Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Thurs 05.28.2009
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery. - Winston Churchill
Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look Levy Viewed as Way to Reduce Deficits, Fund Health Reform With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax. Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity. At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT.
***** Excellent! False Confidence "Socialism is the philosophy of failure, the creed of ignorance and the gospel of envy," said Winston Churchill. Although it inevitably lowers living standards, socialism feels good - at least at the outset - as "free money" flows in great abundance. Keep this in mind as we examine the "good news" about consumer confidence. Last week, it was reported that consumer confidence has seen an unexpected lift. In response, the sluggish stock market saw a manic 196-point rally. This mania overrode losses from the week's other big news: Great Britain was put on negative credit watch by Standard & Poor's; the U.S. markets tanked on expectations of a similar downgrade domestically; and, Case-Shiller reported an unrelenting slide in home prices. In other words, the economic decline continues. So, why are consumers so confident? They are being deceived by "free money" into believing in the power of socialism.
N. Korea threatens actions over warships North Korea threatened military action Wednesday against U.S. and South Korean warships plying the waters near the Koreas' disputed maritime border, raising the specter of a naval clash just days after the regime's underground nuclear test. In Washington, Secretary of State Hillary Rodham Clinton warned that Pyongyang faced unspecified consequences because of its "provocative and belligerent" acts. Pyongyang, reacting angrily to Seoul's decision to join an international program to intercept ships suspected of aiding nuclear proliferation, called South Korea's decision tantamount to a declaration of war.
Can North Korean Nukes Rattle Global Markets? North Korea threatened military action against American and South Korean warships in the waters near Korea's' disputed maritime border, raising the specter of a naval clash just days after Pyongyang's underground nuclear test. "Now that the South Korean puppets were so ridiculous as to join in the said racket and dare declare a war against compatriots, North Korea is compelled to take a decisive measure. Seoul's decision comes at a time when the state of military confrontation is growing acute and there is constant danger of military conflict," the statement warned. Still, what global traders failed to recognize, is that North Korea and Iran are closely and secretly coordinating their nuclear weapons programs. Most of the missile guidance technology in Iran's long-range Seijl-2 surface missile, tested by Tehran on May 20th, with its bull's-eye accuracy, came from Pyongyang. Iran's Seijl-2 missile test was carried out less than a month after North Korea's internationally condemned missile test launch on April 5th, and the reopening of its plutonium reactors.
North Korean Threat Shapes Gates Talks at Asia Defense Summit North Korea’s nuclear test and bellicose rhetoric are raising the stakes for the U.S. and its Asian allies as defense officials head to Singapore for an annual security conference this week, Pentagon officials said. U.S. Defense Secretary Robert Gates will consult on potential responses to North Korea in a meeting with counterparts from Japan and South Korea, his spokesman Geoff Morrell told reporters in Washington. Gates is also set to confer with China’s deputy chief of the general staff for the People’s Liberation Army, Lieutenant General Ma Xiaotian.
Prediction: Gold price will zoom from $1224 to $3000 Here is a set of [9] gold predictions from noted global bullion analyst Jim Sinclair: . . . . . . . . Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000. Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th.
Gold, silver are on a tear these days Gold and silver have been on a tear as of late (for reasons we’ve discussed at length in these pages, and will address in further detail soon). To give you the quick and dirty version, the yellow metal has been bid up as more traders and investors anticipate a loss of faith in government assets – and a coinciding return of inflation. Where gold hasn’t gotten much respect, at least in recent months, is as a form of crisis insurance. Gold is not only the asset du jour in a time of rampant currency debasement... it’s also one of the last, best stores of value in a world gone mad.
Gerald Celente The bailout bubble The Mother of all bubbles 27 May 09
Gold Pares Gains in New York as Dollar Rises; Silver Advances Gold prices were little changed in New York, paring an earlier gain, after demand for the metal as a store of value eased as the dollar rose. Silver advanced. The U.S. Dollar Index, a six-currency gauge of the greenback's value that includes the euro and yen, climbed after North Korea provoked international condemnation by exploding an atomic device on May 25 and test-firing missiles. The index fell 3.7 percent last week to a 2009 low, while gold increased 3 percent. The metal typically moves inversely to the dollar. "The market is overbought," Jon Nadler, a senior analyst at Kitco Metals Inc., said by e-mail. "Where are the jitters? North Korea did not do the trick," he said. "Add it all up, and we see profit-taking as imminent.
Gold’s share in foreign exchange reserves is 10% . . . . Gold’s share by value of global foreign exchange reserves is currently about 10%. This is not co-incidentally similar to what is often said to be the right amount of gold and just 5% lower than what the European Central Bank decided its gold holdings would be as a percentage of total reserves when it was formed, the only recent example of a central bank deciding on a gold share. Gold’s share has declined sharply since the 1950s and 1960s, but has stabilised in the last decade, despite a huge increase in foreign exchange reserves. After the US dollar and the euro it is easily the third largest asset by value. And there would be enough gold to go around, even if every country wanted to have 10% of its foreign reserves in gold.
What Moves Up 3 Times Faster Than Gold? The dollar is out. The U.S. dollar index has fallen 5% last week. Treasury bonds are quickly falling out of favor. The yield on 10-year Treasury bonds has climbed from 2.5% to almost 3.5% since March signaling inflation fears and an unwillingness to fund ballooning government borrowing. Gold is hot. Gold prices are back on the rise and gold stocks have done even better. . . . . . . despite the strong interest in gold at the moment, I encourage you to continue to look for value in the sector. Right now, there seems to be some exceptional value in an asset which is so undervalued, it could outpace gold by 400% or more. I’m talking about Silver.
Buy Commodities, Pay Off Debt as Inflation Looms The fallout that has irradiated highly leveraged Western economies has started a King Kong versus Godzilla battle. To avoid getting trampled, you will need to finesse your credit options and hedge against inflation.
Dollar Headed Way Down The dollar, which has dropped 5 percent against the euro over the past month, has a lot further to fall, says Stephen Gallo, head of market analysis at Schneider Foreign Exchange. He told Bloomberg TV that the German economy, which shrank 3.8 percent in the first quarter, has probably hit bottom. Economic indicators in both the United States and Europe have stabilized, he points out. "The market is pretty much convinced that in terms of economic contraction, we're already through the worst."
China: No Dethroning Dollar Despite Risks BEIJING -- The global financial crisis has tarnished the dollar and will prompt reserve managers to diversify, but the U.S. currency will retain its dominant international role, a senior Chinese official said in remarks published on Wednesday. Guan Tao from the State Administration of Foreign Exchange, which invests China's $1.95 trillion in currency reserves, likened the risk of U.S. inflation and dollar depreciation to "blocked dams" that threatened the stability of the global monetary system in the medium term. The phrase, 'My dollar, your problem' vividly captures the capacity of the United States to exploit the current international monetary system to palm off this crisis," he said.
Hyper-Inflation Ahead, Fed to Blame John Hussman says the government has crowded out $1 trillion of private investment and virtually guaranteed double-digit inflation by insisting on bailing out bank bondholders to the tune of 100-cents on the dollar. "Any incipient recovery will be cut short, because the only reason that our economy is able to absorb the present supply of government liabilities is extreme risk aversion that creates a demand for default-free instruments," Hussman, of Hussman Strategic Growth Fund, writes in his weekly note to investors.
U.S. Inflation to Approach Zimbabwe Level, Faber Says The U.S. economy will enter "hyperinflation" approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said. Prices may increase at rates "close to" Zimbabwe's gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe's inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
Marc Faber hyperinflation in the US like Zimbabwe pt 1/3
Marc Faber hyperinflation in the US like Zimbabwe pt 2/3
Marc Faber hyperinflation in the US like Zimbabwe pt 3/3
Slumping Treasury bond prices send stocks lower Stocks tumble as 10-year note yield jumps on worries about borrowing costs; Dow falls 173 The stock market put its rally back on hold as investors worried about rising borrowing costs. The Dow Jones industrial average fell almost 175 points Wednesday, erasing most of the previous day's rally as a jump in government bond yields fanned concerns that higher interest rates will sap strength from the economy. A steep drop in the price of the benchmark 10-year Treasury note pushed its yield up to 3.75 percent from 3.55 percent late Tuesday and to the highest level since November. Bond investors were selling on concerns that the huge amount of debt the government is selling to fund its bailout programs will ultimately keep Treasury prices down.
More Banks Under Stress as Recession Wears On Despite signs that the nation's biggest banks are stabilizing, a growing number of small and midsize institutions are coming under stress as the recession wears on. The F.D.I.C. said Wednesday that it had placed 305 banks on its list of "problem" institutions, the most since 1994, and up from 252 at the end of 2008. From January through March, 21 small or medium-sized banks failed, and 15 more went under in the second quarter. The findings underline the toll the credit crisis continues to take on America's smaller banks, which are weighed down by souring commercial real estate loans and mounting losses.
U.S. ‘Problem’ Banks Rise to 15-Year High, FDIC Says U.S. “problem” banks climbed 21 percent to the highest total in 15 years in the first quarter as provisions set aside for loan losses weighed on earnings, the Federal Deposit Insurance Corp. said. The FDIC classified 305 banks as “problem” and their total assets rose 38 percent to $220 billion, the highest since 1993, the agency said without identifying any lender. The FDIC said its insurance fund slumped 25 percent to the lowest level in 15 years.
U.S. will eventually adopt 'bad bank' plan The U.S. government will eventually adopt a "bad bank" plan to purchase toxic assets from struggling lenders, despite avoiding such a solution so far, accountancy firm PricewaterhouseCoopers said Wednesday. A government "bad bank" should be set up quickly and be focused on the largest institutions, the firm explained, noting that Germany, Switzerland and Ireland have already taken this approach. "The crisis is about to enter a new phase where efforts to remove troubled assets from bank balance sheets must be accelerated," PWC said. "U.S. government interventions to date have stabilized individual institutions, but have not created a functioning market and pricing mechanism and therefore have had little impact on reviving the broader markets."
Banks Face $1 Trillion of Losses Ahead Whitney Tilson, managing partner of money manager T2 Partners, says banks aren't nearly out of the woods yet, as the credit crisis continues to evolve. "As of a month ago, worldwide there was $1.3 trillion in bank writedowns," he told FT.com's video site. "Our estimate is that total losses, looking out many years, will be at least double that, could be triple that." As a result, "While we're … maybe halfway through the bursting of … (the housing) bubble, we're probably not even halfway through the overall unwinding of this great debt bubble."
Number of US banks at risk to rise again The number of “problem banks” in the US rose by 21 per cent in the first quarter of the year to the highest level since 1994 and more are set to struggle, says the Federal Deposit Insurance Corporation (FDIC). The collective net income of the 8,200 banks that the FDIC insures slumped by 60.8 per cent year on year to $7.6bn as the recession savaged their loan books. One in five made no profit at all. “The first-quarter results are telling us that the banking industry still faces tremendous challenges and that, going forward, asset quality remains a major concern,” Sheila Bair, who chairs the FDIC, said on Wednesday. “Bank failures continued to mount and they will continue to do so.”
Greenspan Flunks Test, Bush Falls Into $15 Trillion Pit Let’s pause for a minute and think about $15 trillion. That’s roughly how much money the U.S. has committed toward rescuing the economy from the credit meltdown, housing collapse and recession, according to the number-crunching of Barry Ritholtz, chief executive officer of research firm FusionIQ. Find that figure hard to grasp? Ritholtz has some handy comparisons: In inflation-adjusted terms, $15 trillion is more than the U.S. spent on the Louisiana Purchase, he says. It’s bigger than the Marshall Plan. More money than the government paid for the Race to the Moon, the savings-and-loan crisis, the Vietnam War -- or all of the above combined, he says.
Stocks Whacked, As Bears Pray They've Finally Got Their Selloff As we've been noting, there have been a lot of very unhappy bears out there lately, who have been forced to suffer through this trashy, low-volume, short-covering sucker's rally. No amount of questioning the green shoots has done them any good, as bulls have trampled over them every time they dare make a stand.
JPMorgan warns on credit card woes Jamie Dimon, JPMorgan Chase chief executive, warned on Wednesday that loss rates on the credit card loans of Washington Mutual, the troubled bank acquired last year by JPMorgan, could climb to 24 per cent by the year end. In the past, credit card loss rates have tracked the unemployment rate but that relationship has been breaking down for more troubled credit card portfolios, such as the $25.9bn in WaMu credit card loans.
Geithner Prepares to Meet With Chinese Leaders Timothy F. Geithner, who before his confirmation as Treasury secretary unintentionally charged that China was "manipulating" its currency, will make his first trip to that country since taking office and meet with its leaders next week amid rising concern about China's willingness to continue buying United States debt.
Roubini: Bottom of Recession Not Here Yet Economist Nouriel Roubini on Wednesday said the end of the global recession is likely to occur at the end of the year rather than the middle, and that U.S. growth will remain below potential afterwards. "We are not yet at the bottom of the U.S. and the global recession," said Roubini. "The contraction is still occurring and the recession is going to be over more toward the end of the year rather than in the middle of the year." "There is still too much optimism that a recovery is just around the corner," said Roubini, a professor at New York University's Stern School of Business and chairman of RGE Monitor, an independent economic research firm.
Dr.Doom Nouriel Roubini "Yuan will become a reserve currency" Part 1/3
Dr.Doom Nouriel Roubini "Yuan will become a reserve currency" Part 2/3
Dr.Doom Nouriel Roubini "Yuan will become a reserve currency" Part 3/3
U.S.'s AAA Credit Rating Is Stable, Moody's Says he U.S. government's Aaa credit rating is stable "even with a significant deterioration" in the nation's debt, Moody's Investors Service said, signaling confidence in a rebound from the recession. The U.S. rating is supported by "a diverse and resilient economy, strong government institutions, high per-capita income, and a central position in the global economy," New York-based Moody's said in a statement. At the same time, the firm warned that any "reassessment" of long-term growth prospects could put pressure on the rating.
Treasuries Fall on Concern Record Sales Will Overwhelm Demand Treasuries fell for a fourth day, pushing the difference in yields between two- and 10-year debt to a record amid concern record supply will overwhelm investor demand as the economy begins to show signs of stability. The slump in Treasuries is helping to send yields on mortgage bonds higher, prompting holders of the securities to sell government debt used as a hedge to protect portfolios against rising interest rates. ‘We are in a bit of a freefall,’’ said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee. “This is the beginning of a lot of sales.” The decline pushed 10-year note yields to a record 2.75 percentage points more than two-year securities, surpassing the record of 2.74 percentage points set in August 2003.
Sotomayor reversed 60% by high court With Judge Sonia Sotomayor already facing questions over her 60 percent reversal rate, the Supreme Court could dump another problem into her lap next month if, as many legal analysts predict, the court overturns one of her rulings upholding a race-based employment decision. Three of the five majority opinions written by Judge Sotomayor for the 2nd Circuit Court of Appeals and reviewed by the Supreme Court were reversed, providing a potent line of attack raised by opponents Tuesday after President Obama announced he will nominate the 54-year-old Hispanic woman to the high court.
Mortgage-Bond Yields Jump, Jeopardizing Fed's Housing Effort Yields on Fannie Mae and Freddie Mac mortgage bonds rose for a fourth day, after exceeding for the first time yesterday their levels before the Federal Reserve announced it would expand purchases to drive down interest rates on new loans. Yields on Washington-based Fannie Mae's current-coupon 30- year fixed-rate mortgage bonds climbed to 4.55 percent as of 3:15 p.m. in New York, the highest since Dec. 5 and up from 3.94 percent on May 20, data compiled by Bloomberg show.
The California Bailout Next on Obama's Spending Agenda When the Tax Day Tea Party protests happened on April 15, the idea of government spending us into bankruptcy seemed hard for some to grasp. A month-and-a-half later, they have a perfect example - California. California is the Golden State no more. If Sutter's Mill were still a major mining operation, the state would sell it to Chinese investors for quick cash. The Golden Gate Bridge would be next. Thanks to years of screwed up government, California is $21 billion or more in debt. That's nearly $600 for every man, woman and child in the state - in addition to their usual tax over-burden.
Next in Line for Bailouts - Cities and States Municipalities are the latest entities to beg the federal government for a bailout. Large spending obligations and shrinking tax revenue are sending state and local budget deficits soaring, so the localities need money to fund their debt. And thanks to the credit crisis, the municipal bond market isn’t as open to state and local governments as in the past. California, where voters rejected government efforts to trim the deficit, has even asked for money from the Treasury’s Troubled Asset Relief Program (TARP), created to assist troubled banks.
U.S. Home Sales Remain Sluggish as Supply Soars A glut of unsold homes continued to grow last month, fed by a new wave of foreclosures, even though sales of existing homes rose, a national real estate trade association said Wednesday. The National Association of Realtors reported that the inventory of unsold houses, townhouses and condominiums rose to 3.97 million in April, the highest level since November. At the current rate of sales, it would take 10.2 months to exhaust those unsold properties.
Niall Ferguson Financial crisis and international change: historian Niall Ferguson on past financial emergencies and whether the current crisis in American credit markets will result in power flowing from West to East. Monday September 29 2008
GM's Demand for Additional $415 Million Stalls Talks on Opel General Motors Corp., facing a potential bankruptcy filing, asked for an additional 300 million euros ($415 million) for its Opel unit, stalling talks with Fiat SpA and Magna International Inc., the German government said. The parties will resume negotiations and the government hopes to reach a solution by Friday, German Economy Minister Karl-Theodor zu Guttenberg told reporters in Berlin. “We were once again confronted with new numbers,” said Guttenberg. “We do not have the assurances we need in order to extend a bridge loan.”
GM all but certain to file for bankruptcy GM moves to the brink of bankruptcy; Chrysler hopes to emerge quickly General Motors, the company that put tail fins on a Cadillac and was once America's largest employer, moved to the edge of bankruptcy Wednesday as debtholders refused a last-ditch deal. Crosstown rival Chrysler hoped to pull off a quick exit from bankruptcy and prove there is hope yet for a leaner Detroit.
GM: Startups Aren't Better At Making Electric Cars Than We Are There's no reason to think that pishers like Tesla and Fisker are going to be better at making electric cars than GM. At least not in GM's opinion, anyway. Frank Weber, GM's Global Electric Vehicle Development Executive, took to the blogosphere to defend his company against attacks being lobbed its way from people like Elon Musk, and Dave Letterman.
IRS tax revenue falls along with taxpayers' income Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says. When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been." For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago. "These are staggering numbers," Lynch says. Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years.
Americans' credit scores fall as they struggle to pay bills As more consumers struggle with bills, their credit scores are paying a price. From the third quarter of 2008 to the first quarter of 2009 - the latest data available - the average TransUnion credit score dropped 6 points to 651, the credit bureau says. Scores fell more dramatically in states hardest hit by the housing bust: California saw a 10-point drop, for example, and Arizona, 11.
Antitrust Laws a Hurdle to Health Care Overhaul President Obama’s campaign to cut health costs by $2 trillion over the next decade, announced with fanfare two weeks ago, may have hit another snag: the nation’s antitrust laws. Antitrust lawyers say doctors, hospitals, insurance companies and drug makers will be running huge legal risks if they get together and agree on a strategy to hold down prices and reduce the growth of health spending.
Catholic Obama Campaign Adviser Wants to Replace All Legal 'Marriages' with 'Civil Licenses' A top constitutional law professor who served as a surrogate for then-presidential candidate Barack Obama told CNSNews.com that he would like to see "marriage" replaced in the legal sense with a neutral "civil license." "As awkward as it may be, I think the way to untie the state from this problem is to create a new terminology that they would apply to everyone--straight or gay-call it a 'civil license,' said Douglas Kmiec, a law professor at Pepperdine University and author of "Can a Catholic Support Him?'
Working Out the Details of Guns in National Parks ROCKY MOUNTAIN NATIONAL PARK, Colo. - Guns tend to bring out a black-or-white, yes-or-no stridency in American policy debate. Guns are bad. Guns are good. Guns are dangerous. Guns keep you safe. The National Parks evoke equally deep emotional feelings - about place. Setting aside specific spots for the celebration of nature, or history, or spirituality, is an old tradition - as old as the Second Amendment. Now those emotions are colliding.
The climate change debate is not a simple battle of good and evil These issues are more complicated than some would have us believe, says Thomas Crowley Your list of key members of the US committee considering Barack Obama's global warming legislation included a number from conservative districts (2,500 lobbyists, $45m on PR – but just 12 views count, 13 May). Some readers may be inclined to stereotype the attitudes of such people. But is it really wrong for a person to reflect the interests of his or her voters? "Turn on the radio in a blighted town in America's rust belt, and a new advertisement paid for by a lobbying group with close ties to oil industry giants claims that ordinary families could be worse off by thousands of dollars," you report. I despise the distortions of science by some groups resisting the proposed law changes, but economic concerns are by no means trivial.
Europe tightens regulatory noose on City The European Commission has seized on the financial crisis to bring the City under closer EU control and clip the wings of Britain's Financial Services Authority, unveiling far-reaching plans for a new EU regulatory machinery with binding powers. "It's now or never," said Commission President Jose Manuel Barroso. "If we cannot reform the financial sector when we have a real crisis, when will we?" Three new bodies are to be created with a permanent staff and powers to impose decisions on member states: a European Banking Authority in London; a European Insurance Authority in Frankfurt; and a European Securities Authority in Paris.
In the southern Italian port city of Palermo, home to bustling outdoor markets and Arab-influenced architecture, prosecutor Roberto Scarpinato has hunted Mafia money for two decades. Now, as the rest of the world tightens its belt in the global recession, he's tracking how the mob is profiting by lending and investing what's become a scarce commodity these days: a growing hoard of cash.
A little mockery from Axis of Evil Two of the peace-loving republics formerly known as the Axis of Evil threw a frightful scare into anyone paying attention Monday, with North Korea exploding a nuclear bomb as powerful as the one that destroyed Hiroshima and Iran telling Barack Obama to get lost (and take his teleprompter with him). Mahmoud Ahmadinejad said he wouldn't accept an invitation to freeze work on his own nuclear weapon and he's not interested in talking to Mr. Obama or anyone else about it. But not to worry. The United Nations Security Council postponed its afternoon tea to hold an "emergency session" to consider options for dealing with developments in Korea. The world is considerably less worried about Iran, since Mr. Ahmadinejad appears to be mostly interested in only killing Jews.
Middle-class Pakistanis awaken to Taliban threat Khalid Mahmood is a graduate of Northwestern University and runs a flourishing marketing consultancy firm in Karachi. He speaks English fluently, leads a charmed life crammed with parties and globe-trotting, and regularly reads U.S. newspapers on the Internet. At heart, however, Mr. Mahmood, 38, is a man of the Swat Valley: His grandfather was the army commander of the last wali, or ruler, of the region now under the control of Islamist Taliban militants. Mr. Mahmood has vowed to restore the Switzerland of Pakistan to its former glory. "Swat is where my heart and soul is," he said. "And I will do everything in my power to bring back the valley."
N. Korea threatens U.S., S. Korean ships North Korea threatened military strikes on U.S. and South Korean ships Wednesday and renounced a 1953 truce halting the Korean War fighting -- an escalation of tensions in the wake of Pyongyang's nuclear test. The threats, which follow Seoul's decision to join more than 90 nations in stopping and inspecting ships suspected of transporting banned weapons, raised the prospect of a naval clash off Korea's west coast. Secretary of State Hillary Rodham Clinton responded by saying North Korea faces consequences for its nuclear and missile tests and denouncing its "provocative and belligerent" threats. She also underscored the firmness of the U.S. treaty commitment to defend South Korea and Japan, which are in easy range of North Korean missiles.
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