As global security unravels, dollar returns to dominance; Making a living off Facebook; 'GDP' term marks 80th anniversary

1 As global security unravels, dollar returns to dominance (Ambrose Evans Pritchard in Sydney Morning Herald/The Daily Telegraph) We enter the year of the all-conquering US dollar. As the global security system unravels - with echoes of 1914 - the premium on the world’s safe-haven currency must rise. The effect is doubly powerful since the US economy is simultaneously coming back to life.

America has shaken off the most drastic fiscal tightening since the Korean War, thanks to quantitative easing. Growth is near “escape velocity” - at least for now - at a time when half of Europe is still trapped in semi-slump and China is trying to cool the world’s most dangerous credit boom.

As the Fed turns off the spigot of dollar liquidity, it will starve the world’s dysfunctional economy of $US1 trillion a year of stimulus. This will occur through the quantity of money effect, hitting in a series of hammer blows, regardless of whether interest rates remain at zero. The Fed denies that this is “tightening”, and I have an ocean-front property to sell you in Sichuan. It is hard to imagine a strategic and economic setting more conducive to a blistering dollar rally.

It is a myth that emerging markets borrow only in their own currencies these days. External debt will reach $7.36 trillion in 2014, double 2006 levels (IMF data), mostly in dollars. Some $2 trillion is short-term. It must be rolled over continuously. Euroland will be hit on two fronts by Fed action. Bond yields will ratchet up, shackled to US Treasuries. Emerging market woes will ricochet into the eurozone. 

Over all else hangs the fate of China. The sino-bubble is galactic. Credit has grown from $9 tillion to $24 trillion since late 2008, as if adding the US and Japanese banking systems combined. The pace of loan growth - 100pc of GDP over five years - is unprecedented in any major economy, eclipsing the great boom-bust dramas of the past century. China may try to cushion any hard-landing by driving down the yuan. If so, this will transmit a further deflationary shock through the global system, catching the West sleeping with its defences against deflation already run down. The US may be strong enough to cope. For Europe it would be fatal. The denominator effect would push Club Med into a debt compound spiral. Let us give it a 30pc probability. Happy new year.

http://www.smh.com.au/business/comment-and-analysis/us-dollar-to-dominate-as-spectre-of-1914-returns-20140102-307md.html

2 Making a living off Facebook (Nicholas Carlson in San Francisco Chronicle) You should meet Koby Conrad. If you're older than him, he'll make you more optimistic about the future. If you're his age, he might inspire you. Conrad is a 20-year-old college student. Unlike most 20-year-old college students, he's also a business owner. Conrad owns an online store called Hippie Hope Shop. There, he sells goods like hookahs, incense, and hippie clothes made out of hemp. He gets traffic to his shop by running a Facebook page called "The Hippy Bloggers."   He also runs another Facebook page called Mother Hemp, which sends traffic to a store called Mother Hemp Products.

The business seems to be going well. Conrad says it pays for his entire living. He also tells us he's about to sell 50% of the shop to two investors in two $30,000 chunks. He plans to use the money to buy "likes" on Facebook. "The Hippy Bloggers" currently has 75,000 likes. Conrad wants to get that number to a million. By his math, that many likes will put his revenues past $50,000 per month — $600,000 per year.

Obviously, Conrad might be wildly overestimating his ability to scale his small online retail business. But you've got to love the ambition and the hustle. Conrad tells us he first got into online marketing way back when he was 19 and "knew absolutely nothing." He started with a YouTube page. Then he came to Facebook and built The Hippy Bloggers, which sends traffic to HippiesHope.com. Then came Mother Hemp. Now he's running a small retail empire and taking on investors.

Conrad says the best thing he "ever did" was go into consulting. "I never made any real money off of it. I had maybe 10 clients. But my 10 clients, they opened my eyes. CEOs I was consulting for hours — I made friends with lots of them, and they turned into mentors for me."

Conrad is not the next Mark Zuckerberg or Kevin Systrom. He's not a hacker building the next $1 billion or $100 billion social network. He's something almost better. He's a kid with limited technical expertise, who is using the Internet to build a fast-growing, small business. He's the kind of hustling, hard-working person the experts say doesn't exist in his "millennial" generation. "Everyone always tell you to be scared," he says. "Be scared of things going wrong, be scared of things not working, be scared of the people you meet online, but no one ever tells you that it could all actually work."

http://www.sfgate.com/technology/businessinsider/article/Meet-The-20-Year-Old-Millennial-Making-A-Living-5113474.php

3 'GDP' term marks 80th anniversary (Caroline Hepker on BBC) The term Gross Domestic Product was first introduced 80 years ago. GDP, the sum total of consumption, investment, government spending and exports in any country, has been the main way to compare the relative performance of countries. It is arguably the most important of all economic statistics as it attempts to capture the state of the economy in one number.

Quite simply, if the GDP measure is up on the previous three months, the economy is growing. If it is negative it is contracting. And two consecutive three-month periods of contraction mean an economy is in recession. GDP can be measured in three ways:

Output measure: This is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. Expenditure measure: This is the value of the goods and services purchased by households and by government, investment in machinery and buildings. It also includes the value of exports minus imports. Income measure: The value of the income generated mostly in terms of profits and wages. In theory all three approaches should produce the same number.

http://www.bbc.co.uk/news/business-25587089

Dawn of the drone era; Sharing economy may boost productivity; 'Secret of modern Britain: There's no power anywhere'

1 Dawn of the drone era (Khaleej Times) The US Federal Aviation Administration (FAA) has just come out with the names of six sites across the country where unmanned aircraft systems (UAS) can be tested. The agency expects 10,000 small drones to be flying over the US airspace in less than five years, which would be remarkable considering the stiff opposition from most states. According to the American Civil Liberties Union, 42 states are considering bills to restrict the use of drones.

But proponents of drones claim that these unmanned flying vehicles would prove useful not just in rescue operations, but also help security agencies in nabbing criminals and provide early warnings of pest attacks to farmers.  The opening up of skies for drones will also trigger new business opportunities. The Association for Unmanned Vehicle Systems International estimates that drones could generate more than $80 billion worth of business annually by 2025, besides creating more than 100,000 jobs.

Jeff Bezos of Amazon has already unveiled plans to deliver packages to customers virtually at their doorsteps by deploying drones. A Chinese company has launched an intelligent drone, equipped with a flying camera, the DJI Phantom 2 Vision, which is being sold for as little as $1,200. The quadrocopter can soar 1,000ft high and fly for nearly 30 minutes, while the operator controlling it from the ground can take pictures that can be streamed on to a smartphone.

But the threat posed by the unregulated flying of these vehicles was underlined recently when officials in Beijing had to divert two aircraft and reschedule flights after they detected a drone flying 700 metres above the international airport. Four employees of a firm that had designed the drones were detained by the police. The Chinese have taken to drones in a big way and entrepreneurs are busy experimenting with newer versions of the vehicles.

http://khaleejtimes.com/kt-article-display-1.asp?xfile=/data/editorial/2014/January/editorial_January6.xml&section=editorial

2 Sharing economy may boost productivity (Aki Ito & Jeff Kearns in San Francisco Chronicle) In the sharing economy, consumers not only save money but also earn a little extra. Ben Palmer in Boston rents his Lexus to RelayRides Inc. members some weekends, making about $100 to $200 a month for a vehicle that he rarely drives. He says the money that supplements his salary pays for the car's maintenance costs and helps him justify keeping it. "I've invested so much into it and it would feel like a loss if I had to sell it," said Palmer, 29.

The downside to it is the risk that these services lead to a society that needs fewer cars and such other things. If so, it's unclear whether the smaller rental fees collected in the sharing economy will offset a decline in pricey up-front purchases. One car-sharing vehicle takes about nine to 13 cars off the road, and 2 percent of bike-share members reported the service was somewhat or very important to their decision to sell an automobile or postpone buying one, according to the research of Susan Shaheen, co-director of the Transportation Sustainability Research Centre at UC Berkeley.

"This has all the hallmarks of a disruptive technology for a bunch of industries that have never had to think about disruptive technologies," said Nicolas Colas, chief market strategist at ConvergEx Group, a trading services company in New York. He described the change as potentially catastrophic for businesses reliant on an ownership society. "In the near term GDP would take a hit," he said. 

Ian Hathaway, formerly an economic analyst with the Federal Reserve, said he is optimistic innovations such as sharing networks will boost growth over time. Some businesses are preparing for a future of more sharing, with General Motors'' venture arm investing $3 million in RelayRides, based in San Francisco. "As more people are moving into urban environments with increasing congestion, GM is looking at alternative business models," said Dan Flores, a GM spokesman. 

http://www.sfgate.com/business/article/Hopes-for-productivity-revival-in-sharing-economy-5107137.php

3 'Secret of modern UK: No power anywhere' (Decca Aitkenhead in The Guardian) Tory MP Rory Stewart  feels ordinary Afghans are far more powerful than British citizens, because at least they feel they can have a role in one of the country's 20,000 villages. "But in our situation we're all powerless. I mean, we pretend we're run by people. We're not run by anybody. The secret of modern Britain is there is no power anywhere. I mean, nobody can see power in Britain. The politicians think journalists have power. The journalists know they don't have any. Then they think the bankers have power. The bankers know they don't have any. None of them have any power."

And this from a man who only two years ago attended the Bilderberg conference, a highly exclusive and secretive gathering of the world's most powerful bankers, politicians and businesspeople? "Well there we are, you see," he smiles. "I can tell you, there is nothing there. It's like the wizard of Oz. This is the age of the wizard of Oz, you know. In the end you get behind the curtain and you finally meet the wizard – and there's this tiny, frightened figure. I think every prime minister has sort of said this since Blair. You get there and you pull the lever, and nothing happens."

But that doesn't mean he thinks he's wrong to be an MP, and he doesn't for a minute regret it. In fact he is remarkably cheerful, plans to do the job for at least a decade, and hopes for a ministerial post. "I'm not depressed or disillusioned – I want to be here to see if I can change it. I'm desperate to try to use my life to engage with the spirit of the age, and in the end the thing I grumble about – powerlessness – is the essence of the spirit of the age. So the thing I'd be really proud of would be to change the British constitution in a way that unlocked all that untapped energy in this country."

http://www.theguardian.com/politics/2014/jan/03/rory-stewart-interview

Obesity quadruples in developing world; AgustaWestland's 3,300 jobs at risk; 'Aid helps more than advice'

1 Obesity quadruples in developing world (BBC) The number of overweight and obese adults in the developing world has almost quadrupled to around one billion since 1980, says a report from a UK think tank.  The Overseas Development Institute said one in three people worldwide was now overweight and urged governments to do more to influence diets. In the UK, 64% of adults are classed as being overweight or obese. The report predicts a "huge increase" in heart attacks, strokes and diabetes.

Globally, the percentage of adults who were overweight or obese - classed as having a body mass index greater than 25 - grew from 23% to 34% between 1980 and 2008. The majority of this increase was seen in the developing world, particularly in countries where incomes were rising, such as Egypt and Mexico. The ODI's Future Diets report says this is due to changing diets and a shift from eating cereals and grains to the consumption of more fats, sugar, oils and animal produce.

A total of 904 million people in developing countries are now classed as overweight or above, with a BMI of more than 25, up from 250 million in 1980. This compares to 557 million in high-income countries. Over the same period, the global population nearly doubled. At the same time, however, under-nourishment is still recognised to be a problem for hundreds of millions of people in the developing world, particularly children. 

The regions of North Africa, the Middle East and Latin America saw large increases in overweight and obesity rates to a level on a par with Europe, around 58%. While North America still has the highest percentage of overweight adults at 70%, regions such as Australasia and southern Latin America are now not far behind with 63%. The greatest growth in overweight people occurred in south east Asia, where the percentage tripled from a lower starting point of 7% to 22%.

http://www.bbc.co.uk/news/health-25576400

2 AgustaWestland may cut 3,300 jobs (Simon Goodley in The Guardian) As many as 3,300 jobs at AgustaWestland's Yeovil base could be at risk after the British-Italian helicopter company said that a bribery scandal may force it to cut staff. The move follows the news this week that India had terminated a 466m pound helicopter order following claims that the firm paid kickbacks to its officials.

AgustaWestland says it "directly employs 3,280 people while supporting a further 10,000 jobs in the supply chain including 650 small and medium-sized enterprises" – with the company warning that the latter group could also be affected by reductions in orders for parts and materials.

A statement issued on Thursday evening by its Italian parent, Finmeccanica, said: "AgustaWestland is ready to take the necessary actions (in response to India's termination) included in a mitigation plan already prepared. This plan includes a reduction to the workforce to readdress the company business model and the reallocation of existing working capital that will be reflected also on the supply chain." The saga, which has been brewing for 11 months, is now threatening the UK's ambitions to become a centre for high-value manufacturing.

http://www.theguardian.com/business/2014/jan/03/agustawestland-job-losses-bribery

3 'Aid helps more than advice' (Drake Bennett in San Francisco Chronicle) The tradition of seeking to improve the lives of the poor by teaching them virtuous habits - thrift, sobriety, piety, self-control - extends back to Victorian social reformers. Today, the question of whether poverty is caused primarily by bad decision making or societal conditions is one of the main points of contention between American conservatives and liberals.

But if interesting new research is correct, the conditions and the decisions are indistinguishable. In other words, poor people really do tend to make worse financial decisions than rich people, but it's not for lack of good McAdvice. It's because they're poor.

The research, some of which was published in the journal Science in the fall, was led by Harvard economist (and MacArthur grant winner) Sendhil Mullainathan and Princeton cognitive scientist Eldar Shafir. The two detail the work in their book, "Scarcity: Why Having Too Little Means So Much," published in September.

Financial stresses of poverty is seen to weaken people's decision-making ability. As journalist Matthew Yglesias has pointed out, this may help explain the research finding that simply giving money to poor people is a particularly effective form of aid, particularly compared with the far more popular practice of giving the poor the things donors think they need - with noticeably positive effects years later. By providing a financial buffer and alleviating stress that may lead to poor decision making, a cash infusion helps people make better financial decisions.

In contrast, giving the poor advice as to how to make better decisions, even if such advice is more germane to their lives than how much to tip a domestic, doesn't do anything to alleviate that pressure. It's a cruel twist that, if Shafir and Mullainathan are right, the poor simply can't afford to think as clearly as the rich.

http://www.sfgate.com/business/article/Aid-helps-the-poor-more-than-advice-study-says-5105585.php

India's historic anti-graft law; Record decline in Japanese population; One man's wait for a polio-free India

1 India's historic anti-graft law (Straits Times) India's president took the final step to create a powerful anti-graft watchdog on Wednesday, signing it into law two years after a mass anti-corruption movement swept the country and galvanised politicians into action. Parliament saw rare unity last month when the ruling Congress and main opposition Bharatiya Janata Party approved the bill creating a corruption ombudsman with sweeping powers to prosecute all politicians and civil servants.

President Pranab Mukherjee's final approval of the law comes as the world's largest democracy gears up for general elections due by May. Voters have become increasingly incensed by a string of corruption scandals that have engulfed the nation.

http://www.straitstimes.com/breaking-news/asia/story/indian-president-signs-historic-anti-graft-law-20140101

2 Record decline in Japanese population (BBC) Japan's population declined by a record 244,000 people in 2013, according to health ministry estimates. The ministry said an estimated 1,031,000 babies were born last year - down some 6,000 from the previous year. Meanwhile, the number of people that died last year was 1,275,000 - a rise of around 19,000 from 2012.

Japan's population has been shrinking for several years now. If current trends persist it will lose a third of its population in the next 50 years. A quarter of the population is currently aged over 65 and that figure is expected to reach nearly 40% by 2060. The government says the population totalled 126,393,679 as of 31 March - down 0.2% from a year earlier.

Japan has taken aggressive measures in recent months to spur growth in the world's third-biggest economy, after years of stagnation. The government of Prime Minister Shinzo Abe is trying to boost the economy through a combination of quantitative easing and cash injections, higher taxes, higher government spending and longer-term structural reforms.

http://www.bbc.co.uk/news/world-asia-25566868

3 One man's wait for a polio-free India (Saptarishi Dutta in The Wall Street Journal) Polio eradication campaigner Ramesh Ferris, who has lived with the paralyzing nervous system disease since was just six months old, is hoping to see the country – and global eradication efforts — soon reach a major milestone. If no new cases of polio infection are reported in the country by Jan. 13, it will allow the World Health Organization, the United Nations’ public health arm, to declare the disease officially eradicated from its Southeast Asia zone, which includes 11 countries.

The last such polio case in the region was reported in India’s West Bengal state on Jan. 13, 2011. For a zone to be certified polio-free, all the countries in that group must complete three years without a single new infection caused by the wild polio virus. An announcement confirming this status is expected to take place in March, after laboratory tests of stool samples of recently paralyzed children rule out wild polio infection, said Lokesh Gupta, manager of the Rotary International’s India polio eradication campaign.

The polio virus spreads primarily through contaminated food and water, and affects the nervous system, leading to irreversible paralysis in about one out of 200 cases, according to the WHO. India, which has been battling polio for about 35 years through the use of an oral vaccine, is regarded as success story in the global fight to wipe out the disease, to which young children are particularly vulnerable. India reported 741 new cases of polio as recently as 2009 more than any other country in the world. It then took a more aggressive approach, and ramped up its focus on high-risk groups. The program now covers 170 million children in two rounds of vaccination a year. Just three years later, the WHO took India’s name off the list of polio-endemic countries. In 2012, there were only 223 polio cases worldwide, down from 350,000 in 1988.

For the 34-year-old Mr. Ferris, India’s completion of three years without polio will have enormous personal significance. He contracted polio in the southern Indian city of Coimbatore when he was an infant. By the time he was a year old, and unable to walk, his impoverished birth mother decided to give him up for adoption.

Mr. Ferris then grew up in Canada where he learned to walk with the help of braces and crutches, and also underwent numerous surgeries. But he also suffered mockery and derision over his condition, which was rarely seen there. But it was a visit to India – his first since his adoption – that led him to begin actively campaigning for the global eradication of polio. That was in 2002, when he flew to India to meet Lakshmi, his biological mother.

During his visit, he saw a middle-aged polio-affected man crawling on the ground using rubber pieces to pad his knees and sandals covering his palms. “This was absolutely appalling and horrific. That was my eye-opening experience in terms of what the reality of life is like for many polio survivors in India and around the world,” he said. Mr. Ferris has since campaigned in Canada for global polio eradication, but also in other countries where the disease still prevails.

http://blogs.wsj.com/indiarealtime/2014/01/01/one-mans-anxious-wait-for-a-polio-free-india/