The US deficit in the broadest measure of international trade surged to an all-time high last year, increasing a potential threat to the American economy as the country sank deeper into debt to Japan, China and other nations.

The United States’ trade deficit is soaring and the once high-flying dollar has sunk to record lows against Europe’s common currency but US President George Bush’s administration has reacted with remarkable calm to developments that raise worries about a possible dollar crisis.

The world will be living with volatile oil prices for years to come, but this year’s price spike should not be serious enough to push the US into a recession, US Federal Reserve Chairman Alan Greenspan said yesterday.

The US Federal Reserve, still striving to coax the struggling economy to stronger growth, cut a key interest rate to its lowest level since the 1950s.

US FEDERAL RESERVE chairman Alan Greenspan spent two months saying the war in Iraq was impeding the US recovery. Now that the fighting is over, the world is about to see whether he was right.