Environmentalists have long claimed that the U.S. Navy's use of sonar for training exercises unduly threatens whales, dolphins and other acoustically sensitive marine creatures.

The navy has adopted some procedures to mitigate the risk but has resisted stronger protections ordered by two federal courts. The Supreme Court has now agreed to address the issue.

The justices will not try to determine the extent of harm but rather the balance of power between the executive branch and the courts in resolving such issues.

In an effort to sidestep the courts, the Bush administration invoked national security to exempt the navy from strict adherence to the two federal environmental laws that underlay the court decisions.

The Persian Gulf may be sitting atop massive oil reserves. But with prices for crude skyrocketing, it makes more sense to sell it than to burn it. Instead, the Gulf is turning to coal for its energy needs -- to the detriment of the climate.

A coal-fired plant belonging to Evonik Steag in Turkey. The company is currently expanding in the Gulf. For Alfred Tacke, CEO of the Essen energy giant Evonik Steag, it's the yellowish-brown pall below that tells him the plane he's on is approaching the Persian Gulf. Beneath the haze, he knows, is Kuwait, which has five large-scale gas- and oil-fired power plants in operation. The power they generate provide around-the-clock electricity for Kuwait's gigantic seawater desalination plants and the country's enormous air-conditioning needs.

"Here, you only need to stick your finger in the sand and you're likely to strike oil or gas," says Tacke, whose energy group ranks fifth among Germany's electricity producers. But Tacke has his own ideas about how to make money in the region. And they center on a different kind of black gold: coal-fired power plants. "We're currently in the process of discussing the conditions for projects of this kind," he says.

As odd as the idea may seem, coal power in the gulf is just one more outcome of skyrocketing oil prices. In a world with dramatically disparate ideas on how or even whether to address the risks of global warming, demand for coal plants across the globe is growing rapidly to the detriment of efforts to increase the production of renewable energies such as solar, hydro and wind.

The Colombian authorities say they have rescued Ingrid Betancourt and three Americans held by rebels in Colombia.

Ms Betancourt, a French-Colombian politician, has been held for more than six years by the rebel Farc group and is said to be in very poor health.

She is the group's highest-profile hostage and the French government has made securing her release a priority.

The Farc group has been fighting to overthrow the Colombian government for more than 40 years.

The number of people out of work in the world's leading economies is expected to rise by 9 per cent to 34.8m by the end of next year under the impact of the credit crunch, the Organisation for Economic Growth and Development reported on Wednesday.

Rising unemployment, however, should dampen fears of inflationary pay rises as workers worry more about retaining their job than using their bargaining power to increase real pay.

"The unemployment rate in the US for example was expected to rise to 6.1 per cent next year a percentage point higher than its recent 10 year average.

The average unemployment rate in Europe by comparison was expected to "remain essentially unchanged during the next two years". The biggest European rises in the jobless rates were likely to occur in Iceland, Ireland, Spain and Turkey while unemployment rates would fall in the Czech Republic, Poland and the Slovak Republic, said the OECD.

Employment growth has already slowed in the OECD area declining from 1.7 per cent in 2006 to 1.5 per cent last year. It is expected to fall to just 0.7 per cent this year and 0.5 per cent in 2009. Increases in the size of the labour force, partly driven by increased migration, however means that the jobless total will rise over the next two years, said Mr Gurría.

As investors digest a recent spate of rating downgrades for the bond insurers, concerns have surfaced about risks that could affect the last remaining insurers with triple-A credit ratings and further darken the outlook for the troubled industry.

Together with heavy losses on subprime mortgage-related bonds they guaranteed, bond insurers such as Ambac and MBIA are exposed to problems in their so-called "guaranteed investment contracts" (GIC) businesses. These problems could result in additional claims on capital at a time when they can least sustain them.

Meanwhile, FSA, one of the last triple-A rated bond insurers because it sidestepped writing protection on so-called collateralised debt obligations, also faces potential problems in its GIC business.

The deepening crisis for the bond insurance industry threatens banks with further writedowns on derivatives contracts they hold with the insurers, and investors with further downgrades and market losses on insured bonds they own.

Meanwhile, GIC funds are also facing pressure from investors pulling out their money, in some cases forcing the GIC to sell assets into distressed markets.

These investors are often structured finance vehicles that are themselves under pressure from market losses and have hit triggers that force them to unwind. Morgan Stanley estimates MBIA, Ambac and FSA have around $15bn of CDO-related funds invested in GICs.

We told you so." The Bank for International Settlements has long warned of the dangers of unrestrained credit growth and asset price inflation. In this year's annual report, ... it felt free to point out how right it had been.

As readers of BIS annual reports would expect, this one gives good answers to four big questions.

First, why did it happen? The report states that "loans of increasingly poor quality have been made and then sold to the gullible and greedy, the latter often relying on leverage and short-term funding to further increase their profits. This alone is a serious source of vulnerability. Worse, the opacity of the process implies that the ultimate location of the exposures is not always evident."

Obviously, internal governance and external oversight were deficient. "How," asks the report, "could a huge shadow banking system emerge without provoking clear statements of official concern?" How, indeed? Moreover, one of the features of the crisis is how widely distributed securitised loans turned out to be. The resulting uncertainty about who owns them, along with parallel uncertainty about what they are worth, has blighted money markets for almost a year (see charts).

Yet, insists the report, the drivers were not so much new inventions as old errors: a long period of easy money, asset price inflation and rapid credit growth.

This then brings us to a second question: how big are the risks now?

The answer is: very large. This is partly because the world economy is poised between deflationary financial and house-price collapses in several high-income countries and an inflationary global commodity price boom. Just as striking are the many huge uncertainties.

The divergence in possible outcomes is so large that nobody can credibly claim to know what lies ahead. The combination of a massive re-rating of risk with global inflationary pressure is unprecedented and still quite scary.

The third big question is what policies we need right now. The BIS view is that the right bias in monetary policy is towards being "much less accommodating". Better, it suggests, a sharp global slowdown than a big inflationary upsurge.

The BIS also stresses the need for policymakers and private actors to recognise reality: "If asset prices are unrealistically high, they must eventually fall. If saving rates are unrealistically low, they must rise. And if debts cannot be serviced, they must be written off."

The most interesting part of the BIS analysis of the lessons is that it focuses not on what is new - the paraphernalia of the modern financial system - but on what is old - "the inherent procyclicality of the financial system and excessive credit growth". The important point here is that fiddling with details of the regulatory regime or tightening supervision of individual institutions is not the heart of the matter. What matters is the operation of the system as a whole.

This is why the BIS takes such a strong stance on the need to tighten monetary policy when credit growth soars and asset prices explode, even if that temporarily reduces inflation below target levels. This, argues the BIS, would be a more symmetrical use of policy instruments. It is also why the report stresses "macroprudential" policies. These would focus not on the misbehaviour of specific institutions but rather on systemic risks, such as their shared exposure to common shocks and possible adverse interactions among and between institutions and markets.

The next 25 years could prove "far more interesting and more challenging" for investors than the past 25, according to Tobias Levkovich, chief US equity strategist at Citigroup.

"Near-record margins will be difficult to maintain over the next 25 years. Following a period in which corporate margins rebounded to levels not seen since the 1960s, it seems difficult to conceive that profit trends will be able to match the 1980s-1990s golden period of improvement. Thus stock market gains could become more muted," he says.

Inflation is also likely to be higher because of global demographic changes. "Lower inflation supplied favourable interest rates and valuations. Low interest rates as a result of muted inflationary threats over the past 25 years meant valuations could expand. Yet it would seem that this is unlikely to persist, with negative ramifications for investors in financial assets," Mr Levkovich says.

Finally, he says, markets might have to contend with "the end of American global predominance, particularly if commodity strength and dollar weakness endure". The US position could be threatened by an overstretched international military presence; too much government debt; and a growing challenge from China and Russia.

But there are also reasons for optimism. "Given the American spirit, a flexible economy, strong profit motives and technological innovation, the US may stumble but is unlikely to fall," he says.

The US housing slump is likely to be extended and "continues to pose a considerable downside risk to the US economy", the US Treasury secretary warned in a speech in London on Wednesday.

"We should not be surprised at continued reports of falling home prices," Hank Paulson warned in a speech at Chatham House, the international affairs think-tank.

Among the measures necessary to prevent repetitions of the housing meltdown, he said, were stronger oversight of the way mortgages are extended to housebuyers and national licensing standards for mortgage brokers - measures which in the past had been vigorously resisted by the housing industry.

Separately, Mr Paulson underlined the need to overhaul the US's "balkanised" financial regulatory system, in which a multitude of bodies participate.

Among the most pressing matters to face US regulators - particularly since the near-bankruptcy of investment bank Bear Stearns in March - was the fact `Americans have come to expect the Federal Reserve to step in to avert events that pose unacceptable systemic risk'.

The US needs a new "market stability regulator" with the authority to avert system-wide melt down in financial markets, he said. Such a regulator would allow banks to fail as a result of their own risky behaviour while protecting the rest of the system from contagion.

Less than a year ago, diplomats in the Middle East were taking bets on the likelihood of a US military attack on Iran, with some assessing it at higher than 50 per cent.

Those odds subsided after the National Intelligence Estimate, the co-ordinated view of US intelligence agencies, concluded in December that Iran had halted its weapons programme in 2003.

But now the betting is back on.

As Tehran has accelerated its uranium enrichment programme instead of suspending it, speculation has mounted that Israel is preparing to do the job itself, possibly even before the US presidential elections in November.

Suspicions were fuelled by recent Israeli military manoeuvres over the Mediterranean, which some US officials described as target practice for an Iran strike.

Admiral Mike Mullen, the chairman of the joint chiefs of staff, flew to Israel over the weekend for meetings with defence officials. Although the Pentagon said little, some analysts interpreted the trip as a show of American concern over Israel's plans for Iran.

America's top military officer has said opening up a third front in the Middle East through a strike on Iran would be "extremely stressful" for US forces.

Adm Mike Mullen, chairman of the Joint Chiefs of Staff, was commenting on the likelihood of US or Israeli military action over Iran's nuclear programme.

Tensions have risen amid reports Israel could be planning a possible strike against Iran's nuclear facilities.

Iran denies its nuclear programme is anything other than peaceful.

The BBC's Justin Webb in Washington says it has been clear for some time that Adm Mullen does not want to attack Iran.

Normal business cycles are self-correcting. De-leveraging cycles are self-reinforcing because the destruction of debts and assets feed on one another until excess leverage has been eliminated. The current de-leveraging is unleashing two major deflationary forces.

First, the re-capitalisation of banks, and the restructuring of their balance sheets. Second, the long overdue correction of household balance sheets, especially in the US and UK, but also elsewhere where personal debt levels have risen rapidly.

If we don't see the full effects of de-leveraging immediately in economic data, it is probably because economic decisions made by banks and households take much longer to affect the economy than in the case of businesses, which have to make production and employment decisions quickly. This de-leveraging downturn, therefore, will last a long time, perhaps until 2010.

Today, significant securitised asset losses have already been recognised and over $200bn of new capital has been raised. But more losses, especially on residential, commercial, home equity, and consumer loans will come to light with weak or negative growth. More capital will have to be injected into financial institutions for both operational and regulatory reasons, and bank balance sheets will shrink in size and in terms of risk.

According to a UBS research report, a 1 per cent rise in Tier 1 capital ratios in 2009, for example, could result in a 10 per cent decline in banks' risk-weighted assets, assuming no new capital injections. We should expect, therefore, both a larger re-capitalisation, and some contraction in assets. This hardly augurs well for an early end to the economic downturn.

Households in the US and some other countries have to de-leverage for the simple reason that highly indebted households will no longer have adequate or cheap access to credit - especially housing based credit - to fund the gap between income and consumption growth.

The savings rates in the US, UK and some other countries are now at historic lows at a time when credit is less accessible, real incomes are being squeezed, and unemployment is starting to increase.

De-leveraging is likely to drive a downturn which is easier to define in terms of duration (measured in years rather than months) than precise depth. Monetary conditions will remain restrictive, irrespective of the level of official rates, discretionary consumption will stagnate at best, and the output gap will widen.

India's 4.8m truckers on Wednesday launched a nationwide, indefinite strike against rising diesel prices and government taxes in an attempt to capitalise on public discontent over a sharp increase in inflation.

The truckers are refusing to drive their vehicles, leaving them parked wherever they happen to stand while their leaders attempt to negotiate with the government to lower various service taxes, toll charges and a government levy on diesel.

"Wherever they are parked, they are parked. They are not loading or unloading; nothing, no activities are taking place," said Vinesh Khanna, of the All India Motor Transport Congress, the umbrella body for truckers in India.