As an aghast world — from China to Chicago and Chihuahua — watches, THE CIRCUS-LIKE US POLITICAL SYSTEM SEEMS TO BE DECLINING INTO NEAR CHAOS. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: IS THIS THE END OF AMERICA?

The AIG bonus firestorm is a diversion from real issues, but it puts the ghastly political classes who make US law on display for what they are: ageing self-serving demagogues who have spent decades warping the US political system for their own ends. We see the system up close, law-making that is riddled with slapdash, incompetence and gamesmanship. America is at risk in other ways, especially in the technical business of setting and executing policy. THE PRESIDENCY OF BARACK OBAMA HAS SET OUT ON A COURSE THAT HAS NO PRECEDENT IN US HISTORY. The Obama administration is different in many ways, NOT LEAST IN ITS SUPREME SELF-CONFIDENCE IN ITS METHODS AND OBJECTIVES.

For the rest of the world, however, the worry is that AMERICA IS AT RISK OF BECOMING THE FOUNTAINHEAD OF A NEW INFLATIONARY OUTBURST. The US dollar is now in decline, gold is moving sharply higher, AND NEW GLOBAL CURRENCY TURMOIL IS ON THE HORIZON. It may not happen. A paper just published by the Federal Reserve Bank of St. Louis says that the Fed will have to be prepared to absorb all the excess money it has poured into the US economy. IT WILL BE A TECHNICAL AND POLITICAL CHALLENGE UNLIKE ANY CENTRAL BANK HAS EVER UNDERTAKEN. THE FUTURE OF AMERICA IS AT STAKE.

Professor Tim Lang said people needed to wake up to how much water farmers and food factories use in producing staple goods, particularly meat, coffee and milk, saying the threat to Britain's food chain from its water footprint is just as great as its carbon footprint. A return to rationing, though "almost unthinkable" in peace time, cannot be ruled out, he warns. While such direct Government intervention would be a very last resort, indirect "editing" of people's diets by supermarkets and central Government is essential, he said.

Professor Lang, who coined the term "food miles" more than a decade ago, now believes that overuse of water is the biggest threat facing Britain's food chain. "Huge amounts of water are being used as irrigation or fed directly to animals. It is a nightmare. Water stress is huge across huge swathes of the globe. We think that we are liberally supplied by God's water. But that's not true."

According to the World Wide Fund, the production of a simple pint of milk uses up more than 550 litres (968 pints) of water – the equivalent of running six full baths. A cut of coffee uses up 140 litres (246 pints), while a hamburger uses an astonishing 1,800 (3,168). These figures take into account the amount of water used from the start to the end of the food chain, including the irrigation on the farm, the processing of the food, such as washing the coffee beans, and the cooking of the product. Meat uses so much because of the water needed to irrigate the crops that end up as animal feed.

"We cannot carry on consuming the same amount of meat and dairy that we do currently. We are convinced about that now. It is absolutely madness." The UK has become the sixth largest net importer of water in the world, the environment group WWF estimates, with every consumer indirectly responsible for the use of thousands of litres a day. Only a third of the UK's total water use comes from its own resources; the rest depends on the water systems of other countries, some of which are already facing serious shortages.

While rationing, as experienced during and after the Second World War, is very unlikely, Professor Lang says supermarkets and the Government will need to "choice edit", the products on sale to reduce shoppers water footprint. "Don't think it doesn't already go on. It is a myth that consumers have free choice," he said, pointing out that food companies frequently change the formula of food to cut out salt or additives – under pressure from campaigners or legislation.

Mr Brown's hopes of unity in London have already been dented by a dispute over the need for more "fiscal stimulus" measures. EU states including France and Germany have given a cool response to British and American calls for more stimulus packages of tax cuts and public spending funded by borrowing.

Jose Manuel Barosso, the president of the European Commission, said despite the rift European and US leaders are at least "converging" on the need for a global standard for financial regulation. But he warned that resistance to more international co-operation on financial rules will come from other countries. "The main problem will come from other countries, like China, for example, that don't have the culture of a common setting of rules," Mr Barosso said at a European Union summit in Brussels.

Lord Malloch Brown, a Foreign Office minister, has said that MR BROWN "CANNOT AFFORD" TO HAVE THE LONDON SUMMIT FAIL, and warned that FINANCIAL MARKETS COULD PLUNGE if the meeting does not unite to produce a substantial recovery plan. The Prime Minister was quick to reject Mr Barosso's talk of Chinese resistance to his plans, insisting that his private talks with Beijing are proving successful.

"Any suggestion that China does not want to see a positive outcome from the G20 discussions is wrong," he said. The London meeting, he said, will produce "very specific and precise" measures to improve the regulation of the financial sector and prevent banks and institutions like hedge funds taking dangerous risks. "The significance of the G20 is that all the major economies are coming together. They all have the same problems. We have a common interest."

At the flick of a switch, the RAF Reaper device's deadly arsenal of laser-guided 500lb bombs and hellfire missiles can destroy an enemy stronghold in seconds. Reaper's array of sensors can detect improvised explosive devices, eavesdrop on mobile phones and monitor Taliban activity in virtually all weathers, by day and night. Unlike other RAF aircraft operating in Afghanistan, however, the Reaper MQ-9 is "flown" from 8,000 miles away in darkened control rooms at the United States' Creech Air Force Base in the desert in Nevada, United States. It is, quite simply, the most risk-free form of combat to have been invented – and it is a growing element of modern warfare.

For the British crews who fly the aircraft, the most dangerous part of their day is the drive between the air-force base and their homes in the suburbs of Las Vegas. "There is no risk to any of my crews at all," said Wing Commander Andy Jeffrey, the head of the RAF's 39 Squadron – the Reaper unit. "But that does not mean they are emotionally detached from what is happening on the ground. When troops are in contact, you can hear the guns firing, and the stress in the voices of the British soldiers [on the ground]. We know the risks they are taking and we know if we make mistakes, lives can be lost. Every day we fly operations over Helmand – flying the Reaper is not a soft option."

Squadron Leader Steve Smith, 40, who previously flew Tornado jets, admits to suffering a "sense of humour failure" when comparisons are made with video games. "I hate the Xbox generation comparison. The Reaper is the size of a Harrier ground-attack aircraft. You need to be an experienced pilot to fly this thing. It's not a high-performance aircraft like a fast jet, you don't get involved in dog fights, but you need to know how the air environment works."

He said: "In the way we deploy weapons you actually see the delivery of the bomb to the bitter end. You see the weapon go all the way and you can see the look on the faces of the enemy as the bomb hits. We can also see the aftermath, so we are definitely emotionally involved."

The Office of the United Nations High Commissioner for Refugees (UNHCR) classifies THE SITUATION IN 26 OF AFGHANISTAN'S 34 PROVINCES AS "INSECURE." But this is not exclusively the doing of terrorists. The world is too quick to lump all those standing in the way of positive development in Afghanistan together under the term "Taliban." In fact, THE TALIBAN IS ONLY ONE OF MANY GROUPS struggling for political and military power in the country.

The radicals of the Hezb-e-Islami militant group are no less active, nor are the Hakkani and al-Qaida terrorist networks any less dangerous. Chechen and Yemeni fighters, possibly diverted from Iraq, are already being picked up in the country. Complicit in their acts of terror are all sorts of criminals, local warlords, tribal leaders and their militias, regional governors and their corrupt police forces, drug barons and their henchmen, who systematically subjugate the people in the regions they control. Murder and murder threats, torture, kidnappings and rape are the tools in this confusing war, one in which clear fronts disappeared long ago, and in which everyone seems to be fighting everyone else.

US generals say that they are seeing a "significant challenge from insurgents" in Wardak, and their commander-in-chief, President Barack Obama, recently responded with a simple "no" to the question of whether the United States and its allies are currently winning the war in Afghanistan.

The news sparked a run on the bank, with many investors queuing to withdraw savings from Northern Rock branches. The government calmed the panic by guaranteeing deposits and in February 2008 was forced to nationalize Northern Rock, which had grown rapidly by lending aggressively to home buyers.

A report by the National Audit Office (NAO), said Northern Rock had continued to write controversial loans for up to 125 percent of a property's value for months after seeking help from the Bank of England. Such high loans, now unobtainable, are widely seen as symptomatic of a housing market bubble before the credit crunch.

Northern Rock's "Together" mortgage included a secured loan of 95 percent of the value of a property together with an unsecured loan, which could be used for any purpose, of up to 30 percent of the property's value. Between September 2007 and February 2008, when Northern Rock was nationalized, more than 1.8 billion pounds of "Together" loans were written, the NAO said.

Sacramento Mayor Kevin Johnson promised to first make alternative shelter space available for the estimated 150 men and women who inhabit the squalid encampment near the American River, at the edge of the city's downtown. Johnson, who toured the area with California Governor Arnold Schwarzenegger a day earlier, said he hoped to have the ramshackle settlement cleared of tents and debris in the next two to three weeks.

"We want to move as quickly as we can," he told a news conference, insisting the city was determined to treat the tent dwellers with compassion. "They are people out there. We have to do whatever we can do," he said. "We as a city are not going to shy away from it. We're going to tackle it head-on."

Gun sales shot up almost immediately after Barack Obama won the US presidential elections on November 4 and firearm enthusiasts rushed to stores, fearing he would tighten gun controls despite campaign pledges to the contrary. After the November spike, gun dealers say, a second motive has helped drive sales: FEAR OF SOCIAL UNREST as the ailing economy pushes the newly destitute deeper into misery. Many of the newly poor come from the relentlessly rising ranks of the unemployed. In February alone, an average of 23,000 people a day lost their jobs.

Tent cities for the homeless have expanded outside a string of American cities, from Sacramento and Phoenix to Atlanta and Seattle, for people who are living the American dream in reverse. First they lose their jobs, then their health insurance, then their homes, then their hopes. The encampments are reminiscent of Third World refugee camps. Often former members of the middle class, tent dwellers' accounts of their plight to television cameras have a common theme: "I never thought this could happen to me." Unlike the victims of Katrina, the 2005 hurricane that destroyed much of New Orleans, many of the newly-poor are white.

As columnist David Ignatius put it in the Washington Post, "THERE'S AN UGLY MOOD DEVELOPING AS PEOPLE START LOOKING FOR VILLAINS TO BLAME FOR THE ECONOMIC MESS." In November, an analysis published by the US Army War College's Strategic Studies Institute listed "UNFORESEEN ECONOMIC COLLAPSE" as one of the possible causes of future "WIDESPREAD CIVIL VIOLENCE."

"My administration is now committed to diplomacy that addresses the full range of issues before us, and to pursuing constructive ties," Obama said in a message released to select Middle East broadcast outlets timed for an Iranian holiday celebration. Obama went further than he has since taking office on January 20 in extending an olive branch to Tehran, which has been locked in bitter disputes with Washington over Iranian nuclear ambitions and support for militant Islamic groups.

The Obama administration - in a major shift from former President George W. Bush's isolation policy toward Iran, which he once branded part of an "axis of evil" - has expressed an openness to face-to-face diplomatic contacts with Tehran. Reaching out directly to Iranian leaders and their people, Obama said: "This process will not be advanced by threats. We seek instead engagement that is honest and grounded in mutual respect."

He said the United States wanted Iran to take its "rightful place in the community of nations," but also insisted that Tehran do its part to achieve reconciliation. "You have that right - but it comes with real responsibilities, and that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization," Obama said. "THE MEASURE OF THAT GREATNESS IS NOT THE CAPACITY TO DESTROY, IT IS YOUR DEMONSTRATED ABILITY TO BUILD AND CREATE," he added, alluding to Iran's contested nuclear program and its missile development efforts.

In some cases the bonuses might be taxed 100 percent leaving the recipients with nothing. It was only this past weekend that the bailed-out insurance giant paid bonuses totalling $165 million to employees, including traders in the Financial Products unit that nearly brought about AIG's collapse. AIG has received $182.5 billion in federal bailout money and is now 80 percent government owned.

Disclosure of the bonuses touched off a national firestorm that both the Obama administration and Congress have scurried to contain. The House vote was 328-93. Similar legislation has been introduced in the Senate and President Barack Obama quickly signalled general support for the concept. "I look forward to receiving a final product that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated," the president said in a statement.

"We want our money back now for the taxpayers," said House Speaker Nancy Pelosi. "It isn't that complicated." Representative Charles Rangel, a New York Democrat, chairman of the tax-writing House Ways and Means Committee, said he expected local and state governments to take the remaining 10 percent of the bonuses, nullifying the pay-outs.

All leave for police officers in the capital has been called off and businesses are being advised to cancel unnecessary meetings because PROTESTERS HAVE VOWED TO TARGET THE FINANCIAL DISTRICT as the world leaders gather to discuss the financial crisis. Previous world economic summit meetings and conferences have been targeted by anarchists, anti-globalization protesters and other groups. The police say they fear that the gathering April 2 in London, set against anger at the economic downturn, could provoke more violence.

Environmentalists, antiwar campaigners and protesters have already indicated that they would demonstrate April 1 as politicians and officials begin arriving in London. A movement called "Storm the Banks" is circulating on the Internet indicating that anti-capitalist protesters are planning TO FOCUS THEIR ATTENTION ON THE BANK OF ENGLAND during what some protesters have dubbed "Financial Fools Day."

During a Group of Eight meeting in Scotland in July 2005, four British Islamists carried out suicide bombings on trains and a bus in London that killed 52 people. "There will be concern from business over the two days of protest, but the vast majority of firms will have robust security arrangements in place," said Helen Hill, policy director at the London Chamber of Commerce and Industry. "Cancelling unnecessary meetings may have to be considered, but people shouldn't feel as though they can't travel in London to conduct important business."

Achim Steiner said spending should focus on five environmental sectors including improved energy efficiency for buildings and solar or wind power to create jobs, curb poverty and fight climate change. "The opportunity must not be lost," Steiner, head of the UN Environment Program (UNEP), told Reuters of a UNEP study that will be put to world leaders meeting in London on April 2 to work out how to spur the ailing economy.

The UNEP report said investments of one percent of global gross domestic product, or about $750 billion, could bankroll a "Global Green New Deal" inspired by the "New Deal" of US President Franklin D. Roosevelt that helped end the depression of the 1930s. Investments should be split between more energy efficient buildings, renewable energies, better transport, improved agriculture and measures to safeguard nature - such as fresh water, forests or coral reefs, it said.

Steiner also said that the world urgently needed funds to jump start a UN deal to fight global warming, due to be agreed in Copenhagen in December to succeed the UN's Kyoto Protocol beyond 2012.

The Holy See is struggling to contain international anger over the Pope's claim on his first official visit to Africa that Aids "cannot be overcome through the distribution of condoms, which even aggravates the problems". The Pope's remarks about condoms, and a recent furore over his lifting of the 20-year excommunication of a British bishop who has questioned the Holocaust, has left him looking isolated and out of touch, prompting calls for a radical shake-up of the way the Holy See delivers its message.

The Pope is isolated and fails to adequately consult his advisers, said a Vatican source with 20 years' knowledge of the Holy See. Another Vatican insider described Pope Benedict's four-year-old papacy as "a disaster", recalling the pontiff's previous inflammatory remarks on Islam and homosexuality.

"He's out of touch with the real world," the Italian insider said. "On the condom issue, for example, there are priests and bishops in Africa who accept that condoms are a key part of the fight against Aids, and yet the Pope adheres to this very conservative line that they encourage promiscuity. The Vatican is far removed from the reality on the ground." The Vatican's traditional culture of secrecy has made it ill-equipped to communicate its message in the internet age. The Vatican's press office works to a timetable from a gentler era, closing each day at 3pm, and familiarity with the internet appears barely to have penetrated the Vatican's cloistered confines.

In a report prepared for a meeting of Group of 20 nations last week, the IMF said it was still forecasting a modest economic recovery in 2010, but said restoring confidence was key and meant policymakers needed to urgently deal with distressed assets on banks' balance sheets.

The forecasts are substantially lower than the IMF projected in January when it saw world economic growth of 0.5 percent in 2009. "The prolonged financial crisis has battered global economic activity beyond what was previously anticipated," said the report published on Thursday.

It said advanced economies were in a severe recession that will shrink their economies by a range of 3.0 percent to 3.5 percent in 2009, improving to around zero growth in 2010. It said the United States economy would likely contract by 2.6 percent this year, while the euro area economy would decline by 3.2 percent in 2009.

The right-extremist National Democratic Party is almost broke. That, at least, has been the message delivered recently by both media reports and the party itself. Even the NPD chairman Udo Voigt admitted that his party was in an "existential crisis." The NPD, which Germany's domestic intelligence agency describes as a "racist, anti-Semitic, revisionist" party BENT ON REMOVING DEMOCRACY AND FORMING A FOURTH REICH, is on the brink of insolvency because it faces heavy fines for accounting irregularities in recent years.

To the overwhelming majority of Germans, that will naturally come as good news. But regardless of the NPD's financial problems and the possibility that it may cease to function, the country's far-right scene is becoming more dangerous, experts say.

"THE NEO-NAZI SCENE, BOTH INSIDE AND OUTSIDE THE NPD, IS BECOMING STRONGER, not as a nationwide electoral force but in its influence on racist attitudes and violence," Professor Hajo Funke, a prominent analyst of the far right at Berlin's Free University, told Spiegel Online. "There are places I wouldn't advise anyone who looks foreign to go without protection. THE CRIMES STATISTICS SHOW RIGHT-WING EXTREMISM IS STEADILY EXPANDING," confirmed Funke.