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Bad news from Japan: there have been explosions at 3 of the 4 nuclear reactors at Fukushima, and there is currently a fire at No. 4 reactor (which wasn't operating at the time of the earthquake and tsunami on Friday). Very scary article in the New York Times:

Japan faced the likelihood of a catastrophic nuclear accident Tuesday morning, as an explosion at the most crippled of three reactors at the Fukushima Daiichi Nuclear Power Station damaged its crucial steel containment structure, emergency workers were withdrawn from the plant, and a fire at a fourth reactor spewed large amounts of radioactive material into the air, according to official statements and industry executives informed about the developments....

Government officials also said the containment structure of the No. 2 reactor had suffered damage during an explosion shortly after 6 a.m. on Tuesday. They initially suggested that the damage was limited and that emergency operations aimed at cooling the nuclear fuel at three stricken reactors with seawater would continue. But industry executives said that in fact the situation had spiraled out of control and that all plant workers needed to leave the plant to avoid excessive exposure to radioactive leaks.

If all workers do in fact leave the plant, the nuclear fuel in all three reactors is likely to melt down, which would lead to wholesale releases of radioactive material — by far the largest accident of its kind since the Chernobyl disaster 25 years ago.

If you'd like to hear the news directly from a Japanese broadcaster, the English service of NHK is available at http://www.ustream.tv/channel/nhk-world-tv.

For information about how nuclear reactors work, see http://allthingsnuclear.org/ of the Union of Concerned Scientists.

According to the Washington Post, a "Partial meltdown is likely under way at power plant" in Japan. CNN has more details:

A meltdown may have occurred at at least one nuclear power reactor in Japan, the country's chief cabinet secretary, Yukio Edano, said Sunday, adding that authorities are concerned about the possibility of another meltdown at a second reactor.

"We do believe that there is a possibility that meltdown has occurred. It is inside the reactor. We can't see. However, we are assuming that a meltdown has occurred," he said about the No. 1 reactor at the Fukushima Daiichi nuclear facility. "And with reactor No. 3, we are also assuming that the possibility of a meltdown as we carry out measures," Edano said.

Edano's comments confirm an earlier report from an official with Japan's Nuclear and Industrial Safety Agency, who said, "we see the possibility of a meltdown."

"There is a possibility, we see the possibility of a meltdown," said Toshihiro Bannai, director of the apan's Nuclear and Industrial Safety Agency international affairs office, in a telephone interview from the agency's headquarters in Tokyo. "At this point, we have still not confirmed that there is an actual meltdown, but there is a possibility."

An AP story is much more illuminating about what happened at the No. 1 reactor:

TOKYO (AP) -- Inside the troubled nuclear power plant, officials knew the risks were high when they decided to vent radioactive steam from a severely overheated reactor vessel. They knew a hydrogen explosion could occur, and it did. The decision still trumped the worst-case alternative - total nuclear meltdown.

At least for the time being.

The chain of events started Friday when a magnitude-8.9 earthquake and tsunami severed electricity to the Fukushima Dai-ichi nuclear complex 170 miles (270 kilometers) northeast of Tokyo, crippling its cooling system. Then, backup power did not kick in properly at one of its units.

From there, conditions steadily worsened, although government and nuclear officials initially said things were improving. Hours after the explosion, they contended that radiation leaks were reduced and that circumstances had gotten better at the 460-megawatt Unit 1. But crisis after crisis continued to develop or be revealed.

Without power, and without plant pipes and pumps that were destroyed in the explosion of the most-troubled reactor's containment building, authorities resorted to drawing seawater in an attempt to cool off the overheated uranium fuel rods.

Robert Alvarez, senior scholar at the Institute for Policy Studies and former senior policy adviser to the U.S. secretary of energy, said in a briefing for reporters that the seawater was a desperate measure. "It's a Hail Mary pass," he said.

He said that the success of using seawater and boron to cool the reactor will depend on the volume and rate of their distribution. He said the dousing would need to continue nonstop for days. Another key, he said, was the restoration of electrical power, so that normal cooling systems can be restored.

Officials placed Dai-ichi Unit 1, and four other reactors, under states of emergency Friday because operators had lost the ability to cool the reactors using usual procedures. An additional reactor was added to the list early Sunday, for a total of six - three at the Dai-ichi complex and three at another nearby complex. Local evacuations have been ordered at each location. Japan has a total of 55 reactors spread across 17 complexes nationwide.

Officials began venting radioactive steam at Fukushima Dai-ichi's Unit 1 to relieve pressure inside the reactor vessel, which houses the overheated uranium fuel. Concerns escalated dramatically Saturday when that unit's containment building exploded.

It turned out that officials were aware that the steam contained hydrogen, acknowledged Shinji Kinjo, spokesman for the government Nuclear and Industrial Safety Agency. More importantly, they also were aware they were risking an explosion by deciding to vent the steam.

The significance of the hydrogen began to come clear late Saturday:

• Officials decided to reduce rising pressure inside the reactor vessel, so they vented some of the steam buildup. They needed to do that to prevent the entire structure from exploding, and thus starting down the road to a meltdown.

• At the same time, in order to keep the reactor fuel cool, and also prevent a meltdown, operators needed to keep circulating more and more cool water on the fuel rods.

• Temperature in the reactor vessel apparently kept rising, heating the zirconium cladding that makes up the fuel rod casings. Once the zirconium reached 2,200 degrees Fahrenheit (1,200 Celsius), it reacted with the water, becoming zirconium oxide and hydrogen.

• When the hydrogen-filled steam was vented from the reactor vessel, the hydrogen reacted with oxygen, either in the air or water outside the vessel, and exploded.

A similar "hydrogen bubble" had concerned officials at the 1979 Three Mile Island nuclear disaster in Pennsylvania until it dissipated.

If the temperature inside the Fukushima reactor vessel continued to rise even more - to roughly 4,000 degrees Fahrenheit (2,200 Celsius) - then the uranium fuel pellets would start to melt.

According to experts interviewed by The Associated Press, any melted fuel would eat through the bottom of the reactor vessel. Next, it would eat through the floor of the already-damaged containment building. At that point, the uranium and dangerous byproducts would start escaping into the environment.

At some point in the process, the walls of the reactor vessel - 6 inches (15 centimeters) of stainless steel - would melt into a lava-like pile, slump into any remaining water on the floor, and potentially cause an explosion much bigger than the one caused by the hydrogen. Such an explosion would enhance the spread of radioactive contaminants.

If the reactor core became exposed to the external environment, officials would likely began pouring cement and sand over the entire facility, as was done at the 1986 Chernobyl nuclear accident in the Ukraine, Peter Bradford, a former commissioner of the U.S. Nuclear Regulatory Commission, said in a briefing for reporters.

At that point, Bradford added, "many first responders would die."

The New York Times reports that in reactor no. 3 at the Fukashima Daiichi plant the nuclear fuel rods were exposed. "On Sunday morning, officials injected water and boric acid into the second reactor and released radioactive vapor to ease pressure, said Yukio Edano, the chief cabinet secretary. The reactor’s fuel rods had become exposed, he said, which called for the extraordinary measures."

The Times also commented that the initial report by officials of the power company that owns the plant was misleading. "Late Saturday night, officials said that the explosion at Daiichi occurred in a structure housing turbines near its No. 1 reactor at the plant, rather than inside the reactor itself. But photos of the damage did not make clear that this was the case. They said that the blast, which may have been caused by a sharp buildup of hydrogen when the reactor’s cooling system failed, destroyed the concrete structure surrounding the reactor but did not collapse the critical steel container inside. This pattern of damage cast doubt on the idea that the explosion was in the turbine building."

The BBC has more on reactor no. 3 -

The plant's operator says pressure is rising inside reactor No. 3 after it lost its emergency cooling system....

The Japanese government has sought to play down fears of a meltdown at Fukushima 1, but media reports say radiation has now risen above safety limits at the plant.

On Sunday morning, Tokyo Electric Power (Tepco) revealed that the cooling system of a second reactor had failed....

But later Kyodo news agency quoted Tepco as saying radiation levels around the plant had risen above permissible limits....

But the BBC's Chris Hogg in Tokyo says the second reactor is a different type which uses MOX (plutonium plus uranium) fuel and the consequences of a problem there are potentially more severe. Quoted by Kyodo, Tepco said the tops of the MOX fuel rods were 3m above water.

I woke up this morning (actually, noon....) and turned on the computer and saw that there had been an explosion at one of the Japanese nuclear power plants that has been badly damaged by the earthquake and tsunami. Very scary. I hope all the officials who are trying to calm the Japanese people that there won't be a nuclear meltdown are telling the truth.

When I turned on CNN to get their typical minute-by-minute coverage, one of their more witless anchors was on, telling me no more than the online NYT coverage. So much for cable news.

In Middle East news, the Arab League to officially request UN impose no-fly zone on Libya. One wonders - will the UN do anything? And if the UN Security Council does approve it - who will enforce it? The Obama administration doesn't appear very keen on getting involved in yet another war with a Muslim country. And as Secretary of Defense Gates has said, enforcing a no-fly zone does require acts of war - like destroying the Libyan air defense system.

Egyptian state television said the Arab League had decided to open channels of communication with a Libyan rebel council based in Benghazi. The League said the council represented the Libyan people, the channel reported.

The Arab League decided on Saturday that the "serious crimes and great violations" the Libyan government had committed against its people had stripped it of legitimacy, Secretary General Amr Moussa said. Earlier Saturday, Moussa called for a no-fly zone over Libya in an interview with a German magazine, ahead of the group meeting in Cairo on Saturday to discuss the proposal. "I am speaking of a humanitarian action," he said in comments to Der Spiegel released on Saturday. "It is about assisting the Libyan people with a no-fly zone in their struggle for freedom against an increasingly inhuman regime." "The Arab League can also play a role," said Moussa, who is stepping down as secretary-general after a decade, intending to contest the Egyptian presidency later this year.

European states hope the Arab League will lead the way in shaping policy, particularly over a no-fly zone, towards the revolt against Muammar Gaddafi.

In his opening remarks to an Arab League meeting Saturday, the foreign minister of Oman said, "What is needed now is Arab intervention using mechanisms of the Arab League and at the same time in accordance with international law." "Based on this we must look at various options that [the] circumstances in Libya need," he said.

Oman Foreign Minister Youssef bin Alawi bin Abdullah also said that the Libyan crisis poses a threat to the stability of Arab states, and that Arab inaction on the Libyan crisis could lead to "unwanted foreign intervention" and fighting among Libyans.

And then there's the terrible terrorist attack against a family in the Israeli settlement of Itamar on the norther West Bank: Horror in Samaria: Terrorist murders family of 5

A terrorist infiltrated the West Bank settlement of Itamar, southeast of Nablus, early Saturday and stabbed five family members to death. The shocking attack occurred around 1 am as the terrorist entered the family home and murdered three children aged 11, 3, and a baby girl along with their parents. The victims were apparently sleeping as the killer came in.

Three other children at the home, a 12-year-old girl and her two brothers, aged 6 and 2, were able to escape to a nearby house and inform their neighbors of the attack.

A later article says that apparently two terrorists carried out the attack, and "Authorities also estimate that the attack was carried out by a local cell not directly affiliated with Hamas or any other organization, and that the murder was motivated by growing friction with settlers, growing incitement against the settlements on the Palestinian street, and a desire to avenge 'price tag' acts."

One of the Haaretz articles on the attack also says the Al Aqsa Martyrs Brigade took responsibility for the attack. The English article didn't have any details, but below is my translation of the relevant Hebrew article.

The Al Aqsa Martyrs Brigade, by the name of Imad Mughniyah, from the military arm of the Fatah movement, took responsibility for the terrorist attack. An announcement by the organization said that "The attack was a heroic action and a natural response to the murderous actions of the Israeli occupation against our people in the West Bank and in the Gaza Strip." Despite this, the reliability of the announcement was not yet clear, because in the past the organization has rushed to take responsibility for actions that they had no connection to. Hamas expressed support for the terrorist attack, but denied that its men were involved in carrying it out.

From our correspondent in South Korea, Louisa Metcalfe:

Seoul - I sit reading about “dark clouds” moving over the Korean economy. Of course, the problem is common to all of the global economy, but a phenomenon which has been specific to Korea since the Lehman Brothers collapse of September last year. The continuing slide of the Korean economy begs the question: how will Asia, the apparent new beacon in the global economy, lead the world economy out of recession? Moreover, will the progress be facilitated by further cooperation as witnessed at the end of last year?

This is a question which is in part related to the recent news that a Tripartite Agreement has been formed between Japanese, Chinese and Korean leaders. Korean President Lee Myung-Bak, Japanese prime minister, Taro Aso, and Chinese Premier Wen Jiabao, pledged “Tripartite cooperation” at Fukoka, Japan, on December 13th 2008. This agreement comes as somewhat of a breakthrough in Asia, after decades of mistrust and resentment toward the acts Japan committed during World War II, and before. Therefore, the subject of cooperation here in Korea seems to have witnessed symbolic progress - something which appears to be a result of the global economic downturn itself.

The relevance of this news resonates now as this week in Korea marks a year in power for the president Lee Myung-Bak. Yet despite talks of the Asian miracle of late, and hopes of economic success via cooperation in December, the ratings of the Korean president have been halved in the past year. This is arguably largely a result of the extent of the damage which has occurred in the Korean economy during this time. The past year has seen a vast decline in exports and capital reserves as the USA has become less able to consume Asian goods. Two of the traits which lead to nations such as Korea being held up as examples of the ‘Asian Miracles’.

So what now? Will the Asian miracle last? I see that this question may be subject to cooperation. Can and will the ‘Asian Miracle’ persist without external facilitation? For me, the answer is yes. The situation looks optimistic for the next year in power of Lee MyunBak. The Korean media is projecting that the president has finally accepted that the crisis means harder action must be taken, and his mantra has become, ‘Crisis equals Opportunity’. Moreover, the two words have the same meaning in Japanese, portraying an image that the national differences between the two countries will soon be offset, at least temporarily, in order to resuscitate the Asian economies.

The Tripartite Agreement promises to boost the Asian Development Bank, and supersede the "Chiang Mai initiative", created during the East Asian Financial Crisis, to allow bilateral swaps. Furthermore, the Association of South East Asian Nations (ASEAN) has been further developed in recent years (for example, including China into ASEAN+3). The recent news of cooperation and change in Korea therefore comes as a refreshing change to the news of gloom and doom, with Korea, Japan and China comprising a quarter of the world’s population, and a fifth of the world’s economy. Thus portraying the potential for these countries, including Korea, to chase away the dark clouds over their economies over the coming year.

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Interested in being a guest correspondent? Fire us an email: ipejournal at gmail.com.

Politique
-Obama unveiled his massive 2010 budget proposal, much of which breaks with the conservative consensus that governed US policy for much of the past 30 years. $634bn in health care spending will be, in theory, offset by tax increases on American's earning over $250,000 a year. The US president also vowed to cut the deficit in half by 2012. More than a few people questioned the likelihood, and math, of this plan.

-Obama fulfilled a core campaign pledge by announcing a withdrawal date for US combat troops in Iraq (August 2010). He aims to have all troops out by 2011. Oddly, congressional Republicans embraced the president's announcement. Didn't their candidate for the oval office just run on not "cutting and running"? I guess after seeing their poll numbers plummet in the wake of their stimulus obstructionism, they latched on to a sure political winner.

-In Pakistan, Taleban leaders in Bajaur province declared a unilateral ceasefire, a week after a negotiated truce was reached in the Swat valley. In Islamabad, Nawaz Sharif and his brother Shahbaz, the chief minister of Punjab province, were banned from holding political office by the Supreme Court, causing the Punjab government to collapse and igniting protests. Political instability + balance of payments crisis + losing control of large portions of your territory = failed state.

-In her first foreign trip abroad, US secretary of state Hillary Clinton promoted pragmatism in US-China relations, overlooking human rights in favor of economic and financial cooperation...and US treasuries. Days later, a US State Department report laid the smack-down on China over the very issue Clinton skirted face-to-face. China was not pleased.

-Cracks in the Russian power structure?

Economia
-The central banks of Poland, Czech Republic, Hungary and Romania issued coordinated statements defending their currencies, while a consortium of international institutions announced a loan package for the troubled region.

-The US government increased its stake in Citigroup to as much as 36%, days after Bernanke and Obama sought to calm fears over nationalization. Bernanke said the debate essentially "misses the point." The US Treasury also provided details on its upcoming stress tests.

-ASEAN signed trade agreements with Australia and New Zealand.

-The defense of the rouble appears to have been a success. For now.

The Rest
-In the Champion's League, ManU held Inter to a draw in the San Siro, Arsenal beat Roma on a Van Persie penalty, and Liverpool beat Real Madrid in typical Kop Champion's League fashion. In the UEFA Cup, two of the favorites, AC Milan and Aston Villa, crashed out.

-This. Is. Crazy.

-The Times of London looks at "Japan: the nation that loves robots."

-Slumdog Millionaire was the big winner at the 81st Academy Awards.

From the BBC:

Japan's finance minister is facing calls for him to resign amid claims he was drunk at a recent G7 meeting.

Shoichi Nakagawa has apologised for his behaviour but blamed cold remedies for a slurred performance at a news conference in Rome at the weekend.

You may recall similar suspicions following Nicolas Sarkozy's "winded" press conference at the '07 G8 in Heiligendamm. Which begs the question: what are they serving at these summits (and where can I get some)??

Update: Nakagawa's gone, can Aso be far behind?

IPE Journal looks back at the cultural, sporting and down right random things that diverted our attention from economic Armageddon in 2008. In other words, The Rest...

-The 2008 Olympic Games were much more than China's coming out party. The world stood in awe at the Opening Ceremonies, Michael Phelps became the greatest Olympian of modern times and China's athletes topped the gold medal table. 2008 was a year of stark contrasts for China: the tragedy of the Sichuan earthquake, tainted milk, and exposure of the shortcomings of China's economic miracle v. the scale, triumph and symbolism of the games, land reform and progress with Taiwan. 2009 promises to be an interesting year.

-In the Prem, Arsenal collapsed following a very bad day in Birmingham, throwing away the 07-08 title. They began the 08-09 season in disarray, and placed their future on the young shoulders of Cesc Fabregas, who, naturally, was immediately lost for four months with ruptured knee ligaments. ManU and Chelsea provided a cardiac finish to both the Prem and Champions League final in Moscow, with SAF's men taking the double.

-Rafael Nadal, Roger Federer and an epic Wimbledon final, considered by many the greatest tennis match of all time.

-The Year in Japanese innovation: robots that feed you, bionic legs and a trumpet playing robot joins the Cincinnati Pops. According to the International Federation of Robotics, robot use will increase substantially over the next few years, for combat, labour and personal uses. The Guardian identifies Japan as the world leader in robotic labour density (25 per 10,000 workers).

-In what will surely go down as man's historic victory over the animal kingdom, monkey waiters hit Japan.

-Contemporary art market boom/bust: The contemporary art market is an interesting barometer for investor sentiment (the Mayfair, not main street, investor) and Banksy provides a perfect case study. In October 2007, 10 prints by the London-based street artist sold at auction for a whopping ₤546,000. Fast forward to September 2008, and the five Banksy pieces at auction in London went unsold. In fact, two thirds of the items in the Loyd and Turnbull contemporary art auction were withdrawn. (Editor's note- my two Banksy prints were purchased in Covent Garden for 30 quid. Beat that.)

-Finally, in a year of great You Tube moments (Bush shoe thrower, Brown's messiah slip), this one takes the cake, both for humour and IPE symbolism:

The rapid US dollar resurgence of the past couple of months is being felt in a number of very specific ways. Rory has been following this trend closely (see posts on USD resurgence, other currency stuff and the, er, "GreenPack.") so I won't spend too much time on the specifics. What I have been meaning to discuss is the significance of this shift in a broader context.

I'm referring to the issue of "global macroeconomic imbalances." What are these imbalances, you ask? The expression refers to situation that has arisen because A) countries in East Asia and the Middle East have a lot of money they wish to lend somewhere safe and B) the United States has until recently been very willing to borrow.

On the other side of the equation, the American economy has been saving almost nothing and accumulating debt like it's going out of style (this applies to other rich developed economies, but less so). This is partly because there was no need: cheap credit from abroad helped fuel equity bubbles in the late 1990s and the recent housing bubble - people were getting rich. But this system was only sustainable so long as American deficits continued to grow and American consumption continued to hold up the world economy.

Some people have argued that this balancing act is (was) sustainable, but they are wrong. The real question is when and how will things re-balance themselves. There are two worries. First, that US deficits grow to the point where China & co lose faith in the dollar, dump their assets and cause a recession in the United States. I think that fear has always been overstated. To paraphrase the old banking addage: when you owe the Chinese government $100 million, you have a problem. When you owe the Chinese $1.9 trillion, they have a problem. If the US economy drops 10%, say, these Chinese-held assets will suffer enormous losses. So the fear of a "hard landing" caused by foreign investors was always problematic.

The second worry is that of a Sudden Stop: a slowdown in the US economy prevents them from acting as "consumer of last resort" and emerging markets are forced to readjust internally on short notice. This could also result in a "hard landing" for the economies involved - something to be avoided.

However, last week John Kemp pointed out that we no longer need to worry about which outcome it will be since the decision has been made for us:

The unfolding credit crisis is producing a deep recession, cutting U.S. demand for imports, and forcing the long-overdue adjustment in the trade deficit.

He concludes:

With recession taking care of the current account deficit, financial crisis reducing gross capital outflows, and foreign official buyers continuing to support the Treasury market, the U.S. currency has been a strange beneficiary of the crisis. If the dollar’s earlier decline was a symptom of over-fast growth, its rise is a by-product of recession.

That's all fine and good for the dollar, but what about everyone who was relying on US consumers to fuel growth? A hard landing is still a strong possibility in some parts of the world. Over the next few months we're going to find out just how capable some countries are at redirecting investment inwards and stimulating their own demand.

Further Reading: Patrick and I discuss China's counter-move of devaluing the yuan. Checkitout!

(Photo: Daylife)

Politique
-US President-elect Barack Obama unveils details of his "21st century New Deal". The Economic Recovery Plan is preliminarily based on 5 pillars: energy, roads and bridges, schools, broadband, and electronic medical records. Many, including prominent members of his own party, are becoming increasingly frustrated with his "there is only one president at a time" line, as the sitting President appears to have checked out while Rome burns.
-The terrorist attacks on Mumbai end, the Indian investigation expands, and at least 29 people die from a car bomb in the Pakistani city of Peshwara. Blame for the attacks has focused on Pakistan-based Lashkar-e-Taiba (the likely perpetrators), the Indian government (early warnings, poor response, failure to hold Pakistan accountable), and the Pakistani regime (failure/inability to address sources of terrorism and militancy within its borders).
-A deliciously intriguing affair in the British House of Commons has ignited a fierce debate over Parliamentary independence, opposition politics, and police powers. Meanwhile, Canada has its own legislative controversy to deal with (find Dave's take here).

Economia
-The US learned it has been in recession since December 2007 (something everyone but this guy has been well aware of) and lost 533,000 jobs in November, the largest jobs decline in 34 years.
-Angela Merkel grew increasingly isolated in Europe as French President Sarkozy unveiled a €26bn stimulus package. UK Prime Minister Brown and Sarkozy will meet in London on Monday to renew their call for a coordinated European stimulus.
-An historic week in European central banking: BoE cuts 100 basis points to 2.0% (lowest level since 1951), ECB goes with 75 basis points to 2.5% (its largest single cut ever), and Sweden slashes a record 175 basis points to 2.0%.

The Rest
-In the Prem: Arsenal continue form following famous win at Stamford Bridge, Liverpool stay top, and ManU and Spurs on track for Carling Cup final. In Europe: Cristiano Ronaldo wins Ballon d'Or, reveals he was "an inch away" from being a Gunner in 2003.
-This week in Japanese innovation: omelets with the Motoman SDA10.
-"Experienced bandits" steal €85mn in luxury jewels from Harry Winston store in Paris. According to Reuters, the heist occurred almost a year to the day of a similar $16mn robbery at the store.

While IPE Journal got a makeover...

Politique
-The US National Intelligence Council's 2025 project releases Global Trends 2025: A Transformed World. The report announces the end of the "unipolar moment", and predicts declining American influence and power. While the US will remain the preeminent power, the rise of the BRICs will reintroduce a multipolar world. Other defining trends: increasing competition for scarce resources, greater West-East transfer of wealth, and broader Middle East destabilization.

-World trade is grappling with a tricky little pirate problem, as Saudi joins a NATO anti-piracy fleet and calls for a global response to this "terrorism".

-The IAEA confirms speculation that the Syrian structure bombed by Israel in 2007 contained nuclear material. Syria swiftly calls for end to probe.

-Obama announces plans to create 2.5 million jobs through massive fiscal stimulus, government projects. His cabinet takes shape: Geithner for Treasury, Clinton at State (the Guardian broke her acceptance plans, beating US media to story), and reported negotiations for Gates to remain at Defense.

Economia
-Citi executives huddle in New York with government officials to discuss the bank's survival. The Dow Jones Industrial average closed below 8,000 this week, the first time since March 2003.

-Japan falls into recession, ending longest postwar expansion.

-Pakistan formally requests $7.6bn IMF standby loan, agrees to economic reforms including fiscal deficit reduction.

The Rest
-Scientists now believe that massive glaciers may lie beneath the rocky Martian surface, and humanity is step closer to confirming life beyond Earth.

-Arsenal drop Gallas, ManU lose Berbatov for big Villa clash, and Liverpool/Chelsea stay top of Prem

-Vanity Fair releases its International Best Dressed List. This year's list includes Michelle Obama, Kate Middleton, and Kanye West. West drops a full preview of new album, 808s and Heartbreak.

Politique
-G20 leaders arrived in Washington for a summit that had been hailed Bretton Woods II. With President-elect Obama avoiding the summit, and sharp differences between world leaders on the reforms needed to repair the international financial and economic systems, the summit ends like so many before it- with a consensus on principles, little coordinated action, and an agreement to meet again. Declaration text here.

-A regional war looms as the situation in the DRC deteriorates. African peacekeepers are impotent and declared targets by Nkunda, the number of foreign troops/mercenaries in the country grows by the day, and southern African leaders are threatening full-scale military involvement. The NYT looks at the role of minerals in the DRC's history of conflict.

-The EU agreed to restart talks on a strategic partnership agreement with Russia following an EU/Russian summit at Nice. Russia hasn't met the EU conditions set out as a prerequisite to talks following the conflict in Georgia, and it seems only Lithuania has the spine to say so.

-Iraq's cabinet approves new security pact with the US. The agreement extends US troop mandate through 2011.

Economia
-Paulson shocks congress with plan to spend remaining TARP money on capital injections into troubled institutions and companies and consumer spending. The Treasury will no longer purchase illiquid assets, and congressmen/women of both parties are screaming "bait and switch". Paulson deputy Kashkari testified before an angry House, with Rep. Elijah Cummings asking him, "Is Kashkari a Chump?"

-Treasury v. FDIC. FDIC's Bair wants to directly assist 1.5 million homeowners in the US, while Paulson resists a (*cough-cough*) "government spending program"- Paulson believes that his actions are "investments".

-Is a sterling run imminent? That's what George Osborne, Tory shadow chancellor, implied this week in criticizing Gordon Brown's fiscal plans. Osborne's political career is likely done. Sterling has hit a 6-year low against the dollar at $1.49, and Simon Derrick at BoNY Mellon believes sterling's position is now worse than Sept. 1992.

-Eurozone enters its first official recession.

The Rest
-India celebrates first lunar landing.

-This week in Japanese innovation: a robot that feeds you, and bionic legs.

-Arsenal's Prem title run is dead in the water.

-Gordon Brown: control freak.