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The country’s main international airport has been closed since early Wednesday because of tens of thousands of protesters laying virtual siege on the terminal in their push for the government’s resignation.

Serirat Prasutanont, chief of Thailand Airport Authority, says that the city’s main domestic airport, Don Muang, was closed early Thursday as authorities feared that protesters might harm passengers and planes.

He said authorities are considering using an air force base outside Bangkok and have alerted all airports nationwide to be ready to receive more diverted flights.

The closure of Don Muang cuts off Bangkok completely to air traffic.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BANGKOK, Thailand (AP) — A call by Thailand’s powerful army commander to end the country’s deepening political crisis was rebuffed Wednesday, as the prime minister rejected his suggestion to step down, and protesters refused to end their occupation of the country’s main airport.

Prime Minister Somchai Wongsawat justified his stance saying he came to power through elections and has “a job to protect democracy for the people of Thailand.” He spoke from the northern city of Chiang Mai, a stronghold of government supporters.

His rejection of Army Gen. Anupong Paochinda’s plan seemed to put him on a collision course with the military although the general has said he would not launch a coup.

The anti-government People’s Alliance for Democracy insisted it would continue its airport occupation and other protest activities until Somchai resigns. It rejected the general’s proposal for new elections, pushing instead for the appointment of a temporary government.

As the deadlock continued, political violence spread Wednesday to Chiang Mai, where government supporters attacked a radio station aligned with the protesters. Separately, there were unconfirmed reports that one man was killed and several people assaulted in an attack on the city’s local airport.

However, it was the occupation of the international Suvarnabhumi Airport, just outside the capital Bangkok, that put the world on notice of the turmoil that has reduced Thailand to a dysfunctional nation.

European Union and Britain’s Foreign Office both issued statements of concern about the political situation.

Thousands of travelers were stranded in Bangkok when members of the alliance swarmed the airport Tuesday night, forcing a halt to virtually all outgoing flights.

Several thousand passengers were bused to city hotels Wednesday to await developments, but many other passengers spent a second night at the airport after a day of behind-the-scenes negotiations failed. All flights have been suspended until further notice.

Among those stranded were Americans trying to get home for the Thanksgiving holiday on Thursday.

Cheryl Turner, 63, of Scottsdale, Arizona, had asked neighbors to pull an 18-pound turkey from her freezer a day ahead of time to defrost so she could cook it for a traditional Thanksgiving dinner.

“My turkey is sitting in the sink at home,” she said.

Some travelers took the inconvenience in stride.

“It’s really horrible to be delayed and I’m missing my friend and things, but the local people have given us food, offered us drinks, and the airport’s actually quite a nice place at the moment,” said Andy Du Bois-Barclay, an English traveler .

Protesters were also occupying late Wednesday the passenger terminal at the older and smaller Don Muang airport, which appeared to effectively cut off civilian aviation services to the Thai capital.

The protest alliance accuses Somchai of acting as the puppet for former Prime Minister Thaksin Shinawatra, who was ousted in a September 2006 military coup after being accused of corruption and abuse of power. Thaksin is in exile, a fugitive from a conviction for violating a conflict of interest law. Somchai is Thaksin’s brother-in-law.

PAD, as the protest alliance is known, launched their current campaign on Aug. 26, with a failed attempt to take over a government television station, after which they stormed the grounds of the prime minister’s office, which they continue to use as their stronghold.

The group has also tried twice to blockade Parliament, in one case setting off a daylong street battle with police that left two people dead and hundreds injured.

They prepared for their “final showdown” Sunday in an almost festive atmosphere at their Government House stronghold. Even as they pushed through police lines Monday to blockade parliament and the temporary government office at Don Muang airport, crowds remained relaxed as police yielded to them.

The situation soured Tuesday, with scattered violence between political rivals in different parts of Bangkok. At one point, government supporters threw rocks at a truckload of alliance members, who shot back with pistols and then chased and beat their attackers.

Skirmishes continued in several spots Tuesday night and Wednesday, leaving more than a dozen people hurt.

Their action came as the group’s public support seemed to be waning and they appeared to be seeking out confrontations to up the ante in their struggle.

“It is no secret that the PAD are armed with guns, bombs, knives and wooden batons. They constantly break the law with impunity,” said Ji Ungpakorn, an associate professor of political science at Bangkok’s Chulalongkorn University.

In an open letter, he charged that the alliance, along with the military, the opposition Democrat Party and “the Conservative Establishment would rather see total chaos in Thailand rather than allow democracy to function.”

In a televised press conference, Paochinda said, “the government should give the public a chance to decide in a fresh election.”

However, he insisted he was not pressuring the government and ruled out staging a coup.

“We have considered every option including a coup, but it will not resolve the problem,” he said. Government supporters have said they would forcefully resist a military takeover.

Suriyasai Katasila, a spokesman for the protesters, said the group would not abide by the army chief’s plea to leave the country’s international airport or other occupied government facilities

“If the government does not quit, we will not quit,” he said.

Late Wednesday night, in response to a petition by the state airport operator, Bangkok’s Civil Court issued an injunction ordering the demonstrators to immediately leave Suvarnabhumi Airport.

The protesters have ignored similar orders, but the document provides a legal basis for security forces to remove them.

Airport director Serirat Prasutanont, who had tried to negotiate with the protesters to allow passengers to fly out, said the takeover “damaged Thailand’s reputation and its economy beyond repair.”

Tourist income during the high season — from late October to February — could slump to about half the expected $6.8 billion, said Kongkrit Hiranyakit, head of the Tourism Council of Thailand.

The figures will put the spotlight on hunger when Congress begins deliberations on a new economic stimulus package, said legislators and anti-hunger advocates, predicting that any stimulus bill will include a boost in food stamp benefits. Advocates are also optimistic that President-elect Barack Obama, who made campaign promises to end childhood hunger and whose mother once briefly received food stamps, will make the issue a priority next year.

“We soon will have the most food stamps recipients in the history of our country,” said Jim Weill, president of the Food Research and Action Center, a D.C.-based anti-hunger policy organization. “If the economic forecasts come true, we’re likely to see the most hunger that we’ve seen since the 1981 recession and maybe since the 1960s, when these programs were established.”

The Agriculture Department is set to release the new numbers as early as this week. Agency officials declined to confirm the figures but outlined them in a briefing last month for advocates and administrators of state food stamp programs. Breaking the symbolically important 30 million mark comes on the heels of government data showing that 11.9 million people went hungry in the United States at some point last year. That included nearly 700,000 children, up more than 50 percent from the year before.

The decline in yields – to a low of 2.98 per cent – comes in response to unconventional policy measures taken by the US Federal Reserve this week aimed at pushing short-term and long-term interest rates lower.

This so-called “quantitative easing” is a strategy central banks use to fight deflation, the dreaded combination of declining growth and falling asset prices.

“It is astonishing [that yields are so low],” said Michael Chang, interest rate strategist at Credit Suisse. “The current environment is not like anything we’ve seen before. The Fed’s being very aggressive in quantitative easing, and the fall in yields is the result.”

On Tuesday, the Fed said it would buy $600bn of mortgage bonds issued or guaranteed by government agencies such as Fannie Mae and Freddie Mac. This pushed mortgage rates sharply lower.

The lower rates threaten to trigger a wave of refinancing of mortgages, the prospect of which in turn pushes investors to hedge that risk by buying 10-year Treasury debt, a benchmark for many mortgage rates.

Weak economic data released on Wednesday reinforced the gloomy economic outlook and the potential for declines in growth. The latest wave of data showed collapses in new home sales, consumer spending and orders for durable goods in October.

Such evidence of crisis in the US economy will fuel the Fed to try and stem declines in growth by pushing interest rates lower.

“Ten-year US Treasury bond yields are sitting at 3 per cent, below the trough reached five years ago when the market was last worried about deflation,” said analysts at Capital Economics. “But as the Fed embarks on quantitative easing, expect yields to fall further. We have 2.5 per cent pencilled in for 2009, but it could easily be less.”

“Today, November 23rd, I was slated to give remarks in Damascus, Syria at a Conference being held to commemorate the 60th Anniversary of the Universal Declaration of Human Rights and, sadly, the 60th year that the Palestinian people have been denied their Right of Return enshrined in that Universal Declaration. But a funny thing happened to me while at the Atlanta airport on my way to the Conference: I was not allowed to exit the country,” writes McKinney.

His apparent realization of the error of his initial refusal to nationalize, deeming it in effect ‘un-American’ came too late. When Paulson reversed policy on September 19 and presented the nine largest banks with an ultimatum to accept partial Government equity ownership, abandoning his original bizarre plan to merely buy up the toxic waste asset-backed securtities of the banks with his $700 billion TARP taxpayer money, he never revealed why.

Under the original Paulson Plan, as Dimitri B. Papadimitriou and Research Scholar L. Randall Wray of the respected Jerome Levy Institute at Bard College in New York point out, Paulson sought to create a situation in which the US ‘Treasury would become an owner of troubled financial institutions in exchange for a capital injection—but without exercising any ownership rights, such as replacing the management that created the mess. The bailout would be used as an opportunity to consolidate control of the nation’s financial system in the hands of a few large (Wall Street) banks, with government funds subsidizing purchases of troubled banks by “healthy” ones.’

Paulson soon realized the scale of crisis, largely triggered by his inept handling of the Lehman Brothers case, had created an impossible situation. Were Paulson to use the $700 billion to buy up toxic waste ABS assets from the select banks at today’s market price, the $700 billion would be far too little to take an estimated $2 trillion ($2,000 billion) in Asset Backed Securities off the books of the banks. The Levy Economics Institute states, ‘It is probable that many and perhaps most financial institutions are insolvent today — with a black hole of negative net worth that would swallow Paulson’s entire $700 billion in one gulp.’

That reality is the real reason Paulson was forced to abandon his original ‘crony bailout’ TARP plan and opt to use some of his money to buy equity shares in the nine largest banks. That scheme as well is ‘dead on arrival.’ The dilemma he has created with his inept handling of the crisis is simple: If the US Government paid the true value for these nearly worthless assets, the banks would have to write down huge losses, and, as Levy economists put it, ‘announce to the world that they are insolvent.’ On the other hand, if Paulson raised the toxic waste purchase price high enough to protect the banks from losses, $700 billion ‘will buy only a tiny fraction of the ‘troubled’ assets.’ That is what the latest nationalization of Citigroup is about.

Yin Weimin, China’s Social Security minister, has revealed that employment is the Communist Party’s number one concern in the downturn and said the “situation is critical”. Unemployment is expected to rise from 4pc to 4.5pc by the end of the year and anecdotal reports have suggested that 3m people have already been fired in the industrial province of Zhejiang alone.

Two major provinces, Shandong and Hubei, have already responded by banning companies from firing staff without permission from the government.

The Chinese government has also announced a £373bn bailout to stimulate domestic growth by investing in infrastructure. However, only a fifth of the money is likely to come from central government coffers, with the rest coming from a mix of private enterprise and local government funds.

“We’re seeing a government that steps in, that is trying to do everything it can to keep growth at a decent rate, and has the financial means and the administrative capacity to make that happen,” said Louis Kuijs, the head of the World Bank’s China economics analysis.

Even by the standards of terrorism in India, which has suffered a rising number of terrorist attacks this year, the assaults were particularly brazen and drastically different in scale and execution. The attackers used boats to reach the urban peninsula where they hit, and their targets were sites popular with tourists.

Tuesday, November 25, 2008
The US treasury market reaches breaking point
by Helen Avery

As attention focuses on the treasury market’s ability to cope with the US’s growing funding needs, Euromoney reveals the structural issue that could cause the world’s market of last resort to grind to a halt in its hour of greatest need.

The problem: the settlement system for the US government bond market has broken down

THE US TREASURY market, the foundation of government bond and corporate bond markets worldwide, is suffering a crisis of confidence at the worst possible moment. Investors in treasuries are the lenders enabling the US government bail-out of the country’s broken financial institutions. That leaves them financing purchases of equity of volatile and highly questionable worth and backing a ragbag of distressed assets. For now, treasury yields are at record lows across the term structure as investors with cash to invest conclude that they can trust no one else with their money. But investors must wonder at what point the expanded supply of government debt and its use will make the borrower inherently less creditworthy.

There is an even more pressing concern for many participants in this increasingly swollen market: the settlement system has broken down. Following the collapse of Lehman Brothers in September, fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion. Broker/dealers have stopped delivering bonds. Holders of US treasuries are now scared to lend into the repo market in case their bonds are not returned, and potential buyers sit on the sidelines fearful of handing over their money to a counterparty that at best might not deliver a bond on time, and at worst might go under.

With global stock markets plummeting, investors are still turning to treasuries as a safe haven. But investors might become nervous if something is not done soon to sort out the market’s problems. “As yet investors are still coming in, but in the longer term the worry is the lack of functionality in the treasury market. That could impact investor perception on a longer-term basis,” says Mike Pond, US treasury and inflation-linked strategist at Barclays Capital in New York. If investors turn their back on treasuries, the US government will find it increasingly difficult and expensive to raise money and roll over its maturing debts. Upward pressure on interest rates will occur at a time when the government needs to be loosening monetary policy in order to jump-start a domestic economy that is heading towards a depression.

As a result of fails to deliver, the most transparently priced instrument available now has investors scratching their heads. The natural balance of supply and demand has been altered and the true price of treasuries has become obscured. The effects are being seen across other bond markets. “The TIPS (Treasury Inflation Protected Securities) market is also clearly broken,” says Pond. “An obvious trade right now would be to go long TIPS where real yields are high and short the nominal bond in a breakeven inflation trade but hedge funds are fearful that if they go through the repo market the borrow could fail. So we have a situation now in the 10-year TIPS where the market is pricing in zero or negative average inflation for the next 10 years. Inflation has not been that low since the 1930s.” Economists also claim that fails have spread across to other bond markets such as municipals, agencies, mortgage-backed and corporate bonds.

Why the Federal Reserve is not urgently considering regulation is bewildering. As yet, the US Treasury has merely asked for market participants to sort out the situation themselves. That might help reduce fails but it will not eliminate them, and in panic periods they will simply creep back up. The global economy has significantly contracted since the collapse of Lehman Brothers, which spurred the fails to deliver. More market-shocking events are certain to lie ahead. The solution is simple – delivery needs to be enforced, and liquidity returned. If not, confidence in the US treasury markets will be lost. Loans made using treasuries as collateral will be reconsidered, bond markets priced off treasuries will further dry up and, with equity markets so volatile, central banks and investors will not know where to turn.

Fails to deliver in the treasury markets are not a new phenomenon. There is data for fails for treasuries, agencies and mortgage-backed securities as far back as 1990, says Susanne Trimbath, an economist, and former employee of the Depository Trust Co, a subsidiary of Depository Trust and Clearing Corp.

Back then, though, there would be $50 billion of fails in a whole year, she says. That figure has grown enormously. Failures in US treasuries were 8.6% of all treasuries outstanding in the first five months of this year, compared with 1.2% in the first five months of 2007. That has ballooned further over the past three months, hitting more than $2 trillion for almost the entire month of October – more than 20% of the daily treasuries trading volume.

The problems, and the aid offered, were vastly different. But both reflected the worries and needs of many.

In Montebello, nearly 5,000 turned out for a food giveaway, a number that stunned organizers who had tried to keep it a low-key event, targeting publicity to several churches and schools. But word of mouth proved stronger than a few fliers, and crowds inundated Montebello Park. A diverse mix of people stood in a six-hour-long line — families from middle- and working-class communities, including Pico Rivera, Montebello, Norwalk and Whittier. No one left empty-handed, though.

The company was hired to monitor and report on the internet activities of anti-war campaigners, animal rights activists, environmental campaigners, and other protest groups, Fairfax Media reported.

It was hired by Victorian Police, the Australian Federal Police and the federal Attorney-General’s department.

The Melbourne-based firm has for the past five years monitored websites, online chat rooms, social networking sites, email lists and bulletin boards, the report said.

It has gathered intelligence on planned protests and other activities, and many of those on the watch list have broken no laws, the report said.

It also prepared threat assessments and intelligence reports for government agencies that included material from media reports, speeches, academic journals and publicly available company data, but no private correspondence was monitored.

The company was not named at the request of its management for fear extremists may target the firm.