Well, the financial shock has hit but where is the stampede out of dollars? The greenback has fallen, to be sure, particularly since it has become clear that the Federal Reserve is likely to cut interest rates on September 18th, and particularly against the yen and the euro—the dollar hit an all-time low of $1.39 per euro on Wednesday September 12th and its decline continued on Thursday.

      But the decline, so far, has hardly been a panicked rout. Although the dollar has plumbed historical depths against an index of important currencies, it has fallen by less than 1.5% since the financial turmoil hit in early August. Measured against a broader group of currencies that includes all America’s main trading partners, the dollar is little changed from where it was before August’s tumult began.

      As the first signs of trouble emerged, the dollar even rose. To some analysts this confirmed the dollar’s status as a haven in troubled times. More likely, it was the consequence of unwinding leveraged bets elsewhere. Whatever the reason, the dollar’s initial buoyancy did not last. In recent weeks the greenback has slowly fallen and the likely path of interest rates suggests there is more weakness to come.

      Recent gloomy job statistics suggested that the economy was weakening well before the credit turmoil hit, and all but sealed the case for a cut in short-term interest rates on September 18th, certainly of a quarter point, perhaps by as much as half a percentage point. With the European Central Bank hinting strongly that euro-zone interest rates might rise again this year, it is no surprise that the dollar has hit new lows against the euro.

      Its path against the yen is harder to foresee. Japan’s economy, too, seems to be in a spot of bother making it much less likely that the Bank of Japan will raise interest rates in a hurry. That suggests the carry-trade (selling borrowed yen to invest elsewhere) will remain attractive, limiting the yen’s rise.

      For true dollar pessimists, these cyclical considerations are only part of the story. Far more important, they argue, is the risk that the private investors and central banks that have been funding America’s gaping current-account deficit become permanently less keen on dollar assets. Ken Rogoff, an economist at Harvard University, and a dollar bear, argues that America’s image as a great financial centre has been tarnished by the subprime mess. The “mystique” that has allowed America to borrow lavishly and cheaply has suffered a blow. The result, he argues, must be a lower dollar and higher interest rates in America relative to the rest of the world.

      Indeed, the complex structured-debt products that investors now shun have been an important source of financing for America’s current-account deficit. In 2006 foreign investors, on net, bought some $400 billion of corporate-issued debt (including mortgage-backed securities not guaranteed by the government-sponsored housing giants Fannie Mae and Freddie Mac). That is the equivalent of around half the current-account deficit.

      It is hard to know what share of this debt was asset-backed, let alone mortgage-backed but the numbers are big enough that foreign flight from the mortgage-backed market, if not countered by eager buying of other types of American assets, could cause trouble for the dollar.

      The lesson of the past few weeks, however, is that this is unlikely to happen all of a sudden. And if private investors fret, central banks may well pick up the slack. China, in particular, has little to gain from a dollar crash. With domestic inflation now at a ten-year high, China’s politicians may be willing to let the yuan rise somewhat faster against the dollar. But they are unlikely to add to a rout, not least because that would make their exports much less competitive in America.

      Another argument against a sudden crash is that the dollar is already quite cheap. In real effective terms, it has slowly fallen by some 20% since its recent peak in 2002. That decline is already helping to shrink America’s external deficit. Add in the probability of sharply slower domestic demand in America, and the current-account deficit could shrink a fair bit over the coming months. A smaller need for foreign funds would itself put a floor under the dollar. All told, the doom-mongers’ script may play out in reverse. Instead of a financial crisis prompting a dollar crash, it may accelerate the unwinding of the imbalances that had the worrywarts so unnerved in the first place..."

      The Bottom Line:  I fear, that the answer in this situation is "Far too quickly for your average person to adapt in time".

      NEW YORK (CNNMoney.com) -- "At some point in the near future, worldwide oil production will peak, then decline rapidly, causing depression-like conditions or even the starvation of billions across the globe.

      That's the worst-case scenario for subscribers to the "peak oil" theory, who generally believe oil production has either topped out or will do so in the next couple of years.

      What follows depends on who one talks to, but predictions run the gamut from the disaster scenario described above to merely oil prices in the $200-a-barrel range while society transitions to other energy sources.

      It's not a view held by most industry experts, including the oil companies, the government and most analysts at the financial houses.

      But its adherents are growing, and include some fairly well-known names.

      In the coming week, a former chairman of oil giant Royal Dutch Shell is speaking at a peak oil conference in Ireland, as is former U.S. Energy Secretary James Schlesinger.

      Most peak-oil proponents simply don't believe the numbers put forward by industry and the government.

      The world will produce 118 million barrels of oil a day, up from its current 85 million barrels per day, just to satisfy projected demand by 2030, according to the Energy Information Agency.

      "That's never going to happen," said Richard Heinberg, a research fellow at the Post Carbon Institute and author of three books on peak oil.

      Heinberg says world production of regular crude oil actually peaked in May 2005. He also says production in 33 of the 48 largest oil producing countries is in decline, and that global oil discoveries peaked in 1964.

      Most importantly, he says reserves in the Middle East, where EIA predicts the bulk of new supply will come from, have been "systematically overstated."

      "Everyone just takes their figures at face value," Heinberg said. "But they are national oil companies, they can't be audited."

      Instead of production ramping up to 118 million barrels per day, Heinberg sees a plateau over the next few years, then gradual declines beginning in 2010.

      By 2015, he says the rate of decline will accelerate as field after field runs dry and few new supplies are found. By 2030, the world could be looking at powering its economy on 30 million barrels a day.

      "It's going to be an enormous shock to the global system," said Heinberg. "We're talking something on the order of the Great Depression, perhaps much worse."

      As for billions starving to death when crops dependent on fossil fuel-based fertilizers fail en masse, he said, "that's the worst case scenario, but it can't be ruled out."

      Indeed, Web sites devoted to peak oil sell numerous survival-style books seemingly geared toward a society in which, at the very least, the basic economic infrastructure has broken down - if there's not total anarchy...

      ...Growth in the developing world is just too great," said Stephen Leeb, an investment manager who has authored two books on oil scarcity, the last one predicting $200-a-barrel oil in the next 5 to 10 years. "Demand for oil will outstrip supply.""

    ROME (Fox) —  "A senior U.S. nuclear official said Friday that North Koreans were in Syria and that Damascus may have had contacts with "secret suppliers" to obtain nuclear equipment.

      Andrew Semmel, acting deputy assistant secretary of state for nuclear nonproliferation policy, did not identify the suppliers, but said North Koreans were in the country and that he could not exclude that the network run by the disgraced Pakistan nuclear scientist A.Q. Khan may have been involved.

      He said it was not known if the contacts had produced any results. "Whether anything transpired remains to be seen," he said.

      Syria has never commented publicly on its nuclear program. It has a small research nuclear reactor, as do several other countries in the region, including Egypt. While Israel and the U.S. have expressed concerns in the past, Damascus has not been known to make a serious push to develop a nuclear energy or weapons program.

      In Washington, State Department spokesman Sean McCormack declined to comment on Semmel's remarks but noted that the United States had longstanding concerns about North Korea and nuclear proliferation..."

      NEW YORK (Reuters) - "U.S. economic growth has slowed sufficiently to prompt a reduction in interest rates from the Federal Reserve and economists see a nearly one in three chance of a recession in the next year, according to a Reuters poll.

      The first net U.S. employment decline in four years, which took place in August, has convinced economists the central bank will have no choice but to push rates lower at its meeting next Tuesday.

      Housing is already in recession and paralysis has overtaken many areas of lending. In the poll, in which a total of 114 analysts took part, the median of 78 forecasts was for growth to ease to 2 percent in the fourth quarter before picking up to a still-anemic 2.3 percent in the first quarter of next year.

      The U.S. economy grew at a 4 percent annual rate in the second quarter of this year.

      Such softness should induce policy-makers to put inflation concerns aside for now and reduce the federal funds rate by a quarter percentage point to 5 percent this month, with two more cuts likely to follow.

      At this point, the median forecast of 66 economists who gave an estimate put the chance of recession in the next 12 months at 31.5 percent.

      "The probability of an economic recession has certainly gained traction over the month of September, but our recession risk indicator remains well below the threshold for signaling an approaching recession," said Ellen Zentner, economist at Bank of Tokyo-Mitsubishi.

      The Bottom Line:  Makes me want to set up an old school trading post or some kind of a barter-based trade bizarre.

      Philippines (The Guardian) - "Al-Qaida has revived, extended its influence, and has the capacity to carry out a spectacular strike similar to the September 11 attacks on America, one of the world's leading security thinktanks warned yesterday.

      There is increasing evidence "that 'core' al-Qaida is proving adaptable and resilient, and has retained an ability to plan and coordinate large-scale attacks in the western world despite the attrition it has suffered", said the London-based International Institute for Strategic Studies (IISS). "The threat from Islamist terrorism remains as high as ever, and looks set to get worse," it added.

      "The US and its allies have failed to deal a death blow to al-Qaida; the organisation's ideology appears to have taken root to such a degree that it will require decades to eradicate," it continued.

      The warning came in the latest annual review of world affairs by the IISS. Its strategic survey paints a bleak picture of global security in the future and warned:

            · Iran could have a nuclear weapon by 2009 or 2010, though this remains the "worst-case prediction";

            · the US suffered a loss of authority as a result of the failure to impose order in Iraq. "The strategic hole the US found itself in [in 2007] did not have any obvious escape";

            · there are serious doubts about the ability of Nuri al-Maliki, Iraq's prime minister, but any replacement would probably come too late to "halt the draining of American willpower to 'stay the course' ".

            · that if climate change is allowed to continue unchecked, its affects will be catastrophic "on the level of nuclear war".

      At a press conference launching the report, senior IISS analysts went further. Asked whether al-Qaida had the capacity now to carry out a 9/11-style attack, and whether it was stronger than in 9/11, Nigel Inkster, the institute's director of transnational threats and political risk, replied: "Both."

      Mr Inkster, a former director of MI6 who was a candidate for the secret intelligence agency's top job three years ago, said there was much debate within al-Qaida after the September 11 attacks on the US. Many of its supporters believed the operation was a "tactical error", Mr Inkster said, because it led to the removal of a safe base - Taliban-controlled southern Afghanistan.

      But the recent foiling of an alleged plot in Germany and the alleged airliner plot last year in Britain showed that al-Qaida had the ambition to carry out spectacular attacks while "strengthening" its "position in the badlands of north-west Pakistan", he added.

      Pakistani groups were "aligning themselves with al-Qaida and the process of radicalisation within Islamic countries was continuing apace", he warned.

      A number of "regional jihadist groups", notably in Iraq and the Maghreb (north Africa) had not only sworn formal allegiance to al-Qaida, but, more importantly, had begun to demonstrate ambitions beyond their parochial concerns in support of its global objectives, the IISS warned. It said that disrupted plots had pointed to a "continuing and worsening problem of radicalisation within Europe's Islamic diasporas - and the degree to which terrorists were still being directed by al-Qaida".

      The institute's assessment of the terrorist threat reflects that of MI5 and MI6. There are 2,000 individuals engaged in 30 terrorist plots in 200 networks, according to British security and intelligence officials. They said earlier this year that al-Qaida had begun to regroup and that Britain was a prime target.

      John Chipman, the IISS director general, said yesterday: "Western governments tend to meet the Muslim 'single narrative' [that the west is by definition anti-Muslim] by way of rebuttal, arguing against its basis in fact." That had to be addressed by encouraging non-violent responses, he said.

      WASHINGTON (Reuters) - "Tropical Storm Ingrid, the ninth Atlantic storm of the year, formed on Thursday in the Atlantic Ocean east of the Caribbean islands, the U.S. National Hurricane Center said.

      The storm, located about 840 miles east of the lesser Antilles, was headed in the general direction of the northeastern Caribbean but was days from having any impact on land.

      The Bottom Line:  Buy stuff that is tangible and has practicle use.  Stocks and bonds are just pieces of paper in the long run.  Tangibles like guns, ammo, gold, food, fuel, etc. are all going to have trade/barter value in the long run.

      NEW YORK (Reuters) - "U.S. crude inventories dropped to an eight-month low last week and stocks of gasoline slumped to their lowest level in two years, a weekly government report said Wednesday.

      U.S. crude oil dropped by 7.1 million barrels to 322.6 million barrels as imports fell by 670,000 million barrels per day to 9.563 million bpd, the Energy Information Administration said.

      Gasoline supplies fell 700,000 barrels to 190.4 million barrels, the lowest level since the week ending September 2, 2005, according to EIA data.

      U.S. crude oil stocks have fallen 14.5 million barrels in the last three weeks but remain above the upper range of the average for this time of year, according to EIA, the statistical arm of the Department of Energy.

      "The reality is that the crude tightness in Europe and Asia has begun to affect the U.S. market in a big way," said Antoine Halff of Fimat Research in New York. "In retrospect it validates OPEC's decision to increase production."

      OPEC ministers agreed to boost output by 500,000 bpd effective November 1 at their regular meeting in Vienna on Tuesday in a bid to keep oil prices under control amid rapidly falling fuel stocks in oil consuming nations.

      The sharp fall in crude oil inventories came even as oil refinery operations slowed. Capacity utilization at U.S. refineries dropped to 90.5 percent from 92.1 percent a week earlier amid weakening refining margins and the beginning of the fall refinery maintenance season.

      Distillate stocks rose 1.8 million barrels to 134 million barrels despite the drop in usage.

      In a separate report released Wednesday, industry group American Petroleum Institute reported a large fall in crude oil supplies but increases in inventories of refined products. Crude oil stocks fell 5.22 million barrels to 321.5 million barrels in the week to Sept. 7, with gasoline inventories up 3.33 million barrels at 200.1 million barrels and distillate stocks up 5.67 million barrels at 137.6 million barrels..."

More:

Supply worries keep oil high despite OPEC increase

The mystery behind surging oil prices

Oil Touches $80 for First Time After Inventory Report

      MOSCOW  (Fox) —  "President Vladimir Putin dissolved Russia's government Wednesday and then quickly nominates Viktor Zubkov, a Russian Cabinet official who oversees the fight against money laundering, to be the new prime minister.

      Boris Gryzlov, the speaker of the State Duma, said Putin nominated Zubkov, who heads the Federal Financial Monitoring Service and who served under Putin when the two worked in the city administration of St. Petersburg in the early 1990s.

      Earlier Wednesday, in a major political shakeup, Putin dismissed Prime Minister Mikhail Fradkov and dissolved his cabinet, paving the way for Putin to name a new head of government.

      Most observers had expected that the new premier would be the leading contender to succeed Putin when he steps down after March elections.

      But Zubkov had not been even considered as a contender.

      A Kremlin source told FOX News that Zubkov was not Putin's choice to be the next president of Russia.

      The newspaper Vedomosti, citing unidentified Kremlin officials, reported that Sergei Ivanov, a first deputy prime minister and a leading contender to succeed Putin, could be appointed to replace Prime Minister Mikhail Fradkov..."

More:

Putin replaces long-serving prime minister

      Expectations that the Federal Reserve would move to lower interest rates at its meeting on September 18 have increased since last week’s US employment report, which showed the recent turmoil in the credit markets had spilled over into the wider economy.

      “The dollar remains undermined by the increasing prospect of monetary easing by the Federal Reserve as it attempts to forestall the US economy from slipping into recession,” said Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ.

      Analysts said a sharp rise in the price of oil caused by attacks on oil and gas pipelines in Mexico and doubts that Opec would raise its production quotas at its Vienna meeting had not helped the dollar’s cause.

      Paul Robson at Royal Bank of Scotland said higher oil prices would be a short-term focus for the currency investors.

      “Euro/dollar tends to be positively correlated with the oil price as it makes Fed rate cuts more likely and European Central Bank more cautious [over inflation],” he said.

      The dollar fell 0.2 per cent to $1.3820 against the euro, just shy of the record low of $1.3852 it hit in July.

      This helped the dollar index, which tracks its value against a basket of six leading currencies, fall to a low of 79.787, its weakest level since September 1992.

      The dollar also edged 0.1 per cent lower to $2.0300 against the pound, but was flat at Y113.60 against the yen as the Japanese currency showed little reaction to data showing a jump in Japanese machinery orders in July.

      Mansoor Mohi-uddin at UBS said the surprisingly positive figures should throw the probability of the Bank of Japan raising interest rates this year back into the mix.

      “We maintain our view that the BoJ will hike its target rate to 0.75 per cent in October,” he said.

      However, the yen failed make progress as a rally on global stock markets saw investors shy away from the low-yielding yen in favour of riskier, higher-yielding assets.

      The yen slipped 0.1 per cent to Y157.00 against the euro and edged lower to Y230.50 against the pound.

      The Bottom Line:  Monetary limbo is never a fun game to get stuck playing.

      SINGAPORE (Reuters) - "Oil held near a record high above $78 a barrel on Wednesday, after OPEC's token output increase failed to soothe consumers' worries about falling inventories and supply disruptions.

London Brent crude was down 3 cents at $76.35.

      Saudi Arabia persuaded OPEC to raise crude output by 500,000 barrels per day (bpd) at a meeting on Tuesday, in a gesture to consumer nations worried by the economic impact of pricey oil and rapidly diminishing fuel stocks.

      The move by the Organization of the Petroleum Exporting Countries, which supplies more than a third of the world's oil, follows months of calls for more supply from industrialized consumers worried about a supply crunch in the peak demand winter season.

      "With this move, the supplier is signaling 'we think there may be a supply shortage', not just the consumers," said Tobin Gorey, a commodities strategist at Australia's Commonwealth Bank.

      "But with the U.S. dollar so low, $78 now is not what $78 was a month ago," he added.

      MOSCOW  (Fox) —  "The Russian military has successfully tested what it described as the world's most powerful non-nuclear air-delivered bomb, Russia's state television reported Tuesday, the latest show of the nation's military muscle amid chilly relations with the United States.

      Channel One television said the new ordnance, nicknamed the "dad of all bombs" is four times more powerful than the U.S. "mother of all bombs."

      "The tests have shown that the new air-delivered ordnance is comparable to a nuclear weapon in its efficiency and capability," Col.-Gen. Alexander Rukhsin, a deputy chief of the Russian military's General Staff, said in televised remarks. Unlike a nuclear weapon, the bomb does not pose an environmental threat from the release of radiation, he added.

      The statement reflected the Kremlin's efforts to restore Russia's global clout and rebuild the nation's military might. At the same time, ties with Washington have become strained over U.S. criticism of Russia's backsliding on democracy, Moscow's vociferous protests against U.S. missile defense plans and rifts over global crises.

      The U.S. Massive Ordnance Air Blast, nicknamed the Mother Of All Bombs, a large-yield satellite-guided, air delivered bomb, had been described as the most powerful non-nuclear weapon in history.

      Channel One said that while the Russian bomb contains 7.1 metric tons of high explosives compared with more than 8 metric tons of explosives in the U.S. bomb, it's four times more powerful because it uses a new, highly efficient type of explosives, which the report didn't identify.

      While the American bomb is equivalent to 11 tons of TNT, the Russian one is equivalent to 44 tons of regular explosives. The Russian weapon's blast radius is 300 meters, or 990 feet, twice as big as that of the U.S. design, the report said.

      The report showed the bomb dropping by parachute from a Tu-160 strategic bomber and exploding in a massive fireball. It featured the debris of apartment buildings and armored vehicles at a testing range, as well as ground burnt by a massive explosion.

      It didn't give the bomb's military name or say when it was tested.

      Rukhsin said the new bomb would allow the military to "protect the nation's security and confront international terrorism in any situation and any region."

      "We have got a relatively cheap ordnance with a high striek power," Yuri Balyko, head of department at the Defense Ministry's institute in charge of weapons design, said on Channel One.

      Booming oil prices have allowed Russia to steadily increase military spending in recent years, and the Kremlin has taken an increasingly assertive posture in global affairs.

      Last month, Putin said he ordered a resumption of regular patrol flights of strategic bombers that had been suspended after the 1991 Soviet breakup..."

More:

Russia tests superstrength bomb: military

      NEW YORK (AP) -- "Oil prices rose to a new record settlement price Tuesday as traders turned their attention to Wednesday's government inventory report expected to show tight supplies and shrugged off OPEC's decision to boost output.

      Light, sweet crude for October delivery rose 74 cents to settle at $78.23 a barrel on the New York Mercantile Exchange after alternating between gains and losses. The settlement price beat the previous record, set July 31, by 2 cents.

      Even factoring in OPEC's decision to increase oil production by 500,000 barrels per day starting Nov. 1, "supplies are tight," said Addison Armstrong, an analyst at TFS Energy Futures LLC.

      And according to analyst predictions, they're going to get even tighter. Analysts surveyed by Dow Jones Newswires, on average, expect Wednesday's report from the Energy Department's Energy Information Administration will say that crude oil inventories fell by 2.7 million barrels in the week ended Sept. 7.

      Investors had already priced in OPEC's increase, and many were looking for a larger production boost, analysts said.

      Oil's rise pulled October gasoline 0.25 cent higher to settle at $1.9811 a gallon after the contract spent much of the day in negative territory. In other Nymex trading, heating oil futures rose 1.11 cents to settle at $2.1827 a gallon.

      OPEC, which produces about 40 percent of the world's oil, had long been expected to hold production levels steady at the meeting. But rumors started circulating on Monday that Saudi Arabia was campaigning to boost production.

      Many analysts think the Saudis are worried high oil prices will crimp demand for crude, which could hurt OPEC nations in the long run.

      However, some analysts interpreted the fact that Tuesday's meeting lasted longer than expected as a sign the Saudis had a hard time persuading other OPEC nations to boost production.

      Tim Evans, an analyst at Citigroup Inc., thinks some OPEC members are worried demand for oil will slow in the fourth quarter, which combined with more supplies could mean sharply lower prices.

      Many OPEC countries already produce more oil than their quotas. But Omar Farouk Ibrahim, spokesman for the Organization of Petroleum Exporting Countries, said the announced increase would be based on the group's current production, not quotas -- meaning the 12-nation cartel will be adding actual oil to the market.

      That translates into a quota increase of nearly 1.4 million barrels per day, Evans said..."

      The Bottom Line:  Burning the midnight oil from the candle at both ends?  At this rate it won't last for much longer.

       Washington Mutual chief executive Kerry Killinger said the result would likely be falling house prices across many parts of America into 2008.

       Centred on the sub-prime sector, the crisis in the US mortgage market has been sparked by record loan defaults.

       Washington Mutual may put aside an extra $500m (£247m) to cover bad loans.

       This would come on top of the $1.5bn to $1.7bn of exposure the company - now America's sixth largest mortgage lender - had forecast in July.

       "Most housing markets appear to be weakening, to us," said Mr Killinger.

Global issue

       In recent weeks, US house price figures have been mixed.

       Last month, the Commerce Department said new homes sales held up in July, while further figures from the National Association of Realtors showed sales of existing properties fell to a near five-year low in the same month.

       The crisis in the US sub-prime mortgage sector has been sparked by American mortgage rates rising sharply over the past year.

       As a result more than 50,000 jobs have been lost in the US mortgage industry so far this year, including 12,000 announced last week by the largest lender Countrywide.

       The crisis has spread overseas, and to the wider global financial sector, because US sub-prime debt is often resold as part of a wider debt package.

       As a consequence, banks and investors are, as yet, unsure about how far the sub-prime downturn could spread.

       In turn, global banks have become far more cautious about whom they lend to, and are stockpiling funds to cover any potential liabilities of their own.

       The result has been a sharp downturn in available credit, and higher lending rates, both for companies wishing to borrow, and individuals trying to get a mortgage..."

      WASHINGTON (Fox) —  "A recent decision by German officials to withhold support for any new sanctions against Iran has pushed a broad spectrum of officials in Washington to develop potential scenarios for a military attack on the Islamic regime, FOX News confirmed Tuesday.

      Germany — a pivotal player among three European nations to rein in Iran's nuclear program over the last two-and-a-half years through a mixture of diplomacy and sanctions supported by the United States — notified its allies last week that the government of Chancellor Angela Merkel refuses to support the imposition of any further sanctions against Iran that could be imposed by the U.N. Security Council.

      The announcement was made at a meeting in Berlin that brought German officials together with Iran desk officers from the five member states of the Security Council. It stunned the room, according to one of several Bush administration and foreign government sources who spoke to FOX News, and left most Bush administration principals concluding that sanctions are dead.

      The Germans voiced concern about the damaging effects any further sanctions on Iran would have on the German economy — and also, according to diplomats from other countries, gave the distinct impression that they would privately welcome, while publicly protesting, an American bombing campaign against Iran's nuclear facilities.

      Germany's withdrawal from the allied diplomatic offensive is the latest consensus across relevant U.S. agencies and offices, including the State Department, the National Security Council and the offices of the president and vice president. Under Secretary of State for Political Affairs Nicholas Burns, the most ardent proponent of a diplomatic resolution to the problem of Iran's nuclear ambitions, has had his chance on the Iranian account and come up empty.

      Political and military officers, as well as weapons of mass destruction specialists at the State Department, are now advising Secretary of State Condoleezza Rice that the diplomatic approach favored by Burns has failed and the administration must actively prepare for military intervention of some kind. Among those advising Rice along these lines are John Rood, the assistant secretary for the Bureau of International Security and Nonproliferation; and a number of Mideast experts, including Ambassador James Jeffrey, deputy White House national security adviser under Stephen Hadley and formerly the principal deputy assistant secretary for Near Eastern affairs.

      Consequently, according to a well-placed Bush administration source, "everyone in town" is now participating in a broad discussion about the costs and benefits of military action against Iran, with the likely timeframe for any such course of action being over the next eight to 10 months, after the presidential primaries have probably been decided, but well before the November 2008 elections.

      The discussions are now focused on two basic options: less invasive scenarios under which the U.S. might blockade Iranian imports of gasoline or exports of oil, actions generally thought to exact too high a cost on the Iranian people but not enough on the regime in Tehran; and full-scale aerial bombardment.

      On the latter course, active consideration is being given as to how long it would take to degrade Iranian air defenses before American air superiority could be established and U.S. fighter jets could then begin a systematic attack on Iran's known nuclear targets.

      Most relevant parties have concluded such a comprehensive attack plan would require at least a week of sustained bombing runs, and would at best set the Iranian nuclear program back a number of years — but not destroy it forever. Other considerations include the likelihood of Iranian reprisals against Tel Aviv and other Israeli population centers; and the effects on American troops in Iraq. There, officials have concluded that the Iranians are unlikely to do much more damage than they already have been able to inflict through their supply of explosives and training of insurgents in Iraq.

      The Bush administration "has just about had it with Iran," said one foreign diplomat. "They tried the diplomatic process. China is now obstructing them at the U.N. Security Council and the Russians are tucking themselves behind them.

      "The Germans are wobbling …There are a number of people in the administration who do not want their legacy to be leaving behind an Iran that is nuclear armed, so they are looking at what are the alternatives? They are looking at other options," the diplomat said.

      Vice President Cheney and his aides are said to be enjoying a bit of "schadenfreude" at the expense of Burns. A source described Cheney's office as effectively gloating to Burns and Rice, "We told you so. (The Iranians) are not containable diplomatically."

      The next shoe to drop will be when Rice and President Bush make a final decision about whether to designate the Iranian Revolutionary Guard Corps (IRGC) and/or its lethal subset, the Quds Force, as a terrorist entity or entities. FOX News reported in June that such a move is under consideration.

      Sources say news leaks about the prospective designation greatly worried European governments and private sector firms, which could theoretically face prosecution in American courts if such measures became law and these entities continued to do business with IRGC and its multiple financial subsidiaries.

More:

Russia Tests 'World's Most Powerful Non-Nuclear Bomb'

Russia says builds most powerful vacuum bomb

Sources confirm Israel airstrike on Syria

US says Israel jets struck Syria

      Euro-zone interest rates, meanwhile, are seen rising before the year is out, diminishing the dollar's yield advantage and sending it to its lowest level against the euro in a month.

      Demand for the dollar fell sharply on Friday after data showed U.S. employers cut jobs in August for the first time in four years.

      That sparked fear that a deepening housing slump and credit crisis was starting to cost American jobs and led investors to position for the Fed to cut its benchmark interest rate by 50 basis points at its September 18 meeting.

      Before the jobs data, markets were expecting a 25-basis-point cut. But one in five primary dealers polled by Reuters now expects a bigger cut, while Fed funds futures put the chance above 80 percent.

      "This is a no-win situation for the dollar," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. "A 25-basis-point cut and the Fed looks out of tune, leaving asset markets to extract an extra pound of flesh. A 25-basis-point cut and rate differentials do the dollar damage. The negative dollar views seem universal."

      At mid-afternoon, the euro was up 0.2 percent at $1.3797, near a one-month high of $1.3816 touched earlier. The dollar index, which measures the greenback against a basket of currencies, was last at 79.832, near a 15-year low at 79.788 (.DXY: Quote, Profile, Research).

      "With the last remaining holdouts abandoning their views that the Fed will not lower interest rates, the euro's interest rate advantage over the dollar continues to grow," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.

      The Bottom Line:  "Paper [money] is poverty,... it is only the ghost of money, and not money itself." --Thomas Jefferson to Edward Carrington, 1788.

       California (Newsweek) -- "Economists make a big deal out of all the junk we import from China—tainted pet food, lead-laced toys and enough cheap plastic tchotchkes to load up a landfill the size of Montana. And American industries are clearly being drenched by the rising tide of Chinese imports, which totaled $288 billion in 2006. But as imports from China loudly rise, American exports to China are quietly rising at an even more rapid pace. Would it surprise you to learn that a lot of those exports are ... junk?

      In an act of macroeconomic karma, materials thrown out by Americans—broken-down auto bodies, old screws and nails, the precious magazine you hold in your hands—accounted for $6.7 billion in exports to China in 2006, second only to aerospace products. Junkyards may conjure up images of Fred Sanford's ratty collection of castoffs. But these days, scrap dealers are part of a $65 billion industry that employs 50,000 people, who together constitute a significant arc of a virtuous circle. The demand of China's factory bosses for junk—which they recycle to make all the junk Americans buy from China—creates jobs, tamps down the growth of the trade deficit and might help save the planet.

      Scrap materials are the alpha and the omega of the industrial process. Consumers create scrap when they use goods; factories consume it to create new goods. As China has industrialized, its demand for such materials has soared. According to Stan Lancey, chief economist at the American Forest & Paper Association, U.S. exports of recovered paper to China—where paper was invented around 100 B.C.— soared from 348,000 metric tons in 1994 to nearly 9.1 million metric tons in 2006, worth $1.07 billion. This year, China has bought 58 percent of U.S. scrap-paper exports. Meanwhile, exports of ferrous scrap (it sounds like a Scottish breakfast but means waste iron and steel) rose from 166,000 metric tons in 1998 to 2 million metric tons last year. Junk dealers reaped $1.5 billion selling scrap copper to China in 2006. All told, China's ravenous factories hoovered up 42 percent of U.S. scrap exports in 2006..."

      NEW YORK (Liberty Post) - "Contradictions now wrack the world's financial system, and a growing consensus exists between those who endorse it and those who argue the status quo is both crisis-prone as well as immoral. If we are to believe the institutions and personalities who have been in the forefront of the defense of capitalism, we are on the verge of a serious crisis-if not now, then in the near future.

       The International Monetary Fund (IMF), the Bank for International Settlements, the British Financial Services Authority, the Financial Times, and innumerable mainstream commentators were increasingly worried and publicly warned against many of the financial innovations that have now imploded. Warren Buffett, whom Forbes ranks the second richest man in the world, last year called credit derivatives-only one of the many new banking inventions-"financial weapons of mass destruction." Very conservative institutions and people predicted the upheaval in global finances we are today experiencing.

       The IMF has taken the lead in criticizing the new international financial structure, and over the past three years it has published numerous detailed reasons why it has become so dangerous to the world's economic stability. Events have confirmed its prognostication that complexity and lack of transparency, the obscurity of risks and universal uncertainty, especially regarding collateralized debt and loan obligations, will cause a flight to security that will dry up much of the liquidity of banking. "…Financial innovation itself," as a Financial Times columnist put it, "is the problem". The ultra-creative system is seizing up because no one understands where risks are located or how it works. It began to do so this summer and fixing it is not very likely.

       It is impossible to measure the extent of the losses. The final results of this deluge have yet to be calculated. Even many of the players who have stakes in the countless arcane investment instruments are utterly ignorant. The sums are enormous.

Only a few of the many measures give us a rough estimate:

       The present crisis began-it has scarcely ended there--with subprime mortgage loans in the U.S., which were valued at over $1.3 trillion at the beginning of 2007 but are, for practical purposes, worth far, far less today. We can ignore the impact of this crisis on U.S. housing prices, but some projections are of a 10 percent decline-another trillion or so. Indirectly, of course, the mortgage crisis has also brought many millions of people into the larger financial world and they will get badly hurt.

       What the subprime market did was unleash a far greater maelstrom involving banks in Germany, France, Asia, and throughout the world, calling into question much of the world financial system as it has developed over the past decade.

       Investment banks hold about $300 billion in private equity debts they planned to place-mainly in leveraged buy-outs. They will be forced to sell them at discounts or keep them on their balance sheets-either way they will lose.

       The near-failure of the German Sachsen LB bank, which had to be saved from bankruptcy with 17.3 billion euros in credit, revealed that European banks hold over half-trillion dollars in so-called asset backed commercial paper, much of it in the U. S. and subprime mortgages. A failure in America caused Europe too to face a crisis. The problem is scarcely isolated.

       The leading victim of this upheaval are the hedge funds. What are hedge funds? There are about 10,000 and, all told, they do everything. Some hedge funds, however, provided companies with capital and successfully competed with commercial banks because they took much greater risks. A substantial proportion is simple gamblers; some even bet on the weather--hunches. Many look to their computers and mathematics for models to guide their investments, and these have lost the most money, but funds based on other strategies also lost during August. The spectacular Long-term Capital Management 1998 failure was also due to its reliance on ingenious mathematical propositions, yet no one learned any lessons from it, proving that appeals to reason as well as experience fall on deaf ears if there is money to be made.

       Some gained during the August crisis but more lost, and in the aggregate the hedge funds lost a great deal-their allure of rapid riches gone. There have been some spectacular bankruptcies and bailouts, including some of the biggest investment firms. Investors who got cold feet found that withdrawing money from hedge funds was nigh on impossible. The real worth of their holdings is hotly contested, and valuations vary wildly. In reality, there is no way to appraise them realistically-they all depend largely on what people want to believe and will take, or the market.

       We are at an end of an era, living through the worst financial panic in many decades. Now begins global financial instability. It is impossible to speculate how long today's turmoil will last-but there now exists an uncertainty and lack of confidence that has been unparalleled since the 1930s-and this ignorance and fear is itself a crucial factor. The moment of reckoning for bankers and bosses has arrived. What is very clear is that losses are massive and the entire developed world is now experiencing the worst economic crisis since 1945, one in which troubles in one nation compound those in others.

       All central banks are wracked by dilemmas. They have neither the resources nor the knowledge, including legal powers, to remedy the present maelstrom. Although there is clamor from financiers and assorted operators to bail them out, the Federal Reserve must also weigh the consequences of its moves, above all for inflation. Then there is the question of "moral hazards." Is the Federal Reserve's responsibility to save financial adventurers from their own follies? Throughout August the American and European central banks plunged about a half-trillion dollars into the banking system in an attempt to unfreeze blocked credit and loans that followed the subprime crisis-an event which triggered a "flight to safety" which greatly reduced banks' willingness to loan. In effect, the Federal Reserve relied on banks to restore confidence in the financial system, subsidizing their efforts.

       Central banks' efforts succeeded only very partially but, in the aggregate, they failed: banks and investors now seek security rather than risk, and they will sit on their money. The Federal Reserve privately acknowledges its inability to cope with an inordinately complex financial structure. European central bankers are in exactly the same dilemma: they simply don't know what to do.

       But this scarcely touches the real problem, which is structural and impinges wholly on the way the world financial structure has evolved over the past two decades. As in the past, there is a critical split in the banking and finance world and each has political leverage along with clashing interests. More important, central banks were not designed to cope with today's realities and have neither the legal powers nor knowledge to control them.

       In this context, central banks will have increasing problems and the solutions they propose, as in the past, will be utterly inadequate, not because their intentions are wrong but because it is impossible to regulate such a vast, complex economy-even less today than in the past because there is no international mechanism to do so. Internationalization of finance has meant less regulation than ever, and regulation was scarcely very effective even at the national level.

       Not only leftists are naïve but so too are those conservatives who think they can speak truth to power and change the course of events. Greed's only bounds are what makes money. Existing international institutions-of which the IMF is the most important--or well-intentioned advice will not change this reality..."

      The Bottom Line:  Dark clouds on the horizon.

      In the 1980s, sea ice receded 30 to 50 miles each summer off the north coast, said James Overland, a Seattle-based oceanographer for the National Oceanic and Atmospheric Administration.

      "Now we're talking about 300 to 500 miles north of Alaska," he said of projections for 2050.

      That's far past the edge of the highly productive waters over the relatively shallow continental shelf, considered important habitat for polar bears and their main prey, ringed seals, as well as other ice-dependent mammals, such as walrus.

      The NOAA researchers reviewed 20 computer scenarios of the effects of warming on sea ice, used by the United Nations' Intergovernmental Panel on Climate Change in its assessment report released this year.

      The researchers compared those models with observations from 1979 through 1999, Overland said, and concluded that the summer ice in the Beaufort Sea likely will have diminished by 40 percent, compared with its 1980s area.

      The same is likely for the East Siberian-Chukchi Sea region off northwest Alaska and Russia. In contrast, Canada's Baffin Bay and Labrador showed little predicted change.

      There was less confidence for winter ice, but the models also predict a sea ice loss of more than 40 percent for the Bering Sea off Alaska's west coast, the Sea of Okhotsk east of Siberia and the Barents Sea north of Norway.

      The research paper by Overland and Muyin Wang, a NOAA meteorologist, will be published Saturday in Geophysical Research Letters, a publication of the American Geophysical Union.

      The situation is dire for polar bears, said Kassie Siegel of the Center for Biological Diversity, who wrote the petition seeking federal protection for the animals.

      "They're going to drown, they're going to starve, they're going to resort to cannibalism, they're going to become extinct," she said.

      As ice recedes, many bears will get stuck on land in summer, where they have virtually no sustainable food source, Siegel said. Some will try and fail to swim to sea ice, she said.

      Bears that stay on sea ice will find water beyond the continental shelf to be less productive, she said, and females trying to den on land in the fall will face a long swim..."

       MIAMI (CNN) -- "Tropical Storm Gabrielle picked up speed and prompted a new warning as it began to make its presence felt on the North Carolina coast.

      The storm's outer rain bands were moving into the Outer Banks on Saturday night, and its center will arrive Sunday afternoon, the National Hurricane Center said, calling Gabrielle "a little better organized."

      The greatest danger will be flooding in low-lying areas and on roads, said North Carolina Gov. Mike Easley, according to The Associated Press.

      "The most deaths during tropical storms occur when people drive into flood waters and drown. Rip currents will be strong in the ocean. The safest place to be will be indoors," he said.

      But some North Carolinians were taking Gabrielle's approach in stride.