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Even excluding fuels, import prices rose 0.5%.

Import prices have now risen 11.4% in the past year, the largest gain in the 25-year history of the import price index. Import prices increased a downwardly revised 1.4% in October.

The report comes one day after the Federal Reserve cut its overnight interest rate target by a quarter percentage point, citing slower economic growth. However, the Fed also said some inflationary pressures remain, which could be an argument against cutting rates further.

The import price index report certainly highlighted the inflationary dangers facing the Fed and the economy. More bad inflationary news is likely over the next two days with the release of the producer price index on Thursday and the consumer price index on Friday.

By Fred Bergsten

Published: December 10 2007 19:24 | Last updated: December 10 2007 19:24

The world economy faces an acute policy dilemma that, if mishandled, could bring on the mother of all monetary crises. Many dollar holders, including central banks and sovereign wealth funds as well as private investors, clearly want to diversify into other currencies. Since foreign dollar holdings total at least $20,000bn, even a modest realisation of these desires could produce a free fall of the US currency and huge disruptions to markets and the world economy. Fears of such an outcome have risen sharply in both official circles and the markets.

However, none of the countries into whose currencies the diversification would take place want to receive these inflows. The eurozone, the UK, Canada and Australia among others believe that their exchange rates are already substantially overvalued. But China and most of the other Asian countries continue to intervene heavily to keep their currencies from rising significantly. Hence, further large shifts out of the dollar could indeed push the floating currencies far above their equilibrium levels, generating new imbalances and a possibly severe slowdown in global growth.

There is only one solution to this dilemma that would satisfy all parties: creation of a substitution account at the International Monetary Fund through which unwanted dollars could be converted into special drawing rights, the international money created initially by the fund in 1969 and of which $34bn-worth now exists. Such an account was worked out in great detail in 1978-1980 during an earlier bout of currency diversification and free fall of the dollar that closely resembled today’s circumstances.

There was widespread agreement, including from influential private sector groups and congressional leaders as well as the IMF’s governing body, that the initiative would enhance global monetary stability. It failed only because the sharp rise in the dollar that followed the Federal Reserve’s monetary tightening of 1979-1980 obviated much of its rationale, and over disagreement between Europe and the US on how to make up for any nominal losses that the account might suffer as a result of further depreciation of dollars that had been consolidated.

The idea of a substitution account is simple. Instead of converting dollars into other currencies through the market, depressing the former and strengthening the latter, official holders could deposit their unwanted holdings in a special account at the IMF. They would be credited with a like amount of SDR (or SDR-denominated certificates), which they could use to finance future balance-of-payment deficits and other legitimate needs, redeem at the account itself or transfer to other participants. Hence the asset would be fully liquid.

The fund’s members would authorise it to meet the demand by issuing as many new SDR as needed, which would have no net impact on the global money supply (and hence on world growth or inflation) because the operation would substitute one asset for another. The account would invest the dollar deposits in US securities. If additional backing were deemed necessary, the fund’s gold holdings of $80bn would more than suffice.

All countries would benefit. Those with dollars that they deem excessive would receive an asset denominated in a basket of currencies (44 per cent dollars, 34 per cent euros, 11 per cent each yen and sterling), achieving in a single stroke the diversification they seek along with market-based yields. They would avoid depressing the dollar excessively, minimising the loss on their remaining dollar holdings as well as avoiding systemic disruption.

The US would be spared the risk of higher inflation and potentially much higher interest rates that would stem from an even sharper decline of the dollar. Such consequences would be especially unwelcome today with the prospect of subdued US growth or even recession over the next year or so.

The international financial architecture would be greatly strengthened by a substitution account. In the wake of the dollar crises of the early postwar period, the IMF membership adopted SDR as the centrepiece of a strategy to build an international monetary system that would no longer rely on a single currency.

The move to floating exchange rates by most major countries in the 1970s postponed the need to pursue that strategy to its conclusion but also generated the extreme currency instability that triggered official consideration of an account. The global imbalances and large currency swings in recent years, and the accelerated accumulation of official dollar holdings by countries that have essentially reverted to fixed exchange rates, replicate the conditions that led to both the creation of SDR and the negotiations on an account.

A substitution account would not solve all international monetary problems nor would it suffice to restore a stable global financial system.

The dollar needs to decline further to restore equilibrium in the US external position. China, many other Asian countries and most oil exporters will have to accept substantial increases in their currencies now and much more flexible exchange rates for the long run. But early adoption of a substitution account would minimise the risks of adjustment of the present imbalances and the inevitable structural shift to a bipolar monetary system based on the euro as well as the dollar.

Motorists who care to linger over their McMeals for any longer at some drive-throughs are receiving demands from a private company that manages car parks for the burger chain.

If they do not pay, the fee rises steadily and customers are threatened with court action and approached by bailiffs. A spokeswoman for McDonald’s said the 45-minute restrictions had been introduced at about 40 restaurants because car parks were being abused. She said signs explaining the policy were displayed and leaflets given out.

Many supermarkets and restaurants are handing over the management of their car parks to companies which use number plate recognition cameras to log when people enter and leave.

If they stay too long, the details of the registered keeper of the vehicle are obtained from the Driver and Vehicle Licensing Agency (DVLA), and he or she is billed. An elderly Wiltshire couple were recently berated by Tesco after taking too long to do their Christmas shopping at the supermarket.

Spokesperson Chris Isleib did not respond to a request for comment on a passage from the Defense Department’s annual report sent to Congress last April that suggests the Pentagon is gearing up to resume the tests.

Resumption of open-air testing would reverse a long-standing moratorium adopted after a public outcry against them following accidents in the Sixties.

The Pentagon’s annual report apparently calls for both the developmental and operational “field testing of (CBW) full systems,” not just simulations.

The Pentagon’s report to Congress contains the following passage: “More than thirty years have passed since outdoor live-agent chemical tests were banned in the United States, and the last outdoor test with live chemical agent was performed, so much of the infrastructure for the field testing of chemical detectors no longer exists or is seriously outdated. The currently budgeted improvements in the T&E infrastructure will greatly enhance both the developmental and operational field testing of full systems, with better simulated representation of threats and characterization of system response.” “T&E” is an acronym for testing and evaluation.

“Either the military has resumed open-air testing already or they are preparing to do so,” said Francis Boyle, a University of Illinois Professor of International Law who authored the implementing legislation for the U.S. Biological Weapons Convention signed into law by President George Bush Sr. and who has tracked subsequent developments closely.

“I am stunned by the nature of this development,” Boyle said. “This is a major reversal of policy.” The 1972 treaty against germ warfare, which the U.S. signed, forbids developing weapons that spread disease, such as anthrax, a pathogen that is regarded by the military as “ideal” for conducting germ warfare.

“The Pentagon is fully prepared to launch biological warfare by means of anthrax,” Boyle charged. “All the equipment has been acquired and all the training conducted and most combat-ready members of U.S. armed forces have been given protective equipment and vaccines that allegedly would protect them from that agent.”

Indeed it isn’t. It’s an ad for “Paranormal State,” a ghost-themed series premiering on A&E this week. The billboard uses technology manufactured by Holosonic that transmits an “audio spotlight” from a rooftop speaker so that the sound is contained within your cranium. The technology, ideal for museums and libraries or environments that require a quiet atmosphere for isolated audio slideshows, has rarely been used on such a scale before. For random passersby and residents who have to walk unwittingly through the area where the voice will penetrate their inner peace, it’s another story.

Ms. Wilson, a New York-based stylist, said she expected the voice inside her head to be some type of creative project but could see how others might perceive it differently, particularly on a late-night stroll home. “I might be a little freaked out, and I wouldn’t necessarily think it’s coming from that billboard,” she said.

Joe Pompei, president and founder of Holosonics, said the creepy approach is key to drawing attention to A&E’s show. But, he noted, the technology was designed to avoid adding to noise pollution. “If you really want to annoy a lot of people, a loudspeaker is the best way to do it,” he said. “If you set up a loudspeaker on the top of a building, everybody’s going to hear that noise. But if you’re only directing that sound to a specific viewer, you’re never going to hear a neighbor complaint from street vendors or pedestrians. The whole idea is to spare other people.”

Holosonics has partnered with a cable network once before, when Court TV implemented the technology to promote its “Mystery Whisperer” in the mystery sections of select bookstores. Mr. Pompei said the company also has tested retail deployments in grocery stores with Procter & Gamble and Kraft for customized audio messaging. So a customer, for example, looking to buy laundry detergent could suddenly hear the sound of gurgling water and thus feel compelled to buy Tide as a result of the sonic experience.

Mr. Pompei contends that the technology will take time for consumers to get used to, much like the lights on digital signage and illuminated billboards did when they were first used. The website Gawker posted an item about the billboard last week with the headline “Schizophrenia is the new ad gimmick,” and asked “How soon will it be until in addition to the do-not-call list, we’ll have a ‘do not beam commercial messages into my head’ list?”

Researchers from Europe, Japan and the US are considering the viability of building giant solar panels in a low earth orbit that would supply cheap, inexhaustible energy to industry and homes.

Building a huge array outside the Earth’s atmosphere would have the advantage of having no clouds to interrupt the flow of solar energy to the arrays.

Yet the sizeable downside would be the technical challenges of construction and of getting the power down to the ground.

Additionally, the company slashed its quarterly dividend 73 percent and said it plans a $2.5 billion offering of convertible preferred stock. Washington Mutual has not yet priced the offering, but increasing the total number of company shares will dilute their value for existing stockholders. In after-hours trading, shares fell $1.73, or nearly 9 percent, to $18.15 following the company’s announcement.

Chairman Kerry Killinger said in a statement that “significant expense reductions” were needed “to further fortify” the bank’s capital and liquidity.

The Seattle thrift dismantled much of its subprime mortgage business in September, cutting 1,000 jobs related to the sale of home loans to people with questionable credit. It folded the remaining subprime operations into its regular mortgage business.

The savings and loan will now get out of the subprime mortgage business entirely.

Jamie Leigh Jones, now 22, says that after she was raped by multiple men at a KBR camp in the Green Zone, the company put her under guard in a shipping container with a bed and warned her that if she left Iraq for medical treatment, she’d be out of a job.

“Don’t plan on working back in Iraq. There won’t be a position here, and there won’t be a position in Houston,” Jones says she was told.

In a lawsuit filed in federal court against Halliburton and its then-subsidiary KBR, Jones says she was held in the shipping container for at least 24 hours without food or water by KBR, which posted armed security guards outside her door, who would not let her leave.

“It felt like prison,” says Jones, who told her story to ABC News as part of an upcoming “20/20” investigation. “I was upset; I was curled up in a ball on the bed; I just could not believe what had happened.”

Finally, Jones says, she convinced a sympathetic guard to loan her a cell phone so she could call her father in Texas.

“I said, ‘Dad, I’ve been raped. I don’t know what to do. I’m in this container, and I’m not able to leave,'” she said. Her father called their congressman, Rep. Ted Poe, R-Texas.

“We contacted the State Department first,” Poe told ABCNews.com, “and told them of the urgency of rescuing an American citizen” — from her American employer.

Poe says his office contacted the State Department, which quickly dispatched agents from the U.S. Embassy in Baghdad to Jones’ camp, where they rescued her from the container.