Presently the dollar is underwritten by $8.3 trillion of debt. The US trade deficit is running at $800 billion per year which is 6.4% of GDP. The trade deficit is large enough to cover the yearly costs of the war in Iraq, the defense budget, and Bush's lavish tax cuts. In other words, America's war machine is lubricated with money borrowed from the developing world.

Despite the enormity of America's debt, foreign nations still accept our fiat money in exchange for their resources and manufactured goods. That's because the American consumer market has been the main engine for global growth for more than 25 years. Only recently have other countries started to shy-away from the dollar, recognizing the tell-tale signs that the over-leveraged American consumer is nearing the end of his spending spree. As consumer spending gradually slows, recession will set in, and investors will shift capital to foreign markets. These developments will make it more difficult for the dollar to maintain its supremacy.

Typically, foreign-owned US dollars are used to purchase American securities or US Treasuries. It takes roughly $2.5 billion per day of foreign net-inflows to cover the burgeoning deficit. These infusions help to keep interest rates low in the short term, but they come at a hefty price. America is placing its future in the hands of its creditors who now own more than $3 trillion of American assets and securities. We saw how explosive this situation can be in the case of the Dubai Port deal. Middle Eastern businessmen wanted to purchase American seaports with US dollars. The transaction set off a political firestorm even though the Dubai businessmen were operating entirely within the legal confines of current international trade law. As more of America's wealth is transferred to foreigners, we can expect similar situations will arise.

The massive trade deficit serves the narrow interests of western elites and the Federal Reserve, but is destructive to the working class. It allows the shifting of wealth from one class to another via tax cuts, "no-bid" contracts, and other contrivances which escape public notice behind the smokescreen of low interest rates. It also allows the Fed to keep increasing the money supply (which has doubled in the last 7 years) to meet the requirements of expanding foreign trade.

It's no wonder Washington politicians and banking giants plan to prolong this system as long as possible. Their power and personal wealth are only enhanced by the process. The exchange of paper scrip for valuable commodities, resources and manufactured goods is the best deal around. It is the equivalent of having a mint in one's own backyard. Last year's trade deficit with China alone (which was $200 billion) would have paid for 2 full years of the war in Iraq!

War is considerably less painful when someone else is paying the bill.

Although the current deficits are "unsustainable," (according to former Fed-chief Alan Greenspan) foreign countries continue to accept greenbacks in exchange for their goods; sucking hundreds of billions of dollars from the poorest countries on the planet to sustain the living standards of people in the world's biggest "debtor nation". The brisk pace of international trade keeps trillions of dollars in circulation preventing the hyper-inflation it would cause if the money was returned to America.

As America's debt has continued to balloon, there are signs that nation's around the world are beginning to diversify their stockpiles of US dollars. If they reduce their holdings too quickly, the dollar could free-fall and precipitate a widespread sell-off.

According to Arab News, nearly $4 trillion in US dollars is currently held in central banks around the world; nearly 70% of all their holdings. This is as close to a monopoly as it gets. If even a fraction of those greenbacks are traded for euros or some other currency, the effects on the American economy would be catastrophic.

To a large extent, the supremacy of the dollar depends on the oil trade. Oil is the largest commodity in the world and its trade is almost exclusively denominated in dollars through the New York Mercantile Exchange (NYMEX) or London's International Petroleum Exchange (IPE). Foreign countries must maintain large stockpiles of US Dollars in order to meet their energy needs. It is estimated that approximately $2.6 trillion is circulating in the oil trade alone.

This vice-like grip on the oil market is now being challenged by a number of countries including Russia, Venezuela and Iran. These three nations produce 25% of daily global output and pose a direct challenge to the dollar's continued dominance. This explains why these three have fallen out of grace with Washington. The US cannot maintain its superpower status unless it can control the lion's-share of world's oil and force the world to use its currency. By 2030 60% of the world's oil will come from the Middle East. The US will have to assert control over the resources of the entire Caspian Basin if it intends to keep the dollar as the de-facto international currency.

Imperial rule requires a "coin of the realm". Even as the American consumer market loses steam; western elites are planning to preserve US dollar hegemony in order to continue their control of the global economic system. Their objectives foreshadow even greater reliance on military force and intimidation.

America is now engaged in a transition that has never before been attempted. It has hollowed out its manufacturing sector (more than 3 million manufacturing jobs have been lost since Bush took office) looted its treasury, and plunged the country into irreversible debt. Its major corporations and banks have disconnected from the mainland and operate as sovereign islands protected by the US military and international trade law. They have no allegiance to America and are unaccountable to anyone except their own shareholders.

Dollar-hegemony is critical to their ongoing success as it keeps the basic unit of exchange; paper money, in the control of fellow-elites at Federal Reserve. Absent that power, American plutocrats would be unable to perpetuate the system of trading debt (US dollars) for resources and manufactured goods. If Bush succeeds in his global resource war, then countries will be forced to use the dollar regardless of how much debt it has accumulated.

The most effective strategy for bringing the dollar into balance with the other currencies is to "democratize" the system and allow the free exchange of goods and resources in one's own currency. This would eliminate the dependence on a reserve currency and make the United States accountable for its own prodigious debt. This, in turn, would force American leaders to revitalize the manufacturing sector as a way of restoring economic solvency.

The dependence on a "reserve currency" inevitably creates winners and losers. It is an invitation to massive account imbalances as well as corruption and exploitation. Greater parity among the currencies should be encouraged as a way of strengthening democracies and invigorating markets. It promises to breathe new life into international trade by allowing other political models to flourish without fear of being subsumed into the capitalist prototype.

The dominance of the greenback has created a global empire which is controlled by a small group of corporatists and autocrats who depend on bullying and brute force to maintain their supremacy. The only way to restore the republic is to topple the empire, dislodge the dollar from its lofty perch, and even the playing field with the other currencies.

The current account is the broadest measure of foreign trade. It covers not only trade in goods and services but also investment flows between countries. The deficit represents the amount the United States must borrow from foreigners to cover the shortfall between exports and imports.

Democrats called the widening of the deficit further evidence that President Bush's free-trade policies have left American workers exposed to unfair trade competition and a steep loss of manufacturing jos.

"Since President Bush took office, we have lost 3 million jobs and America's trade deficit in motor vehicles has climbed by approximately 20 percent," said Rep. Marcy Kaptur, D-Ohio, a frequent critic of Bush's trade policies.

"The recent announcement by Ford Motor Co. of production cutbacks and plant closings will only exacerbate the situation," she said. "Still, the administration clings to the same failed policies."

With just seven weeks left until the congressional elections, Democrats are hoping voter unhappiness with the rising trade deficit will help them win control of the House and Senate.

For its part, the administration is resisting efforts to raise protectionist barriers such as a bill sponsored by Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., that would impose 27.5 percent tariffs on all Chinese imports in retaliation for China's currency system.

U.S. manufacturers contend China is undervaluing its currency by as much as 40 percent to make Chinese goods cheaper than American products.

Treasury Secretary Henry Paulson, who will visit China this week for talks with top officials, said Monday that the administration wanted to see China make progress on a number of economic reforms. But the former Goldman Sachs chief executive sought to lower expectations for any breakthrough during his first trip to China as a member of Bush's Cabinet.

"I am not looking for immediate solutions or quick fixes to any particular economic issue," he told reporters in Singapore.

The deficits through the first six months of this year put the country on track for a fifth consecutive annual deficit, surpassing last year's mark of $791.5 billion. The record high for a single quarter was a $223.1 billion imbalance in the October-December period last year.

So far, foreigners have been happy to hold dollars in payment for American purchases of cars, televisions and foreign oil. But the concern is what would happen should foreigners at some point decide they want to hold less in dollar-denominated assets.

A rush for the exits by foreigners could send U.S. stock prices and the value of the dollar plunging and American interest rates sharply higher.

A separate report by Treasury on Monday showed that net foreign purchases of U.S. securities totaled $26.5 billion in June, the lowest amount since May 2005.

For the second quarter, the current account deficit as a percentage of the overall economy stood at 6.6 percent, the same level as the first quarter. The total deficit of $218.4 billion was $5.2 billion higher than the $213.2 billion first quarter deficit.

The deterioration was larger than analysts had been expecting. The deficit for goods rose by $2.6 billion, reflecting the higher oil prices, to $210.6 billion.

The deficit on investment flows increased to $4.1 billion, up $1.6 billion from the first quarter. As recently as a year ago, the balance on investment income was in surplus. Analysts expect this deficit to grow larger in coming quarters, reflecting the rising ownership of U.S. assets by foreigners.

The deficit on unilateral transfers, the category that includes foreign aid, increased by $900 million to $20.4 billion in the second quarter, while the surplus in services edged down slightly to $16.8 billion.

GM and Ford declined comment Monday on an Automotive News story that their high-level executives discussed a merger or alliance. Ford also declined comment on last month's Wall Street Journal report that Ford proposed its own deal with Renault and Nissan.

In July, GM, France-based Renault and Japan-based Nissan announced a 90-day review of a possible alliance among them.

Auto executives talk frequently about "what-if scenarios" and possible deals large and small, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

"These kind of discussions go on all the time," Cole said. "Collaborating ... is part of how they're doing things. ... We call this 'coopetition.'"

These talks have yielded a growing number of joint efforts on everything from hybrid vehicles to better automatic transmissions, he said.

GM and Ford have been slashing their work forces and closing plants in efforts to reverse multibillion-dollar losses in the face of tough competition from Asia-based automakers. On Friday, Ford announced deeper job cuts as part of its "Way Forward" restructuring plan.

GM lost $2.9 billion, or $5.19 per share in the first half of 2006, while Ford lost $1.3 billion, or 70 cents a share.

Both companies declined comment on a story in Automotive News on Monday, which quoted several people it said were familiar with discussions involving senior GM and Ford executives as saying they began in July and are not taking place now.

"My job is to keep everybody focused on our Way Forward plan and accelerating our results," Mark Fields, Ford's president of the Americas, told The Associated Press on Monday. "If we discussed all the speculation that was out there, I think we'd probably spend a couple of days."

GM spokesman Brian Akre said company officials "routinely discuss issues of mutual interest with other automakers." He said such talks are private and "in many cases do not lead anywhere."

Cole said an outright GM-Ford merger is unlikely and said that the companies carefully weigh antitrust issues during the lower-level cooperation that now takes place on such issues as hybrid vehicles, production technology and components.

"It would surprise me if there were a coming-together on the grand level," said Cole, but said Ford and GM very well could start more joint efforts similar to their current work to develop a six-speed automatic transmission

Even if GM and Ford don't merge, some other automakers will as the industry further consolidates, Cole said.

Ford's chronic labor cost problems and its shortage of interesting models give GM little reason to seek a close alignment, said analyst Charles Fleetham of Project Innovations in Farmington Hills.

"I don't see it from a business standpoint," he said. "They have the same high health costs, high union costs, ineffective white collar work force that they want to get rid of."

Ford shares fell 23 cents, or 2.9 percent, to $7.79 in afternoon trading on the New York Stock Exchange, while GM shares fell 11 cents to $31.55.

In a letter sent to Martin Wednesday, Boxer said she was "dismayed that this report, which was done at taxpayer expense more than two years ago, and which concluded that localism is beneficial to the public, was shoved in a drawer."

Martin said he was not aware of the existence of the report, nor was his staff. His office indicated it had not received Boxer's letter as of midafternoon Thursday.

Local ownership benefits

In the letter, Boxer asked whether any other commissioners "past or present" knew of the report's existence and why it was never made public. She also asked whether it was "shelved because the outcome was not to the liking of some of the commissioners and/or any outside powerful interests?"

The report, written by two economists in the FCC's Media Bureau, analyzed a database of 4,078 individual news stories broadcast in 1998. The broadcasts were obtained from Danilo Yanich, a professor and researcher at the University of Delaware, and were originally gathered by the Pew Foundation's Project for Excellence in Journalism.

The analysis showed local ownership of television stations adds almost five and one-half minutes of total news to broadcasts and more than three minutes of "on-location" news. The conclusion is at odds with FCC arguments made when it voted in 2003 to increase the number of television stations a company could own in a single market. It was part of a broader decision liberalizing ownership rules.

Community responsivenes

At that time, the agency pointed to evidence that "commonly owned television stations are more likely to carry local news than other stations."

When considering whether to loosen rules on media ownership, the agency is required to examine the impact on localism, competition and diversity. The FCC generally defines localism as the level of responsiveness of a station to the needs of its community.

The 2003 action sparked a backlash among the public and within Congress. In June 2004, a federal appeals court rejected the agency's reasoning on most of the rules and ordered it to try again. The debate has since been reopened, and the FCC has scheduled a public hearing on the matter in Los Angeles on Oct. 3.

The report was begun after then-Chairman Michael Powell ordered the creation of a task force to study localism in broadcasting in August of 2003. Powell stepped down from the commission and was replaced by Martin in March 2005. Powell did not return a call seeking comment.

The authors of the report, Keith Brown and Peter Alexander, both declined to comment. Brown has left public service while Alexander is still at the FCC. Yanich confirmed the two men were the authors. Both have written extensively on media and telecommunications policy.

Yanich said the report was "extremely well done. It should have helped to inform policy."

Boxer's office said if she does not receive adequate answers to her questions, she will push for an investigation by the FCC inspector general.

In De Morgen, director of the Flemish Daily Press Alex Fordyn complained that often the fact that journalists and publishers have to be paid for their research is forgotten by those who advocate news should be free for everyone.

At the start of the conflict at the beginning of 2006, the Flemish Newspaper Association Reprocopy left news.google.be because it disagreed with the way the company operated.

Google had been informed of the decision of the Belgian court by Sept. 8 and can still appeal the ruling.

Singapore Prime Minister Lee Hsien Loong said at the opening ceremony that good governance is key to helping economies open up in the age of globalization and making life better for the population.

"Overall, globalization represents the best hope to improve the lives of the world's population. It has created growth and wealth, and fostered trade and interdependence," Lee said.

"Globalization is not without its downsides, but properly managed, it is a powerful force for the good. It must be part of the solution; it need not be part of the problem. With good governance and effective multilateral institutions, all countries can contain the risks and benefit from open markets and competition," he added.

Rodrigo de Rato, managing director of the IMF, announced at the opening ceremony that the Governors have voted overwhelmingly in support of a resolution on reform of quotas and voice in the IMF.

Rato said that these reforms are the first step in a process that will increase the representation of many emerging market countries to reflect their increased weight in the global economy.

"Right away, they will increase the voting power of four countries, China, (South) Korea, Mexico, and Turkey, that are most clearly underrepresented," said Rato. "Equally important, Governors have agreed that we must strengthen the voice and representation of low-income countries that continue to borrow from the Fund but have only a limited share in Fund voting."

Calling the governance reforms "tremendously important" for the future of the IMF, Rato said that they will enhance IMF's effectiveness and add legitimacy to all of the other reforms that it is implementing.

Rato said that the year 2007 will be another year of solid and broad-based growth for the world economy, but warned of risks of high oil price, global imbalance and protectionism.

World Bank President Paul Wolfowitz urged support to Africa at the opening ceremony, saying that Africa remains "the first of the Bank's priority."

He said that the international community needs to make greater strides in resolving conflict, preventing disease, and strengthening governance to bring hope to the many millions more, particularly in Africa.

The past 25 years have seen more than 400 million people worldwide escape extreme poverty, making this the most successful quarter-century in the history of the fight against poverty, he said.

In his speech, Wolfowitz stressed that the Bank is committed to a "course of deeper engagement to strengthen governance and fight corruption" in its own work and in the countries with which it works.

The $2.7b figure is going to finance the development projects at phases 17 and 18 of the South Pars Oil and Gas Field and the capital return will be satisfied by the revenues coming from gas and condensate sales.

Two drilling platforms equipped with water treatment units will bore 22 offshore development wells and two 32-inch pipelines are going to transfer the gas to onshore installations for refining and processing. Construction of flare stands and bridges, testing the wells and related services are among the works to be performed in these operations.

Phases 17 and 18 are anticipated to offer 56 million cubic meters of gas, 400 tons of sulfur and 80,000 barrels of condensates per day while the ethane and liquid gas production should hit one million tons each per annum.

The prosecutor general's office alleged at the weekend that permission to develop the second phase of the Sakhalin island gas project had been granted illegally, but Shell insisted last night that it had done nothing wrong.

The growing pressure on Shell comes at a time when state-owned Gazprom has been trying to persuade the Anglo-Dutch oil company to sell it a 25% stake in Sakhalin-2 in return for some of its other Russian assets. The project has already proved difficult for Shell, with costs doubling, and mounting anger from environmentalists over potential damage to an endangered whale population.

Some interpret the permit issue as the latest attempt by Moscow to wrest back control of oil and gas assets held in the private sector while Gazprom acts as a political arm of the Kremlin. There have also been local reports that ExxonMobil's Sakhalin-1 oil project could face a similar fate.

Shell said it was continuing to work on Sakhalin, but admitted the removal of its environment permit might lead to more delays and further cost overruns.

"Although there have been various environmental challenges on this project, these have been tackled and largely overcome ... We are confident there are no valid grounds to revoke the order 600 [environment permit]," said the company.

Sakhalin-2 is one of two projects in the Russian far east run by western energy firms under production sharing agreements signed in the 1990s, when Russia lacked the resources to develop oil and gas projects on its own.

The other is the ExxonMobil project, which is 20% owned by state-controlled oil company Rosneft. With the Russian economy now booming thanks to high oil prices, many government officials have called for a revision of the Sakhalin-2 deal to include Russian participation.

"This is going to be interpreted by many as an attempt by Gazprom to enter the project," said Adam Landes, an oil and gas analyst at Renaissance Capital. "It seems to be a brutal way of renegotiating previous deals that were quite humiliating for Russia."

At the same time, Gazprom, which is the biggest gas group in the world, was said by Russian newspapers to be in talks to buy the holding in the TNK-BP joint venture that is currently controlled by three local Russian investors.

The partners in TNK, which has become a vital contributor to growing oil production at BP, are poised to receive the last of three $1.25bn instalments for selling part of the business to Britain's biggest company.

The Alfa Group, Renova and Access Industries are locked in to the joint venture until the end of 2007 under the terms of the sale agreement, but are then free to sell out to whoever they wish.

The Vedomosti business newspaper quoted Gazprom senior managers as saying they had held preliminary negotiations with the Russian TNK-BP investors. They are "not against selling their shares to Gazprom," one manager was quoted as saying. "It would be a good deal to develop our company's oil business,"added the unnamed source.

BP said it was aware of the reports, but did not want to comment. Gazprom would also not comment on the BP issue, but told the Guardian that it had nothing to do with environmental permits being withdrawn from Shell at Sakhalin. "We have heard this [about the permits] but our talks with Shell [on the asset sale] are going well," said a Gazprom spokesman.

Russia has taken repeated steps in recent years to consolidate state control over the energy sector, including the dismantling of Yukos, once Russia's largest oil company, and the imprisonment of its founder, Mikhail Khodorkovsky, on charges of tax evasion and fraud.

Backstory

Sakhalin-2 is the second stage of a huge oil and gas project in the far east of Russia. The island was formerly a penal colony for the tsars and was mentioned in the works of Chekhov. Along with Sakhalin-1, operated by ExxonMobil, the oil and gas schemes are the biggest direct foreign investments in Russia. Shell claims the Russian state stands to earn $50bn (£26bn) in tax and other benefits over 40 years. Already living standards in the Sakhalin region have risen by 500% since 2002 and driven unemployment down to a national record low of 1%, according to Shell.