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By MARCUS WOHLSEN, Associated Press Writer Marcus Wohlsen, Associated Press Writer – Wed Oct 7, 9:49 pm ET

SAN FRANCISCO – Marijuana advocates are gathering signatures to get as many as three pot-legalization measures on the ballot in 2010 in California, setting up what could be a groundbreaking clash with the federal government over U.S. drug policy.

At least one poll shows voters would support lifting the pot prohibition, which would make the state of more than 38 million the first in the nation to legalize marijuana.

Such action would also send the state into a headlong conflict with the U.S. government while raising questions about how federal law enforcement could enforce its drug laws in the face of a massive government-sanctioned pot industry.

The state already has a thriving marijuana trade, thanks to a first-of-its-kind 1996 ballot measure that allowed people to smoke pot for medical purposes. But full legalization could turn medical marijuana dispensaries into all-purpose pot stores, and the open sale of joints could become commonplace on mom-and-pop liquor store counters in liberal locales like Oakland and Santa Cruz.

Under federal law, marijuana is illegal, period. After overseeing a series of raids that destroyed more than 300,000 marijuana plants in California's Sierra Nevada foothills this summer, federal drug czar Gil Kerlikowske proclaimed, "Legalization is not in the president's vocabulary, and it's not in mine."

The U.S. Supreme Court also has ruled that federal law enforcement agents have the right to crack down even on marijuana users and distributors who are in compliance with California's medical marijuana law.

But some legal scholars and policy analysts say the government will not be able to require California to help in enforcing the federal marijuana ban if the state legalizes the drug.

Without assistance from the state's legions of narcotics officers, they say, federal agents could do little to curb marijuana in California.

"Even though that federal ban is still in place and the federal government can enforce it, it doesn't mean the states have to follow suit," said Robert Mikos, a Vanderbilt University law professor who recently published a paper about the issue.

Nothing can stop federal anti-drug agents from making marijuana arrests, even if Californians legalize pot, he said. However, the U.S. government cannot pass a law requiring local and state police, sheriff's departments or state narcotics enforcers to help.

That is significant, because nearly all arrests for marijuana crimes are made at the state level. Of more than 847,000 marijuana-related arrests in 2008, for example, just over 6,300 suspects were booked by federal law enforcement, or fewer than 1 percent.

State marijuana bans have allowed the U.S. Drug Enforcement Administration to focus on big cases, said Rosalie Pacula, director of drug policy research at the Rand Corp.

"It's only something the feds are going to be concerned about if you're growing tons of pot," Pacula said. For anything less, she said, "they don't have the resources to waste on it."

In a typical recent prosecution, 29-year-old Luke Scarmazzo was sentenced to nearly 22 years and co-defendant Ricardo Ruiz Montes to 20 years in federal prison for drug trafficking through a medical marijuana dispensary in Modesto.

At his bond hearing, prosecutors showed a rap video in which Scarmazzo boasts about his successful marijuana business, taunts federal authorities and carries cardboard boxes filled with cash. The DEA said the pair made more than $4.5 million in marijuana sales in less than two years.

The DEA would not speculate on the effects of any decision by California to legalize pot. "Marijuana is illegal under federal law and DEA will continue to attack large-scale drug trafficking organizations at every level," spokeswoman Dawn Dearden said.

The most conservative of the three ballot measures would only legalize possession of up to one ounce of pot for personal use by adults 21 and older — an amount that already under state law can only result at most in a $100 fine.

The proposal would also allow anyone to grow a plot of marijuana up to 5 feet-by-5 feet on their private property. The size, Pacula said, seems specifically designed to keep the total number of plants grown below 100, the threshold for DEA attention.

The greatest potential for conflict with the U.S. government would likely come from the provision that would give local governments the power to decide city-by-city whether to allow pot sales.

Hundreds of medical marijuana dispensaries across the state already operate openly with only modest federal interference. If recreational marijuana became legal, these businesses could operate without requiring their customers to qualify as patients.

Any business that grew bigger than the already typical storefront shops, however, would probably be too tempting a target for federal prosecution, experts said.

Even if Washington could no longer count on California to keep pot off its own streets, Congress or the Obama administration could try to coerce cooperation by withholding federal funds.

But with U.S. Attorney General Eric Holder's announcement earlier this year that the Justice Department would defer to state laws on marijuana, the federal response to possible legalization remains unclear.

Doug Richardson, a spokesman for the White House's Office of National Drug Control Policy, said the office is in the process of re-evaluating its policies on marijuana and other drugs.

Richardson said the office under Obama was pursuing a "more comprehensive" approach than the previous administration, with emphasis on prevention and treatment as well as law enforcement.

"We're trying to base stuff on the facts, the evidence and the science," he said, "not some particular prejudice somebody brings to the table."

Article Link:
http://news.yahoo.com/s/ap/20091008/ap_on_re_us/us_marijuana_legalization

NEW YORK/LONDON (Reuters) - Gold surged to a record high above $1,040 per ounce on Tuesday, as investors piled into the metal to preserve the value of their dollar-denominated assets against erosion by a weakening dollar and inflation.

Both spot gold prices and U.S. gold futures have benefited from a convergence of factors, including technical buying, a report that some oil producers could switch to other currencies to price their crude and worries about the potential inflation impact of unprecedented global fiscal stimulus.

"In an environment where interest rates are virtually zero, the incremental cost of moving into gold is nil. It stands to reason for investors that gold is more desirable," said Jack Ablin, chief investment officer at Harris private bank in Chicago.

Spot gold hit a historic $1,043.45 per ounce, and was last up 1.9 percent at $1,036.10 at 2:36 p.m. EDT (1836 GMT), against $1,016.65 quoted late in New York on Monday.

Bullion surpassed its previous record $1,030.80 set in March 2008. Year to date, the metal has gained 18 percent.

However, Tuesday's all-time high was still sharply below the inflation-adjusted record pinpointed by analysts. Metals consultancy GFMS put that figure as high as $2,079 an ounce.

Most-active U.S. gold December futures hit an all-time high $1,045. December settled at $1,039.70 an ounce, up 2.2 percent or $21.90.

Bullion also hit six-month highs when priced in sterling and euros, breaking above 700 euros an ounce for the first time since early April.

The dollar slipped sharply after U.K. newspaper the Independent said Gulf Arab states were in secret discussions to end the use of dollars in oil trading. Big oil-producing countries later denied the report.

An interest rate hike in Australia also reinforced expectations the Federal Reserve will lag other central banks in ending its loose monetary policy.

Gold's rally was driven primarily by fears over currency depreciation. A weaker dollar, however, will eventually lead to import-led inflation down the road, analysts said.
Traders said they were also seeing rising demand in India, the largest consumer of gold last year, ahead of the Diwali festival on October 19.

Mark Cutifani, chief executive of AngloGold Ashanti, the world's third largest and Africa's top gold producer, said he saw gold prices at $950 to $1,100 an ounce in the next 12 months, and they could break $1,100 if the U.S. economy continued to dip and investment demand rises.

The yellow metal's gains helped lift silver to a two-week high of $17.36 an ounce as investors bought it as a cheaper proxy for gold. Silver, which has the market characteristics of both the precious and industrial metals, was later at $17.25 an ounce against $16.59. Palladium hits its highest since August last year at $308.50. It was last at $307.50 against $298.50.

Platinum, the precious metal widely used in autocatalyst manufacturing, also benefited from gold's climb, as well as the better appetite for risk demonstrated by rising equity markets. Platinum was at $1,315 an ounce against $1,293.

Article Links:
http://www.reuters.com/article/newsOne/idUSTRE59534Z20091006?pageNumber=1&virtualBrandChannel=0

Published: 6:39AM BST 06 Oct 2009

The move would see oil priced not in dollars but in a unit based on a basket of currencies including the Chinese yuan, the Japanese yen, and a new currency intended for use by the Gulf emirates, according to a report in Tuesday's Independent newspaper. The paper added that the transistion from the dollar to a new currency will take almost a decade.

Finance ministers and central bankers have held meetings in Russia, China, Japan and Brazil to discuss the idea, which the Americans are aware of, the Independent said.

"Eventually there will be a move to non-dollar commodity contracts, and it may be the next big risk for the dollar," Ben Simpfendorfer, chief China economist for Royal Bank of Scotland, told Bloomberg. "At the same time, I don't want to overplay the importance of the story. There's no credible sources there."

The financial crisis has intensified speculation about the eventual demise of the dollar as the world's reserve currency. In the last six months, Russia, Brazil, India and China have already discussed buying each other's debt as a way of cutting their dependence on the dollar, while the United Nations last month proposed a new global currency to replace the greenback.

The dominant role of the dollar in world trade and financial markets - a position it inherited from sterling - has already been under threat since the formation of the euro and the emergence of China as a major economic power.

The amount of the the world's currency reserves held in dollars has fallen over the past decade, with the it declining to a record low of 62.8pc in the second quarter, figures from the International Monetary Fund showed last week. The euro's share climbed to 27.5pc from 25.9pc.

But few experts expect the dollar's status to be quickly eclipsed.

Niall Ferguson, a Harvard University Professor, said yesterday that there wouldn't be a dollar collapse given the lack of proper alternatives. “There are enormously strong arguments for maintaining a substantial pile of your reserves in dollar form,” according to Professor Ferguson. "That is still the currency of choice for most of the trade that goes on in the world.”

However, there seems little doubt that China's fears over the fate of the dollar have increased recently. Timothy Geither, the US Treasury Secretary, has sought to ease China's worry that America's combination of record low interest rates and a policy of printing money will spark a sharp decline in the currency. China is America's biggest international creditor.

The dollar was weaker in early morning trading in London, losing half a cent against the euro at $1.4722 and weaker against the pound.

Article Link:
http://www.telegraph.co.uk/finance/currency/6263992/Dollars-demise-plotted-by-oil-producers-China-and-France-report-says.html