unit — are mixed with acid.

"As opposed to the (gasoline unit) that cracks big components into small, this one takes two components and basically combines them," said Mark Fligner, director of planning and economics at Valero Energy Corp.'s refinery in Paulsboro, N.J., across the Delaware river and just south of Philadelphia.

Owners of about two-thirds of U.S. refineries have invested the $100 million or more it takes to add an alkylate unit. The rest have to buy alkylate on the spot market if they want to use it as additive in their gasoline supplies.

Refiners aren't gaming the system, purposely limiting alkylate production to boost gas prices, said John Auers, senior vice president at Turner Mason & Co., a Dallas consultancy. "They're not because they can't," he said. "You can't make more alkylate than you have feedstocks."

But there are tradeoffs that every refiner must weigh. For example, olefins and isobutane are in high demand for use in producing other lucrative products like plastics. Refiners can tweak their main gasoline producing unit to make more olefins and isobutane, but that would cut the gasoline output.

Alkylate prices have jumped from 77 cents a gallon in the summer of 2001 — when MTBE was still in use — to nearly $3 a gallon at points over the past two summers. Wednesday's price on the spot market was $2.72 a gallon, 40 cents more than the spot price of gasoline, according to Platts. Retail prices for gas are higher because things like state and federal taxes are added. In recent summers, that spot market differential has jumped as high as 60 cents.

Refiners place the blame for spring gas price increases on crude costs, environmental regulations that have increased the overall cost of refining, and their inability to expand or build new refineries fast enough to keep up with gasoline demand.

John Pickering, vice president and general manager at the Paulsboro refinery, said Valero makes enough alkylate to meet its needs, but concedes that there is a national shortage of the additive in the spring and summer.

Other refiners contacted by The Associated Press said they are reluctant for competitive reasons to talk about how they blend gasoline, or whether they face alkylate shortages.

What is known, however, is that refiners are hiring companies such as UOP LLC of Des Plaines, Ill., to determine whether they can increase the capacity of their existing alkylation units. "In the last year or so, there has been a significant uptick (in business)," said Ashis Banerji, director for refining at UOP, which licenses alkylation technology to refiners.

And the 36 percent of domestic refineries that don't have alkylation units are looking at adding them.

"Our impression is that refineries are moving as fast as they possibly can to add alkylation capacity," said Jim Pawloski, business director at UOP competitor DuPont Clean Technologies, a unit of DuPont Co. He said his unit's business has jumped five-fold over the past five years and will likely double again this year.

The steep jump in summer alkylate prices has also caught the attention of at least two companies that used to produce MTBE. Enterprise Products Partners LP and Texas Petrochemicals Inc., both of Houston, say they're closely studying whether to convert idled MTBE plants into alkylate factories.

That also highlights the conundrum that is alkylate: If too many refiners decide to spend big bucks to crank up production, the premium prices now enjoyed by alkylate makers could disappear.

Refiners have to weigh the cost of such an investment against the incremental cost of simply buying the extra alkylate they need. "I'm not sure that it would be economical," said Jeff Hazle, technical director at the National Petrochemical and Refiners Association.

But if production doesn't rise, American motorists will be faced with big jumps in spring gas prices for years to come.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

URL: http://www.msnbc.msn.com/id/22919642/page/2/

Peacekeepers 'deface ancient art'

Peacekeepers 'deface ancient art'

UN peacekeepers in the disputed African territory of Western Sahara have vandalised ancient rock paintings, a UN official has told a UK newspaper.

The Times has published pictures of the paintings, some 6,000 years old, showing them defaced with spray paint.

Julian Harston, the UN official responsible for Western Sahara, said he had been shocked by the vandalism.

He said funds would now be sought from the UN cultural organisation, Unesco, to remove the graffiti.

Western Sahara has been at the centre of a bitter dispute since former colonial power Spain pulled out in 1975 and neighbouring Morocco invaded.

UN peacekeepers were deployed in 1991 to monitor a ceasefire between Morocco and the Algerian-backed Polisario Front, which has been seeking independence for the territory.

'Tragedy'

Graffiti, including the spray-painting of UN personnel's names, can been seen at Lajuad, an important archaeological site, Mr Harston said.

According to The Times, an area there known as Devil Mountain is regarded by the local Sahrawi people as a place of great cultural significance.

"I was appalled. You'd think some of them would know better. These are officers, not squaddies," Mr Harston said.

Nick Brook, a climate scientist who runs the Western Sahara Project, has written a blog about his findings which show pictures of graffiti more than a metre high on granite rocks.

He says the vandalism at Lajuad is not the first example of the deliberate vandalism of an archaeological site by the UN.

"It is a tragedy that UN personnel tasked with resolving one of the world's longest running military and political conflicts are engaging in the wilful destruction of important archaeological sites that have much to teach us about the prehistory of a part of the world that is virtually unknown to the international research community," he writes on his Sand and Dust blog.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/africa/7219297.stm

Published: 2008/01/31 10:41:29 GMT