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That opportunity involves a seeming contradiction. On one level, the financial collapse represents a major blow to the standing of the United States. While American political judgments have often proved controversial, the American prescription for a world financial order has generally been unchallenged. Now disillusionment with the United States’ management of it is widespread.

At the same time, the magnitude of the debacle makes it impossible for the rest of the world to shelter any longer behind American predominance or American failings. Every country will have to reassess its own contribution to the prevailing crisis. Each will seek to make itself independent, to the greatest possible degree, of the conditions that produced the collapse; at the same time, each will be obliged to face the reality that its dilemmas can be mastered only by common action.

Even the most affluent countries will confront shrinking resources. Each will have to redefine its national priorities. An international order will emerge if a system of compatible priorities comes into being. It will fragment disastrously if the various priorities cannot be reconciled.

The nadir of the international financial system coincides with simultaneous political crises around the globe. Never have so many transformations occurred at the same time in so many different parts of the world and been made accessible via instantaneous communication. The alternative to a new international order is chaos.

The financial and political crises are, in fact, closely related partly because, during the period of economic exuberance, a gap had opened up between the economic and the political organisation of the world. The economic world has been globalised. Its institutions have a global reach and have operated by maxims that assumed a self-regulating global market. The financial collapse exposed the mirage. It made evident the absence of global institutions to cushion the shock and to reverse the trend. Inevitably, when the affected publics turned to their political institutions, these were driven principally by domestic politics, not considerations of world order. Every major country has attempted to solve its immediate problems essentially on its own and to defer common action to a later, less crisis-driven point.

So-called rescue packages have emerged on a piecemeal national basis, generally by substituting seemingly unlimited governmental credit for the domestic credit that produced the debacle in the first place, so far without achieving more than stemming incipient panic. International order will not come about either in the political or economic field until there emerge general rules toward which countries can orient themselves.

In the end, the political and economic systems can be harmonised in only one of two ways: by creating an international political regulatory system with the same reach as that of the economic world; or by shrinking the economic units to a size manageable by existing political structures, which is likely to lead to a new mercantilism, perhaps of regional units. A new Bretton Woods kind of global agreement is by far the preferable outcome.

America’s role in this enterprise will be decisive. Paradoxically, American influence will be great in proportion to the modesty in our conduct; we need to modify the righteousness that has characterised too many American attitudes, especially since the collapse of the Soviet Union. That event and the subsequent period of nearly uninterrupted global growth induced too many to equate world order with the acceptance of American designs, including our domestic preferences. The result was a certain inherent unilateralism – the standard complaint of European critics – or else an insistent kind of consultation by which nations were invited to prove their fitness to enter the international system by conforming to American prescriptions.

Not since the inauguration of president John F Kennedy half a century ago has a new administration come into office with such a reservoir of expectations. It is unprecedented that all the principal actors on the world stage are avowing their desire to undertake the transformations imposed on them by the world crisis in collaboration with the United States.

The extraordinary impact of the President-elect on the imagination of humanity is an important element in shaping a new world order. But it defines an opportunity, not a policy. The ultimate challenge is to shape the common concern of most countries and all major ones regarding the economic crisis, together with a common fear of jihadist terrorism, into a strategy reinforced by the realisation that the new issues like proliferation, energy and climate change permit no national or regional solution.

The new administration could make no worse mistake than to rest on its initial popularity. The role of China in a new world order is crucial. A relationship that started on both sides as essentially a strategic design to constrain a common adversary has evolved over the decades into a pillar of the international system. China made possible the American consumption splurge by buying American debt; America helped the modernisation of the Chinese economy by opening its markets to Chinese goods.

Each side of the Pacific needs the cooperation of the other in addressing the consequences of the financial crisis. Now that the global financial collapse has devastated Chinese export markets, China is emphasising infrastructure development and domestic consumption. It will not be easy to shift gears rapidly, and the Chinese growth rate may fall temporarily below the 7.5 per cent that Chinese experts define as the line that challenges political stability.

What kind of global economic order arises will depend importantly on how China and America deal with each other over the next few years. A frustrated China may take another look at an exclusive regional Asian structure, for which the nucleus already exists in the ASEAN-plus-three concept. At the same time, if protectionism grows in America or if China comes to be seen as a long-term adversary, a self-fulfilling prophecy may blight the prospects of global order. Such a return to mercantilism and 19th-century diplomacy would divide the world into competing regional units with dangerous long-term consequences.

The Sino-American relationship needs to be taken to a new level. This generation of leaders has the opportunity to shape relations into a design for a common destiny, much as was done with trans-Atlantic relations in the postwar period – except that the challenges now are more political and economic than military.

The complexity of the emerging world requires from America a more historical approach than the insistence that every problem has a final solution expressible in programmes with specific time limits not infrequently geared to our political process. We must learn to operate within the attainable and be prepared to pursue ultimate ends by the accumulation of nuance. An international order can be permanent only if its participants have a share not only in building but also in securing it. In this manner, America and its potential partners have a unique opportunity to transform a moment of crisis into a vision of hope.

Tice said on Wednesday that the NSA had vacuumed in all domestic communications of Americans, including, faxes, phone calls and network traffic.

Today Tice said that the spy agency also combined information from phone wiretaps with data that was mined from credit card and other financial records. He said information of tens of thousands of U.S. citizens is now in digital databases warehoused at the NSA.

“This [information] could sit there for ten years and then potentially it marries up with something else and ten years from now they get put on a no-fly list and they, of course, won’t have a clue why,” Tice said.

In most cases, the person would have no discernible link to terrorist organizations that would justify the initial data mining or their inclusion in the database.

“This is garnered from algorithms that have been put together to try to just dream-up scenarios that might be information that is associated with how a terrorist could operate,” Tice said. “And once that information gets to the NSA, and they start to put it through the filters there . . . and they start looking for word-recognition, if someone just talked about the daily news and mentioned something about the Middle East they could easily be brought to the forefront of having that little flag put by their name that says ‘potential terrorist’.”

The revelation that the NSA was involved in data mining isn’t new. The infamous 2004 hospital showdown between then-White House Counsel Alberto Gonzales and Deputy Attorney General James Comey over the legality of a government surveillance program involved the data mining of massive databases, according to a 2007 New York Times article.

But there was always a slight possibility, despite the suspicions of many critics, that the NSA’s data mining involved only people who were legitimately suspected of connections to terrorists overseas, as the Bush Administration staunchly maintained about its domestic phone wiretapping program.

“There’s no spying on Americans,” former Director of National Intelligence Mike McConnell insisted to the New Yorker last year.

But Tice’s assertions this week contradict these claims.

With regard to the surveillance of journalists, Tice wouldn’t disclose the names of the specific reporters or media outlets he targeted when he worked as an analyst for the NSA but said in the part of the program he covered, “everyone was collected.”

“They sucked in everybody and at some point they may have cherry-picked from what they had, but I wasn’t aware of who got cherry-picked out of the big pot,” he said.

The purpose, he was told, was to eliminate journalists from possible suspicion so that the NSA could focus on those who merited further surveillance. But Tice said on Wednesday that the data on journalists was collected round-the-clock, year-round, suggesting there was never an intent to eliminate anyone from the surveillance.

New York Times reporter James Risen, who co-authored that paper’s 2005 story on the warrantless wiretapping program with colleague Eric Lichtblau, suspects he could have been among those monitored, because Bush Administration officials obtained copies of his phone records, which they showed to a federal grand jury. The grand jury is investigating leaked information that appeared in Risen’s 2006 book State of War about a CIA program, codenamed Operation Merlin, to infiltrate and destabilize Iran’s nuclear program. Risen doesn’t know if his records were obtained by the FBI with a legitimate warrant or through the NSA program that Tice described.

Risen told Olbermann that the NSA program to monitor journalists was likely intended to be used to ferret out and intimidate possible sources “to have a chilling effect on potential whistleblowers in the government to make them realize that there’s a Big Brother out there that will get them if they step out of line.”

Who else might have been among those targeted by the NSA?

Senator Jay Rockefeller (D-West Virginia) said, in a separate interview, that he could very well have been targeted, too.

Rockefeller was speaking to MSNBC host Chris Matthews and gave a cryptic reply when Matthews asked him what he thought about Tice’s spying allegations (see 4:14 in the video below).

“I’m quite prepared to believe it,” Rockefeller said. “I mean, I think they went after anybody they could get. Including me.”

Matthews replied, “They didn’t eavesdrop on you, did they Senator?”

“No,” Rockefeller said shaking his head, “and they sent me no letters.”

Gold for February delivery gained $21.10, or 2.5%, to $879.90 an ounce in electronic trading on Globex.

Earlier, gold soared to an intraday high of $882 an ounce, its highest level since Jan. 1.

Gold gained “on heavy safe-haven demand as sentiment deteriorated across global equity markets,” said analysts at Action Economics.

On Wall Street, U.S. stocks posted losses, with the Dow Jones Industrial Average dropping 158 points, or 2%. In more worrying economic news, Britain’s economy contracted at its fastest quarterly pace in nearly 29 years during the final three months of 2008, government data revealed Friday, marking a result even worse than most economists’ pessimistic expectations.

Gross domestic product shrank by 1.5% in the final three months of the year, following a 0.6% quarterly contraction in the July-to-September period, the office for national statistics said in its initial estimate.

The British pound plunged to a 23-year low Friday against the dollar, undermined as data confirmed the U.K. economy fell into a deep and potentially long-lasting recession in the final three months of 2008. See Currencies.

“The true secular measure of currencies is gauged against gold,” as the metal extends to fresh record highs against the British pound, three-month highs against the euro, three-week highs against the U.S. dollar and only three-day highs against the rallying yen, said Ashraf Laidi, chief market strategist at CMC Markets.

The bleak news came after a halt in dividend payments on Thursday by Italy’s Fiat SpA, the first European car maker to report 2008 results, as it headed into what it called one of its worst years.

As the global auto sector reeled from economic recession, plunging demand and production cuts, UBS analysts said they expected France’s PSA Peugeot Citroen and Renault to suspend dividends as well.

European commercial vehicle makers also shared the pain of economic downturn with industry data on Friday showing a 24.4 percent year-on-year drop in the market for December.

Toyota is considering cutting full-time employees in Britain and North America, a company source familiar with the matter told Reuters.

At least one missile hit a house in a village near the town of Mirali in North Waziristan, a stronghold of al-Qaeda and Taleban militants.

A second suspected drone attack has now been reported in South Waziristan but there is no word on casualties.

Pakistan has long argued that such strikes are counter-productive and are a violation of its sovereignty.

The new Wackenhut operation is shrouded in mystery. It has been running its fleet of empty prison buses night and day, apparently logging miles on a Department of Homeland Security (DHS) contract. Multiple buses can be seen driving all over town and even on remote desert back roads. Oddly, except for the driver and one escort guard seated in front, these buses are always empty.

Wackenhut Services was founded by George Wackenhut in 1954 to provide prison guard services to state and federal governments. Wackenhut Services is now owned by the Danish corporation G4S.

Observers originally thought that the purpose of the new Wackenhut operation was to outfit prison buses to be distributed in other parts of the country. But it soon became apparent that none of the buses was leaving the Tucson depot. Recently, a passerby observed what appeared to be a training operation there. In what seemed to be strange activity for 10:30 PM on a Saturday night, the depot yard was fully illuminated, the entire fleet of buses was up and running, and drivers and guards were scrambling around the yard. The question is, what were they training for?

Investors have little confidence in the banks’ ability to pull themselves out of the credit mess and are growing frustrated with a government response seen as haphazard. This is putting pressure on President Barack Obama to come up with a bolder plan.

His economic team has dropped strong hints that an idea to buy up bad assets, which was proposed but then discarded under former President George W. Bush, may soon be resurrected.

While the word “nationalization” is rarely uttered in official public discussion, the end result may be the same. By carving out the bad assets that are blocking the normal flow of credit and then pumping taxpayer money into the remaining healthy part, the public’s stake in these institutions may exceed private holdings.

“It’s really a question of semantics and what you call nationalization,” said Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund. “The banking system can’t stand on its own at the moment and it needs to be cleaned up and recapitalized.”

At issue is the same problem that has been plaguing financial firms and the economy for well over a year. Lax lending standards left banks with too many souring loans and insufficient capital to cover them.

A series of government efforts to clean up the mess have fallen short, as evidenced by banks such as Citigroup and Bank of America coming back to government coffers for more money, in return for partial public ownership.

Director of National Intelligence Mike McConnell has launched a sweeping technology program to knit together the thousands of databases across all 16 spy agencies. After years of bureaucratic snafus, intelligence analysts will be able to search through secret intelligence files the same way they can search public data on the Internet.

Mr. McConnell’s new technology program is also addressing a more basic problem: Spies often have trouble emailing colleagues in other U.S. intelligence agencies, because email addresses aren’t readily accessible, and messages sometimes get eaten by security filters. Mr. McConnell aims to solve that by uniting the agencies’ email systems into a single system with a full directory that links names, expertise and addresses.

Linking up the 16 agencies is the challenge at the heart of the job of director of national intelligence, created after 9/11. Dennis Blair, nominated by President Barack Obama to succeed Mr. McConnell, faces a confirmation hearing Thursday where senators are likely to ask how he will make agencies with different histories and missions work together.

The new information program also is designed to include Facebook-like social-networking programs and classified news feeds. It includes enhanced security measures to ensure that only appropriately cleared people can access the network. The price tag is expected to be in the billions of dollars, but much of that money will be reallocated from existing technology programs.

The impact for analysts, Mr. McConnell says, “will be staggering.” Not only will analysts have vastly more data to examine, potentially inaccurate intelligence will stand out more clearly, he said.

Today, an analyst’s query might scan only 5% of the total intelligence data in the U.S. government, said a senior intelligence official. Even when analysts find documents, they sometimes can’t read them without protracted negotiations to gain access. Under the new system, an analyst would likely search about 95% of the data, the official said.

Several similar efforts have been aborted in the past decade, because cultural divides couldn’t be bridged between rival agencies. Some of those efforts predated 9/11, and many intelligence agencies have botched their own technology programs since 2001.

Mr. McConnell’s team says this effort, called the Information Integration Program, has experienced officials working on it full-time and is designed to deliver tangible products every few months. “There really is a very different spirit about doing all these things than there was, I think, in the past,” said Prescott Winter, a senior National Security Agency official who is directing the program for Mr. McConnell.

The program is likely to get a review from Mr. Blair. The new administration is expected to make sure it is adequately funded, effective and protects privacy.

The initiative grew out of discussions more than a year ago between the Pentagon’s intelligence chief and Mr. McConnell’s top deputy, who were concerned that military and civilian intelligence data couldn’t be easily tapped. They asked the chief information officers at the six largest intelligence agencies to develop a solution.

Over the summer, the officers began to sketch out the technology and policy problems to be solved, including protecting sources and connecting systems at different levels of classification. They also assembled case studies, which showed that the typical analyst is using technology that is about a decade old, a senior intelligence official said.

In September, all 16 agencies agreed to the goal of creating one searchable data and email system, and Mr. McConnell borrowed Mr. Winter from the NSA to get the program under way.

The first stage of the initiative is to merge the email systems of the six largest intelligence agencies, including the Federal Bureau of Investigation, the Central Intelligence Agency and the NSA. Mr. Winter said that is on track to be largely completed by the end of the month. Then, they will expand to the other 10 agencies. By 2010, the intelligence agencies and the Pentagon would have a single email system.

With the Google-like system, intelligence officials would like to connect the bulk of the databases by the end of the year, though no firm date has been set. The system would search all intelligence data, and quickly determine which data an analyst is permitted to see. Someone focused on one corner of the world may be allowed to see everything available on the countries in the region, but not other regions.

Instead, her Uncle Leonard gave Ebel news of another kind of disaster that would upend her life: New York investment manager Bernard L. Madoff had been charged with massive fraud.

Ebel, 60, a widow who lives outside West Chester and winters near West Palm Beach, thought she had $7.3 million with Madoff.

It became sickeningly clear over the next day or so that all her money was gone. “The thought that I have to work now as long as I can stand up to feed myself” shattered her comfortable world, she said.

Six days after Madoff’s arrest for allegedly bilking investors in a $50 billion Ponzi scheme, Ebel had a strenuous temporary job caring for a wealthy friend’s 93-year-old mother and keeping her house, pushing the vacuum cleaner and ironing.

“The first day, I went home and cried,” Ebel said.

Ebel, a retired nurse with blond hair and big blue eyes set on a broad face that turns red with emotion, is no stranger to hard work. She got her first job at age 14. But she believed she had moved on for good.

Not so.

“This is my fate,” said Ebel, who is still pained by her husband’s death in 2000, when he was just 53.

Less than 48 hours after Barack Obama became president, his choice for U.S. Treasury secretary, Timothy Geithner, said a strong dollar is in the United States’ interest.

That phrasing — first used by former Treasury Secretary Robert Rubin more than 14 years ago — lost its weight and credibility when it was over-used by the Bush administration.

The greenback lost about 40 percent of its value versus the euro and more than 15 percent versus the yen between 2000 and 2008. A weaker currency was an important step for the Bush White House in rebalancing a global economy plagued by a U.S. trade deficit and huge Chinese surplus.

“This time around the administration probably means it when it says it backs a strong dollar. They have to be dead serious about it,” said Samarjit Shankar, a director for global strategy at the Bank of New York Mellon, in Boston.

“Trillions worth of U.S. debt is coming soon to the markets. Which foreign central bank or institution will buy this debt if they are not fully convinced the dollar will remain strong?” he added.

The challenge for Obama’s team, analysts said, will be to support the dollar’s value without direct manipulation in the markets, with the economy in recession, interest rates near zero, and a ballooning current account deficit.

Moreover, Washington will have to achieve all that without antagonizing China, the biggest holder of U.S. Treasury debt, the analysts said.

“It will be a real test. One thing is to finance a $450 billion deficit and another is to finance $2 trillion,” said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi in New York.

“We are always worried foreigners could ditch the dollar. But they have no incentive to do that,” he added. “The amount they own is so large that they can’t get out of it without impacting their own currencies and economies in the process. And that includes China.”

Geithner, in written response to questions from the Senate Finance Committee on Thursday, said a strong dollar “is in America’s national interest.” For details, see [ID:nN22364222]

But while stressing the need for a stronger dollar Geithner also said the administration would be vigilant against currency manipulation, in particular that stemming from China.

President Obama “believes that China is manipulating its currency” and that he has pledged to use “all the diplomatic avenues open to him to see change in China’s currency practices,” he said in his response.

DOLLAR BULL-CYCLE

“In the case of China, the U.S. may actually favor a weaker dollar,” said Daniel Katzive, a director for global foreign exchange at Credit Suisse Securities in New York. “But despite all the talk, practical policy implications are likely to be minimal.”

The U.S. trade gap with China totaled $246.5 billion year-to-date through November and the country holds $681.9 billion of U.S. Treasury securities.

Katzive said the dollar will stay strong in coming months as the financial crisis deepens in other regions, notably in Britain and the euro zone.

“As long as the euro is weak, the dollar will remain strong,” he said. “Those are the only two reserve currencies in the world and no matter the fundamentals of the U.S. economy, dollar weakness will not be a problem for now.”

Risk aversion and the spread of the credit crisis boosted demand for the greenback and it gained about 20 percent versus the euro since the single currency touched a record above $1.60 last year. The euro was last trading at $1.2960 , rounding up a 7.1 percent drop since the start of the year.

“The dollar’s relative strength is here to stay and may last years, not months or weeks,” said Brian Belski, a U.S. strategist at Merrill Lynch in New York. “It’s not going to be a gangbuster move, but the U.S. will be the first to recover.”

According to Merrill, strong-dollar cycles tend to last an average of 10 years.