The US Treasury says it will be forced to default on its obligations if Congress does not raise the $14.3 trillion debt ceiling, which caps how much it can borrow, by August 2. The Treasury has not specified which bills it wouldn't pay, but the prospect of its missing interest or principal payments on any outstanding debt is a terrifying one for Wall Street.

Even temporary default would erode the United States' status as the world's most powerful economy and the dollar's role as the dominant global currency. "It would be catastrophically bad to tell the world that the United States is willing to default on its obligations," said Gregory Whiteley, who helps manage $12 billion in assets at DoubleLine Capital in Los Angeles. "Even if the default only lasted a few days, the precedent would be set."

A default would undermine confidence in Treasuries, the world's safest asset and the benchmark for the global bond market, particularly if ratings agencies were to cut the United States' prized AAA credit rating. If investors start demanding higher returns for holding riskier US debt, the rise in bond yields would crank up borrowing costs for consumers and businesses. This in turn could tip a still fragile economy back into recession.

Standard and Poor's told Reuters last week it would waste no time cutting the top-notch US credit rating if Treasury missed a $30 billion debt payment on August 4. Robert Tipp, chief investment strategist at Prudential Fixed Income, with $240 billion in assets, said long-term interest rates could swiftly rise by up to 50 basis points.

Based on the projected budget deficit, that amounts to an extra $70 billion in interest costs - a fairly hefty price to pay for a country already facing a large debt burden. Robert Brusca, chief economist at Fact and Opinion Economics, reckons a default could be a lot more costly, knocking Treasury prices down 5 to 10 points in a day - a violent and unusual move. "This could be a horror show."

In a startling response to the scandal engulfing Murdoch's media empire, the British newspaper arm of News Corp announced it would publish the 168-year-old News of the World for the last time this weekend. As allegations multiplied that its journalists hacked the voicemail of thousands of people, from child murder victims to the families of war dead, the tabloid haemorrhaged advertising, alienated millions of readers and posed a growing threat to Murdoch's hopes of buying broadcaster BSkyB.

The scandal has also become an embarrassment for Cameron. The prime minister chose former News of the World editor Andy Coulson as his communications director, even though one of Coulson's reporters and a private investigator had been convicted of hacking into the phones of royal aides. Coulson insisted he knew nothing about it, but as new allegations surfaced, Coulson resigned from Cameron's team in January.

The Guardian reported that Coulson would be arrested on Friday over suspicions that he knew about or had direct involvement in phone hacking during his editorship of the News of the World from 2003-2007. The announcement on Thursday that the News of the World was to close was one of the most dramatic in the 80-year-old Murdoch's controversial career, and is widely seen as an effort to prevent the crisis spreading beyond the tabloid to more lucrative parts of his empire.

Murdoch's son James, who chairs the British newspaper arm of News Corp, said the News of the World, which his father bought in 1969, had been "sullied by behaviour that was wrong. Indeed, if recent allegations are true, it was inhuman and has no place in our company," he said in a statement.

Growing popular and political anger over the phone hacking saga had spurred concerns that there could be snags in securing government approval for News Corp's $14-billion (8.77 billion pounds) bid for BSkyB, of which it already owns 39 percent. Cameron's government has given an informal blessing to the takeover, despite criticism on the left that it gave Murdoch too much media power.

Investigations into phone hacking at the tabloid have been bubbling for several years. Until recently only celebrities and other public figures were believed to have been victims. But the scandal exploded earlier this week after revelations that an investigator working for the paper may have listened to - and deleted - the voicemail messages of a missing 13-year-old schoolgirl, later found murdered.

The scandal deepened on Thursday with claims News of the World hacked the phones of relatives of British soldiers killed in Iraq and Afghanistan. Several major brands pulled advertising from the title. Police have also been criticised over allegations officers took money from the News of the World for information.

Admiral Michael Mullen, speaking to the Pentagon Press Association, said Iran had curtailed weapons shipments, including powerful rockets and roadside bombs, in 2008 but resumed them recently. Top-level officials in Tehran know about the weapons shipments, he said.

"Iran is very directly supporting extremist Shiite groups which are killing our troops," said Admiral Mullen, chairman of the Joint Chiefs of Staff. "There is no question they are shipping high-tech weapons in there... that are killing our people. And the forensics prove that."

The Wall Street Journal first reported in its weekend editions that Iran's Islamic Revolutionary Guard Corps was shipping arms to allies in Iraq and Afghanistan. Iranian officials interviewed for that article denied the charge. On Thursday, two more US troops were killed by a roadside bomb outside a Baghdad military base. Officials believe an explosively formed projectile, many of which are manufactured in Iran, was responsible. The weapons are designed to penetrate layers of armor.

For decades Sudan had been at war with itself, with around two million people being killed and the development of the nation - both North and South - held back. The latest bout of civil war, which began in 1983, came to an end with a Comprehensive Peace Agreement, signed by both sides in 2005. South Sudan became independent after a massive majority of 99% pledged support for cutting the ties with Khartoum.

But the price of independence is still to be fully calculated. There is as yet no official demarcation of the actual borderline between North and South and there has been fighting in the border area in recent weeks. The United Nations has peacekeeping troops in the town of Abiyei after Northen forces raided the area several weeks ago.

The other big deal for both North and South is oil. Eighty per cent of the reserves are in the South, but the majority of the refineries, and crucially the pipeline to the outside world, are in the North. Currently the revenues are split 50/50, but that agreement lapses with independence and there is no replacement as yet.

London educated Lieutenant General Majak D'Agoot, who heads the South's intelligence service, says all the people, both North and South, are "tired of war". But he says that if the South is pressed "the two states may spiral into a perpetual state of warfare". A challenging backdrop to the first steps into nationhood.

They called on the Government to 'put its money where its mouth is' and use receipts from fuel and aircraft duties to improve public transport rather than just fill Treasury coffers. The Environmental Audit Committee also urged ministers to restore the public's trust by using green taxes more carefully and more openly. The report came just days after official figures showed that green taxes topped more than 40 billion pounds for the first time last year. Most fell on motorists, who paid a highest-ever amount of 27 billion pounds in fuel duties.

But air passengers paid a further 2 billion pounds, while the tax on rubbish, landfill tax, for the first time raised more than 1 billion pounds. A further half billion pounds came from green taxes on energy companies which are passed on to consumers.

Green taxes are forecast to rise as a proportion of all taxation until 2014. After that they will level out, the report said.

Critics say too many green taxes are stealth taxes and have called for greater transparency. Energy watchdog Ofgem estimates the average householder pays around 100 pounds a year in hidden green taxes on their electricity and gas bills.

Climate change sceptics claim the real cost could reach 150-200 pounds.

But in a bid to foil airport scanners, the militants may have taken the most drastic measures, cutting themselves open and planting bombs within their bodies, leaked US intelligence suggests. Authorities have already been on high alert since the death of Al Qaeda leader Osama Bin Laden in May, ramping up security at airports, government buildings and other facilities in case of a retaliatory strike.

And security will now be boosted further at airports after Homeland Security officials warned air carriers and other world leaders about the possibility of the 'body bomber' attacks on commercial flights. Security services believe the move by terrorists to surgically implant explosives was prompted by the introduction at airports of body scanners, designed to catch them before they board flights.

It is thought male bombers would have the explosive secreted near their appendix or in their buttocks, while females would have the material placed inside their breasts, in the same way implants are inserted. Experts said bombers would be surgically cut open, the explosive PETN (Pentaerythritol Tetranitrate) would then be placed in a plastic sachet inside his or her body before the wound was stitched up like a normal operation incision and treated to heal.

A shaped charge of 8oz of PETN can penetrate five inches of armour and would easily blow a large hole in an airliner.

The explosives would be detonated by the bomber using a hypodermic syringe to inject TATP (Triacetone Triperoxide) through their skin into the explosives sachet - a method which has created a serious fear that the body-bombers could pretend to be diabetics injecting themselves in order to prevent anyone stopping their suicide missions.

A 12-inch Exxon pipeline ruptured on Friday night about 150 miles downstream from Yellowstone National Park near the town of Laurel, Montana, southwest of Billings, dumping up to 1,000 barrels, or 42,000 gallons, of crude oil into the flood-swollen river.

Toxic fumes from the oil overcame a number of people who reported breathing problems and dizziness and were taken to local hospitals. But state and federal officials on Tuesday said they lacked a tally of health problems or the number of riverside homes that were evacuated after the accident.

The US Department of Transportation on Tuesday ordered Exxon to re-bury the pipeline underneath the Yellowstone river bed to protect it and conduct a risk assessment on the 69-mile long pipeline where it crosses any waterway. It must then submit a restart plan before operations can resume.

"The investigation into this incident is ongoing," said Transportation Secretary Ray LaHood. "When companies are not living up to our safety standards, we will take action. We will continue to work with the EPA, while ensuring that those responsible are held accountable."

UK interest rates have stood at 0.5 percent since March 2009, when a deep recession and the threat of deflation prompted central banks around the world to slash rates to record lows. Since then, inflation has returned as a force to be reckoned with. Consumer prices are rising more than twice as fast as the Bank would like, but it has been reluctant to tighten monetary policy when the government's massive fiscal tightening is already crimping growth.

"The Bank can do nothing about inflation over the next six months, and will not try to," said Paul Mortimer-Lee, chief global economist at BNP Paribas."It will focus on inflation in two years, which will be much lower than now." After contracting at the end 2010, Britain's economy has struggled to gather pace. Consumer confidence has tumbled, the labour market is stagnant and house prices are flatlining at best.

Well known retail names that have collapsed in the past few months include wine seller Oddbins, home improvement firm Focus DIY, and home furnishings retailer Habitat UK. While the European Central Bank looks set to raise rates this month - its second move since April - all 70 economists polled by Reuters last week predicted that the Bank's key rate would stay at 0.5 percent.

They said Min Zhu, a Chinese national who was a special adviser to former IMF Managing Director Dominique Strauss-Kahn, was expected to fill a new deputy managing director post to be created by the Fund's new chief, Christine Lagarde.

"Min Zhu is expected to be named to deputy managing director," an IMF board member told Reuters. The appointment, which would give China one of the top five management jobs at the Fund, would first need the approval of the 24-member IMF board of member countries.

Lagarde on Wednesday vowed during her first news conference as managing director to give developing nations a greater role in the fund. She said she was considering creating a new high-level job that would be filled by a candidate from an emerging market country. The move should appeal to emerging and developing markets, which have demanded a greater say in the international financial institution to reflect their growing economic clout.

The meaning seems clear. The future is here. Cash is in decline.

You can't use it for online purchases, nor on many airplanes to buy snacks or duty-free goods. Last year, 36 percent of taxi fares in New York were paid with plastic. At Commerce, a restaurant in the West Village in Manhattan, the bar menus read, "Credit cards only. No cash please. Thank you."

There is no definitive data on all of this. Cash transactions are notoriously hard to track, in part because people use cash when they do not want to be tracked. But a simple ratio is illuminating. In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation's economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.

Production of paper currency is declining much more quickly than actual currency use because the bills are lasting longer. Thanks to technological advances, the average dollar bill now circulates for 40 months, up from 18 months two decades ago, according to Federal Reserve estimates.

Banks regularly send stacks of old notes to the Fed, which replaces the damaged ones. Until recently, notes were simply stacked facedown and destroyed, as were dog-eared notes, because the Fed's scanning equipment could not distinguish between creases and tears. Now it can. In 1989, the Fed replaced 46 percent of returned dollar bills. Last year it replaced 21 percent. The rest of the notes were returned to circulation where they may lead longer lives because they are being used less often.

The Hekla volcano is close to the ash-spewing Eyjafjallajokull, which last year caused the biggest closure of airspace shut down since the Second World War, affecting more than 100,000 flights and eight million passengers. "The movements around Hekla have been unusual in the last two to three days," University of Iceland geophysicist Pall Einarsson said.

While this might not necessarily mean an immediate blast, "the volcano is ready to erupt," he stressed. "The mountain has been slowly expanding in the last few years because of magma buildup." Another geophysicist, Ari Trausit Gudmundsson, also said the measurements around Hekla were very "unusual" and that the volcano looked ready to blow. "Something is going on," he said.

The volcano, dubbed the "Gateway to Hell" by Icelanders in the Middle Ages, is one of the country's most active, having erupted some 20 times over the past millennium, most recently on February 26, 2000.

Strange as it may seem, there are still credit rating agencies that give cash-strapped Greece top marks. The experts at Germany's Euler Hermes Rating currently give the Mediterranean country their top AA rating, citing its "very strong business environment." And there is little doubt that Euler Hermes can be trusted. It is the first rating agency that officially meets the tougher European regulations for the industry that were introduced at the end of 2010.

There is only one problem: Their good rating for Greece is not related to the creditworthiness of the state, but to that of Greek companies. When it comes to rating sovereign bonds, that is still done almost exclusively by the three major US-based rating agencies - Standard & Poor's, Moody's and Fitch - who are collectively known as the Big Three.

That is something that European politicians have long wanted to change, and there have been repeated calls to set up an independent European rating agency. Now the European Union is working on its proposal for what such an agency could look like.

The criticism, delivered by German finance minister Wolfgang Schaeuble and the president of the European Commission Jose Manuel Barroso, is the latest attempt to stem the flow of country downgrades. But despite the threat of stricter controls on the big three agencies and continued vocal criticism, Europe's political leaders have so far failed to prevent their rating downgrades.

WHAT DOES BRUSSELS PLAN TO DO TO CURB THE AGENCIES?

The European Union has already introduced rules that require the agencies to spell out how they decide on ratings changes. It is now working on a new law, which it will present by the end of this year, that will start dismantling the role ratings play in determining the value of bank capital or investments, for example.

By robbing credit ratings of their legal status in finance, the EU will stop the ripple effect of a rating demotion which now prompt banks to dump downgraded assets such as government bonds. The new law, which could come into effect as soon as the middle of next year if it wins the blessing of countries and the European Parliament, could also propose a new European ratings agency.

European Commission President Jose Manuel Barroso said the decision to cut Lisbon's rating by four notches so soon after it became the third country to receive an EU/IMF bailout was fuelling speculation in financial markets. The cost of insuring all weaker euro zone states' debt against default rose after Moody's announced the downgrade on Tuesday.

The euro and European shares fell, ending a seven-day stocks rally, and Portugal had to pay more to sell three-month T-bills on Wednesday. "It seems strange that there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe," Barroso told reporters in the European Parliament.

Dropped four notches to Ba2, Lisbon found itself on the defensive in the markets as rattled investors demanded more for their money, with the new government's tough austerity program forgotten quickly in the crossfire. Portugal did manage to raise 848 million euros ($A1.15 billion) for three months at a yield, or rate of return, of 4.926 per cent, but this was up from the 4.863 paid at a similar sale on June 15.

Worse still, the yield on its benchmark 10-year bond soared above 12 per cent for the first time ever, and compared with 10.755 per cent late Tuesday as the downgrade sparked fresh nerves about the whole eurozone debt crisis. "The sale was clearly affected by this decision and investors ended up demanding higher interest when, in the last ten days, short-term rates had fallen," Filipe Silva, fixed-income strategist at Carregosa bank said.

Moody's said its downgrade reflected "the growing risk that Portugal will require a second round of official financing before it can return to the private market (to raise funds)." In other words, it did not believe that a first bailout of 78 billion euros ($A105.86 billion) agreed with the European Union and International Monetary Fund earlier this year would stabilise Portugal's public finances.

It said it was increasingly concerned that Lisbon would not meet the deficit reduction and debt stabilisation targets agreed with the EU and IMF.