ReadinessHub.com - News Archives, September 23-30, 2007

NEW YORK (Bloomberg) -- "Sales of new homes in the U.S. dropped more than forecast in August and prices plunged by the most since 1970, pointing to a worsening housing recession that spells more cutbacks in construction.

Purchases declined 8.3 percent to an annual pace of 795,000, the lowest level in more than seven years, from a revised 867,000 rate in July, the Commerce Department said today in Washington. The median price dropped 7.5 percent from August 2006.

The outlook for residential real estate has dimmed since borrowing costs jumped and credit restrictions increased last month on concern over subprime mortgage defaults. The drop in sales underlines concerns among Federal Reserve officials that the housing contraction may deepen and slow the economy.

``The bottom is probably two or three quarters away yet for housing,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, which forecast a decline to 790,000 units. ``It seems like the credit restrictions did hit much harder than people expected.''

Economists forecast sales would fall to an 825,000 pace from a previously reported 870,000 in July, based on the median estimate of 72 forecasts in a Bloomberg News survey. Predictions ranged from 730,000 to 870,000. Compared with a year earlier, purchases were down 21 percent.

The economy grew in the second quarter at a revised 3.8 percent annual pace, the most in more than a year, a separate Commerce report today showed. The gain compares with a previous estimate of 4 percent and a 0.6 percent increase in the first three months of the year. The figures didn't reflect last month's credit-market turmoil which heightened concern the expansion might be cut short.

The number of workers filing first-time jobless claims unexpectedly fell last week to a four-month low of 298,000, a report from the Labor Department also showed. The decline may help allay concerns about a weakening labor market.

U.S. Treasury securities were little changed following the reports and stock prices held gains. The yield on the benchmark 10-year note was 4.60 at 10:07 a.m. in New York, compared with 4.62 percent late yesterday.

The number of homes for sale at the end of the month fell 1.5 percent to 529,000 in August. With sales dropping more than five times as much, the inventory of unsold homes jumped to 8.2 months at the current sales pace.

TEHRAN, Iran (Fox) — "Iran's parliament on Saturday approved a nonbinding resolution labeling the CIA and the U.S. Army "terrorist organizations," in apparent response to a Senate resolution seeking to give a similar designation to Iran's Islamic Revolutionary Guard Corps.

The hard-line dominated parliament cited U.S. involvement in dropping nuclear bombs in Japan in World War II, using depleted uranium munitions in the Balkans, Afghanistan and Iraq, supporting the killings of Palestinians by Israel, bombing and killing Iraqi civilians, and torturing terror suspects in prisons.

"The aggressor U.S. Army and the Central Intelligence Agency are terrorists and also nurture terror," said a statement by the 215 lawmakers who signed the resolution at an open session of the Iranian parliament. The session was broadcast live on state-run radio.

The resolution, which is seen as a diplomatic offensive against the U.S., urges Iranian President Mahmoud Ahmadinejad's government to treat the two as terrorist organizations. It also paves the way for the resolution to become legislation that — if ratified by the country's hardline constitutional watchdog — would become law.

The government is expected to wait for U.S. reaction before making its decision. In Washington, the White House declined to comment Saturday..."

TOKYO (Reuters) - "A strong earthquake with an estimated magnitude of 7.1 hit near the U.S. Pacific territory of Guam on Sunday, Japan's Meteorological Agency said, but island media said there were no immediate reports of injuries.

Guam's Pacific Daily News said the quake could be felt in high-rise buildings on the island, which is home to a major U.S. military base.

The quake, at a depth of 30 km, occurred at 11:09 a.m. Japan time near the island, the Japanese government agency said on its Web site (www.jma.go.jp/en/quake).

The U.S. Geological Survey also recorded a quake in the same area, which it said on its Web site (http://earthquake.usgs.gov/eqcenter) was of magnitude 6.8 and centered about 345 km (215 miles) south-southeast of Guam.

NEW YORK (AP) -- The U.S. dollar dropped to a record low against the euro for a sixth consecutive session Thursday, sagging under expectations of a U.S. Federal Reserve rate cut next month.

The dollar has skidded to new lows against the European currency since the Fed last week cut interest rates by a larger-than-expected half percentage point.

The fresh low on Thursday came as market expectations build for another rate cut by the Fed amid more signs the U.S. economy is in a funk. And some think the greenback is likely to remain in a swoon until the economy stops weakening.

Thursday's disappointing economic data included a sharp drop in new homes sales for August. It followed other discouraging reports released this week that could prompt the central bank to further cut rates when it meets next month.

Lower interest rates, used to jump-start an economy, can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.

With so many warnings signs of a weakening economy, the dollar will be hard-pressed to eke out a rebound, said Michael Woolfolk, senior currency strategist at the Bank of New York.

"We're going to have to live with a sagging dollar in the foreseeable future, until the U.S. economy gets back on its feet," he said.

The euro rose as high as $1.4189 Thursday, breaking its previous record of $1.4162 from early Wednesday. It later retreated to $1.4160 in late New York trading, up from $1.4136 late Wednesday.

The Commerce Department reported Thursday that sales of new homes tumbled 8.3 percent in August to the lowest level in seven years, a stark sign that the credit crisis, triggered by bad U.S. mortgages, is aggravating an already painful housing slump..."

The Bottom Line: What's with all this talk about a "recession"? That started over a year ago. Now we're dipping down into "depression" territory.

MOSCOW (RIA Novosti) - "Russia is ready to take appropriate measures if weapons are deployed in space, the commander of the Russian Space Forces said Thursday.

"Should any country deploy weapons in space, then the laws of armed warfare are such that retaliatory weapons are certain to appear," Col. Gen. Vladimir Popovkin said.

He said Russia and China have drafted an international declaration on the non-deployment of weapons in space and sent it to the UN.

"It is necessary to establish the rules of the game in space," he said, adding that the deployment of weapons in space could have unpredictable consequences, since such weapons are "very complex systems."

"We do not want to fight in space, and we do not want to call the shots there either, but we will not permit any other country to do so," he said.

Popovkin also said that Russia has an integrated missile attack warning system, covering the country's entire territory..."

NEW YORK/LONDON (Reuters) - "Central banks are not quite ready to prop up a weakening U.S. dollar, but that could change if inflation rises, investors shun U.S. assets and a sluggish U.S. economy starts to drag world economic growth down.

As long as it doesn't happen too fast, a dollar decline is exactly what Washington is after because it boosts U.S. exports and narrows the country's massive current account deficit.

Also, intervention in currency markets would undermine U.S. efforts to get China to float its currency, the yuan, more freely, thereby addressing the global imbalance between nations running huge trade and current account deficits and surpluses.

"There's probably agreement right now that a dollar decline is not such a bad thing, given the trade imbalances and the weakness of the U.S. economy relative to the rest of the world," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co. in New York. "So I don't see the urgency for intervention right now."

The dollar tumbled to a record low against the euro for the sixth straight day on Thursday, and hit an all-time low against a basket of major currencies.

The latest dollar slide was triggered when the Federal Reserve cut interest rates last week to boost an economy starting to groan beneath the weight of a worsening U.S. housing slump and a credit squeeze sparked by losses on risky U.S. mortgages.

Since early 2006, the euro has climbed from $1.18 to just shy of $1.42 as dealers priced in prospects for slower U.S. economic growth.

The Bottom Line: The people of a nation are expected to maintain fiscal responsibility, but I guess our governments do not lead by example. What a bunch of buffoons.

U.S. crude for November delivery rose 30 cents to $83.18 a barrel by 9:45 p.m. EDT, after gaining $2.58 or 3.24 percent in the previous session. Oil was recovering from a profit-taking dip earlier this week that pulled prices off their $83.90 peak.

"On a macro level people are clearly buying crude oil as a hedge against a weaker dollar. The crude market is structually very solid," said a hedge fund manager based in Asia.

The dollar hit an all-time low against a basket of currencies on Thursday on concerns over a slowdown in the U.S. housing sector. The weak dollar, which can strengthen the nominal values of commodities traded in the currency, also boosted metals.

The return of a backwardated structure in the crude market -- in which prompt oil is more expensive than oil further in the future -- is also drawing more investors who can profit by rolling long positions from one month to the next.

The premium of front-month U.S. crude to the second month last week rose to above $1.50, the highest since early 2003, just before a wave of long-term investors ploughed over $100 billion into commodity markets. It was at $1.40 on Friday.

It might start with a minor incident, possibly involving an American Marine patrol operating out of the new base at Badrah near the Iranian border. The Marines are surrounded by superior Iranian forces claiming that the Americans have strayed inside Iranian territory. The Marines refuse to surrender their weapons and instead open fire. The Iranians respond. Helicopter gunships are called in to support the Marines, and artillery fire is directed against Iranian military targets close to the border. President Bush calls the incident an act of war and, in an emotional speech to the nation, orders U.S. forces to attack. A hastily called meeting of the UN Security Council results in a 17-1 vote urging the United States to exercise restraint, with only Washington voting "no." In the UN General Assembly, only the U.S., Israel, Micronesia, and Costa Rica support the military action. The U.S. is effectively alone.

In the first few days, overwhelming American air and naval superiority destroy Iran's principal air, naval, and army bases. Iranian Revolutionary Guard facilities are particularly targeted and are obliterated, as are the known Iranian nuclear research and development sites. Population centers are avoided, though smart weapons destroy communications centers and command and control facilities. There are nevertheless large numbers of civilian casualties and widespread radioactive contamination as many of the targeted sites are in or near cities. Infrastructure is also hit, particularly bridges, roads, and power generation stations close to known nuclear research centers and military sites. The U.S. media, which had supported the administration's plans to engage Iran, rallies around the flag, praising the surgical attacks designed to cripple Tehran's nuclear weapons program. Congress supports the bombing, with leaders from both parties praising the president and commenting that Iran had it coming.

The Pentagon and White House call the attacks a complete success, but Iran strikes back. With five years to prepare, Iran has successfully hidden and hardened many of its military and nuclear facilities, a large percentage of which are undamaged. The aircraft carrier USS Eisenhower operating in the Persian Gulf is hit by a Chinese Silkworm cruise missile and grounds itself in shallow water to avoid sinking. Three other support vessels are also hit and severely damaged when they are attacked by small craft manned by suicide bombers. Pro-Iranian riots break out in Beirut, where the government is forced to call in soldiers to shoot at the crowds. In the south of Lebanon, Hezbollah fires salvoes of rockets into Israel. Israel responds by bombing Lebanon and Syria, which it blames for the attacks. Iranian Shahab-3 missiles also strike Israel, killing a number of civilians. The Israeli Defense Forces are mobilized, and troops are sent to the northern border. Syria and Lebanon also mobilize their forces. Rioters in Baghdad attack US. .troops and the American embassy and are driven back only after the soldiers open fire and call in helicopter gunships. Snipers attack American soldiers all over Iraq. Shi'ites sympathetic to Iran sabotage Saudi Arabia's eastern oil fields. The Saudi fields suffer some damage, and hundreds of alleged saboteurs are shot dead by Saudi security forces. An oil tanker out of Kuwait is hit by a Silkworm close to the Straits of Hormuz and runs aground. Another hits a mine planted by Iran. Insurers in London refuse to cover any tankers transiting the Persian Gulf. Oil shipments from the region, one quarter of the world supply, stop completely, and oil goes up to $200 a barrel. Wall Street suffers its biggest loss in 20 years, with the Dow Jones index plummeting by more than 800 points.

The U.S. offers Iran a cease-fire, which Tehran rejects. Two days later, President Hamid Karzai of Afghanistan is assassinated under orders from Tehran. Fearing that he will be next, Pakistan's President Pervez Musharraf flees to Dubai. Order breaks down in both countries. The Pakistani army declares a state of emergency. Several leaders in the Pakistani tribal areas that are sheltering Osama bin Laden declare themselves independent. Fighting increases in Iraq with U.S. soldiers being targeted by both leading Shi'ite militias. U.S. troops evacuate Baghdad, fighting their way out with heavy casualties. There are reports of Iranian soldiers and militiamen massing at the border. Rioters in Basra succeed in cutting the main roads leading to Kuwait that supply U.S. forces.

The U.S. scrambles to contain the damage, pressuring the Pakistani army to put down the riots and secure the country's nuclear arsenal, while at the same time trying to restore order in Kabul through the multinational force. Several NATO allies balk at using their soldiers in what they see as a burgeoning civil war, and the U.S. suffers heavy losses in street fighting before withdrawing to its bases. Taliban-backed militias take over much of Kabul and Kandahar. Afghanistan's Mazar-i-Sharif, which is largely Shi'ite, declares itself part of Iran. Waves of Iranian soldiers and militiamen cross the border into Iraq, where they are welcomed by the Iraqi militias. U.S. troops are under siege countrywide and are forced to withdraw into their bases where they can be supplied by air. The Iraqi government resigns and is replaced by a group of Shi'ite clerics. The government in Lebanon falls and is replaced by a coalition headed by Hezbollah. A salvo of Iranian Silkworm missiles sets the Saudi Arabian eastern oil fields ablaze. Saudi Arabia sends an urgent message to Tehran declaring that it is "neutral" in the fighting and will not assist the U.S. in any way. Kuwait sends the same message, as does Egypt. Kuwait refuses to allow the U.S. to use its men and supplies at Camp Doha against Iran. In Bahrain, rampaging Shi'ite crowds depose Sheik Khalifa al-Khalifa and set up an Islamic Republic which immediately demands that the U.S. Fifth Fleet dismantle its headquarters and go home. The Dow Jones index loses another 1,000 points.

The U.S. attempts to get China and Russia to mediate with Iran to end the fighting, but they refuse to do Washington any favors, noting that they had opposed the attack in the first place. Suicide bombers attack London, Washington, New York, and Los Angeles. The attacks are poorly planned and inflict only a few casualties, but panic sets in and the public demands that the respective governments do something. The U.S. tells the Iranian government that unless resistance ceases, nuclear weapons will be used on select targets. India and Pakistan are alarmed by the U.S. threat and put their own nuclear forces on high alert, as does Israel. Russia and China also increase their readiness levels to respond to the crisis.

Iran refuses to concede defeat, and the Iranian people rally around the government. The U.S. public clamors for action. Oil prices continue to surge, and even the long term viability of petroleum supplies is in question as the Straits of Hormuz continue to be closed. Another U.S. ship is sunk by suicide attackers in the Persian Gulf. U.S. troops are under fire nearly everywhere in Iraq and in Afghanistan. Anti-American rioting takes place in Jakarta, Kuala Lumpur, and Dhaka. The U.S. consulate general in Karachi, Pakistan, is overrun and sacked. Forty Americans are killed, along with hundreds of Pakistanis. The Pakistani army announces that it can no longer protect Americans. There are frequent terrorism scares in a number of American cities, which are under red alert security lockdown, though there are no new attacks. As a preventive measure, Muslim leaders and some antiwar activists are arrested and detained at military prisons, including Guantanamo. Israel continues to be bombarded from inside Lebanon and Syria. Its air attacks on targets in both countries inflict major damage on civilians but are unsuccessful in stopping the rockets. Rioting rocks the West Bank and Gaza. Palestinian President Mahmoud Abbas flees to Cairo. India threatens to attack Pakistan if there is any question about the security of Islamabad's nuclear arsenal.

The United States uses a neutron-type bomb against the main Iranian nuclear research center at Natanz, which it had already bombed conventionally and destroyed. It vows to bomb again if Iran continues to resist. Iran is defiant and fires another wave of Silkworms at U.S. ships, sinking one. Suicide bombers hit U.S. targets in Iraq and Afghanistan. Russia and China place their nuclear forces on high alert. Pakistani militants take over parliament, aided by radical elements in the army and the intelligence service. India launches a preemptive strike against the main Pakistani nuclear centers at Wah and Multan, where the country's arsenal is believed to be concentrated. Pakistan has hidden some of its nukes elsewhere, however, and is able to strike back by bombing New Delhi. World War III has begun..."

NEW YORK (CNNMoney.com) -- "The bullhorn message from the government to mortgage lenders has been: Bend. Do what you can to help struggling homeowners.

The message to troubled homeowners has been: Call your lender. You may be able to work something out.

Despite the persistent blare, there is not a whole lotta "loan modifying" going on yet.

A survey by Moody's found that most subprime-loan servicers this year had modified only about 1 percent of their adjustable-rate mortgages (ARMs) that had reset to higher rates by the end of July. Servicers, which may or may not be the original lender, collect mortgage payments and deal with defaults and foreclosures.

At the Consumer Credit Counseling Service (CCCS) of San Francisco, which has been working with borrowers referred by lenders, a loan modification is the rare exception rather than the rule.

In a modification, a loan servicer could, for instance, freeze the loan's introductory rate for 24 months or fix that rate for the remainder of the loan.

But based on what the credit counselors have seen from lenders' responses, "if a borrower is behind because of the rate hike, in general that is not enough of a reason to modify the loan. The borrower needs to have a reason [e.g., losing one's income or a medical crisis] and proof they can make the modified payment," said Erica J. Sandberg, CCCS of San Francisco's financial education and communications advisor.

And lenders are not likely to even consider a modification unless a borrower is already behind in their payments, Sandberg said.

There are competing reasons for why modifications are few and far between, and they don't necessarily speak to willful refusal on the part of lenders and servicers.

Swamped lenders. Lenders have been bombarded with requests for modifications and aren't adequately staffed to handle them, according to Mortgage Bankers Association spokesman John Mechem, who added that lenders are in the process of hiring more people.

Borrowers in too deep. Loan modifications don't make sense for some borrowers since they've already had trouble handling their mortgages before their rates reset higher. In those cases, Sandberg said, modifications "just stretch out the problem."

For those borrowers, a credit counselor might recommend they ask their bank to agree to a short sale in which the bank will forgive the debt not covered by the sale of their home. Or they might pursue a deed-in-lieu-of-foreclosure - whereby they sign over the deed of their house to the lender and walk away without further obligation. If they choose this option, they may be able to minimize damage to their credit if they ask the lender to remove the negative reference on their credit report, according to legal information publisher NOLO.

The "Mother, may I?" factor. Servicers who get loans in securitized bundles - say 3,000 to 5,000 loans per deal - may be restricted in how many loans they may modify without seeking the permission of investors in those securities, said Larry Litton, president of Litton Loan Servicing. A 5 percent cap on the amount of loans that may be modified is typical.

What's more, the servicers' contracts with investors may have rules governing when modifications may be made.

The "Are you my mother?" factor. Sometimes no one knows who to ask for permission to modify a loan. "The loans have been sliced and diced so many times, that the owners cannot be found," said Center for Responsible Lending senior vice president Eric Stein, in written Congressional testimony delivered this week.

No-shows. There has been a push by lenders to contact at-risk borrowers earlier and more frequently. But the borrowers are hesitant. Litton said that for every six letters he sends to at-risk borrowers, he might get one response.

The Bottom Line: All of this lending, borrowing and selling of debt is truly giving me a headache.

LONDON (Reuters) - "Tight oil supplies, red-hot global demand and a weakening dollar will boost average oil prices to a record level next year, a Reuters poll showed on Wednesday.

Analysts raised their average 2008 oil price forecast for U.S. crude to $67 a barrel as many believe the current rally will continue well into next year. The forecast surpasses the record average of $66.24, reached in 2006.

"Behind the market tightening, we see global oil demand accelerating in the second half of this year and maintaining strong momentum through early 2008," said independent analyst Geoff Pyne of Enerpyltd.com.

Falling U.S. crude stocks, concern about storm damage to Gulf of Mexico oil installations, a half-point cut in key U.S. interest rates and a weak dollar have pushed oil to a record $83.90 a barrel this month.

Analysts forecast oil prices to finish strong this year with U.S. crude averaging $69.82 in the fourth quarter. The average 2007 oil price is estimated at $66.07, slightly lower than last year due to the market's brief dip below $50 in January.

"For the balance of this year, we do not see much downside given current OPEC production trends," said Harry Tchilinguirian, senior oil analyst at BNP Paribas.

"And the usual geopolitical suspects -- Iran, Iraq, Nigeria, Venezuela -- will feature again prominently next year," he added.

WASHINGTON (CNN) -- "Researchers who launched an experimental cyber attack caused a generator to self-destruct, alarming the federal government and electrical industry about what might happen if such an attack were carried out on a larger scale, CNN has learned.

Sources familiar with the experiment said the same attack scenario could be used against huge generators that produce the country's electric power.

Some experts fear bigger, coordinated attacks could cause widespread damage to electric infrastructure that could take months to fix.

CNN has honored a request from the Department of Homeland Security not to divulge certain details about the experiment, dubbed "Aurora," and conducted in March at the Department of Energy's Idaho lab

In a previously classified video of the test CNN obtained, the generator shakes and smokes, and then stops.

"I can't say it [the vulnerability] has been eliminated. But I can say a lot of risk has been taken off the table," said Robert Jamison, acting undersecretary of DHS's National Protection and Programs Directorate.

Government sources said changes are being made to both computer software and physical hardware to protect power generating equipment. And the Nuclear Regulatory Commission said it is conducting inspections to ensure all nuclear plants have made the fix.

WASHINGTON (Reuters) - "A strike against General Motors Corp will likely skew crucial data for assessing the impact of a housing slump and credit squeeze, but the degree of danger the walkout poses to the U.S. economy depends on how long it drags on.

The automaker and the United Auto Workers resumed contract talks on Monday afternoon, just hours after the union called the strike. For auto-industry analysts, that was a sign the two sides could quickly resolve disagreements over job security and benefits.

If a settlement comes in a matter of days, rather than months, the economy would probably suffer little damage, economists say.

But a protracted work stoppage could prove disastrous with a housing downturn and credit market unrest already threatening to stall an expansion now in its sixth year.

"If the strike lasts a month or longer, it could take 1 percentage point off of real GDP (gross domestic product) in the fourth quarter, or more, even if activity ramps back up in December," Merrill Lynch analyst David Rosenberg said.

That would be a significant blow considering economists were forecasting a slim 2.1 percent gain in real fourth-quarter GDP, according to the Blue Chip consensus forecast.

"Lost income can also have a negative impact on consumer outlays in the months after the strike resolution since the income lost during a strike is gone permanently," Rosenberg said.

Pennsylvania (Fox) - "A Pennsylvania robbery turned into a bad kung fu movie last weekend when two women in ninja attire robbed a gas station of lottery tickets, cigarettes and cash, the Pittsburgh Tribune-Review reported.

The two women walked into the Sunoco station early Saturday armed with a samurai sword and a dagger, respectively, the paper reported. They allegedly tied up a female clerk, grabbed the loot and fled. The robbery was captured on security video.

The swarthy 'ninjas' were dressed all in black except for white gloves. Police have made no arrests in the case..."

United Kingdom (The Standard) - "The US Federal Reserve's move last week to cut key interest rates by a larger-than-expected 50 basis points came as a pleasant surprise for financial markets, but it also intensified concerns that the world's largest economy may be facing a risk of a sharp slowdown or even a recession.

Some economists say that with the Fed signaling it has become more worried about the negative effects of subprime problems on the economy it is likely to allow a cycle of rate cuts in the event of a slowdown.

Morgan Stanley Asia chairman Stephen Roach said on Friday there was a 40-45 percent chance a recession will occur in the United States next year, led by a housing market downturn and the subprime problem.

China International Capital Corp economist Ha Jiming said: "The Fed action [last week] signals that it is deeply worried about the negative consequences of the subprime mortgage crisis, in particular regarding the weak housing market that could affect consumption and growth in general."

While the US economy enjoyed relatively solid growth in the second quarter, with strong business investment and private consumption, which remained robust, new data have indicated a worsening in residential investment and labor market conditions.

"The main risk, related to the spread of credit market turmoil and further housing market deterioration, seems to have increased. Despite high labor cost, inflationary pressure is moderate, providing room for further interest rate cuts," Ha said.

He predicts the Fed will cut the benchmark lending rate by 25 basis points next month, and believes monetary policy easing should reduce the likelihood of recession. A recession is defined as negative economic growth for two consecutive quarters.

Some economists say that, while there is considerable risk to the US economic outlook, economic data so far, have been sanguine and do not indicate a looming recession.

"The data so far have been upbeat and the problem with financial crises such as the credit crisis is that the impact becomes only clear over time," said Frederic Neumann, HSBC Asia economist. "In that sense, the Fed's rate cut was somewhat preemptive without being based on clear economic evidence, but it is rather trying to forestall the possibility that the US economy would slow down."

The Bottom Line: Dump your cash into something useful and quick. "Equity" no longer means something you can resell for profit. It means something you own that will make your life easier.

London (The Guardian) - "Britain is preparing territorial claims on tens of thousands of square miles of the Atlantic Ocean floor around the Falklands, Ascension Island and Rockall in the hope of annexing potentially lucrative gas, mineral and oil fields, the Guardian has learned.

The UK claims, to be lodged at the UN Commission on the Limits of the Continental Shelf, exploit a novel legal approach that is transforming the international politics of underwater prospecting.

Britain is accelerating its process of submitting applications to the UN - which is fraught with diplomatic sensitivities, not least with Argentina - before an international deadline for registering interests.

Relying on detailed geological and geophysical surveys by scientists and hydrographers, any state can delineate a new "continental shelf outer limit" that can extend up to 350 miles from its shoreline. Data has been collected for most of Britain's submissions and Chris Carleton, head of the law of the sea division at the UK Hydrographic Office and an international expert on the process, said preliminary talks on Rockall are being held in Reykjavik, Iceland, next week.

Mr Carleton believes the Falklands claim has the most potential for acrimonious political fallout. Britain and Argentina fought over the islands 25 years ago, and the value of the oil under the sea in the region is understood to be immense: seismic tests suggest there could be up to 60m barrels under the ocean floor.

Britain has been granted licences for exploratory drilling around the islands within the normal 200-mile exploration limit and any new claim to UNCLCS would extend territorial rights further into the Atlantic.

"It would be beyond the 200-mile limit but less than 350 miles," said Mr Carleton, who is involved in preparing the submission. "It effectively joins up the area around South Georgia to the Falklands. It's a claim but how it's handled has not been decided yet. The Argentinians will say it's not ours to claim. It's all a bit tricky."

Martin Pratt, director of research at Durham University's international boundaries research unit, added: "The Russians may be claiming the Arctic but the UK is claiming a large chunk of the Atlantic. Some states might ask why a big power is entitled to huge stretches of the ocean's resources thousands of miles away from its land, but that's the way the law is."

Because of the sensitivities - earlier this year Buenos Aires scrapped a 1995 agreement with the UK to share any oil found in the adjacent waters - the first formal application from the UK is likely to centre on Ascension.

The volcanic island, 1,000 miles from the African mainland, sits just to one side of the mid-Atlantic ridge. No gas or oil is likely to be found below the surrounding waters but there could be significant mineral deposits on the ocean floor.

Talks have already begun between Ireland, Iceland and Denmark for the division of rights far out into the north Atlantic. It includes the island of Rockall and the sub-sea Hatton ridge. The competing claims are nowhere near final resolution although Ireland and the UK have agreed a common boundary..."

TOKYO (Reuters) - "The dollar dipped to a 15-year low against a basket of currencies on Monday and hovered near a record low against the euro as investors shrugged off more gripes about the single currency's strength from French officials.

Activity was subdued with financial markets in Tokyo, Asia's top currency trading centre, closed for a national holiday. Markets in South Korea and Taiwan were also shut for holidays.

Market players are keeping a close eye on whether the dollar breaks the all-time low of 78.19 struck on its trade-weighted index in 1992, a level that analysts said would provide a key test of whether the U.S. currency's sell-off deepens or pauses.

The dollar index slipped to a 15-year low of 78.398 and was down 0.1 percent from late U.S. trade on Friday at 78.480.

"It's a general sentiment continuation of dollar weakness," said a senior currency trader at a European bank in Singapore.

The retreat in the dollar index came as the euro edged up slightly to $1.4100 and climbed as high as $1.4118, just shy of the record peak of $1.4121 hit on Friday on trading platform EBS.

The Federal Reserve's 50-basis point cut in overnight rates last week to 4.75 percent stirred expectations for even more monetary easing that would erode the dollar's interest rate appeal compared with the euro and higher-yielding currencies.

The news comes amid reports that Israel launched an air strike against Syria this month over a suspected nuclear site.

Citing two unidentified sources, Newsweek said former Cheney Middle East adviser David Wurmser told a small group several months ago that Cheney was considering asking Israel to strike the Iranian nuclear site at Natanz.

A military response by Iran could give Washington an excuse to then launch airstrikes of its own, Newsweek said.

Wurmser's wife, Meyrav Wurmser of the neoconservative Hudson Institute think tank, told Newsweek the claims were untrue.

Wurmser left Cheney's office last month, the magazine reported. The steady departure of neoconservative hawks from the administration has also helped tilt the balance against war, it said.

Washington has been pursuing diplomatic efforts to persuade Iran to alter its nuclear program. It has refused to take military options off the table, even U.S. resources are taxed by having 169,000 troops in Iraq.

Although some intelligence sources say Iran is years away from nuclear capability, Israel believes that military action may be necessary as early as 2008, Newsweek said.

NEW YORK (Reuters) - "Recent accidents and spills have made the U.S. energy industry more risk-averse in the face of potential hurricanes, leading to more extensive precautionary shutdowns than in the past and adding to supply disruptions during hurricane season.

This week a cluster of wind squalls that for a time threatened to form into a storm triggered mass evacuations of offshore oil rigs and shut nearly 63 percent of the Gulf's crude oil output.

The shutdown was the largest in the Gulf of Mexico since 2005 when massive hurricanes Katrina and Rita barreled across the offshore rigs and into the coast, inflicting billions of dollars in damage. Yet by Friday, little damage was expected and companies were already preparing to resume production.

"Most companies are just hypersensitive these days about protecting their employees," said Jim Ritterbusch, president of Ritterbusch and Associates. "It's not just because they want to keep good workers, but it is also an immense public relations issue at the moment."

A deadly explosion at BP's oil refinery in Texas in 2005 which killed 15 workers and an oil spill at its field in Alaska in 2006 had focused the industry to improve its record on safety and the environment.

Oil industry association the American Petroleum Institute said companies were particularly concerned with storm safety in the Gulf of Mexico after the devastating storms of 2005.

"It's an individual company decision but after Rita and Katrina we had a series of discussions and dialogues about best practices and I'd expect them to put those to use," said John Felmy, API director.

The currency reached as high as 99.99 U.S. cents, and hasn't equaled $1 since November 1976, when Pierre Trudeau was Canada's prime minister. Gold rose to a 27-year high today as the U.S. dollar sank to a record low against the euro, spurring demand for alternative investments. Crude oil set a record high yesterday.

``I don't see any barrier in the way of parity now,'' said Toronto-based James Dutkiewicz, who manages C$5 billion in fixed- income assets at CI Investments Inc., Canada's second-largest mutual fund manger. ``This is a story of U.S. dollar weakness, the commodity boom, and our unparalleled fiscal situation among the Group of Seven countries.''

Canada's dollar climbed 1.4 percent to 99.84 U.S. cents at 9:49 a.m. in Toronto, and gained against another 15 major currencies.

So-called option barriers are in place at the $1 level, ``which the currency has to surpass before reaching parity,'' said David Bradley, director of currency trading at Scotia Capital Inc. in Toronto. ``My sense is that we'll get there in the next 24 hours. Sentiment is very strong for the Canadian dollar. Everything is in place for the Canadian dollar to continue to appreciate.''

Canada has benefited from rising demand for copper, gold, wheat and oil from the U.S. and from emerging economies such as India and China. The country is the world's largest producer of uranium, the second-biggest exporter of natural gas, and sits on the largest pool of oil reserves outside the Middle East. Canada is also the second-largest exporter of wheat, which rose to a record this month.

Canada's economy is set to expand 2.5 percent this year, outperforming the U.S. for the first time in five years, according to a Bloomberg survey this month.

Rising tax revenue and energy royalties have allowed the Canadian government to post 10 straight annual budget surpluses, the only country among the Group of Seven nations with a balanced account. Canada's total consolidated revenue rose 25 percent during the past five years to C$601.26 billion.

Traders sold U.S. dollars today, driving the currency weaker than $1.4 per euro for the first time, on speculation the Federal Reserve will continue to reduce interest rates, dimming the allure of U.S. assets. The U.S. dollar fell today against 15 of 16 major currencies tracked by Bloomberg.

While the Fed cut its benchmark rate by half a percentage point on Sept. 18 to 4.75 percent to revive growth, Canada's central bank raised rates in July and may increase them again this year to stem inflation, futures contracts show. Canada's key rate is 4.5 percent.

The yield on the benchmark two-year Canadian government bond rose 4 basis points, or 0.04 percentage point, to 4.28 percent. The price of the 3.75 percent security maturing in June 2009 fell 7 cents to C$99.14. Bond yields move inversely to prices.

The Bottom Line: The only consensus about the coming economic storm is "we don't know exactly when or how". That and it's a matter of "when", not "if".

      WASHINGTON (Reuters) - "The decline in the world’s oil supply offers no sudden dramatic event that would appeal to the writer of “apocalyptic” science fiction: no mushroom clouds, no flying saucers, no giant meteorites.

      The future will be just like today, only tougher. Oil depletion is basically just a matter of overpopulation — too many people and not enough resources.

      The most serious consequence will be a lack of food. The problem of oil therefore leads, in an apparently mundane fashion, to the problem of farming.

      To what extent could food be produced in a world without fossil fuels? In the year 2000, humanity consumed about 30 billion barrels of oil, but the supply is starting to run out; without oil and natural gas, there will be no fuel, no asphalt, no plastics, no chemical fertilizer. Most people in modern industrial civilization live on food that was bought from a local supermarket, but such food will not always be available. Agriculture in the future will be largely a “family affair”: without motorized vehicles, food will have to be produced not far from where it was consumed. But what crops should be grown? How much land would be needed? Where could people be supported by such methods of agriculture?

...

...

...

When Will Mechanical Agriculture Be Abandoned?

      One way of determining when oil-based agriculture will be abandoned is strictly economic: when it costs farmers more money to use machinery than to use hand tools, they will go back to hand tools. In the study of Mexican labor mentioned by Pimentel, “a total of 1,144 hours of labor was required to raise a hectare of corn.” Pimentel then compares that labor with the mechanized corn production in the United States, telling us that “600 liters of oil equivalents [for fuel, fertilizer, and pesticides] are required to cultivate 1 ha of corn.” The ratio of hours to liters therefore seems to be approximately 2:1.

      Modern grain-corn production in the US, however, results in yields of about 6,000 kg/ha, about 3 times as great as in the Mexican example. If we include that factor of higher yield, the previous 2:1 ratio of hours/liters must really be regarded as 6:1.

      To discover whether mechanization is cost-effective, we must insert a number for hourly wage. If the laborer is self-employed, however, the figure for hourly wage seems purely imaginary: If costs are rising, for example, can the laborers not simply pay themselves less? Only to a certain degree. The laborer’s wage is often as little as it takes to keep body and soul together, but anything less than that subsistence wage would make farming impossible.

      The rise in the price of fuel, combined with the hourly wage, then, determines the cut-off point for mechanized labor. When farmers pay themselves a certain amount for 6 hours of work, but the price of fuel is equal to that amount, the 6:1 ratio has been reached, and it would be reasonable for the farmer to give up mechanization.

      Two other factors must be included if we are to compare manual labor with mechanization. Capital costs are higher with mechanization: a tractor must be paid for, there are repairs to consider, and eventually the tractor must be replaced. For now, however, let us assume that the laborer is working with a minimum of equipment. Secondly, in spite of what was said above about subsistence wages, farming income is higher in some countries than in others, and the same can be said of fuel costs. Farmers in Mexico, with high fuel costs and low wages, might be inclined to abandon mechanization sooner than farmers in the United States.

      Food, of course, can also be produced with the labor of horses or oxen, and in fact many hours of human labor can thereby by saved. Even if animals are fed only on forage, however, a good deal of land is needed for that purpose. It is also questionable whether large numbers of horses or oxen could be bred and distributed in the next few decades. There is also the question of “alternative energy,” in the sense of solutions involving advanced technology, but such innovations would probably serve little purpose without fossil fuels to provided at least an infrastructure [7,8].

      What will be the price of gasoline in a few years’ time? (“Current dollars” are used here; it is misleading to speak of “inflation-adjusted energy prices,” since it is mainly energy shortages that cause inflation in the first place [3].) US gasoline prices increased over the quarter-century before 2003 only at the same rate as the median income [16], with the exception of some small deviations during periods of warfare. In recent years, however, prices have risen by 18% per year [6]. With such a growth trend, a gallon of US gasoline will cost $60 in 2025, and $140 in 2030, although number-juggling of that sort soon becomes highly speculative.

      For the sake of a thought-experiment, however, we might take a closer look at those price projections. Let us recall the 6:1 ratio of hours-versus-liters at which it is no longer cost-effective to use mechanization. A cost of $140/gallon in 2030 would equal $36/liter. If 6 hours of labor should also happen to cost $36, a sensible farmer would decide to give up mechanization at that point. In countries poorer than the US, that cut-off point would actually arrive well before the year 2030.

      The other way of estimating a cut-off date for oil-based agriculture, of course, is to look at predictions of the decline in global oil production. According to the latest annual report of BP Global [1], “proved reserves” are only 1.2 trillion barrels (excluding a little from Canadian tar sands), although that figure inches up slightly from one annual report to another. A trillion barrels of oil is not enough to stretch more than a few decades. A continuation of an 18% annual increase in the cost of gasoline may seem absurd, but that figure closely matches the likely bell curve for global oil production: a decline from 30 billion barrels (5 barrels per person) in the year 2000 to 11 billion barrels (1 barrel per person) in 2030 would be an average annual decrease of 22%. It is not only gasoline prices and estimated oil reserves that have an ominous chronological relationship: it is surely not merely coincidental that there has recently been a spate of legislation, in several countries, for ethanol and other biofuels, in spite of the economic and ecological absurdity of such forms of “alternative energy.”.."

NEW YORK (BBC) - "Iran's President Mahmoud Ahmadinejad has issued a tough warning to any country considering an attack on Iran.

He said Iran's forces were just for defence, but that anybody who attacked would experience nothing but regret.

He urged those he called the occupiers in the region - an apparent reference to the US and its allies in Iraq - to admit defeat and withdraw their troops.

Mr Ahmadinejad was speaking at a huge annual military parade marking the anniversary of the Iran-Iraq War.

On display at the parade was Iran's latest military hardware, including new long-range missiles and Saeqeh fighter jets.

According to the Associated Press news agency some of the lorries carrying Iranian missiles bore anti-US and anti-Israeli slogans.

"Those who prevented Iran, at the height of the [1980-88 Iran-Iraq] war from getting even barbed wire must see now that all the equipment on display today has been built by the mighty hands and brains of experts at Iran's armed forces," Mr Ahmadinejad said.