A rolling credit crunch emanating from U.S. subprime lending has spread through the asset backed commercial paper market through to interbank money markets, the very heart of the global financial system. And while central banks have regained a semblance of control, more or less, over the overnight lending markets, there is still a hugely unusual unwillingness by financial institutions to lend each other money for three months.

There is debate about why this is happening, but what is clear is that there are people out there with a huge mismatch between how long their commitments to lend money are compared to the length of time for which they are able to borrow. That leaves these financial entities, be they conduits or mortgage lenders or whoever else, extremely vulnerable in a market which is already highly agitated.

This knowledge must, in turn, make the money markets still less willing to extend credit for longer periods.

So, how did we come to be here, and who is responsible for getting things back on track? It's easier to answer the first question than the second. The problems with U.S. mortgages and structured finance has shaken the faith of the world's lenders in the value of collateral and the credit ratings upon which the whole edifice has been built.

The asset backed commercial paper market, where many of the people who made such mortgage loans found financing, has partially shut, with many unable to get funding and many now only able to get it for a week at a time, where previously they might have obtained 30 or 60 day loans.

These markets have shrunk by about quarter of a trillion dollars in a month in the U.S. alone, and much of the money has found its way on to banks' balance sheets, either because the banks had extended a commercial paper backup line to someone which has now been drawn, or because they have chosen to bail out a conduit or other entity with which they had a relationship.

At the same time, the banks look like getting stuck with something like another $300 billion of bridge bank loans extended to private equity and other acquirers under very aggressive terms. These loans may now be difficult or impossible to sell.

The storm has been checked out by hurricane hunters and so far it hasn't been given a name or a number. It's a low pressure system sitting about 400 miles off the Carolina coast.

Four RAF F3 Tornado aircraft were scrambled in response to the Russian action, the UK's defence ministry said. The Russian planes - long-range bombers - had earlier been followed by Norwegian F16 jets. Russia recently revived a Cold War-era practice of flying bombers on long-range patrols.

The IDF officially refused to comment on reports from Syria that its air defenses fired on a formation of IAF warplanes that entered Syrian airspace from the Mediterranean. In addition, fears mounted that Hizbullah would use the escalating tensions along the Golan Heights as an excuse to initiate its own conflict with Israel.

Counterterrorism expert Boaz Ganor said that if Thursday's flyover did occur, it was possible that Israel was "collecting intelligence on long-range missiles" deployed by Syria in the North. Imad Fawzi Shoaibi, a Syrian political analyst, speculated that Israel may have been probing Syria's new air defense systems, provided by Russia, at a time when tension was running high between the two countries.

Israel has acknowledged making routine flights over Lebanon, but it is unclear how often the IAF flies over Syria, if at all. At the beginning of the Second Lebanon War last summer, warplanes buzzed the palace of Syrian President Bashar Assad in what analysts called a warning to Damascus. In June of the same year, they also flew over Assad's summer home in Latakia, near the border with Turkey, after Hamas terrorists abducted Cpl. Gilad Schalit in Gaza.

"His initial inclination is to do it next year," Peres told a news conference. "I believe he will try to do whatever he can to have his visit not postponed for any length of time." The Pope told Peres's predecessor two years ago that he hoped to visit Israel in 2006, but that failed to happen and his spokesman said the timing of a visit was still not clear. "As you know, the Pope is ready but the timetable still needs to be seen," Federico Lombardi told reporters after the audience.

Proposals for draconian new laws that target the country's immigrants have been condemned as unjust and racist. A poster campaign, the work of its leading political party, is decried as xenophobic. Has Switzerland become Europe's heart of darkness?

At first sight, the poster looks like an innocent children's cartoon. Three white sheep stand beside a black sheep. The drawing makes it looks as though the animals are smiling. But then you notice that the three white beasts are standing on the Swiss flag. One of the white sheep is kicking the black one off the flag, with a crafty flick of its back legs. The poster is, according to the United Nations, the sinister symbol of the rise of a new racism and xenophobia in the heart of one of the world's oldest independent democracies.

A worrying new extremism is on the rise. For the poster - which bears the slogan "For More Security" - is not the work of a fringe neo-Nazi group. It has been conceived - and plastered on to billboards, into newspapers and posted to every home in a direct mailshot - by the Swiss People's Party (the Schweizerische Volkspartei or SVP) which has the largest number of seats in the Swiss parliament and is a member of the country's coalition government.

With a general election due next month, it has launched a twofold campaign which has caused the UN's special rapporteur on racism to ask for an official explanation from the government. The party has launched a campaign to raise the 100,000 signatures necessary to force a referendum to reintroduce into the penal code a measure to allow judges to deport foreigners who commit serious crimes once they have served their jail sentence.

But far more dramatically, it has announced its intention to lay before parliament a law allowing the entire family of a criminal under the age of 18 to be deported as soon as sentence is passed. It will be the first such law in Europe since the Nazi practice of Sippenhaft - kin liability - whereby relatives of criminals were held responsible for their crimes and punished equally. The proposal will be a test case not just for Switzerland but for the whole of Europe, where a division between liberal multiculturalism and a conservative isolationism is opening up in political discourse in many countries, the UK included.

The truth is that at the heart of the Swiss People's Party's vision is a visceral notion of kinship, breeding and blood that liberals would like to think sits very much at odds with the received wisdom of most of the Western world. It is what lies behind the SVP's fear of even moderate Islam. It has warned that because of their higher birth rates Muslims would eventually become a majority in Switzerland if the citizenship rules were eased. It is what lies behind his fierce support for the militia system.

To those who say that Germany, France, Italy and Austria are nowadays unlikely to invade, he invokes again the shadow of militant Islam. "The character of war is changing. There could be riots or eruptions in a town anywhere in Switzerland. There could be terrorism in a financial centre."

The race issue goes wider than politics in a tiny nation. "I'm broadly optimistic that the tide is moving in our direction both here and in other countries across Europe," said Dr Schlüer. "I feel more supported than criticised from outside." The drama which is being played out in such direct politically incorrect language in Switzerland is one which has repercussions all across Europe, and wider.

The price increase was triggered by claims that Israeli warplanes had penetrated Syrian airspace.

As US crude rose to less than $1.50 short of its record peak, Christophe de Margerie, chief executive of Total, the French oil group, told the Financial Times he expected the oil price to stay high, and suggested the cycle in the market had been broken. "Demand is still strong in Asia, [and there is] strong demand in the Middle East," Mr de Margerie said. "So definitely the price will remain high, and we have to build our strategy on this."

West Texas Intermediate surged to $77.43 a barrel, just below early August's all-time high of $78.77. Later, it fell to $76.67. Brent crude rose above $75. US crude oil inventories fell last week by 3.9m barrels to 329.7m barrels, down year-on-year. Gasoline stocks fell by 2.3m barrels to 132.2m barrels, the lowest level in absolute terms in nearly two years.

The New York Fed added 7.0 billion dollars in 14-day repurchase agreements, 16 billion in seven-day repurchase agreements and 8.25 billion in one-day repos.

THE FED HAS INJECTED SOME 200 BILLION DOLLARS INTO THE FINANCIAL SYSTEM SINCE AUGUST 9 IN A BID TO BOOST CREDIT FLOWS which have seized up due to problems linked to the distressed US mortgage market.

The US central bank typically buys billions of dollars worth of securities from major banks, pumping extra cash into the banking system, which the banks are obliged to repurchase at a later date.

I am convinced that all that has been anticipated since 1968 has now occurred. THE SITUATION NOW RESEMBLES THE WEIMAR REPUBLIC (the term given to describe the German state from 1919-33) in the sense that the Weimar case study is predicated on planned currency destruction to avoid war reparations that got out of control.

THE PRESENT SITUATION IS BASED ON THE ULTIMATE SIN OF GREED CALLED OVER-THE-COUNTER DERIVATIVES. This mountain of unfunded special performance contracts is shaking and will, as a product of declining US business activity and profits, fall precipitously.

Before the fall of this unimaginably large mountain of garbage paper, ALL world central banks will in concert prime the pump any way they can. Priming for this purpose has no practical way of being drained. WHAT IS GOING TO GET OUT OF CONTROL NOW IS MONETARY INFLATION TO OFFSET THE SHAKING MOUNTAIN OF OVER-THE-COUNTER DERIVATIVES. THE BEGINNING OF THIS FALL IS IN PROGRESS AND WILL BE HISTORY BY 2012 OR SOONER.

SIMPLY STATED THIS IS IT, TODAY, NOW!
There is no more "if this happens that will happen" scenario. It has already started to happen and the result will be a bull market for all commodities to a level that even the wildest (rational) bull cannot not even imagine. The dollar is headed below the estimates of the biggest (rational) bear.

THE OVER-THE-COUNTER SHAKING MOUNTAIN OF DERIVATIVES CAN'T BE FIXED BY TRYING TO HIDE IT.
THE PROBLEMS cannot be fixed by any interest rate action.
THE PROBLEM will not even be fixed by a monetary inflation of unprecedented scope.
THE PROBLEM is coming home by 2012 or much SOONER.

Keep in mind that the $20 trillion plus over-the-counter credit and default derivatives generally have the following characteristics.

They are:

- WITHOUT REGULATION.
- WITHOUT LISTING ON PUBLIC EXCHANGES.
- WITHOUT STANDARDS.
- NOT IN THE LEAST BIT TRANSPARENT.
- WITHOUT AN OPEN MARKET OF THE BID/ASK TYPE.
- DEALT IN BY PRIVATE TREATY NEGOTIATIONS.
- WITHOUT A CLEARING HOUSE.
- UNFUNDED WITHOUT FINANCIAL GUARANTEE OF ANY KIND.
- FUNCTIONING AS CONTRACTS OF SPECIFIC PERFORMANCE.

They are of a character or ability to perform that is totally dependent on the balance sheet of the loser in the arrangement.

They are evaluated by computer assumptions made by geeks, non-market experienced mathematicians who assume religiously that all markets return to their normal relationships regardless of disruptions.

They are now in the credit and default category and are considered by accepted authorities as totalling more than USD$20 trillion in notional value.

NOTIONAL VALUE BECOMES REAL VALUE WHEN THE AGREEMENT IS FORCED TO FIND A REAL MARKET FOR ENDING THE OBLIGATION WHICH IS HOW ONE SELLS IT.

Overnight interest rates between lenders fell as the Bank used its first public statement since the financial storm broke to promise to provide up to £4.4 billion of additional reserves this month against which institutions could borrow at the base rate, currently 5.75 per cent.

But the tentative measure left some in the City disappointed, as the central bank bluntly ruled out trying to correct the seizure in benchmark three-month Libor interbank rates.

The Bank said the liquidity problems of three-month Libor were not an issue it could solve, as they were caused by the uncertainty surrounding the value of assets held by the banks. It said: "The source of these problems does not, therefore, lie in a lack of central bank liquidity."

The Bank has come under pressure to bring down three-month Libor, now at its highest level since late 1998. The benchmark borrowing rate, which hit a fresh nine-year high of 6.8 per cent yesterday, is more than 100 basis points over the Bank of England base rate, the widest gap in 20 years.

(Libor:- The London Interbank Offered Rate, the rate charged by one bank to another for lending money.)

The move by senior MPs from the three main parties is evidence that pressure for a national vote comes from all sides of the political spectrum - and includes prominent pro-Europeans as well as Euro-sceptics. With Labour MPs who back a referendum claiming to have the private support of 120 of their parliamentary colleagues and most of the 195 Tory MPs backing a national vote, about half of the House of Commons is now sympathetic to a national poll.

The group of Labour, Tory and Liberal Democrat politicians will stage their launch outside the Commons, unveiling a giant ballot box to symbolise the right of Britons to have a say on issues affecting the future governance of their country. The Tory MP Greg Hands said: "People don't want to give even more power to the EU - at least not without fundamental change first." Mr Hancock said: "We promised the public a referendum. If the public can't trust politicians on this, how can they trust us on anything else?"

The launch follows Mr Brown's warning to EU leaders this week that he would call a referendum if Britain was required to surrender more ground during negotiations on the treaty's final wording. At his monthly press conference at No 10, the Prime Minister said he had told Chancellor Angela Merkel of Germany and President Nicolas Sarkozy, of France that Britain's "red lines" must not be breached.

"If I were to come to the conclusion that we were not having the detail of what was decided reflected in the final outcome of the declaration, then of course I would come back to the British people and say, 'Look, we have to do things differently'."

Somewhere here in Guangzhou, the balmy capital of the booming southern province of Guangdong, a shadowy group of computer scientists is said to be hard at work under the supervision of the People's Liberation Army, waging cyber warfare on Western military and industrial targets. Their fellow scientists in the dusty city of Lanzhou in northwestern China, not far from where the Chinese space mission is based, are also reportedly hacking into government files in Whitehall and the Pentagon.

It's hard to believe in the 30-degree-plus heat of Guangzhou, but this city has been named one of the epicentres of the Cold Cyber War. Instead of missiles pointing at capital cities, and huge standing armies facing each other across ideological divides and barbed-wire fences, the only weapons in this secret war are keyboards, some sharp minds and a lot of caffeine pills.

The experts tell of how cyber spies breach supposedly unbreachable firewalls as smoothly as a skilled jewel thief, before swooping on a hard drive, snatching the secret files, and sending them to a third country, usually somewhere in Asia such as South Korea or Hong Kong. Then they make good their escape, often leaving no trace of the raid.

Their methods may be hi-tech but the strategy is ancient - Trojan Horse software developed by the PLA's computer whizzes, disguised as PowerPoint or Word programmes, which find their way into computer systems in the corridors of power of London, into the Foreign Ministry and other government departments, even into the House of Commons. They redirect the programmes via South Korean networks or Taiwanese servers to disguise where they came from.

"There's a huge amount of cyber warfare going on here aimed at gathering intelligence and probing networks. There is also a huge amount of cyber espionage to access information about intellectual property rights and trade matters," said one security expert who did not wish to be named.

Cyber espionage costs British companies billions of pounds every year, not only in the direct effects of stolen secrets, but in the loss of competitive advantage. There have long been reports that China operates a web of operatives throughout Europe, who penetrate all levels of key industries. "As cyber warfare grows, so does cyber espionage. There have been significant advances in China but I still think China is playing catch-up on the West in this game - the West has a lot more to spend - just look at the Chinese military budget and compare it to the American spending on defence," said the analyst.

One internet commentator points out how the US controls the domain name system (DNS), and could do a lot of damage to China by simply removing the "cn" domain. The webheads speculate about just how the hackers were tracked, given that the routes they took are supposedly untraceable. And they say that spammers and organised gangs using automated penetration tools are a much greater threat than the Chinese army.

A key driver in the sudden interest in cyber warfare by the Americans was the confirmation in January this year that the Chinese had successfully shot down one of its own satellites. The test was criticised by the US, Japan, Canada and Australia and read as a sign that China was flexing its military muscle, a way of showing that it is capable of taking out spy satellites should the US follow up on its pledge to assist Taiwan in the event of a military escalation across the straits.

The test also came as a shock to military commanders in the West, a revelation about the level which Chinese technology had attained and they were surprised by the developments. If the reports are true of breaches in Whitehall, Berlin and the Pentagon, it is a sign that China's technological progress is taking place even faster than expected.

The scrapping of Planet Relief, an awareness-raising broadcast similar in concept to programmes such as the poverty-focused Comic Relief and Live8, and planned for early next year, marked a watershed moment: It showed that opining about climate change is now as significant in Britain as scientific fact.

Environmentalists and politicians fiercely criticised the BBC for abandoning the programme, for which Ricky Gervais and Jonathan Ross had been provisionally lined up as presenters. The corporation said that it had decided it was not the BBC's job to lead opinion on the global warming issue. However, critics complained that the effect of the decision was to imply that there was no scientific consensus on the reality of climate change and its human causes, and accused the corporation of being swayed by increasingly vocal climate-change sceptics.

The green activist and author Mark Lynas said that the decision showed "a real poverty of understanding among senior BBC executives about the gravity of the situation we now face. The only reason why this became an issue is that there is a small but vociferous group of extreme right-wing climate 'sceptics' lobbying against taking action, so the BBC is behaving like a coward and refusing to take a more consistent stance," he said.

Planet Relief was a working title for the TV special, which was being developed by Jon Plowman, head of BBC Comedy. While the event might have been similar in scale to Comic Relief or Children in Need, it would not have involved fundraising. However, a spokeswoman for BBC1, the channel on which Planet Relief would have been shown, insisted that last night's decision was not made "in light of the recent debate around impartiality." She added: "BBC1 aims to bring a mass audience to contemporary and relevant issues and this includes the topic of climate change.

"Our audiences tell us they are most receptive to documentary or factual-style programming as a means of learning about the issues surrounding this subject, and as part of this learning we have made the decision not to proceed with the Planet Relief event. Instead we will focus our energies on a range of factual programmes on the important and complex subject of climate change."

Andrew Neil, who presents the Daily Politics and This Week on the BBC, said: "I'm delighted the BBC has cancelled it. Our job is to cover these things, not to comment on them. There's a great danger that on some issues we're becoming a one-party state in which we're meant to have only one kind of view. You don't have to be a climate-change denier to recognise that there's a great range of opinion on the subject."

As the high moves over the Atlantic it will bring the low pressure closer to the East Coast. AccuWeather.com Meteorologists are concerned the system will reach hurricane strength before reaching the East Coast, likely impacting coastal areas from South Carolina to southern New England.

On the western side of the continent, Hurricane Henriette made a second landfall near Guaymas, Mexico, around 5 p.m. PDT. The Eastern Pacific Hurricane Center reports at around 5 p.m. PDT, Henriette made landfall as a weak Category 1 hurricane with maximum sustained winds near 75 mph. As a tropical storm at 8 p.m. PDT, the storm was moving north at about 15 mph and is expected to turn to the northeast overnight.

Henriette will weaken to a heavy rainstorm once it moves over land; however, it will bring 5-10 inches of rain to northwest Mexico, with as much as 15 inches expected in the higher terrain. The heavy rain could trigger potentially deadly flash floods and mudslides.

The Southwest Regional News story reports by tonight, moisture from Hurricane Henriette will spread drenching thunderstorms into southeastern Arizona, southern New Mexico and far West Texas. The heavy rain could lead to dangerous flash floods in the dry Desert Southwest. The Severe Weather Center lists the flood-related Watches and Warnings in effect from southeast Arizona to North Texas.

A weak disturbance over the Gulf Coast and abundant moisture streaming north from the Gulf of Mexico tonight are combining to produce showers and thunderstorms across the Lower Mississippi Valley. Showers and thunderstorms associated with the same disturbance produced very heavy rain across parts of northeastern Texas Tuesday night and early Wednesday.

Severe flooding has been reported in the Dallas Metroplex area.