With tension in the region high, South Korea said it would join a US-led initiative to intercept ships suspected of carrying weapons of mass destruction, something PYONGYANG HAS WARNED IT WOULD CONSIDER A DECLARATION OF WAR. The nuclear test raised concern about North Korea spreading its weapons to other countries and groups.

THE UNITED STATES HAS ACCUSED IT OF TRYING TRY TO SELL NUCLEAR KNOW-HOW TO SYRIA AND OTHERS. "Another risk is that THE NORTH KOREANS MIGHT PEDDLE SOME PLUTONIUM, OR PEDDLE SOME TECHNOLOGY TO TERRORIST GROUPS, That would also be very, very serious," Hans Blix, former head of the International Atomic Energy Agency, told the BBC.

Obama assured South Korean President Lee Myung-bak of Washington's unequivocal commitment to defense on the divided peninsula, where some two million troops face off. Pyongyang said the United States was the aggressor, its usual justification for making nuclear arms. "Our army and people are fully ready for battle... against any reckless US attempt for a pre-emptive attack," said its KCNA news agency.

For China, an immediate concern is a possible breakdown of order inside the ostracized state, which could send a flood of North Korean refugees across its border. China is believed to want to bring North Korea back to the six-party talks, also involving South Korea, Japan, the United States and Russia, to make it give up a nuclear weapons program in return for aid and an end to its years as a pariah state.

Without changes, the federal government has said, THE DETROIT-BASED AUTOMAKER WILL HAVE TO FILE FOR BANKRUPTCY PROTECTION by next Monday. The company has been trying to overhaul its business so it can keep receiving federal money to stay afloat as it deals with soaring costs and slumping sales. On Friday, GM borrowed $4 billion more from the federal government on top of the $15.4 billion it has already received.

In exchange, the Obama administration has demanded moves that include reducing debt, cutting labor costs and shedding dealerships, brands and excess factories. This week, GM's efforts to cut labor costs continued with the Canadian Auto Workers union announcing its members approved wage reductions and other concessions on Monday.

Among other unresolved matters for the automaker:- The question of its European unit Opel: On Monday German Chancellor Angela Merkel said the country hopes to loosen Opel's ties with General Motors before a possible bankruptcy filing. Merkel's government is looking at three bids and expects a decision on Opel's future midweek. It's still not clear what will happen with the Saturn, Hummer and Saab brands. GM has said it plans to phase those brands out or sell them.

In an attempt to restore the public's faith in MPs in the wake of the Daily Telegraph's investigation, the leader of the Conservatives has pledged to boost the role of parliament. In other reforms he called for serious considerations for fixed term parliaments and an end to the right of Downing Street - and Prime Ministers - to announce general election timings.

Other reforms include limiting the use of the Royal prerogative, giving MPs powers to choose the chairs and members of the Commons select committees that scrutinise the work of the various Government departments, as detailed in The Daily Telegraph on Monday.

In a speech at the Open University on Tuesday, Mr Cameron said: "I believe the central objective of the new politics we need should be a massive, sweeping, radical redistribution of power. From the state to citizens; from the Government to Parliament; from Whitehall to communities. FROM THE EU TO BRITAIN; from judges to the people; from bureaucracy to democracy."

"Through decentralisation, transparency and accountability we must take power away from the political elite and hand it to the man and woman in the street."

The Financial Post reported last Wednesday that "...the US dollar slid against most major currencies... hitting a five-month low of US $1.3775 against the euro..." The day after, Florida's BankUnited FSB was seized by Federal regulators in the largest US bank failure so far this year. THE SUDDEN DOLLAR DECLINE AND SEIZURE OF BANK UNITED IS A FLASHBACK TO THE US ECONOMIC TURMOIL OF LATE 2008, AND A BRUTAL REALITY CHECK FOR MANY WHO THOUGHT THE WORST WAS OVER.

Last week's dollar drop was apparently in response to a comment by the president of the Federal Reserve Bank of Boston, Eric Rosengren, who warned America's economic recovery could be "slow." There is also a great deal of concern surrounding the US triple-A credit rating, which many speculate will be downgraded along with Britain's triple-A rating. Such a move would signal a decline in America's position as a reliable borrower on the international market.

Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd, certainly believes a downgrade will happen. In early May, THE OBAMA ADMINISTRATION INCREASED ITS FEDERAL DEFICIT FORECAST FOR 2009 TO $1.84 TRILLION. When the government has a large deficit it needs to borrow more money, which in turn increases both the risk of a credit score downgrade and the likelihood of runaway inflation.

Ashraf Laidi, chief market strategist at CMC Markets, recently cautioned that we are at the start of a "SERIOUS CASE OF DOLLAR DAMAGE," adding that his organization "LONG WARNED ABOUT THE DAY OF RECKONING FOR THE DOLLAR EMERGING AT THE NEXT ECONOMIC RECOVERY." Laidi's prediction may not be too far off. Russia has ditched the dollar in favor of the euro, Pravda reported last week. The Vedomosti newspaper confirmed this, reporting that, "THE DOLLAR HAS... LOST THE STATUS OF THE BASIC RESERVE CURRENCY FOR THE RUSSIAN CENTRAL BANK."

Last week, Israel's Air Force held a three-day drill to exercise possible missile and air strikes by regional countries - A CLEAR WARNING TO REGIONAL FOES SUCH AS SYRIA AND IRAN. Israel's hawkish Prime Minister Benjamin Netanyahu in Sunday's cabinet meeting tried to placate Israel's regional countries, saying "this is a routine drill, which was planned several months ago and is held every year in order to coordinate between civil and military systems."

Tel Aviv accuses Tehran of nuclear weapons development - a charge rejected by both Iran and the UN nuclear watchdog, which has so far made over 14 snap inspections of the country's nuclear facilities. This is while Tel Aviv is widely regarded as the sixth-largest nuclear power in the world and the sole possessor of an atomic arsenal in the Middle East.

In the early 1970s, Israel had already developed missiles capable of delivering nuclear warheads to most countries in the region, including Iran and Russia. MOREOVER, ISRAEL REPORTEDLY HOUSES AT LEAST 100 BUNKER-BUSTING BOMBS, WHICH COME IN THE FORM OF LASER-GUIDED MINI-NUKES WITH THE ABILITY OF PENETRATING UNDERGROUND TARGETS. The right-leaning government of Israeli Prime Minister Benjamin Netanyahu has repeatedly threatened to bomb Iran's enrichment facilities out of existence.

But his current plan, HR 1207, the Federal Reserve Transparency Act of 2009 to demand an audit of the organization, is quickly gaining steam. As of today, the proposal had collected a bipartisan coalition of 179 members of Congress who have signed on as co-sponsors. Not that Paul's ultimate goals have changed significantly.

"To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have," he wrote in a new Straight Talk commentary. "THEY HAVE BEEN GIVEN THE POWER TO CREATE MONEY, BY THE TRILLIONS, AND TO GIVE IT TO THEIR FRIENDS, UNDER ANY TERMS THEY WISH, WITH LITTLE OR NO MEANINGFUL OVERSIGHT OR ACCOUNTABILITY."

The bill calls for the comptroller general of the United States to audit the private Federal Reserve and report to Congress before the end of 2010. THE CONSTITUTION, PAUL SAID, GIVES CONGRESS, NOT THE PRIVATE FEDERAL RESERVE, "THE AUTHORITY TO COIN MONEY AND REGULATE THE VALUE OF THE CURRENCY."

"Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar," the Texas Republican said. "SINCE 1913 THE DOLLAR HAS LOST OVER 95 PERCENT OF ITS PURCHASING POWER, aided and abetted by the Federal Reserve's loose monetary policy. How long will we as a Congress stand idly by while hard-working Americans see their savings eaten away by inflation? ONLY BIG-SPENDING POLITICIANS AND POLITICALLY FAVORED BANKERS BENEFIT FROM INFLATION," he said. Paul called oversight of the Fed "long overdue."

Jochen Sanio, BaFin's president, said the danger is a series of "BRUTAL" DOWNGRADES OF MORTGAGE SECURITIES BY THE RATING AGENCIES, which would eat into the depleted capital reserves of the banks and cause broader stress across the credit system. "We must make the banks immune against the changes in ratings," he said.

The markets will "kill" banks that try to go it alone without state protection, warning that banks have €200bn (£176bn) of bad debts on their books. "WE ARE PRETTY SURE THAT WITHIN A MONTH OR TWO OUR BANKS WILL FEEL THE FULL FORCE OF THE SHARPEST RECESSION EVER ON THEIR CREDIT PORTFOLIOS," he said, speaking after the release of BaFin's annual report last week.

An internal memo by the regulator's office suggested that likely write-offs may reach €816bn, twice the entire reserves of the country's financial institutions. This figure included a broader array of "problematic" assets. Hypo Real topped the secret list with €268bn in credit risk, followed by HSH Nordbank at €105bn, and Commerzbank at €101bn. The International Monetary Fund (IMF) has called for a stress test for Europe's banks along the lines to the US Treasury's health screen, saying the region "urgently needs to weatherproof its institutions".

It could mean every taxpayer having to pay an extra £2,000 to plug the gap, according to the Conseravtives who said Labour's forecasts were based on "fantasy." Mr Darling's own forecast for growth to rebound strongly after this year were also thrown into grave doubt by the survey of 20 independent forecasts included in the Treasury survey.

The survey predicts over the next four years the total borrowing figures will be £679 billion. In the Budget Mr Darling said it would be £606 billion. That would mean the Treasury would need to find another £72.7 billion in borrowing. George Osborne, the shadow chancellor, said: "The Treasury's own document shows that Labour are GAMBLING BRITAIN'S ECONOMIC CREDIBILITY ON FANTASY FORECASTS FOR THE RECOVERY."

"While we all hope that this long recession will end later this year, Gordon Brown's claims that we will bounce back to boom time levels of growth has now been discredited by first the Bank of England and now the Government's own survey of independent forecasters."

"If the independent forecasters are right then the Government will have to borrow almost £73 billion more over the next four years than it forecast just a month ago. That's more than £2,000 in extra borrowing for every taxpayer in the country."

In a blow to the Government's 24-hour licensing law, separate figures show a fifth of all violence now occurs in or around pubs and clubs. The grim statistics leave grave questions over Labour's promise to make the streets safer and to tackle alcohol-fuelled disorder.

Chris Huhne, the Liberal Democrat home affairs spokesman, said: "It is indicative of how appalling habitual violence is on our streets that so many women are involved. The number of women, often teenage girls, resorting to violence is proof of a worrying binge-drinking ladette culture." Women and girls were responsible for 13 per cent of all violent attacks in 2007/08, according to the British Crime Survey, which was the equivalent of 281,320 assaults, robberies and muggings, compared with 11 per cent in the previous year.

A further 11 per cent of incidents - or 238,040 crimes - involved both male and female offenders, the figures from the Home Office show. Females were also either directly responsible for or involved in 21 per cent of all woundings, the equivalent of 98,070 offences, and 28 per cent of all assaults involving a minor injury. Chris Grayling, the shadow home secretary, said: "I think we really do now need to review the Government's new licensing regime. Far from creating the promised continental café culture, it just seems to have created a problem of binge drinking and violence outside pubs and clubs."

Out will go kebabs, greenhouse tomatoes and alcohol. Instead, diners will be encouraged to consume more potatoes and seasonal vegetables, as well as pork and chicken, which generate fewer carbon emissions. "CHANGING OUR LIFESTYLES, INCLUDING OUR DIETS, IS GOING TO BE ONE OF THE CRUCIAL ELEMENTS IN CUTTING CARBON EMISSIONS," said David Kennedy, chief executive of the Committee on Climate Change. Kennedy has stopped eating his favourite doner kebabs because they contain lamb.

A government-sponsored study into greenhouse gases found that producing 2.2lb of lamb released the equivalent of 37lb of carbon dioxide. The problem is because sheep burp so much methane, a potent greenhouse gas. Cows are only slightly better behaved. The production of 2.2lb of beef releases methane equivalent to 35lb of CO2. Tomatoes, most of which are grown in heated glasshouses, are the most "carbon-intensive" vegetable, each 2.2lb generating more than 20lb of CO2. Potatoes, in contrast, release only about 1lb of CO2 for each 2.2lb of food. The figures are similar for most other native fruit and vegetables.

"We are not saying that everyone should become vegetarian or give up drinking but moving towards less carbon intensive foods will reduce greenhouse gas emissions and improve health," said Kennedy.

The 6-1 decision written by Chief Justice Ron George rejected an argument by gay rights activists that the ban revised the California Constitution's equal protection clause to such a dramatic degree that it first needed the Legislature's approval. The court said the Californians have a right, through the ballot box, to change their constitution.

"In a sense, petitioners' and the attorney general's complaint is that it is just too easy to amend the California Constitution through the initiative process. But it is not a proper function of this court to curtail that process; we are constitutionally bound to uphold it," the ruling said.

The justices said the 136-page majority ruling does not speak to whether they agree with Proposition 8 or "believe it should be a part of the California Constitution." They said they were "limited to interpreting and applying the principles and rules embodied in the California Constitution, setting aside our own personal beliefs and values." Gay rights activists immediately promised to resume their fight, saying they would go back to voters as early as next year in a bid to repeal Proposition 8.

Her comments come a day after the UN unanimously condemned North Korea for conducting an underground nuclear test. North Korea responded by firing two more missiles hours later. Ms Rice told CBS news channel in the US that Pyongyang's actions were "CLEARLY PROVOCATIVE AND DESTABILISING ACTIONS WHICH THREATEN INTERNATIONAL PEACE AND SECURITY. North Korea needs to understand that its actions have consequences," she said.

"The pressure will increase on North Korea, economically and otherwise, and North Korea will realise that its actions have only left it further isolated and further debilitated." Ms Rice said the international community would not "throw up our hands and let them pursue this path" and that North Korea would "pay a price for their action".

The strong words from the US come as UN diplomats begin work on a resolution to punish North Korea for its underground nuclear test on Monday, which were accompanied by at least three missile tests.

That is why the Home Front Command is conducting A FIVE-DAY DRILL next week, dubbed Turning Point 3, which will send Israelis running for their bomb shelters on June 2. "THIS ISN'T AN IMAGINARY SITUATION. This isn't detached from reality and if there is a war, it's very likely that this is what will happen," Vilnai said, during the committee hearing.

On the third day of the drill, at 11am, a siren will go off throughout the entire country, and everyone is expected to immediately head to the nearest shelter or protected space. The time suggested for reaching the protected space differs depending upon location. Those living in the GOLAN HEIGHTS AND SOME OTHER NORTHERN CITIES HAVE LESS THAN 30 SECONDS TO FIND SHELTER WHILE THOSE IN TEL AVIV HAVE TWO MINUTES AND IN JERUSALEM, THREE MINUTES. "If someone attacks us, we will be ready," said Vilnai, in an interview after the Knesset session. "The concept is as protected as possible."

Turning Point 3 has been called the largest drill in Israel's history. Schools across the country will interrupt studies to get students into shelters on time. Security personnel at Jerusalem's Malha Mall will try to bring all its customers to the mall's shelters and secured areas. Only hospitals will not disrupt activities for the drill, as per Health Ministry instructions.

In recent months, senior Chinese officials, including Premier Wen Jiabao, have repeatedly signalled their concern that US policies could lead to a collapse in the dollar and global inflation. But Chinese and western officials in Beijing say China is caught in a "dollar trap" and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.

In March alone, China's direct holdings of US Treasury securities rose by $23.7bn (£14.9bn) to reach a new record high of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government. "Because of the sheer size of its reserves SAFE [China's State Administration of Foreign Exchange] will immediately disrupt any other market it tries to shift into in a big way and could also collapse the value of its existing reserves if it sold too many dollars," said a western official, who spoke on condition of anonymity.

The composition of China's reserves is a state secret but dollar assets are estimated to comprise as much as 70 per cent of the $1,953bn total. CHINA OWNS NEARLY A QUARTER OF THE US DEBT HELD BY FOREIGNERS, according to US Treasury data.

But SAFE has not fundamentally changed its strategy of allocating the bulk of its burgeoning foreign exchange reserves to US Treasury securities, a western adviser familiar with Safe thinking told the Financial Times. He said Safe traders were "very negative" on sterling because of expectations of renewed weakness of the UK currency, but SAFE was neutral on the euro and bullish on the Australian dollar.

North Korea presents a classic example of the dilemmas involved in dealing with a STATE WHOSE BEHAVIOUR IS PREDICTABLY UNPREDICTABLE. The basic rule for dealing with such states is that there is no rule. But a major consideration is how powerful they are. In 2002 Libya could be pressured into admitting and giving up a secret nuclear programme because it was weak and exposed.

NORTH KOREA HAS A MILLION-STRONG ARMY, WITH MORE THAN 4,000 TANKS AND ABOUT 18,000 ARTILLERY PIECES, according to the International Institute for Strategic Studies. Its forces are encamped only a short distance from the South Korean capital, Seoul. AN IRAQ-STYLE INVASION IS NOT POSSIBLE. So options are limited.

The long-term hope in these situations is that the regime itself will collapse. This became the solution to the Cold War. THE DANGER WITH NORTH KOREA IS THAT COLLAPSE, OR FEAR OF IT, COULD LEAD TO WAR, GIVEN THE MILITARISTIC NATURE OF ITS GOVERNMENT.