More stimulus can 'harm stability'; Brazil's middle class backlash; Snowden: America's most wanted man; India's hunger games

1 More stimulus can ‘harm stability’ (Heather Stewart in The Guardian) Central banks have done as much as they safely can to rebuild the world economy, and the onus is now on politicians to create the conditions for a stronger recovery, according to the Bank for International Settlements, the central bankers' club.

In its annual report the bank, based in Basle, Switzerland, warns that with unprecedented stimulus already in place, fresh action from central banks to kick-start growth may do more harm than good, by distorting financial markets and jeopardising stability. "Unfortunately, central banks cannot do more without compounding the risks they have already created. Monetary stimulus alone cannot put economies on a path to robust, self-sustaining growth, because the roots of the problem preventing such growth are not monetary," said Stephen Cecchetti, head of the bank's monetary and economic department, presenting the report.

The bank's intervention comes at a critical time, as the Federal Reserve is preparing the US public for the end of the quantitative easing programme under which it bought $85bn of bonds every month. In total, central banks in the world's major economies, including the US, UK and Japan, now own assets worth 25% of those countries' GDP.

The regulating bank in Basle believes it is the right time for central banks to reconsider their role. "We are past the height of the crisis, and the goal of policy has changed – to return still sluggish economies to strong and sustainable growth. Can central banks now really do 'whatever it takes' to achieve that goal? As each day goes by, it seems less and less likely."

2 Brazil’s middle class backlash (Donna Bowater in The Telegraph) More than half of Brazil’s 190million population are now deemed middle class, with many of them travelling abroad for the first time for work and for holidays. But the very improvements that have broadened their horizons have also made them realise that Brazil still has a long way to go - be it in fixing its terrible public services, combating soaring inflation, or doing more for the vast numbers of people still living in favelas, the crime-ridden shanty towns that spread across the hillsides of cities such as Rio.

Indeed, at 36% of GDP, Brazilians have one of the highest tax rates in the developing world. But public services are often dismal and the financially squeezed middle class are frustrated by the low standards in education and healthcare. Private schools, which are considered the only option for ambitious for their children, can be two years ahead in the curriculum compared to their public-sector counterparts. In Brazil's hospitals, patients sometimes lack beds and, last year, rats and cockroaches were found in the kitchen of a state clinic in Sao Paulo that treats lepers.

Adding to the pressure on taxpayers' wallets has been rising inflation, caused partly, say critics, by the growth-led policies that president Dilma Rousseff has introduced to fend off the effects of the global recession. The government has already spent three times what South Africa spent in 2012 on preparations for next year's Soccer World Cup.

Rousseff has vowed to improve health, education and citizens' rights. The package of measures she offered included a new national plan for public transport in cities, more doctors, more spending on schools, and a crackdown on corruption. But some observers expect people to continue to show up on the streets.

3 Snowden: America’s most wanted man (Khaleej Times) He is cognizant of the quandary WikiLeaks founder Julian Assange is currently in, so why did whistleblower Edward Snowden decide to reveal his identity? Perhaps, Snowden preempted his ultimate fate by coming out in the open. The 29-year-old probably knew that after divulging that the US authorities would have sooner or later caught him. By revealing his identity, he has at least been able to garner public sympathy worldwide and has improved his chances of getting political asylum in some country.

But things won’t be easy for the renegade American. Even though he has his coterie of sympathizers, Snowden is a wanted man and he might just have to live as a fugitive in the years to come.

But even though Washington might be able to get hold of him and subsequently convict him, the damage has already been done. Snowden’s shocking revelations have sparked a hot debate about the invasion of privacy. The National Security Agency, in the following weeks, will have to come up with a very smart public relations campaign to salvage its image.

4 New Delhi’s hunger games (Sadanand Dhume in The Wall Street Journal) With economic growth in the doldrums, the rupee hovering near a historic low and business confidence at rock bottom, you would think the Indian government has better things to do than roll out yet another controversial new subsidy. Think again. If the government has its way, it will go into next year's elections having passed a gargantuan food security law whose costs—economic, environmental and moral—will have to be paid down by future generations.

The new law will provide five kilograms of highly subsidized rice, wheat and other grains to two-thirds of India's population, or about 800 million people. The grains will be priced at between one and three rupees (2 to 5 cents) per kilogram, up to 90% below prevailing market prices. A giant state-owned company, the Food Corporation of India, will distribute them through a vast nationwide network of so-called "ration shops."

The food security law betrays the same false assumptions as the rest of an elaborate "rights" framework the government has erected over the past decade: that India's poor must be counted expansively rather than carefully, that they're looking for a handout rather than a hand up, and that government outlays matter more than outcomes. To start with, it's unaffordable. The government claims the program will cost about $22 billion a year, or $4.5 billion more than an existing food subsidy program that covers 325 million people. But the Commission for Agricultural Costs and Prices, itself a government body, says the real cost may be high as $42 billion per year.

Meanwhile, Finance Minister Palaniappan Chidambaram is telling foreign business and government leaders that Delhi is serious about reining in its fiscal deficit (budgeted at 5.2% of GDP in the fiscal year ended March 31). It's hard to see how he can square that assertion with such a large new entitlement. Even if India could afford such spending, the program would still be illogical. Simply put, hunger is yesterday's battle.

Thanks to rising incomes spurred by economic reforms begun in 1991, by 2005 the proportion of hungry Indians had fallen to 2%, or about 25 million people. So why doesn't government target aid at the truly needy who appear unable to help themselves, rather than spreading largesse to two-thirds of the population? Why, then, has the government come up with such a harebrained idea? Quite simply, because India has failed to learn the lessons from its failed socialist past. Populist politicians enhance both their electoral prospects and their bank balances by hatching do-gooder schemes that leak like a sieve.

Britain's spy agency 'taps world communication'; Something worse than credit crunch for China?; How the digital age is changing us; I'm a one-man stand; 'A Brazilian spring'

1 Britain’s spy agency ‘taps world communication’ (Ewen MacAskill, Julian Borger, Nick Hopkins, Nick Davies and James Ball in The Guardian) Britain's spy agency GCHQ has secretly gained access to the network of cables which carry the world's phone calls and internet traffic and has started to process vast streams of sensitive personal information which it is sharing with its American partner, the National Security Agency (NSA).

The sheer scale of the agency's ambition is reflected in the titles of its two principal components: Mastering the Internet and Global Telecoms Exploitation, aimed at scooping up as much online and telephone traffic as possible. This is all being carried out without any form of public acknowledgement or debate.

One key innovation has been GCHQ's ability to tap into and store huge volumes of data drawn from fibre-optic cables for up to 30 days so that it can be sifted and analysed. That operation, codenamed Tempora, has been running for some 18 months. GCHQ and the NSA are consequently able to access and process vast quantities of communications between entirely innocent people, as well as targeted suspects.

The existence of the programme has been disclosed in documents shown to the Guardian by the NSA whistleblower Edward Snowden as part of his attempt to expose what he has called "the largest programme of suspicionless surveillance in human history. It's not just a US problem. The UK has a huge dog in this fight," Snowden told the Guardian. "They [GCHQ] are worse than the US."

However, a source with knowledge of intelligence argued that the data was collected legally under a system of safeguards, and had provided material that had led to significant breakthroughs in detecting and preventing serious crime.

2 Something worse than credit crunch for China? (Robert Peston on BBC) What is the significance of the recent turmoil in China's money markets, the sharp reduction in the flow of credit between banks and the rising cost of loans between banks? Its trigger has been a tightening of credit provision to the financial system by the Chinese central bank, the People's Bank of China.

But its more fundamental cause is the perception that Chinese banks and so-called shadow banks have lent far too much, too recklessly over the past five years, and that a reckoning may loom. First that the Chinese authorities have lost one of their most important economic levers, which they have deployed with powerful effect since the 2008 global financial crisis - namely to create vast amounts of credit to fund investment, and stimulate economic growth to offset deflationary forces imported from the rest of the world.

Or to put it another way, the widespread recognition that excessive amounts of debt have been accumulated by speculators, property developers and local governments, inter alia, makes it much riskier for the central bank to continue the recent policy of stoking up an investment boom each time there is a blip in China's growth. To do so in future would risk China becoming dangerously like Japan in the late 1980s - an economy in which a massive investment bubble deflates to stymie growth for a generation.

So with China's credit-creation lever not what it was, the continued ability of the world's second biggest economy to be the engine of global growth - whatever is happening in the rest of the world - is also not what it was.
As quantum, domestic business and household debt at two times GDP is high - pretty similar, for example, to a debt burden on the UK private sector which has hobbled our economy. But it is the stunning and unsustainably rapid rate of growth in Chinese credit creation, and who has borrowed the money, that are the main sources of concern. Unless China is re-writing financial history, much of that money will have been lent without due care to businesses and individuals, and many of them will never be able to repay much of it. As and when that is too conspicuous to ignore, banks and financial institutions will go bust - unless bailed out by central bank and government.

3 How the digital age is changing us (Jonathan Freedland in The Guardian) The fundamental aspect of human life – memory – is being altered by the digital revolution, and it is far from the only one. I confess I long avoided bowing to such a conclusion. In the 1990s, I was among those who wanted to believe the internet represented a shift in scale or form, rather than in kind: emails would be the same as letters, only faster. But increasingly, it seems, that was to underestimate the nature of the change.

Take two areas of human activity, both highlighted this week. Initially it appeared as if "cyber-porn" would be no different from the old variety, the screen merely replacing the mag. Now most people accept that the ease and availability of a dizzying range of pornography, easily accessed by the very young, represents more than a change of platform.

Friday was Stop Cyberbullying Day. The old response, that bullying is timeless, misses two key differences: the pre-digital tormentor rarely followed his victim into the home, as he can now, and always had to witness the consequences of his actions in the flesh, which for some probably acted as a brake. In the virtual age, both those constraints have gone.

The effect of the great technological upheaval on politics, as social media mobilises protest in Brazil and Turkey and on privacy has been well-documented. But the change manifests itself in other, less obvious ways, too. The global response to the death of the actor James Gandolfini prompted the political scientist Ian Bremmer to remark that "Twitter reduces the famous-person-mourning cycle from days to hours," a comment he made via Twitter of course. The speed with which an event becomes old news has deprived us of the time to process experiences, both public and private.

Perhaps there was similar angst at the birth of the printing press. But this change is reaching into every corner of our humanness. Once it looked like hype, but now those pioneers seem right: the internet really has changed the world completely – and us along with it.

4 I’m a one man stand (Darrel Bristow-Bovey in Johannesburg Times) This week Erdem Gunduz proved that, like stand-up comedy, becoming a protest-celebrity is all about timing. Gunduz is better known in Turkey as duran adam, and outside it as The Standing Man. At 6pm on Monday night he stood in Istanbul's empty Taksim Square, hands in pockets, iPod in ears, staring at a large banner of Kemal Attaturk, the man who secularised and modernised Turkey at the fall of the Ottoman Empire. Soon his photograph and hashtag spread across the social networks, and a small group of 300 people were standing with him.

Gunduz gave the media a name and face for the Turkish protests. Before becoming an internet sensation Gunduz was a dancer and a performance artist. If I were one of the protesters who spent days in Taksim being water-cannoned and pepper-sprayed, I might slightly resent Erdem Gunduz becoming the icon of my struggle. Without the tens of thousands who protested in ways the government didn't find pleasing to the eye, Gunduz would just be a weird bloke with good posture standing in a square. He didn't even stand very long: his long ordeal was from 6pm till around 2am. In Cape Town that's the queue at Burger King.

When the police arrived on Tuesday morning, 10 of the 300 citizens standing by their man refused to leave and were arrested. The Standing Man was not among them. He slipped away, not to go stand somewhere else like some sedentary pimpernel, but to go home and become the Sitting On The Sofa With A Beer Man. It's not exactly self-immolation.

The Standing Man is a perfect icon of resistance for the social media: he's photogenic and unthreatening and easy to understand. It feels vaguely poetic and inspiringly Gandhi-ish and makes you click "Like". Erdem Gunduz is a very comforting icon for a very middle-class protest. In places around the world where people are more desperate than in Turkey, and have more to be desperate about, the face of protest won't look like Erdem Gunduz, and it won't stand still for long.

5 ‘A Brazilian spring’ (Khaleej Times) Brazilian president Dilma Rousseff, just like the rest of the leaders whose countries have experienced massive protests in the last two years, has been short-sighted. But at least Brazil’s first female leader, just like Turkey’s Recip Tayyip Erdogan, had a solid reason for believing that dissent against her regime would not spin out of control: She is a democratically elected leader.

But this fact has not stopped nearly a million Brazilians to join protests against Rousseff’s government. In over a 100 cities of the mammoth country, protesters have come out on the streets in fervour to express their dissent against the rising fares for public transport, corruption and the exorbitant funds used to prepare for next year’s football World Cup. The demonstrations, which started last week, have also grown more violent, with protesters retaliating forcefully against police action.

With the protests growing larger and more vociferous, the Brazilian government will have to soon negotiate with the protesters if it wants peace on the streets. A hardline posture like Erdogan’s will not help Rouseff accomplish much; public’s enthusiasm for chanting anti-government slogans is not going to exhaust anytime soon. The smart option would be to engage the protesters now, before the situation gets further out of control.

Markets sink, gold falls on Fed exit, China credit squeeze; Alibaba as the next Facebook; Gadgets and our planet; India dollar millionaire numbers surge

1 Markets sink, gold falls on Fed exit, China credit squeeze (David Jolly in The New York Times) Global markets tumbled on Thursday over concern about a credit crunch in China and uncertainty about the US central bank’s plans for withdrawing the monetary stimulus upon which the American economy has become dependent.

Just a day after the Federal Reserve hinted that it could soon begin winding down its bond-purchasing program, investors were unnerved by reports that Chinese banks had become reluctant to lend to one another, causing interest rates in the interbank market to spike to punishingly high levels.

On Wall Street, the broad-based Standard & Poor's 500-stock index ended down 2.5%, the Dow Jones industrial average dropped 2.3% — more than 350 points — and the Nasdaq composite index shed 2.3%. The pain was also felt in the bond market, with yields on government bonds, which move in the opposite direction of the price, surging worldwide. The 10-year US Treasury bond was yielding 2.380%, up 2.8 basis points. Expectations that interest rates will rise tend to depress the prices of existing securities. 

Gold futures dropped 6.2%, to $1,288.40 an ounce. The euro fell 0.6%, to $1.3220, while the dollar rose 1.6%, to 97.98 yen. The sell-off Thursday came in the face of economic news that showed an improving trend, if not actual growth, in the European economy. 

2 Alibaba as the next Facebook (Linda Yueh on BBC) Most people will probably have heard of Amazon and eBay, but not the world's largest e-commerce company - which is the Chinese firm, Alibaba. The Alibaba Group is larger than Amazon and eBay combined. Unless you're in the supply chain business, few are likely to have heard of it before. It's because the company operates predominantly in China. 

Think of Alibaba as a company that is a combination of eBay and Amazon. It is an online company with multiple revenue streams that are more conventional than a social network site. By the end of this year, the online market in China is expected to surpass that of the US. By the end of the decade, Alibaba estimates that China will be larger than the US and Europe combined.

As with other Chinese companies that are coming of age, Alibaba is ready to go global and go public. The chance to buy into what is potentially the next Facebook unsurprisingly means there's a lot of interest. It is so high that analysts think that its initial public offering (IPO) could rival Facebook's $104bn offering. If it does so before the end of 2015, then it will have the right to buy back more of the shares that Yahoo owns in the company (currently 20%) or allow Yahoo to sell it in the IPO.

If Alibaba does well in its IPO and breaks into overseas markets, it has the potential to be a globally competitive firm in the online space. That technologically-oriented industry is precisely where China would like to see its firms succeed. Such success would be a tell-tale sign if "Made in China" continues to be viewed as low quality, or it becomes increasingly synonymous with producing the best in the world. So, there's a lot riding on the success of this IPO.

3 Slimmer phones and our planet (Khaleej Times) A key reason for the survival of a business in an intensely competitive environment is product innovation. This is the capitalist mantra that cellular companies seem to religiously adhere to. So first we had the smart phones flooding the market. And now, with every passing month, new cell phones, each one touting its own unique selling point, are released for consumers.

While the fast pace of technological innovation is definitely impressive, it seems like cell phones   are like toys in the modern world — their functionality is secondary to their additional features meant to entertain their users or please them aesthetically. After all, one just needs a simple phone to make phone calls, chat or even check email. Must we rush to the nearest tech store, every time a phone with some swanky, yet complete unnecessary, feature is released in the market?

In the race for the slimmest and the smartest gadget, we have forgotten how our voracious appetite for products adversely affects the environment and produces waste. We should keep that in mind the next time we go to a mall to buy yet another gizmo.

4 India dollar millionaire numbers surge (Joanna Sugden in The Wall Street Journal) India’s economy is struggling with a weak rupee and widening current account deficit, but the number of dollar millionaires in the country has surged, according to a report on the global distribution of wealthy individuals.

In 2012, India had 152,750 dollar millionaires, up 22% from 125,000 in 2011, according to the World Wealth Report 2013. The report  classes dollar millionaires as those with at least $1million beyond the money tied up in their main homes, collectibles, consumables or consumer items made to last a few years. Last year’s increase  made up for the 18% decline in 2011 that pushed India out of the world’s top 12 for number of high net worth individuals.

By contrast, India had 354 million people living below the poverty line (less than half a dollar a day) in 2009/10, the latest year for which figures are available. The US, Japan and Germany continued to dominate world rankings in overall dollar millionaires. For the past three years, these countries accounted for roughly 53% of the world’s high net worth individuals.

By 2014, Asia-Pacific is expected to regain its position as the region with the highest population of dollar millionaires after being overtaken by North America in 2012. By 2015, high net worth individual wealth in the Asia-Pacific region is expected to reach $15.9 trillion, the report said.

Lloyds sell-off in offing; US Fed may scale back bond buy; Obesity recognised as disease; Jail for Dolce and Gabbana; Islam at war with itself

1 Lloyds sell off in offing (Jill Treanor and Nicholas Watt in The Guardian) George Osborne has signalled he is ready to start the sell-off of the taxpayer's stake in Lloyds Banking Group, but said he is to consider whether to break up the Royal Bank of Scotland, in a move that could delay the bailed-out bank's return to the private sector.

The chancellor said he was "actively considering options for share sales in Lloyds", in which the government has a 39% stake. Speculation is mounting that a partial sell-off of the state's Lloyds stake could take place within months. But he played down expectations of an immediate "Tell Sid"-style privatisation, as implemented by the Conservatives for British Gas during the 1980s.

The chancellor also used his strongest language yet to signal his confidence that the economy is recovering nearly five years after the banking crisis forced taxpayers to pump £65bn into the two banks. He said: "We are moving from rescue to recovery. But while Britain has left intensive care, we still need to secure the recovery – and make sure we continue to treat the ailments that brought us low in the first place."

Shadow chancellor Ed Balls said Osborne had been forced to "back down from the foolhardy idea of a pre-election firesale of RBS". "This would have meant a loss of billions of pounds to the taxpayer at the current share price," he said, urging the government to look at other options for RBS, including splitting its retail and investment banking arms.

2 US Fed may scale back bond buy in 2014 (BBC) The US Federal Reserve has maintained the rate of its asset purchase programme at $85bn a month, but could start scaling it back soon. It also kept interest rates at a record low range of between zero and 0.25%. 

Fed chairman Ben Bernanke said if the central bank's forecasts were correct, it could begin slowing asset purchases by the end of 2013 and wind them down completely by the middle of 2014. But he emphasised that the programme was tied to economic conditions. The Fed's asset purchase programme, in which it has been buying $85bn of government bonds a month, aims to lower long-term interest rates to encourage borrowing, spending and investing.

3 Obesity recognized as disease (Andrew Pollack in The New York Times) The American Medical Association has officially recognized obesity as a disease, a move that could induce physicians to pay more attention to the condition and spur more insurers to pay for treatments. In making the decision, delegates at the association’s annual meeting in Chicago overrode a recommendation against doing so by a committee that had studied the matter. 

“Recognizing obesity as a disease will help change the way the medical community tackles this complex issue that affects approximately one in three Americans,” Dr. Patrice Harris, a member of the association’s board, said in a statement. She suggested the new definition would help in the fight against Type2 diabetes and heart disease, which are linked to obesity. 

To some extent, the question of whether obesity is a disease or not is a semantic one, since there is not even a universally agreed upon definition of what constitutes a disease. And the AMA’s decision has no legal authority. Still, some doctors and obesity advocates said that having the nation’s largest physician group make the declaration would focus more attention on obesity. And it could help improve reimbursement for obesity drugs, surgery and counseling. 

4 Jail for Dolce and Gabbana (BBC) Italian fashion designers Domenico Dolce and Stefano Gabbana have been sentenced to jail in Italy for one year and eight months for tax evasion. They were accused of hiding millions of euros from Italian tax authorities. The pair were not at the trial, deny the charges and have appealed. Dolce and Gabbana have not commented on their sentences, which have been suspended pending their appeal. 

The investigation by the Italian authorities began around six years ago as part of a government plan to crack down on tax avoidance. At the hearing, the judge ruled that the designers moved their brand to a Luxembourg-based holding company Gado - an anagram of their two surnames - in 2004. He said they had done this to avoid declaring taxes on royalties of around 1 billion euros ($1.3bn). Prosecutors alleged they sold the business for well below actual market value.

5 Islam at war with itself (Murtaza Hiader in Dawn) From Aleppo in Syria to Quetta in Balochistan, Muslims are engaged in the slaughter of other Muslims. The numbers are enormous: over 93,000 killed in the Syrian civil war and over 48,000 dead in Pakistan. Millions have perished in similar intra-Muslim conflicts in the past four decades. Many wonder if the belief in Islam was sufficient to bind Muslims in peace with each other.

Since the end of the Second World War, the world has moved in two distinct directions. The West, mostly Christian, has tried to minimise the intra-European conflict and has largely been successful with some exceptions. The Muslim world, on the other hand, has fallen into one violent conflict after another, involving mostly Muslims.

The overwhelming evidence suggests that the sectarian and tribal divisions amongst Muslims and justifying violence in the name of religion are the primary causes of why Islam is at war with itself. The hate-fuelled gulfs that divide Muslims are so wide that not only unarmed civilians, but doctors and others who try to save victims of violence, are also targeted by the extremists. Does it really matter what real Islam is when its true followers cannot stand against those who use religion to commit genocide?

6 Singapore millionaire count in 2012: 101,000 (Rachael Boon in Straits Times) The share market rally sharply increased the ranks of Singapore's wealthy last year. New figures show that there were 101,000 millionaires by the end of 2012, a jump of 10.3% over 2011.

Their total wealth went through the roof as well and was estimated to have hit $489 billion, up 11.5% on the 2011 level. The report by Capgemini and RBC Wealth Management defines a millionaire as someone with US$1 million or more in investable assets.