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“This is a very dangerous situation for the dollar,” said Hans Redeker, currency chief at BNP Paribas.

“Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States,” he said.

The Saudi central bank said today that it would take “appropriate measures” to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.
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The Fed’s dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.

There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.

The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit — expected to reach $850bn this year, or 6.5pc of GDP.

Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America’s credit and short-term paper markets over the last two years.

“They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008,” he said.

“This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem,” he said.

Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen “carry trade”, causing massive flows from the US back to Japan.

Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.

The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

“If Ben Bernanke starts running those printing presses even faster than he’s already doing, we are going to have a serious recession. The dollar’s going to collapse, the bond market’s going to collapse. There’s going to be a lot of problems,” he said.

The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.

Former Fed chief Alan Greenspan said this week that house prices may fall by “double digits” as the subprime crisis bites harder, prompting households to cut back sharply on spending.

For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.

The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.

This is Animal Farm meets the Marx Brothers!

It would be one thing if this were meant for the massive factory farms run by agribusiness conglomerates, which account for the vast number of disease outbreaks. After all, they have corporate staffs, computer networks, and existing systems of inventory tracking. But no — rather than focus on the big boys that cause the big harm, NAIS targets hundreds of thousands of small farms, homesteaders, organic producers, hobbyists … and maybe even you.

Me, you shriek?! Yes. If you keep a pony for your kids or board a couple of riding horses, if you’ve got a few chickens in your backyard, if you’ve got a potbellied pig or a pet goose, if your youngsters are raising a half-dozen ducks as part of a 4-H club project, if you maintain a buffalo or a goat just for the fun of it — indeed, if you have any farm animals, NAIS wants you in its computerized grasp.

Every farm, home, horse stable, or other domicile of these animals would have to have its address and precise GPS coordinates filed into the system’s central computer, along with the name, phone number, and other personal data of the owner/ renter of the premises. Owners of the animals would have to tag every one of them (luckily, fish ponds are not included!) with an approved tracking mechanism — most likely by implanting radio-frequency ID chips into them.

Then comes the burden of logging and reporting the “events” in each animal’s life. These not only include sales and deaths, but also any movement of the animals off the registered premises, including taking them to a vet, going to a horse show, presenting them for judging at the county fair, trucking them to another farm and participating in a roundup or sporting event.

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With the unveiling of its 2005 strategic plan, however, the USDA got way more public participation than it wanted. Quicker and hotter than a prairie fire, word of this corporate driven, bureaucratic monstrosity spread throughout the countryside, and NAIS instantaneously became the most hated initiative in rural America. Meetings were held, rallies were organized, research was done, websites sprang up, blogs raged, Paul Reveres rode, groups formed, lawyers leapt into action — and the rebellion was on!

Stunned, the establishment took a step back. The 2005 plan said NAIS was mandatory, but in November 2006, the USDA rushed out a revision declaring NAIS would be voluntary and that the feds would let states take the lead in implementing the system.

Perry appeared in 4th District Court in Orem to enter her plea in a case prominent Los Angeles attorney Gloria Allred described as a gross injustice.

“Today, law enforcement in Orem has enshrined itself as the laughing stock of our country by prosecuting a 70-year-old great-grandmother for allegedly not watering her lawn,” Allred said.

“This ill-conceived action ensures Orem’s law enforcement authorities first place in the [Guinness World Records] for stupidity.”

Perry’s next appearance will be on Oct. 11 for a pre-trial conference.

In July, Perry was cited by Officer James Flygare of the police’s Neighborhood Preservation Unit for failing to water her lawn. Perry refused to give her name to the officer and, when Flygare tried to stop her from going back inside her house, she reportedly tripped and injured her nose.

She was arrested and taken to police station but released shortly afterwards.

The new school is funded and guided by a slew of federal, state, and local agencies, not to mention several defense firms. Officials say it will teach kids to understand the “new reality,” though they hasten to add that the school isn’t focused just on terrorism. School administrators, channeling Cheneyesque secrecy, refused to be interviewed for this story. But it’s no secret that the program is seen as a model for the rest of the country, with the Pentagon and other agencies watching closely.

To Susan Taylor, it was a perfect time to hang her laundry out to dry. The 55-year-old mother and part-time nurse strung a clothesline to a tree in her backyard, pinned up some freshly washed flannel sheets — and, with that, became a renegade.

The regulations of the subdivision in which Ms. Taylor lives effectively prohibit outdoor clotheslines. In a move that has torn apart this otherwise tranquil community, the development’s managers have threatened legal action. To the developer and many residents, clotheslines evoke the urban blight they sought to avoid by settling in the Oregon mountains.

“This bombards the senses,” interior designer Joan Grundeman says of her neighbor’s clothesline. “It can’t possibly increase property values and make people think this is a nice neighborhood.”

Ms. Taylor and her supporters argue that clotheslines are one way to fight climate change, using the sun and wind instead of electricity. “Days like this, I can do multiple loads, and within two hours, it’s done,” said Ms. Taylor. “It smells good, and it feels different than when it comes out of the dryer.”

On Monday night, desperately trying to stave off a wider panic, the British government issued an emergency pledge to Northern Rock savers that their money was safe. The government is trying to find a buyer for Northern Rock.

This is what a good old fashioned bank run looks like. And, as in 1929, the bank owners and the government are frantically trying to calm down their customers by reassuring them that their money is safe. But human nature being what it is, people are not so easily pacified when they think their savings are at risk. The bottom line is this: The people want their money, not excuses.

But Northern Rock doesn’t have their money and, surprisingly, it is not because the bank was dabbling in risky subprime loans. Rather, NR had unwisely adopted the model of “borrowing short to go long” in financing their mortgages just like many of the major banks in the U.S. In other words, they depended on wholesale financing of their mortgages from eager investors in the market, instead of the traditional method of maintaining sufficient capital to back up the loans on their books.

It seemed like a nifty idea at the time and most of the big banks in the US were doing the same thing. It was a great way to avoid bothersome reserve requirements and the loan origination fees were profitable as well. Northern Rock’s business soared. Now they carry a mortgage book totaling $200 billion dollars.

$200 billion! So why can’t they pay out a paltry $4 or $5 billion to their customers without a government bailout?

It’s because they don’t have the reserves and because the bank’s business model is hopelessly flawed and no longer viable. Their assets are illiquid and (presumably) “marked to model”, which means they have no discernible market value. They might as well have been “marked to fantasy”,it amounts to the same thing. Investors don’t want them. So Northern Rock is stuck with a $200 billion albatross that’s dragging them under.

A more powerful tsunami is about to descend on the United States where many of the banks have been engaged in the same practices and are using the same business model as Northern Rock.

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For weeks we’ve been saying that the banks are in trouble and do not have the reserves to cover their losses. This notion was originally pooh-poohed by nearly everyone. But it’s becoming more and more apparent that it is true. We expect to see many bank failures in the months to come. Prepare yourself. The banking system is mired in fraud and chicanery. Now the schemes and swindles are unwinding and the bodies will soon be floating to the surface.

The Fed lowered its benchmark rate by 0.5 percentage point, more than economists forecast, to 4.75 percent, the first cut in four years. Five of the past six bear markets for the U.S. currency have sparked a rally in gold.

“Investors are scared,” said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “The rate cut is inflationary, and money is flowing into gold as a hedge.”

Gold futures for December delivery jumped $11.70, or 1.6 percent, to $735.50 an ounce at 3:26 p.m. in electronic trading on the Comex division of the New York Mercantile Exchange. That marked the highest price for the most-active contract since Feb. 11, 1980.

“Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,” the Federal Open Market Committee said in a statement after meeting today in Washington.

Total grain output may be 25.6 million metric tons in the harvest starting October, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in a statement. That compares to its June estimate of 37 million tons and last year’s drought-ravaged crop of 15.7 million tons.

Wheat futures rose to within 13.25 cents of the record reached last week as demand outpaces supply and inventories head for a 26-year low. Crop expectations in Australia, vying with Canada to be the world’s biggest wheat exporter after the U.S., are being cut after below-average winter rain.