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The managed currency weakened 2.5 percent to 41.6870 per euro at 12:56 p.m. in Moscow, the lowest since the European currency started trading in 1999. It fell 0.7 percent to 29.1884 versus the dollar, the lowest since Oct. 2004. Bank Rossii allowed the ruble to fall 1.7 percent against its basket of 55 percent dollars and 45 percent euros, the most since the measure was introduced in February 2005, according to a central bank official who declined to be identified, citing bank policy.

The ruble has fallen 19 percent against the basket since Russia’s invasion of Georgia in August, to 34.8170. That five-day war, the global credit squeeze and plunging oil prices have led investors to pull more than $200 billion out of Russian investments in the last five months, according to BNP Paribas SA.

“A large part of the government’s revenues, such as oil and gas export duties and extraction taxes, is dollar-denominated, so the ruble weakening certainly helps both the budget and income statements of the oil and gas producers,” said Ronald Smith, head of research at Alfa Bank in Moscow.

Today’s decline is the 12th of more than 1 percent against the basket since Nov. 11. Russia may have to weaken the ruble another 5 percent to bring it into parity with other currencies dependant on commodity prices, such as the South African rand, Norwegian kroner and Australian dollar, Smith said.

Oil Prices, Deficit

The ruble may need to fall another one-fifth against the basket if oil prices don’t rise and Bank Rossii doesn’t change its policy, said Evgeny Gavrilenkov, chief economist at Troika Dialog in Moscow. Gavrilenkov called in October for a one-time depreciation of as much as 20 percent, when oil prices were above $60 a barrel.

Russia is expecting to run its first budget deficit since 1999 next year, of as much as 2 trillion rubles ($69 billion), because of lower-than-expected oil prices, Finance Minister Alexei Kudrin said on Dec. 27. The price of Urals crude, the country’s main export blend of oil and its biggest export earner, has fallen 78 percent to about $32 a barrel since reaching a record high July 3. That’s less than half of the $70 Russia needs to balance its budget in 2009.

The economy, which has averaged 7 percent growth since the 1998 debt default ruble devaluation of more than 70 percent against the dollar, may slip into a recession in the first half of 2009, Kremlin economic adviser Arkady Dvorkovich told Bloomberg Television on Dec. 19.

Stocks, Bailout

The ruble-denominated Micex Index of 30 Russian stocks has lost 67 percent this year, heading for the biggest decline since 1998, when the ruble lost more than 70 percent against the dollar. The market value of state-run OAO Gazprom, the monopoly exporter of natural gas, has fallen to $87 billion from more than $300 billion in May.

Plunging stock prices and the seizure of capital markets has forced Russia’s richest businessmen to seek financing from state development bank Vnesheconombank, or VEB, which is channeling part of the government’s $200 billion in bailout funds. Prime Minister Vladimir Putin heads VEB’s supervisory board.

Oleg Deripaska’s United Co. Rusal, the world’s biggest aluminum producer, received $4.5 billion from VEB to repay foreign lenders, putting up as collateral its 25 percent stake in OAO GMK Norilsk Nickel, the country’s largest mining company.

The move extended six weeks of devaluations by Russia’s central bank designed to offset the impact of the global economic crisis and falling oil prices as the country’s main export commodity approached its lowest level since 2004.

Mikhail Gorbachev, the former Soviet leader, warned Russia faced “unprecedentedly difficult and dangerous circumstances” and could be “heading into a black hole”. “It is not clear what the fate of our rouble will be or if society has sufficient financial and moral resources,” he said.

After the depreciation, which was the eighth so far this month, the rouble declined as much as 1.2 per cent to Rbs29.06 versus the dollar yesterday, a four-year low. The rouble has now lost almost 20 per cent of its value against the US currency since August.

Analysts at Barclays Capital said the best case scenario would see Russian policymakers, facing mounting evidence of a recession, allowing a one-off depreciation of 10 per cent or more.

The rouble’s slide comes as the government faces scrutiny over its policies. A demonstration earlier this month in the far eastern city of Vladivostok marked the first major challenge to the Kremlin since the onset of the global financial crisis.

Mikhail Sukhodolsky, a deputy interior minister, warned on Christmas Eve that there could be further protests. “The situation may be exacerbated by a growth in frustration of workers over the non-payment of wages or those threatened with dismissal,” he said.

His remarks coincided with criticism of the Kremlin’s rough handling of the protests in Vladivostok. Moscow-based Omon riot police detained about 61 people in the protests against car import duties designed to prop up domestic car producers, but making foreign vehicles prohibitively expensive for ordinary Russians.

This year’s retailing slide — when stores were forced to cut prices to convince wary consumers to spend — promises to have a lasting impact on the way the retail industry operates. Many retailers are rethinking how they do business, as others prepared for a large number of bankruptcies and store closures.

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Stephen Harbeck, chief executive of America’s Securities Investor Protection Corporation (Sipc) and official receiver of Madoff’s now defunct brokerage business, said the hunt for funds was likely to spread all over the world. “We will trace funds wherever the trail goes,” he said on the steps of the US Bankruptcy Court for the Southern District of New York.

Sources close to the investigation said forensic accountants examining Madoff’s books believed he had regularly sent large sums of money to offshore accounts in the Caribbean and Europe. “There are accounts at New York Mellon Bank that we have been looking at that appear to have sent and received money from offshore locations,” a senior source said. Tracking down the money investors entrusted to Madoff is likely to be one of the longest and most complicated financial investigations on record.

Harbeck said investigators were dealing with a “highly complex hybrid fraud”, adding each individual investment account operated by Madoff could be its own self-contained fraud. “But it is still too early to say with any certainty what was going on inside Madoff’s business.”

The scandal took a chilling turn last week when Rene-Thierry Magon de la Villehuchet, the co-founder of a firm that lost millions investing with Madoff, was found dead in his New York apartment. Access International Advisors – Magon de La Villehuchet’s firm – is understood to have lost $1.5bn in the Madoff affair.

On the same day a New York judge ruled that Madoff’s investors would receive no more than $100,000 in cash compensation, no matter how much they lost. The ruling was included in a series of court orders made on 23 December by US bankruptcy judge Burton Lifland.

For the biggest losers in the Madoff scandal, the compensation is a drop in the ocean. Fairfield Greenwich, the investment firm run by Madoff chum Walter Noel, lost $7.5bn in the fraud while womenswear magnate and Madoff mentor Carl Shapiro lost $545m of his personal fortune. Claims for compensation will be restricted to those investors who can prove they sent money to Madoff in the 12 months prior to his arrest on 11 December.

A state House panel recommended the state give $20,000 to victims of the eugenics program, which sterilized about 7,600 people between 1929 and 1975 who were considered to be mentally handicapped or genetically inferior. Though North Carolina and several other states have apologized for such programs, none have offered reparations.

“Yes, it is ugly. It’s not something that we’re proud of,” said state Rep. Larry Womble, D-Forsyth, who has been working on the issue for several years. “But I’m glad that North Carolina has done more than any other state to step forward and not run away from it.”

Lawmakers in the full General Assembly will have to approve the idea. They convene next month.

Illinois was the first state to offer a eugenics program in 1907 as social reformers advocated for a way to cleanse society of the mentally handicapped and mentally ill. Many states curtailed their sterilizations after World War II, recognizing it was similar to the actions taken by Adolf Hitler in Nazi Germany.

North Carolina, however, moved ahead aggressively after the war, conducting about 80 percent of procedures after 1945 and growing the program to be the third largest in the nation, behind only California and Virginia.

Most of those sterilized in the 1960s were poor black women.

Willis Lynch, 75, of Littleton was one of the victims. He went through forced sterilization at the age of 14 – not knowing at the time what was happening – and was later frustrated by it.

“I always wanted kids. I love kids,” said Lynch, who married a woman with two children. “You wish you could have kids of your own.”

He praised the state for finally recognizing its mistake 60 years after he went through the procedure. The bills approved by the committee also suggest providing counseling, creating a historical marker and including information about the eugenics program in public school curriculum.

Rep. Ronnie Sutton, the Democratic chairman of the study committee, said because of the nation’s lagging economy, it may not be possible to fully fund the compensation program with an estimated $18 million that would be needed to cover all surviving victims.

The dead and wounded lay scattered on the ground following the Israeli attacks, which destroyed several Hamas police compounds in the bloodiest day for Palestinians in more than 20 years. Distraught rescuers cried out as they tried to find those still alive and black smoke billowed over Gaza city.

The Israeli military said it had targeted “terrorist infrastructure” and pledged more strikes if necessary, possibly targeting leaders of the Hamas Islamist militant group.

Hamas threatened to unleash “hell” to avenge the dead, including possible suicide bombings, and militants fired rockets into southern Israel soon after the Israeli strikes. Medics said one Israeli was killed and two were moderately wounded.

Palestinian President Mahmoud Abbas condemned as “criminal” the Israeli air campaign and called for the international community to intervene.

Hospital officials in Gaza City said more than 120 people had been killed there, including 40 at a police headquarters where Hamas was hosting a graduation ceremony for new recruits. Among those killed was police chief Tawfiq Jabber.

Another 23 Palestinians were killed in air strikes in Khan Younis and Rafah in the southern Gaza Strip, medical officials said. At one site, there was a huge crater in the ground.

ESCALATION THREATENED

Uniformed bodies lay in a pile and the wounded writhed in pain, Reuters television pictures showed. Rescuers carried those showing signs of life to cars and ambulances, while others tried to revive the unconscious.

An Israeli army spokesman said the air force had conducted “a massive operation” against “terrorist infrastructure” following the collapse of a six-month-old, Egyptian-brokered ceasefire just over a week ago.

Gaza militants have fired dozens of makeshift rockets at southern Israel in recent days. The rockets cause damage but few injuries.

Hamas armed wing spokesman Abu Ubaida threatened to unleash “hell” on Israel, saying the Islamist group would “teach the enemy a lesson they will never forget.” Hamas said it was considering a new suicide bombing campaign.

An aide to Israeli Defense Minister Ehud Barak said Israel was prepared to step up its assault “as required.”

Several of the rescuers beat their heads and shouted: “Allahu akbar (God is greatest).” One badly wounded prostrate man was quietly reciting verses from the Koran.

Four blue pills. Viagra.

“Take one of these. You’ll love it,” the officer said. Compliments of Uncle Sam.

The enticement worked. The officer, who described the encounter, returned four days later to an enthusiastic reception. The grinning chief offered up a bonanza of information about Taliban movements and supply routes — followed by a request for more pills.

For U.S. intelligence officials, this is how some crucial battles in Afghanistan are fought and won. While the CIA has a long history of buying information with cash, the growing Taliban insurgency has prompted the use of novel incentives and creative bargaining to gain support in some of the country’s roughest neighborhoods, according to officials directly involved in such operations.
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In their efforts to win over notoriously fickle warlords and chieftains, the officials say, the agency’s operatives have used a variety of personal services. These include pocketknives and tools, medicine or surgeries for ailing family members, toys and school equipment, tooth extractions, travel visas, and, occasionally, pharmaceutical enhancements for aging patriarchs with slumping libidos, the officials said.

“Whatever it takes to make friends and influence people — whether it’s building a school or handing out Viagra,” said one longtime agency operative and veteran of several Afghanistan tours. Like other field officers interviewed for this article, he spoke on the condition of anonymity when describing tactics and operations that are largely classified.

Officials say these inducements are necessary in Afghanistan, a country where warlords and tribal leaders expect to be paid for their cooperation, and where, for some, switching sides can be as easy as changing tunics. If the Americans don’t offer incentives, there are others who will, including Taliban commanders, drug dealers and even Iranian agents in the region.

The usual bribes of choice — cash and weapons — aren’t always the best options, Afghanistan veterans say. Guns too often fall into the wrong hands, they say, and showy gifts such as money, jewelry and cars tend to draw unwanted attention.

“If you give an asset $1,000, he’ll go out and buy the shiniest junk he can find, and it will be apparent that he has suddenly come into a lot of money from someone,” said Jamie Smith, a veteran of CIA covert operations in Afghanistan and now chief executive of SCG International, a private security and intelligence company. “Even if he doesn’t get killed, he becomes ineffective as an informant because everyone knows where he got it.”

The key, Smith said, is to find a way to meet the informant’s personal needs in a way that keeps him firmly on your side but leaves little or no visible trace.

Output at the nation’s manufacturers tumbled 8.1 percent from October, the largest drop since Tokyo began measuring such data in 1953, as Japan’s automakers and others slashed production to cope with slowing global demand. A government survey predicted further declines of 8 percent in December and 2.1 percent in January.

“Exports and industrial production are falling so extraordinarily quickly that it almost defies analysis,” said Richard Jerram, chief economist at Macquarie Securities in Tokyo.

The drop in factory production is nearly double the previous biggest decline of 4.3 percent in January 2001, according to the Ministry of Economy, Trade and Industry. Earlier this week, trade data showed that exports plunged a record 26.7 percent in November.

Many companies, including big names like Toyota Motor Corp. and Sony Corp., have announced plans to cut production and workers. The yen’s recent surge has also dealt a huge blow to the world’s second-largest economy by eroding exporters’ overseas earnings.

The job cuts are already being reflected in a higher unemployment rate, which rose to 3.9 percent in November from 3.7 percent in October, the Ministry of Internal Affairs said. That’s still below the 4.2 percent reached in August.

The ministry said 2.56 million people were unemployed in Japan in November, an increase of 100,000 from a year earlier.

Part-time and temporary workers have suffered the bulk of job cuts so far. The Ministry of Health, Labor and Welfare said Friday that given current company plans, 85,000 such workers will have lost their jobs between October and March, compared to about 3,300 permanent employees.

The largest portion of such job cuts were in Aichi prefecture of central Japan, where Toyota and many of its part makers are based. Layoffs of salaried employees is rare in Japan, where lifetime employment is a tradition.

Consumers are also holding back. Retail sales fell 0.9 percent in November from last year, the third straight monthly decline.

And average monthly household spending dipped 0.5 percent from a year earlier, for the ninth decline in a row. Still, the drop was smaller than expected, beating the 3.6 percent decline forecast by a Kyodo News survey. Household spending is a key indicator of consumer spending, which makes up more than half of Japan’s gross domestic product.

Inflation, meanwhile, eased. Core consumer prices — which excludes volatile fresh food prices — rose 1 percent after a 1.9 increase in October.

As Japan’s economy weakens, government officials have warned that deflation, or steady price declines, is a possibility next year. Japan suffered through bouts of deflation from 1999 to about 2006, as it recovered from previous economic downturns.

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The outlook for manufacturers is particularly grim. If dire forecasts for the next two months of industrial production hold, factory output will have fallen 20 percent from the start of October through January 2009.

Output by automakers fell 15 percent from October and 25 percent from a year earlier. Electronic manufacturers cut output 12 percent compared the previous month and 25 percent from the same month last year.

Economists say that while the outlook for the near-term remains bleak, a modest recovery in demand and production may begin to surface in mid-2009, as governments around the world begin to implement stimulus measures announced in recent months.

The two devices under development by the civilian National Institute of Justice both build on knowledge gained from the Pentagon’s controversial Active Denial System (ADS) – first demonstrated in public last year, which uses a 2-metre beam of short microwaves to heat up the outer layer of a person’s skin and cause pain.

‘Reduced injuries’

Like the ADS, the new portable devices will also heat the skin, but will have beams only a few centimetres across. They are designed to elicit what the Pentagon calls a “repel response” – a strong urge to escape from the beam.

A spokesperson for the National Institute for Justice likens the effect of the new devices to that of “blunt trauma” weapons such as rubber bullets, “But unlike blunt trauma devices, the injury should not be present. This research is looking to reduce the injuries to suspects,” they say.

Existing blunt trauma weapons can break ribs or even kill, making alternatives welcome. Yet ADS has recorded problems too – out of several thousand tests on human subjects there were two cases of second-degree burns.

Dazzle and burn

The NIJ’s laser weapon has been dubbed Personnel Halting and Stimulation Response – PHaSR – and resembles a bulky rifle. It was created in 2005 by a US air force agency to temporarily dazzle enemies (see image, right), but the addition of a second, infrared laser makes it able to heat skin too.

The NIJ is testing the PHaSR in various scenarios, which may include prison situations as well as law enforcement.

The NIJ’s portable microwave-based weapon is less developed. Currently a tabletop prototype with a range of less than a metre, a backpack-sized prototype with a range of 15 metres will be ready next year, a spokesperson says.

The truly portable mini-ADS could prove the more useful, as microwaves penetrate clothing better than the infra-red beam, which is most effective on exposed skin. Although the spokesman says: “In LEC [Law Enforcement and Corrections] use there is always a little bit of skin to target.”

Torture concerns

The effect of microwave beams on humans has been investigated for years, but there is little publicly available research on the effects of PHaSR-type lasers on humans. The attraction of using a laser is that it can be less bulky than a microwave device.

Human rights groups say that equipping police with such weapons would add to the problems posed by existing “non-lethals” such as Tasers. Security expert Steve Wright at Leeds Metropolitan University describes the new weapons as “torture at the touch of a button”.

Using homemade lab equipment and the wealth of scientific knowledge available online, these hobbyists are trying to create new life forms through genetic engineering — a field long dominated by Ph.D.s toiling in university and corporate laboratories.

In her San Francisco dining room lab, for example, 31-year-old computer programmer Meredith L. Patterson is trying to develop genetically altered yogurt bacteria that will glow green to signal the presence of melamine, the chemical that turned Chinese-made baby formula and pet food deadly.

“People can really work on projects for the good of humanity while learning about something they want to learn about in the process,” she said.

So far, no major gene-splicing discoveries have come out anybody’s kitchen or garage.

But critics of the movement worry that these amateurs could one day unleash an environmental or medical disaster. Defenders say the future Bill Gates of biotech could be developing a cure for cancer in the garage.

Many of these amateurs may have studied biology in college but have no advanced degrees and are not earning a living in the biotechnology field. Some proudly call themselves “biohackers” — innovators who push technological boundaries and put the spread of knowledge before profits.

In Cambridge, Mass., a group called DIYbio is setting up a community lab where the public could use chemicals and lab equipment, including a used freezer, scored for free off Craigslist, that drops to 80 degrees below zero, the temperature needed to keep many kinds of bacteria alive.

Co-founder Mackenzie Cowell, a 24-year-old who majored in biology in college, said amateurs will probably pursue serious work such as new vaccines and super-efficient biofuels, but they might also try, for example, to use squid genes to create tattoos that glow.

Cowell said such unfettered creativity could produce important discoveries.

“We should try to make science more sexy and more fun and more like a game,” he said.

Patterson, the computer programmer, wants to insert the gene for fluorescence into yogurt bacteria, applying techniques developed in the 1970s.

She learned about genetic engineering by reading scientific papers and getting tips from online forums. She ordered jellyfish DNA for a green fluorescent protein from a biological supply company for less than $100. And she built her own lab equipment, including a gel electrophoresis chamber, or DNA analyzer, which she constructed for less than $25, versus more than $200 for a low-end off-the-shelf model.

Jim Thomas of ETC Group, a biotechnology watchdog organization, warned that synthetic organisms in the hands of amateurs could escape and cause outbreaks of incurable diseases or unpredictable environmental damage.