Sterling collapsed from just under $1.5580 to just over $1.5480 in a matter of seconds at almost exactly the same moment that surprisingly strong manufacturing data were released at 9.30 am on Monday. The pound immediately rebounded to $1.5550, suggesting somebody took a bath on the hasty transaction.

"It was a miss-hit on cable and we hear an algo just stuck an offer at $1.5480 in the machine which should have been $1.5580," one trader said. Kathleen Brooks, research director at Forex.com, added: "The market legend is that it did spike down due to some sort of mis-trade. Usually when something like that happens, everyone blames an algorithm or a hedge fund."

Somehow it seems, in the trading world, a fat finger can be judged to belong to an algorithm rather than the programmer who built the algorithm. As it turned out, the mistake proved prescient. After the early rebound, sterling slumped again as currency investors dumped the euro and bought the dollar. Sterling rose 0.47 cents to 1.1659 as the euro crashed to an eight-month low against the dollar.

Two things became clear at the end of last week - a week that many pundits had prematurely predicted would spell the end of the center-right coalition of the CDU, its Bavarian sister party the Christian Social Union and the FDP.

First, the government can rely on its own parliamentary majority to push through euro bailout legislation - at least for the time being.

Second, Merkel's finance minister, of all people, has sown doubt about the government's crisis management.

Many German politicians are also insinuating that he has a hidden agenda. They fear that one of the last fully committed supporters of the European project is taking advantage of the crisis to advance his dream of a United States of Europe - at almost any price. Even the chancellor is sometimes annoyed by the finance minister's moves. The government may have survived yet another vote last Thursday, but the hurdles will be even higher next time around.

"The Broken Jug" is one of the most frequently performed plays in German theater. With the village judge Adam, who passes judgment on a crime he committed himself, Heinrich von Kleist created one of the classic comedic figures of world literature. US President Barack Obama currently seems to be portraying a modern version of Kleist's village judge. He is increasingly vocal in his criticism of Europeans for supposedly having exacerbated the ongoing economic crisis with their caution. His audience, however, seems to sense that the plight Obama is lamenting originated in his own country.

It stems from a doctrine that has dominated economic thought for the last two decades and consists of two elements: turbo-capitalism, whose only tenet is that any regulation of financial markets inhibits growth, and its more accommodating but no less dangerous brother, turbo-Keynesianism.

American economists, central bankers and fiscal policy makers have reinterpreted British economist John Maynard Keynes's clever idea that government spending is the best way to counteract a serious economic downturn - and have turned it into a permanent prescription. In their version of the Keynesian theory, declining growth or tumbling stock prices should prompt central banks to lower interest rates and governments to come to the rescue with economic stimulus programs. US economists call this "kick-starting" the economy.

The only problem is that this method of encouraging growth has not stimulated the US economy in recent years, but in fact has put it on a crash course. From the Asian economic crisis to the Internet and subprime mortgage bubbles, economic stimulus programs by monetary and fiscal policy makers have regularly laid the groundwork for the next crash instead of encouraging sustainable growth. In the last decade, the volume of lending in the United States grew five times as fast as the real economy.

Cheap money created the fertilizer for the excesses of the US financial industry. Low interest rates seduced mortgage providers into talking even the homeless into taking out mortgages. And the same low rates made it easier for investment banks and hedge funds, using increasingly risky loan structures, to transform the once-leisurely insurance and bond markets into casinos.

Now the bubble has burst. This has not, however, prompted the US government to conclude that its prescriptions could have been wrong. On the contrary, now it wants to increase the dose. [Mr] Obama plans to follow the largely unsuccessful 2008 economic stimulus program with a new program this year. Meanwhile, Federal Reserve Chairman Ben Bernanke says that he intends to flood the economy with cheap liquidity - for years, if necessary.

The real problem, though, is a different one. The US economy doesn't lack money. Rather, it lacks products that can compete in the global marketplace. The country has a deep trade deficit, yet the Obama administration is borrowing money at the same rate as near-bankrupt Greece.

The fact that Europeans are unwilling to comply with [Mr] Obama's strange logic gives reason for hope. It makes no sense to pile up more and more debt on already unstable piles of debt. The world doesn't have too little debt, but too much. [Mr] Obama should retract his advice, or he might end up like the village judge in Kleist's comedy. When his deception was discovered, he was forced to flee and his days as a judge came to a rapid end.

Between now and mid-December, the sheer onslaught of high-level gatherings - whether euro zone finance officials, EU leaders or the G20 - is likely to force a resolution of the most pressing issues confronting policymakers as they battle to get to grips with Greece, Spain and Italy. On Monday and Tuesday, euro zone finance ministers meeting in Luxembourg will discuss how they can increase the firepower of the European Financial Stability Facility, the bailout fund set up last year and so far used to help Ireland and Portugal.

The aim is to give the EFSF far greater clout than its 440 billion euro capacity, either by leveraging its capital in some way or by using it to guarantee only a portion of at-risk euro zone sovereign debt, allowing its funds to stretch further. While no decisions are expected in Luxembourg, it will prove critical preparatory work for when all 17 euro zone countries have ratified changes to the EFSF agreed in July, changes that will allow the facility to lend to governments preemptively and help recapitalise banks, among other steps.

Guntram Wolff, the deputy director of Bruegel, a think-tank whose analysis frequently informs EU policymaking, told Reuters late last month, referring to a default. "In the middle of October I think there will have to be a decision not to go ahead with the current PSI (private sector involvement) and in November you look at a more fundamental debt restructuring.

That may not come in time for the G20 heads of state meeting in Cannes on November 3/4, but it could arrive by a meeting of euro zone finance ministers in Brussels on November 29, and sharpen the minds of EU leaders as they prepare to meet for their last summit of a hectic year on December 9.

In a coordinated response, the Chinese central bank and the ministries of commerce and foreign affairs accused Washington of "politicizing" global currency issues. The bill to be debated in the United States this week violates World Trade Organization rules and forcing the yuan to appreciate would weaken joint efforts to revive the global economy, the foreign ministry said.

"By using the excuse of a so-called 'currency imbalance', this will escalate the exchange rate issue, adopting a protectionist measure that gravely violates WTO rules and seriously upsets Sino-US trade and economic relations," foreign ministry spokesman Ma Zhaoxu said in a statement posted on China's official government website (www.gov.cn) on Tuesday.

"China expresses its adamant opposition to this."

US senators voted on Monday to open a week of debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the US government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies. US lawmakers, eyeing 2012 elections, said the undervaluing of China's currency had cost American jobs and that a fairer exchange rate would help cut an annual trade gap of $250 billion.

Concerns over the banking sector's exposure to euro zone sovereign debt and plummeting asset values across the board prompted a further sharp widening of credit default swaps. With private sector economists cutting growth forecasts in the face of a darkening economic picture, the weakening outlook for industrial demand weighed on copper and oil, while flight-to-safety strengthened gold, the yen and the dollar.

"Investors are cutting their exposure to risk as the most extreme risks - such as Greek default - are looming closer than they expected," said Jung Sang-jin, a senior fund manager at Dongbu Asset Management. Economists at Goldman Sachs said they now expected the euro area to slip into recession beginning in the fourth quarter, and cut their 2012 growth forecast for the United States to 1.4 percent, from 2 percent, as the crisis bites.

Investor preference for safer assets accelerated flows into gold, pushing the market up 1 percent while copper tumbled 4 percent as investors dumped the industrial metal on worries over a slowdown in growth and turned to dollar holdings. European policymakers met on Monday to discuss ways to leverage the euro zone's rescue fund and pressure Greece to implement agreed structural reforms.

Habib, 34, is one of a new generation of rich young Afghans driving flashy cars and wearing designer labels who have made fortunes in Afghanistan's war economy since the US-led invasion 10 years ago. His shop is one of many signs that some in the Afghan capital are now very wealthy - although Kabul's mirrored glass malls and lavish mansions often sit on dusty roads dotted with children begging for money, highlighting wider, ingrained poverty.

And despite their wealth, many of the city's yuppies are worried that the withdrawal of US-led combat forces in 2014 will mean security declines and the economic boom turns to bust. "Not only me but every investor I know expects the bubble that created this economy will burst as soon as foreign aid is cut or when foreign troops leave in 2014," said entrepreneur Ahmad Lais.

Another young Afghan entrepreneur, car dealer Haji Zabiullah, echoed many of his wealthy countrymen by suggesting he could take his wealth elsewhere, for instance Dubai, if the economic and security situation gets too bad. "I might have to transfer my investments to another country if the Americans leave," he said. The vast majority of Afghans, who remain dirt poor and locked into a predominantly agrarian economy, do not have that option.

Instead, the country finds itself in a vicious circle - a death spiral, some would say - in which it is borrowing ever more to keep up on its existing debts, crushing growth in the process and thereby worsening its all-important ratio of debt-to-gross domestic product. Springing the debt trap would not be a miracle cure either: a manageable level of borrowing is a necessary but not a sufficient condition for Greece to start restoring competitiveness and resume growth after three years of economic contraction.

"If there was a deus ex machina tomorrow and you halved Greece's debt-to-GDP ratio overnight, there'd obviously be a huge benefit in terms of cash flow," said George Magnus, senior economic adviser to UBS in London. "So you can alleviate the financial stress on Greece quite quickly and effectively, but I don't think that in and of itself means the economy is going to grow," he said.

Lax lending by euro zone creditor nations, led by Germany, was as much to blame as unbridled borrowing by the currency bloc's periphery, economists Stephen King and Janet Henry at HSBC argued: "The solution lies in a much greater pooling of sovereignty over bond issuance and fiscal policy."

"Germany is a prolific saver and Greece is a prolific borrower. How do you manage that relationship so that the Greeks can borrow less and the Germans don't lend as much? That's ultimately the acid test about whether monetary union will work," Magnus said.

Putin said the new union would build on an existing Customs Union with Belarus and Kazakhstan which from next year will remove all barriers to trade, capital and labor movement between the three countries. "We are not going to stop there and are setting an ambitious goal - to achieve an even higher integration level in the Eurasian Union," Putin wrote in an article which will be published in Izvestia newspaper on October 4.

Putin wrote that he saw the way out of the global crisis through a regional integration, mentioning the European Union, Asia-Pacific Economic Cooperation, the North American Free Trade Agreement and the Association of Southeast Asian Nations as examples. "These 'bricks' can assemble into a more stable global economy," Putin wrote.

Members of the Syrian National Council (SNC) said it would be an umbrella group for opposition groups inside and outside the country and a vehicle for democratic change. The council aims at "achieving the wishes and hopes of our people in overthrowing the current regime... including the head of this regime," according to a statement read by opposition figure Burhan Ghalioun at a news conference in Istanbul on Sunday.

The development came after another bloody weekend in Syria's six-month uprising which has left 2,700 dead, according to UN estimates. In one of the fiercest clashes of the insurrection, Syrian troops finally took control of the town of Rastan after five days of intense fighting with army defectors who sided with protesters. Syrian authorities said they were fighting armed terrorist gangs.

The Syrian opposition consists of a variety of groups with differing ideologies, including Islamists and secularists. The new council is the broadest umbrella movement of revolutionary forces formed so far. Ghalioun said that the council aims to present a united front for the opposition, and urged Syrians everywhere to support it. He said he was not worried about whether the international community recognised the council, although it would provide a single body with which other countries could coordinate.

The change, which is due to take place within weeks, has been made following claims the original form was 'discriminatory' and failed to include same-sex couples looking after a child. It has led to claims the official travel document is being turned into a 'PC passport'.

Campaigners for family values said the move 'denigrated' the roles of parents bringing up children in traditional families. Norman Wells, director of the Family Education Trust, said: 'Fathers and mothers are not interchangeable but have quite distinct roles to play in the care and nurture of their children. To speak of "parent 1" and "parent 2" denigrates the place of both fathers and mothers. Much as the equality and diversity social engineers might wish it were otherwise, it still takes a father and a mother to produce a child.'

The decision follows the revelation last month that details of the holder's sex could be erased from all passports to spare transgender people from embarrassment.

The latest shift follows lobbying from gay rights groups, who argue that the current passport application form fails to recognise same-sex couples who are both officially registered as a child's parents.

Mr Wells added: 'Like the Labour administration before it, the Coalition seems to be in Stonewall's grip. It is high time ministers started to represent the interests of the country as a whole and not capitulate to every demand made by a vocal and unrepresentative minority.'

"Part of my platform is, of course, the guilty must be punished and that we no longer let our children see their guilty leaders getting away with murder. Because it teaches children, you know, that they don't have to have any morals as long as they have guns and are bullies and I don't think that's a good message," Barr told Russia Today (RT).

"I do say that I am in favor of the return of the guillotine and that is for the worst of the worst of the guilty.

"I first would allow the guilty bankers to pay, you know, the ability to pay back anything over $100 million [of] personal wealth because I believe in a maximum wage of $100 million. And if they are unable to live on that amount then they should, you know, go to the reeducation camps and if that doesn't help, then being beheaded," Barr said with a straight face.

He reiterated that eurozone leaders had to take quick and decisive action. Mr Cameron said that, as 40% of UK exports went to the eurozone, it could not shield itself from the problem. The prime minister said the UK government had "a very clear view" of what needed to be done, and that it was pushing this with its partners in Europe and the International Monetary Fund (IMF).

He said eurozone leaders had to strengthen the region's financial mechanisms, ensure the greater involvement of the IMF, and deal decisively with the high levels of sovereign debt. Mr Cameron added: "Action needs to be taken in the next coming weeks to strengthen Europe's banks, to build the defences that the eurozone has, to deal with the problems of debts decisively." He said these emergency measures were needed before any long-term plans of more economic coordination across the eurozone were introduced, such as a single tax system.

The wider fear is that Greece will ultimately default on its debt payments, and of the knock-on effect this would have on banks across Europe which own Greek government bonds. Some commentators also warn that Greece may ultimately have to leave the eurozone, plunging the region's economic and political systems into chaos.

They will do so before the private sector is ready to grasp the baton, and without stimulus from the trade surplus states (Germany, China, Japan) to offset the contraction in demand. Put another way, there is a chronic lack of consumption in the world. "This probably comes as a surprise to most people, gorged on propaganda about excessive debt and the need for retrenchment," said Charles Dumas from Lombard Street Research.

The inevitable outcome of one-sided austerity polices in the Anglo-sphere and Club Med is a self-feeding downward slide for the whole global system, a variant of 1930s debt-deflation. "Excess savers refuse to acknowledge that if world savings are demonstrably too high, healthy recovery depends on the surplus countries saving less," he said.

In Europe, policy is still on deflationary settings, with Italy and Spain having to tighten fiscally yet further to meet their budget targets.

The European Central Bank is overseeing a collapse in real M1 deposits in Italy of around 6 per cent, annualized over the last six-months. Michael Darda from MKM Partners said the ECB has made such a hash of monetary policy that nominal GDP for the whole eurozone may even start to contract. That is astonishing. If correct, there is no hope of averting a debt spiral in Italy and Spain. Any such outcome will test the EU's bail-out machinery to destruction within months.

Mr King's "disastrous collapse" is staring policy-makers in the face.

In Europe, French and Belgian government officials are due to meet on Monday to discuss the crisis enveloping Dexia as speculation mounts about a possible break-up of the Franco-Belgian lender. Last week, the cost of insuring Dexia bonds hit an all-time high of 900 basis points, nearly double the level just two months ago, meaning the annual cost to insure 10 million euros (8.59 million pounds) of the bonds is 900,000 pounds.

"The money ran out in June and what you are seeing now is the beginning of a new credit crunch, except this time it will be truly global, not Western," said one senior London-based credit analyst. Dexia, along with other European lenders, has been hard hit by the closure of the interbank lending markets and the continuing unwillingness of investors to buy the bonds of eurozone banks.

"Nothing is really working at the moment. None of the markets are functioning. Until Greece defaults it's hard to see any resolution," said one senior London-based credit analyst.