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Also, the G-20 heads of state will announce on Friday that the G-20 will become the permanent council for international economic cooperation, eclipsing the Group of Eight, a senior U.S. administration official said.

“It’s a reflection of the world today,” the official said Thursday night. “It’s basically pulling international cooperation into the 21st century.”

The G-8 will continue to meet on matters important to the most-developed economies, such as international security issues. But those meetings will come as world leaders converge for other events, not in major summits.

The initiative was pressed by U.S. President Barack Obama, but it satisfied the demands on Brazil, China, India and other large developing countries, which have bristled at being left out of G-8 conclaves.

Under the G-20’s proposal aimed at improving coordination of global economic policymaking, the world would reduce its reliance on U.S. consumers. The Chinese would boost domestic demand, the U.S. would trim its borrowing from overseas, and the Europeans would encourage investment, said a number of G-20 officials involved in the talks.

The scope and effectiveness of the agreement — which was expected to be signed off on by G-20 leaders on Friday — will depend on whether and how it is enforced. The potential agreement envisions a procedure where G-20 countries assess whether each others’ policies are working, and the International Monetary Fund provides technical help. Not included are any enforcement mechanisms such as sanctions or other penalties.

Now that the authority is law, how has the Department of Justice used the new power? To go after drug dealers.

Only three of the 763 “sneak-and-peek” requests in fiscal year 2008 involved terrorism cases, according to a July 2009 report from the Administrative Office of the U.S. Courts. Sixty-five percent were drug cases.

Sen. Russ Feingold (D-Wis.) quizzed Assistant Attorney General David Kris about the discrepancy at a hearing on the PATRIOT Act Wednesday. One might expect Kris to argue that there is a connection between drug trafficking and terrorism or that the administration is otherwise justified to use the authority by virtue of some other connection to terrorism.

“It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”

Robertson said inflation is a big risk if foreign countries were to stop buying bonds.

“If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”

Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds.

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, a credit rating company that tracks commercial mortgage-backed securities. Some of the biggest loans, put on the company’s watch list because of late payments, decreasing occupancies or cash flow, were made to luxury properties where rooms can cost more than $850 a night.

“All segments are showing signs of distress but the luxury segment carries much higher loan balances and is more clearly affected,” Frank Innaurato, managing director of CMBS analytical services at Horsham, Pennsylvania-based Realpoint, said in a telephone interview.

Lodging owners are struggling after adding rooms and properties at the peak of the CMBS market from 2004 to 2007, when $83.4 billion in hotel-backed securities was issued. Occupancy among chains with the costliest rooms fell to 60 percent in the first half from 70 percent a year earlier, according to Smith Travel Research. The decline was the industry’s largest for that period.

The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed’s disclosure came this week in a letter to GATA’s Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA’s administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund’s treatise on gold swaps here: http://www.imf.org/external/bopage/pdf/99-10.pdf.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see http://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President’s Working Group on Financial Markets, detailed the Fed’s position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.

Warsh wrote in part: “In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”

The Fed would borrow from the funds via reverse repurchase agreements involving some of the huge portfolio of mortgage-backed securities and U.S. Treasuries that it acquired as it fought the financial crisis, the newspaper reported, without citing any sources.

This would drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered.

The FT said Fed officials had in recent days held discussions with market participants on how it might implement such a scheme.

The Fed is considering whether to conduct a pilot scheme, but worries such a test might be seen as a signal that the central bank was about to drain liquidity on a large scale, the newspaper said. In the near term, a big drain remains unlikely, it added.

The central bank held interest rates at close to zero on Wednesday and upgraded its assessment of the U.S. economy, saying growth had returned after a deep recession.

The Fed also said it would slow its purchases of mortgage debt to extend that program’s life until the end of March, in a move toward withdrawing the central bank’s extraordinary support for the economy and markets during the contraction.

The idea of the Fed using reverse repos to help unwind policy is not new; Fed chairman Ben Bernanke identified them as a potential means of soaking up liquidity in July. But the market had previously expected the repos to be done with primary dealers, including former Wall Street investment banks.