It was the most explicit signal yet from Bernanke that the US central bank is likely to ease as soon as its next meeting in November. He also suggested the Fed could indicate a willingness to hold interest rates low for longer than currently expected. "There would appear - all else being equal - to be a case for further action," Bernanke said at a conference sponsored by the Boston Federal Reserve Bank.

However, he said policymakers were still weighing how aggressive they should be if they decide to pursue a further round of asset buying, or quantitative easing, to push borrowing costs lower. "The only question left is the size and scope of QE," said Boris Schlossberg of GFT Forex in New York.

The Congressional Budget Office is projecting that the deficit for the 2010 budget year that ended September 30 will total $1.29 trillion. That's down by $125 billion from the $1.4 trillion in 2009 - the highest deficit on record. Soaring deficits have become a problem for Democrats in an election year focused on the weak economy.

Republicans have tapped into voter angst over the deficits, using the $814 billion economic stimulus and $700 billion Wall Street bailout to paint President Barack Obama and his party as big spenders. Democrats say the recession would have been worse if the government didn't step in with those programs to prop up the economy. They also note that most of the bailout, which began during the Bush administration and was supported by many Republicans in Congress, has been repaid.

Both parties have acknowledged that rising deficits will present headaches for policymakers regardless of which party controls Congress after November. The Obama administration is projecting that the deficit for the 2011 budget year, which began on October 1, will climb to $1.4 trillion. Over the next decade, it will total $8.47 trillion. Deficits of that size will constrain the administration's agenda over the next two years and will certainly be an issue in the 2012 presidential race.

'I actually am one of those who believes, with a grave danger of financial collapse, we're not out of the woods in the Western world yet,' he said in the extraordinary address. 'There is an extremely serious financial crisis.' His remarks appeared to contradict the Prime Minister, who insisted days ago that the Coalition's early decisions have put Britain 'out of the danger zone'.

Mr Clarke said the UK had 'rescued ourselves at the moment', but added: 'If we fail to deliver with the [cuts] programme we're going to set out, we'll be back there all too soon.' Speaking ahead of next week's comprehensive spending review, which will see most Government departments' budgets cut by 25 per cent over four years, the Justice Secretary said: 'These are difficult circumstances.'

In unscripted remarks to a conference of prison governors, Mr Clarke said the review would be 'quite the most dramatic in living memory'.

So far, so familiar: the classic action/reaction cycle in the development of weapons and military doctrine, while the central idea of warfare remains constant. But in the past decade cyberspace has been seen as a battlefield in its own right and as the venue for a new type of warfare. What is cyber warfare and what are governments doing about it? In spring 2007, during a dispute over a Russian war memorial, Estonian government and banking websites were the targets of sustained computer attacks. It was not clear who was responsible - a "flash mob" of Russian computer users, or the Russian government itself?

The "Clickskrieg" was especially disabling for a country that was a pioneer of electronic government and prompted the creation of Nato's cyber defence centre in Tallinn. During the Russo-Georgian conflict over South Ossetia in 2008 it again became clear that private computing power had been coordinated for strategic effect.

Other cyber-warfare events have involved Belarus, Canada, Israel, South Korea, Syria and the United States. China's intentions and capabilities feature more prominently than most in discussions concerning cyber warfare. A growing number of electronic "intrusions" are reported to originate in China, although it is unclear how far this activity is officially approved. China is believed to allocate large resources to computer network operations to enable the People's Liberation Army to dominate the electromagnetic spectrum from the start of any conflict.

According to a US Congress policy review panel in November 2008 : "China is aggressively developing its power to wage cyber warfare and is now in a position to delay or disrupt the deployment of America's military forces around the world, potentially giving it the upper hand in any conflict."

Mr Fox said the Government had a "global vision of Britain's place in the world". He also reinforced his personal stance on the cuts, describing himself as "a hawk on defence", and criticised Labour for "writing cheques it knew could not be cashed". Writing in the Times, he said: "We will continue to be a big contributor to Nato and our interests will be more secure."

His comments came after US politicians suggested an over-enthusiastic reduction in defence spending could affect international security and strain the Special Relationship. Hillary Clinton, the US secretary of state, and Robert Gates, made their unusual public intervention as talks on the defence budget went down to the wire, with the chiefs of the Armed Forces making 11th-hour personal appeals to David Cameron last night.

The Daily Telegraph disclosed last month that US officials were privately concerned that British defence spending was about to fall below 2 per cent of gross domestic product, the minimum standard expected of Nato members. Mrs Clinton and Mr Gates, America's two most senior figures on international relations and security, made those fears public in separate remarks.

Mr Gates attended a meeting of Nato defence ministers in Brussels yesterday, where he delivered his own warning. "My worry is that the more our allies cut their capabilities, the more people will look to the US to cover whatever gaps are created," he told reporters on his flight to Belgium. "At a time when we are facing stringencies of our own, that's a concern for me." Later, he told the Nato meeting: "As nations deal with their economic problems, we must guard against the hollowing out of alliance military capability by spending reductions that cut too far into muscle." The American intervention will increase tensions within Whitehall over the scale of the defence cuts to be announced next week.

Banks foreclosed on 102,134 properties in September, the first single month above the century mark, RealtyTrac said. There were 347,420 total foreclosure filings in September, 3 percent higher than August and 1 percent higher than a year earlier.

"We expect to see a dip in those bank repossessions - and possibly earlier stages of the foreclosure process - in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks," said James J Saccacio, chief executive officer of RealtyTrac.

On Wednesday, all 50 states launched a joint investigation of the mortgage industry after widespread reports of mortgage industry officials signing foreclosure documents without knowing their contents. For the quarter, there were 930,437 foreclosure filings, an increase of 4 percent over the prior three months and 1 percent lower than a year ago. One in every 139 homes received a foreclosure filing in the third quarter.

Increasing expectations the Federal Reserve will pump more money into the US economy next month under a policy known as quantitative easing sent the dollar to new lows against the Chinese renminbi, Swiss franc and Australian dollar. It dropped to a 15-year low against the yen and an eight-month low against the euro.

The dollar index, which tracks a basket of currencies, reached its lowest level this year. A senior European policy-maker, who asked not to be named, said a further aggressive round of monetary easing by the US Federal Reserve would be "irresponsible" as it made US exports more competitive at the expense of its rivals. Simon Derrick, chief currency strategist for BNY Mellon, said: "In narrow terms, the US is winning the currency wars as a weaker dollar will help its economy, but it could damage the other big economic blocs of China, Japan and Europe."

However, turbulence was contained in the currency markets, as equities are benefiting from expectations of more QE. Investors hope that the fresh flood of money will find its way into stocks. The QE factor and the strong start to the US earnings season propelled the FTSE All World Index to highs last seen around the time of the collapse of Lehman Brothers in September 2008. This index has risen 20 per cent since the start of July.

A desire to look tough on "unfair" trade practices ahead of US congressional elections on November 2, in which Obama's fellow Democrats are battling to retain control of Congress, could tempt Obama to cite China for the first time in 16 years. But concern about angering the United States' largest creditor argues for a continuation of diplomatic efforts that have resulted in a nearly 2.5 percent rise in the value of China's yuan currency over the past several months.

One industry official, speaking on the condition he not be identified, said he thought chances have increased the US Treasury Department would label China a currency manipulator when it releases the semi-annual report. "The tone of the rhetoric has changed," the official said, referring to a recent speech in which Treasury Secretary Timothy Geithner argued forcefully that markets, not governments, should determine exchange rates.

Washington argues Beijing could bring about better balance in the global economy by reducing its reliance on exports for growth and letting the yuan rise. This would alleviate the pressure soaring currencies are placing on many other emerging market economies, Geithner has said. China in turn has argued that moving too quickly with currency reforms could devastate its economy, and has placed the onus on the United States for an easy monetary policy that has weakened the dollar and pressured developing economies.

The drop follows probes by 50 state attorneys general into allegations that thousands of home foreclosures were improperly handled. JP Morgan Chief Executive Jamie Dimon vowed to root out any flawed foreclosure-sale paperwork on Wednesday as the banking giant temporarily suspended evictions in 23 states and is reviewing foreclosures in 41 states.

BofA halted all foreclosures and foreclosure sales last month. Wells Fargo initiated a review of all pending foreclosures where affidavits are required. The flood of mortgage worries could distract from potentially positive third-quarter earnings reports expected in the next several weeks, analysts said. "Any moratorium is bad for banks," Morningstar analyst Jaime Peters said.

At issue is the process by which banks approved foreclosing on homes and whether banks used employees, or "robo-signers," who signed foreclosure documents without fully reading them. Besides facing legal fees and fines, a moratorium means under-performing and non-performing loans stay on the banks' books longer. One possible, but unlikely, scenario is that banks may be forced to return homes to previous owners, modify their mortgages and take a hit on the principle.

Queensland, New South Wales, Victoria and South Australia are all affected, with hundreds of farmers reporting that locust eggs have begun hatching on their land. A record number were laid in autumn, and the conditions have been perfect for them to thrive, with the country enduring its wettest September on record after years of drought. The weather is also helping the farmers but their hopes of a best-in-a-decade harvest are now threatened by the locust invasion.

Steve Wahn, the primary industries minister in the New South Wales government visited a site near Bourke this week to see for himself the tiny insects which are infesting fields. He calls it "a plague of biblical proportions". "We are seeing survival rates of 80% or more from the locusts, whereas in a normal year you'd only get 20% or so which could survive. This is a huge challenge for us," he said.

"We've got potentially our best crop in a decade but potentially the worst locust plague in 30 years." There is now a race against time to spray the insects before they begin to fly.

The seminar was sponsored by Italian Catholic Action and other foundations. It was inspired in Benedict XVI's affirmation of the "universal vocation" of the Holy City during his visit there in May 2009. "Jews, Muslims and Christians alike call this city their spiritual home," the Pope said on that occasion. "How much needs to be done to make it truly a 'city of peace' for all peoples, where all can come in pilgrimage in search of God, and hear his voice, 'a voice which speaks of peace.'"

Cesare Mirabelli, an expert in canon and ecclesiastical law from Rome's Tor Vergata University, spoke about religious liberty as a prerequisite to peace. "All the conventions on human rights guarantee religious liberty but there is no agreement that imposes it specifically, proof that it is a very delicate matter," he said.

"Although the right to religious liberty is the first to be affirmed among the fundamental rights, it is, in fact, violated," continued Mirabelli. This can happen, he said, in "obvious and violent ways in some countries," but also "in a more subtle way when the religious dimension is erased from public life and its manifestation is not allowed. As in all liberties, when the liberty of one is violated the liberty of all is violated," he added.

The IMF policy committee, which has been struggling to agree a consensus on easing currency tensions among key economies including China and the US, said the organisation should instead keep the issue under watch.

Pressure has been piling on China to speed up the pace of economic reform by dropping its policy of using a weak currency and reserve accumulation to boost exports. Finance ministers at the 187-strong lending agency have accused China of imperilling the global recovery by fostering the imbalances that are preventing deficit countries like the US and UK from returning to economic health.

IMF officials argue that if China let its currency appreciate, Chinese imports would become more expensive, potentially sparking demand for US goods. The US is facing crippling levels of unemployment despite returning to growth, which has raised fears of a "jobless recovery" that could trigger political and social unrest. European Central Bank president Jean-Claude Trichet last night pointedly reminded China of its commitment last June to "engage in exchange rate flexibility", adding: "There is no need for [emerging economies] to continue to accumulate immense amount of reserve assets."

Despite calls for tougher action, the IMF could only pledge to "work towards a more balanced pattern of global growth, recognising the responsibilities of deficit and surplus countries". Mr Trichet added that while "we have a consensus on imbalances, the problem is implementation - as always". China on Friday hit back at calls for it to let the currency rise, saying it rejected such "shock therapy" but is committed to a more "flexible" currency regime.

George Soros, the respected hedge fund manager, also weighed into the debate. Speaking in London, he said a global "currency war" pitting China versus the rest of the world could lead to the collapse of the world economy. Mr Soros said that China had created a "lopsided currency" system and suggested it allow the yuan to appreciate by 10 percent a year - far more than the Chinese will contemplate.

Recent IMF figures showed Beijing had currency reserves of $2.447 trillion, the largest in the world and nearly 30 percent of the global total.

Those campaigns are likely to escalate to prevent jihadists and their fellow travelers from seizing control of Somalia and Yemen. Some analysts, like former CIA officer Philip Giraldi, say the United States shouldn't get any more involved in these conflicts than it is already, which is largely low-key support activity with the occasional airstrike or assassination by Special Forces.

Somalia and Yemen, he argues, "are frontline states in the burgeoning but still secret phase three of the Global War on Terror being planned in the Pentagon and spy agencies with the concurrence of the Barack Obama White House... "The administration is clearly thinking beyond Afghanistan (and even Iran), anticipating the next battlefronts in Yemen and Somalia."

"It is assiduously gathering resources to enter the fray, including setting up business fronts that can be used by covert operatives," Giraldi wrote in The American Conservative. "We are again talking of secret wars conducted in places where we do not understand the local issues or players very well, all part of a massive over-reaction directed against low-level troublemakers who do not actually pose any serious threat against the United States. Where it will all lead is anyone's guess..."

American and Chinese officials traded blows over the weekend, setting the stage for a tense G20 summit next month. The head of China's central bank rejected the idea of a big revaluation for the yuan, advocating a slow-acting "herbal medicine" instead. Treasury Secretary Tim Geithner took a swipe at countries with "significantly undervalued" currencies, of which China is an obvious example.

The United States claims to be a loser in the currency wars. But in reality it is winning. The dollar has fallen sharply against most of its trading partners' currencies. On a trade-weighted basis, the dollar is the lowest it has been all year, according to the Federal Reserve major currencies index. The likelihood of an imminent bout of money-printing can keep that trend going for a long time.

China, meanwhile, claims not to be a winner. But that is disingenuous too. While the yuan just hit its highest level versus the dollar since officially abandoning its dollar peg in 2005, it has fallen heavily against most other currencies. The euro, the currency of China's biggest trading partner, has strengthened 14 percent against the yuan. The Japanese yen is not far behind. Various emerging markets, such as Brazil, have also seen their currencies soar.

The gap between winners and losers is widening. With rates as low as can be in the West, money has poured into assets in the East and South. Many Asian stock markets are at multi-year highs - benchmark indices in Indonesia and the Philippines hit records last week. Emerging market bonds too are rallying, as investors scramble for yields. That adds further upward pressure to currencies already out of relative whack with their trading peers. There is no easy answer.

A gradual but sustained revaluation of the yuan versus the dollar - combined with a halt to the dollar's own depreciation - is the least bad way forward. But getting such a deal, as positions become increasingly entrenched, will be tricky. And if both sides refuse to do anything, a currency war could mutate into a trade war - a genuine lose-lose scenario.

More than 3 million demonstrators - one in 20 of all French people - marched yesterday against the President's plans to raise the standard retirement age from 60 to 62. Tens of thousands of students joined the marches for the first time, threatening to radicalise the protests and broaden them into a rebellion against a deeply unpopular presidency.

Militant union branches in the railway and oil-refining industries were pushing last night for a showdown with Mr Sarkozy, who has made reform of the loss-making state pension system the make-or-break issue of his final 20 months in office.