"The massive build-up of the foreign-exchange assets would only give more ammunition to those China critics who call for a rapid appreciation of the yuan," said Tom Orlik, a Beijing-based analyst for Stone & McCarthy Research Associates, who formerly worked for the UK Treasury.

US Treasury Secretary Timothy Geithner says a stronger yuan would stimulate demand in China, which replaced Japan in the second quarter as the world's second-largest economy. Inflows of cash threaten to worsen inflation and asset-bubble risks in the Chinese economy and central bank Governor Zhou Xiaochuan said October 8 that the nation needs to avoid the "shock therapy" of excessive appreciation. China's currency reserves topped $2 trillion in the first half of last year.

Exchange rates dominated the annual meeting of the International Monetary Fund in Washington amid concern that nations are relying on cheaper currencies to aid growth, risking trade wars. China was accused of undervaluing the yuan, while low interest rates in the US and other rich nations were blamed for flooding emerging markets with capital. Finance ministers and central bankers pledged to improve cooperation, yet did little to show how they would alter their ways beyond agreeing to let the IMF study the matter.

An IIF policy letter authored by Dallara and dated October 4 made clear that global currency coordination was needed, in the group's view, to prevent a looming currency war. "The narrowly focused unilateral and bilateral policy actions seen in recent months - including many proposed and actual measures on trade, currency intervention and monetary policy - have contributed to worsening underlying macroeconomic imbalances," Dallara wrote. "They have also led to growing protectionist pressures as countries scramble for export markets as a source of growth."

Dallard encouraged a return to the G-20 commitment to utilize International Monetary Fund special drawing rights to create an international one-world currency alternative to the US dollar as a new standard of foreign-exchange reserves.

Days before Mr Gates arrived in Asia, Commander Cao was aboard a frigate in the Yellow Sea, conducting China's first war games with the Australian Navy, exercises to which, he noted pointedly, the Americans were not invited. Nor are they likely to be, he told Australian journalists in slightly bent English, until "the United States stops selling the weapons to Taiwan and stopping spying us with the air or the surface."

The Pentagon is worried that its increasingly tense relationship with the Chinese military owes itself in part to the rising leaders of Commander Cao's generation, who, much more than the country's military elders, view the United States as the enemy. Older Chinese officers remember a time, before the Tiananmen Square protests in 1989 set relations back, when American and Chinese forces made common cause against the Soviet Union.

The younger officers have known only an anti-American ideology, which casts the United States as bent on thwarting China's rise. "Why do you sell arms to Taiwan? We don't sell arms to Hawaii," said Colonel Liu Mingfu, a China National Defense University professor and author of "The China Dream," a nationalistic call to succeed the United States as the world's leading power.

Lenders across Europe and the US are facing a $4 trillion refinancing hurdle in the coming 24 months and many still need to recapitalise, the Washington-based organisation said in its Global Financial Stability Report. Governments will have to inject fresh equity into banks - particularly in Spain, Germany and the US - as well as prop up their funding structures by extending emergency support.

"Progress toward global financial stability has experienced a setback since April... [due to] the recent turmoil in sovereign debt markets," the IMF said. "The global financial system is still in a period of significant uncertainty and remains the Achilles' heel of the economic recovery."

Although the IMF does not mention individual countries, it is clear it has concerns about the UK. According to the Bank of England, British banks need to refinance 750-800 billion pounds of funding by the end of 2012, 285 billion pounds of which is emergency support that expires in the same period.

The Institute for Science and International Security, a Washington-based nuclear watchdog, has obtained satellite images showing that a row of cooling towers at Pakistan's secret Khushab-III reactor has been completed. This suggests the plant could begin operation within months, allowing Pakistan substantially to increase its stockpiles of weapons-grade plutonium.

Last year, Barack Obama, US president, called for "a new treaty that verifiably ends the production of fissile materials". In response, the Conference on Disarmament, a 64-nation coalition that negotiated the 1992 Chemical Weapons convention and the 1996 Comprehensive Nuclear Test Ban Treaty, agreed to negotiate a Fissile Materials Cut-off Treaty, intended to cap production of weapons-grade enriched uranium and most forms of plutonium.

But Pakistan, which is deepening its nuclear ties to China, has blocked the Conference on Disarmament from starting discussions, saying a cut-off would hurt its national security interests. Ashley Tellis, a scholar at the Carnegie Endowment for International Peace, said: "Pakistan thinks its going to be forced to cap its fissile material stocks and wants to make sure it has as much as it can get before then." The country's position has frustrated many states. Rose Gottmeiler, the US Assistant Secretary of State for Arms Control, recently warned that her country's "patience is running out".

BDO also called on the Bank of England to pump more money into the economy. The Bank has already spent about 200 billion pounds on trying to boost the supply of money to stimulate the economy. There are growing calls for it to expand this quantitative easing programme, not least from Adam Posen, an external member of the monetary policy committee.

Some economists believe that more stimulus measures are needed to counteract the upcoming government spending cuts, designed to reduce the country's budget deficit. "We are worried that it is already beginning to look as if the government's growth figures don't stack up," said Peter Hemmington, partner at BDO.

"The balance of risks has clearly changed since the election and the chancellor would be wise to consider whether he can go slower than planned with [the spending] cuts." The Bank should inject another 50 billion pounds into the economy before the end of the year, Mr Hemmington added.

It is remarkable that mainstream media has given this speech no coverage. I repeat, the central banker of the United States says in his own words:

"Let me return to the issue of longer-term fiscal sustainability. As I have discussed, projections by the CBO and others show future budget deficits and debts rising indefinitely, and at increasing rates. To be sure, projections are to some degree only hypothetical exercises. Almost by definition, unsustainable trajectories of deficits and debts will never actually transpire, because creditors would never be willing to lend to a country in which the fiscal debt relative to the national income is rising without limit. Herbert Stein, a wise economist, once said, 'If something cannot go on forever, it will stop.'"

"One way or the other, fiscal adjustments sufficient to stabilize the federal budget will certainly occur at some point. The only real question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people plenty of time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis."

This is as close as you are ever going to see a central banker admit that his country's financial situation is so dire that it could breakup at any time.

"We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself," said former Fed chair Paul Volcker in Chris Whalen's new book Inflated: How Money and Debt Built the American Dream. "It is a serious question. We are no longer talking about a single country having a big depression but the entire world."

The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20 billion (12.6 billion pounds ) a month. Premier Wen Jiabao confesses that China's ability to maintain social order depends on a suppressed currency. A 20 percent revaluation would be unbearable. "I can't imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs," he said.

Plead he might, but tempers in Washington are rising. Congress will vote next week on the Currency Reform for Fair Trade Act, intended to make it much harder for the Commerce Department to avoid imposing "remedial tariffs" on Chinese goods deemed to be receiving "benefit" from an unduly weak currency. Brazil dived into the markets on Friday to weaken the real. The Swiss have been doing it for months, accumulating reserves equal to 40 percent of GDP in a forlorn attempt to stem capital flight from Euroland. Like the Chinese and Japanese, they too are battling to stop the rest of the world taking away their structural surplus.

The exception is Germany, which protects its surplus ($179 billion, or 5.2 percent of GDP) by means of an undervalued exchange rate within EMU. The global game of pass the unemployment parcel has to end somewhere. It ends in Greece, Portugal, Spain, Ireland, parts of Eastern Europe, and will end in France and Italy too, at least until their democracies object. We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of "unsterilized" intervention. Of course, gold can go higher.

After the early united front to stem the global collapse in 2008, "the momentum [of economic co-operation] is decreasing", Dominique Strauss-Kahn said at the IMF's annual conference in Washington. "That is a real threat. Many do consider their currency a weapon. That is not good for the global economy... There is no domestic solution to a global crisis."

His concerns were echoed by Robert Zoellick, President of the World Bank, who warned that failure to co-operate would risk plunging the world economy into depression. He said: "If one let's this slide into protectionism, we run the risk of the mistakes of the 1930s." The issue broke into the open on Wednesday when US Treasury Secretary Tim Geithner called for "more progress by the major emerging economies to more flexible, more market-oriented exchange rate systems. This is particularly important for those countries whose currencies are significantly undervalued."

His veiled attack on China came as Wen Jiabao, the Chinese Premier, defended his policy of slow appreciation in the yuan and told EU leaders to stop bullying China. He warned that a more rapid appreciation could lead to social turmoil. China is pushing for a bigger role within the IMF but Mr Strauss-Kahn suggested currency concessions would be needed. "If you want to be at the centre, it goes with having more responsibility on what you do and the consequences of what you do in the global economy," he said.

He criticised China for deliberately keeping the yuan - its currency - low in order to keep exports cheap, which is hurting US competitors. Mr Soros told BBC Radio 4's Today programme that China had a "huge advantage" over international competitors because it can control the value of its currency.

He said China could also influence the value of other world currencies because they have a "chronic trade surplus", which means the Chinese have a lot of foreign currencies. "They control not only their own currency but actually the entire global currency system," he said. Writing in the Financial Times, Mr Soros added: "Whether it realizes it or not, China has emerged as a leader of the world. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it."

Air Force bombers flew nuclear rehearsal runs over North Korea's capital during the war. The US military services later vied for the lead role in any "atomic delivery" over North Korea. In the late 1960s, nuclear-armed US warplanes stood by in South Korea on 15-minute alert to strike the north.

Just this past April, issuing a US Nuclear Posture Review, Defense Secretary Robert Gates said "all options are on the table" for dealing with Pyongyang - meaning US nuclear strikes were not ruled out. The stream of new revelations about US nuclear planning further fills in a picture of what North Korea calls "the increasing nuclear threat of the US," which it cites as the reason it developed its own atom-bomb program - as a deterrent. "This is the lesson we have drawn," North Korea's vice foreign minister, Pak Kil Yon, told the UN General Assembly in New York on September 29.

Yoshiki Mine of Japan's Canon Institute for Global Studies, who as a diplomat dealt with both disarmament and North Korea, said the northern regime feels its existence as a nation is threatened. The US nuclear option "does give the North Koreans an excuse to develop, acquire and own nuclear weapons," Mine told the AP. "They have indicated many times that as long as this basic security is not secured, they would not abandon nuclear weapons."

In response, China blamed rich nations for problems in the currency markets that have hit many developing nations. The tension between the US and China over currency policy surfaced once again at the International Monetary Fund (IMF) talks. Mr Geithner renewed the pressure on China to allow its currency to rise. He named no names, but he was talking mainly about China.

The US has a long-standing grievance over China's currency policy, which limits the movement of the yuan against the dollar. The American complaint is that it gives Chinese exporters an unfair competitive advantage. There was a vigorous response from Zhou Xiaochuan, governor of China's central bank (The People's Bank of China), who blamed the rich countries for problems in the currency markets. Mr Zhou said extremely low interest rates in rich countries had created "stark challenges for emerging market countries".

China has stopped its currency rising much by buying foreign currency. If it were to refrain from that and allow the yuan to rise, it would probably help other developing countries that compete with China, as well as the US which is protesting the most. But there is another force behind the rising developing world currencies. Their economies are growing robustly, while the rich countries are not. That uneven global economic recovery is a problem that cannot be quickly fixed.

The move, along with another decision on foreclosures by PNC Financial Services Inc, adds to growing concerns that mortgage lenders have been evicting homeowners using flawed court papers, without verifying the information in them. Charlotte, North Carolina-based Bank of America Corp, the nation's largest bank, said Friday it would no longer complete foreclosures in all 50 states as it reviews documents used to process foreclosures. That applies to homes that the bank takes back itself and those that it transfers to investors such as mortgage giants Fannie Mae and Freddie Mac.

The bank did so in reaction to mounting pressure from public officials inquiring about the accuracy of foreclosure documents. A document obtained last week by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed thousands of foreclosure documents a month and typically didn't read them. The official, Renee Hertzler, said in a February deposition that she signed up to 8,000 such documents a month.

"American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud," Dodd said. "Regulators at the federal, state, and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure, and lenders have a duty to not cut corners around the law." Banking and housing analysts, meanwhile, fear the foreclosure document problems could prolong the housing bust, and hundreds of thousands of inevitable foreclosures will be pushed off into some legal limbo for years.

"If you are looking at the key in this country to economic stability, it's the housing industry," said banking analyst Nancy Bush of NAB Research. "This is a huge mess that helps nothing."

Washington's army of diplomats in Europe has been taking on one country at a time. Germany stood at the top of the list and, initially, surrendered without even a whimper to the American demands. In 2008, the federal government in Berlin signed an agreement pushed by Washington allowing American officials wide-ranging access to the databases of German security agencies. It was only after leaders in Hamburg raised their objections to the deal that it was, temporarily, stalled in the Bundesrat, Germany's upper legislative chamber, which represents the interests of the states. The city-state has since withdrawn its objections after securing minor concessions on data protection provisions in the document, and the treaty is now set to be approved.

Step by step, and largely unnoticed by the public, the US has been pushing through similar arrangements in a number of European capitals. Washington reported its latest success in Vienna last week: The Austrian government said it was ready to grant US security agencies with free access to its police computers, complete with DNA and finger print data and a criminal registry.

The proceedings were not entirely peaceful. One Austrian government official reported "massive pressure." American Ambassador William C Eacho, III was apparently "very charming and friendly," when he appeared in the Austrian Chancellery and offered his "help." President Barack Obama's emissary said the administration in Washington was considering discontinuing the visa-waiver program for Austrians traveling to the United States because Austria wasn't sufficiently cooperating in the fight against terrorism.

Last weekend, the US issued a travel warning for Europe on the basis of possible imminent terrorist attacks. Germany Interior Minister Thomas de Maiziere, however, has warned against scaremongering. There is apparently no concrete evidence of imminent attacks in Germany. But perhaps, speculates one European Union security expert, it was just a little "background music" for the real questions to be discussed in the trans-Atlantic talks: How deeply can American terrorism investigators peer into European computers, how extensively can they monitor European bank accounts, tap into Blackberrys or listen in on Skype calls?

At same time, a potential revival of US and UK asset-purchase plans may spark declines in their currencies. UBS AG says the "mega-trend" of interventions will roil the $4 trillion-a-day foreign-exchange market for the next decade. While lower exchange rates can lift an economy by helping exports, the danger is that the moves escalate into devaluations and protectionist retaliation, impeding global growth. Brazil's Finance Minister Guido Mantega, a delegate to the International Monetary Fund annual meetings in Washington this week, said September 27 that there's already a worldwide "currency war."

"There's a real danger of a more unilateral approach taking hold," said Mansoor Mohi-uddin, the Singapore-based head of global currency strategy at UBS, the world's second-biggest currency trader. "There will be more countries outright intervening and others inadvertently weakening their currencies." Having all but exhausted traditional monetary and fiscal policies, industrial nations are looking for new ways to spark growth amid subdued domestic demand, while emerging markets want to maintain the advantage in commerce that helped power them through the credit crisis.

Chinese Premier Wen Jiabao yesterday reiterated his view that a rapid increase of the yuan would hobble China's economy, dealing a fresh rebuke to US and European calls for a higher exchange rate. "If the yuan isn't stable, it will bring disaster to China and the world," Wen said. "If we increase the yuan by 20 percent to 40 percent as some people are calling for, many of our factories will shut down and society will be in turmoil."

Trade tensions are already brewing. The US House of Representatives last month passed a measure that would let domestic companies petition for duties on Chinese imports. Historians blame a trade war during the Great Depression, starting with the US passage of the Smoot-Hawley Tariff Act in 1930, for deepening the worldwide economic slump. "The esprit-de-corps is dissipating and each economy is pursuing policies that are in their own interest," said Adams, now managing director at the Fairfax, Virginia-based Lindsey Group, an economic advisory firm.