Facebook Inc. is trying to change that. Facebook is beginning to roll out its App Center to its nearly 1 billion users, so they can find games and other applications with social components more easily.
The App Center, available on Facebook's website and on Apple and Android mobile devices, will recommend apps to users based on their interests, the types of apps their friends like, or the apps they have liked in the past.
Many people are introduced to Facebook apps in the form of sometimes-annoying requests from their friends for poker partners, Scrabble buddies or neighbors on virtual farms. Those requests haven't necessarily matched a user's specific interests.
The new App Center will initially feature about 600 Facebook apps, mostly games, reviewed by the company to meet its quality standards. Games, such as Zynga'sCityVille and Electronic Arts' The Sims, are the most popular types of apps on Facebook.
But the company is betting that by personalising recommendations to users, people will find new types of applications beyond games, along with games that are more interesting to them. There are all sorts of social apps that use Facebook, from music-listening services such as Spotify to what-you-just-ate tools such as Foodspotting.
"We spend all day, every day building a platform (so that) great social games and apps can exist," said Matt Wyndowe, product manager for apps and games at Facebook. But a common question has long been where to find them. "Up until now, we haven't had a great answer to that question."Facebook said that on mobile devices, the App Center won't compete with other app stores, such as Apple's or Google's. Rather, the App Center will send users to those other stores to download the programs. People can also get mobile apps from their regular computers by using a feature called "send to mobile."
Among the roughly 600 applications included in the App Center at launch will be the Nike Plus GPS running app, which lets users track their runs and broadcast it to their Facebook feed. Ricky Engelberg, whose title at Nike is experience director at digital sport, said having a place where apps are showcased will "let more people be part of the Nike Plus community."
The App Center, which Facebook announced last month, will be rolled out to US users beginning Thursday night and to everyone else over the coming weeks.
Love manifests itself in many ways. For Keith Shepherd, it was evident when his then-friend Natalia Luckyanova beat him in Mario Kart.
Now married, the couple still have video games at the heart of their relationship. In fact, it's a family business, and a booming one at that--thanks in part to the current surge in the mobile gaming industry.
Shepherd and Luckyanova are the founders of Imangi Studios, the developer behind the addictive mobile game Temple Run. The game—in which users play a thief running through a hidden temple—has captured the attention (and thumbs) of millions worldwide. “One day, I was on the Metro in D.C., and I saw two girls in front of me playing Temple Run and passing the phone back and forth,” Shepherd says. “It’s completely mind-blowing.”
Temple Run, which is available for Android and iOS devices, is free to download and gives users the option to buy virtual coins that can be redeemed for in-game upgrades, including invisibility. Since it debuted last August, the game has been downloaded more than 70 million times. The Android version, launched in April, already has been downloaded more than 15 million times. All told, Temple Run has generated more than $1 million in sales, Shepherd says.
The game’s overwhelming success was unexpected, according to Shepherd, who created it with his wife in their one-bedroom apartment in Washington, D.C. (Or, as Luckyanova jokingly refers to it, “Imangi Studios's world headquarters.”)
The most popular mobile games—Omgpop’s Draw Something and Rovio’s Angry Birds, for example—tend to have bright colors and a cheery theme, Shepherd explains. Temple Run, however, uses dark colors and has a more menacing premise. In the game, a red-haired thief has stolen an idol from a temple and is being chased by a hungry pack of animals. Players must swipe up, down, left, or right and tilt their smartphone or tablet to avoid obstacles and keep the thief from falling into the water below.
“We really wanted to make a game that we wanted to play and looked how we wanted it to look,” Shepherd says.
Rocky Start
At first, it seemed like that approach might not pay off. Although Temple Run, which then cost 99 cents to download, received overwhelmingly positive reviews immediately after launch, the number of new users began to trail off after two weeks.
A month after its debut, Shepherd switched to a "freemium" pricing model, allowing users to download a basic version for free and pay for enhancements. The game quickly vaulted to No. 2 on Apple’s App Store list of free apps and was downloaded some 200,000 times a day at its height.
Only 1% of Temple Run players purchase in-game upgrades, Shepherd says. But with more than 70 million users, that translates into 700,000 paying customers. Temple Run was one of the highest-grossing games in the App Store in January, according to Apple.
Temple Run has become so popular, many assume a large development team created it, Shepherd says. This isn’t the first time Imangi has been mistaken for a larger company. When it launched its sixth title, Harbor Master, in 2009, the game quickly became the third-ranked paid app in Apple’s App Store. At its peak, the game, which challenges users to control boat traffic, was downloaded 10,000 times a day. That’s when Luckyanova began receiving email requests to speak with the company’s director of marketing.
First Love, Then Marriage, Then a Game
Luckyanova and Shepherd became friends in 2003, when they were both working for Vecna Technologies, a health care software developer in Washington, D.C. They started dating a year later, after Luckyanova left to pursue a master’s degree in computer science at Boston University, and married in 2007.
Shepherd launched Imangi in 2008, and Luckyanova joined the company after it turned a profit about a year later, generating $40,000 in revenue. The couple have lived and worked together ever since. “It’s awesome to be able to share this aspect of our lives,” Shepherd says. “And I think our skills complement one another very well.”
In order to develop more advanced games, Imangi placed greater emphasis on graphics, using freelancers before hiring Kiril Tchangov to work remotely as the company’s artist. Tchagnov designed Harbor Master, which is now available in free and $1.99 versions. Recently, Imangi hired Dimensional Branding Group to handle an influx of branding and licensing requests. Their first licensed product, a board game inspired by Temple Run, is due out later this year.
Shepherd and Luckyanova still don’t have corporate offices, but they have expanded from a one-bedroom apartment to a house. Soon, a third person will join them in the home office: They are expecting their first child in June.
Last.fm is investigating a leak of their user passwords, and is warning members to change their passwords just in case. "This follows recent password leaks on other sites, as well as information posted online," the Last.fm team wrote on their blog, possibly hinting that the yesterday's LinkedIn password breach may be linked to their security snag. As added advice, the Last.fm team wrote: "We strongly recommend that your new Last.fm password is different to the password you use on other services." The company is using their Twitter account as a key channel for updates, along with forums.
Google's Verification Service "Trusted Stores" Now Open To Online Shopping Sites
Google has opened up Trusted Stores, a verification system, for all online shopping sites and their patrons. When online merchants apply, Google places them under a month of observation. Stores that pass muster get a badge from Google--a report card of sorts, to say that Google considers the store is one that's "trustworthy, ship quickly and reliably, and offer exceptional customer service." The Trusted Store badges appear on the store's website and Google ads. Customers who make a purchase at the store are offered a free $1,000 purchase protection package from Google. The service is free for stores who apply.
Virgin Mobile Announces Pre-Paid Plans For iPhones In The U.S.
Virgin Mobile confirmed its pre-paid plans for the iPhone today, giving iPhone buyers in the U.S. a second pre-paid carrier to choose from after Leap's Cricket Wireless. Phones will go on sale starting June 29. If you can stomach the full price of the iPhone, Virgin Mobile's prepaid plans start as low $30 a month. Virgin is offering 2.5 GB of data, unlimited texting, and, at the lower end of the scale, 300 minutes of talktime.
Spunky iOS Drives 2 Percent Of Google's, 76 Percent Of Apple's Revenue
Apple's iOS is behind a whole 2 percent of competitor Google's total revenue, an analyst has told AppleInsider. He bases it on an estimate that 40 percent of Google's $1.6 billion, in mobile profits, i.e. about $640 million, comes from iOS. iOS isn't doing too badly for Apple--at the iPad event in March, Tim Cook revealed that the 172 million mobile Apple devices that ran iOS made up 76 percent of Apple's total revenue ($39.2 billion in the second quarter of 2012). Google's Android plays decently for other teams too--Microsoft is estimated to earn $444 million every year from patent licenses on Android software, because of a deal the company struck with HTC. Of course, earnings like these could get skewed in the coming months as relationships between companies get more complicated. After all, isn't everyone in tech is suing everyone else?
Discovery, Recommendations At The Heart Of Foursquare's New App
The "Check in" button that sat front and center of foursquare's app now reads: "Explore." This just about sums up the company's new take on location and data. The new app, redesigned from the scratch, is helping the company reposition itself as a recommendations service like Yelp or Google Places--a shift its users were already making in how they used the app. This new position also fits well with Dennis Crowley's plans to join the coupons game. Over three years, foursquare has gathered 2 billion data points about people's location behavior and habits. The patterns in that data, along with your friends' tips and checkins, is the basis for their new recommendations feature, the New York Times explains. You won't just be able to search locations on foursquare--in the new version, foursquare will offer up a list of recommendations based on past checkins. In addition to this, and a slicker UI, foursquare has added a "Friends" tab, letting you follow, like and comment on your buddies' activity and tips in a news stream.
HTC Revenues Falter--And It May Be Shut Out Of Windows 8
HTC is said, by inside sources speaking to Bloomberg, to be "shut out" of the introduction of Microsoft's hotly-anticipated Windows 8 operating system for tablets. MS is concerned that HTC doesn't sell enough devices or have enough experience making tablets compared to better-known names like HP or Asus. HTC is one of the better-known Android handset makers, however--although it is facing difficulties importing some products into the U.S. after Apple successfully blocked them on patent violation concerns. HTC is now saying its devices are compliant with an ITC ruling on the matter, and that U.S. Customs has now reviewed the matter and cleared importation. HTC separately reported weak quarterly revenue that fell short of analyst estimates by around 10% and has downgraded its second-quarter predictions.
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Launched by a 27-year-old who goes by the pseudonym "Captain Kirk," the site splits Instagram pics of girls and guys into two different categories, then pits two random photos against each other and asks the viewer to pick "who is hottest."
Users and can rank dozens of photos in a matter of minutes with a seemless transition from one pair of photos to the next. Kirk even built in fail-safe feature that lets the user navigate back to the previous page and revote on a pair of photos — you know, in case someone accidentally clicks on a not-so-hot photo.
Kirk debuted the site Monday. His introductory tweet:
Introducing Hotstagram.com - vote on the hottest girls on @instagram! male version coming soon
For anyone who has seen "The Social Network," Hotstagram may be reminiscent of a similar hot-or-not ranking site featured in the film called Facemash. You know, the one that lead to the creation of Facebook, which recently purchased Instagram for a cool $1 billion.
Instagram users can submit their pics to the Hotstagram website by adding the #hotstagram hashtag to their Instagram photo uploads.
Hotstagram uses a bubble sort algorithm to rank the photos. All photos are then ranked according to up and down votes and the top batch of pics for girls and guys are featured on the respective leaderboard pages. For the most part the top ranks are filled with scantily clad girls — it is swimsuit season — or leading men from TV shows or movies.
The system is relatively simple. After all, it only took Kirk a weekend to code Hotstagram.
Aside from his age and preferred TV show, not much is known about Hotstagram's founder. Business Insider revealed he works for a start-up in San Francisco called Tracks.by, which promotes artists seeking to release tracks or music videos.
While Hotstagram is not endorsed or certified by Instagram or its publisher Burbn Inc., Kirk assured Business Insider that he's confident he is in compliance with Instagram's terms of use.
Kirk even added a feature that lets Instagram users to remove their photos from Hotstagram.
While you may be hurrying over to Hotstagram's site to try it out for yourself, don't be discouraged if you receive a 404 error. After its debut yesterday, Kirk said he saw 150 ratings a second". We can only assume that number has skyrocketed since then.
"We continue to test different types of deals in markets around the country, and run categories that represent the interests of each local customer base," Groupon spokeswoman Julie Mossler said in an email Wednesday to CNBC. "While we aren't currently accepting new adult merchants, guidelines for what types of businesses we do and do not run are constantly re-evaluated on a local level."
The coupon giant didn't say why it changed its policy, but Morality in Media, an organization that opposes pornography, claims it pushed the company to say goodbye to X-rated merchants.
The group launched a boycott against the coupon company in April in response to a deal Groupon reportedly offered in San Francisco that involved a tour of a porn studio.
"Over the last month, 20,000+ people joined our boycott of coupon giant, Groupon because the company was selling coupons to visit a porn studio," Morality in Media posted on its website.
Groupon did not respond immediately to a request for comment about why it revised its policy.
 |
| New Twitter Bird logo |
Though the new Twitter bird looks a lot like the old Twitter bird, it is in fact a simplified version of the old bird. With the new bird logo, Twitter does away with other Twitter symbols. "From now on, this bird will be the universally recognizable symbol of Twitter. (Twitter is the bird, the bird is Twitter.) There's no longer a need for text, bubbled typefaces, or a lowercase 't' to represent Twitter," said Twitter in its blog post.
"Our new bird grows out of love for ornithology, design within creative constraints, and simple geometry. This bird is crafted purely from three sets of overlapping circles - similar to how your networks, interests and ideas connect and intersect with peers and friends. Whether soaring high above the earth to take in a broad view, or flocking with other birds to achieve a common purpose, a bird in flight is the ultimate representation of freedom, hope and limitless possibility," Twitter further explained the idea behind the new bird.
Major differences between the new and the old Twitter bird are:
1. The new bird is in a darker shade of blue.
2. The new bird looks upwards, whereas the old bird looked ahead.
3. The wing of the new bird curves upwards instead of downwards.
4. The tuft on the head of the old bird is missing in the new.
5. The new bird looks leaner.
If you're watching this right now, you're probably a liar — about something. It doesn't make you bad. It just makes you human. That's what Dan Ariely, behavioral economist at Duke University and author of the best-seller Predictably Irrational, argues in his new book The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves.
In his book, Ariely describes a series of experiments and studies that undermine a core belief among economists and law enforcement about crime, bad behavior, and cheating. The system tends to believe that people make rational cost-benefit analyses about what they'll gain from outside-the-lines behavior and the potential consequences. And so it follows that the way to forestall bad behavior is to put tough punishments in place. Ariely says that's the wrong way to think about it. "Our behavior is driven by two opposing motivations. On the one hand, we want to view ourselves as honest, honorable people. On the other hand, we want to benefit from cheating and get as much money as possible." Human behavior is the balance between those two forces.
The (Honest) Truth About Dishonesty contains plenty of other great insights. People are much less squeamish about cheating when they can distance themselves from what seems to be immoral behavior. People are much more likely to take a can of coke out of a common refrigerator than they are to take a dollar bill off a plate. Golfers are much less likely to say it's ok to physically move a ball four inches with their hands than they are likely to say it's ok to nudge it with their club — even though both actions are violations of rules.
Fatigue seems to play a role. A concept called "depletion" holds that people who are emotionally or physically exhausted are more likely to cheat, whether it's cheating on their diet or cheating on one of Ariely's controlled tests. "You try to resist temptation all day, and you get tired," he said. "So people are prone to cheat more in the evening than in the morning."
In another experiment, Ariely and researchers found that people are more likely to cheat on his mathematical tests when they were wearing fake designer sunglasses. "We take cues from the environment about who we are," he said. "When you wear a set of fake glasses, you think of yourself as slightly more of a cheater. And then you're more likely to take the next step."
There's lots more in the book. Ariely argues that cheating can spread like a virus within organizations — think of Enron, or the many instances of mortgage fraud. When he did a paired, not-so-scientific test, he found that Wall Streeters were more likely to cheat than politicos on the self-reporting mathematical test.
He also notes that cheating and lying is part of life. And it's not always about personal gain. "We routinely don't tell people how they really look and really smell," he notes. People tend to value truthfulness highly, but they also value loyalty. "When other people you care about tend to gain from you being dishonest, you're more likely to be dishonest." In other words, people are more likely to post a positive review about a book written by a friend even if they don't think it is so great.
I've known Ariely for several years. But you can take it from me (honestly) that The (Honest) Truth About Dishonesty is a fun, highly engaging read.
Every human being on earth currently carries a debt burden of nearly $22,733 on average, if the latest reports are to be believed.
Every child is sharing the same debt burden at birth, as debt growth rates beat the global population growth rate. In fact, debt liabilities are growing faster than GDP expansion rates.
Overall outstanding debt worldwide has more than doubled in the past ten years to $158 trillion (Dh580 trillion) in 2010, up from $78 trillion in 2000, according to a recent report by global consultancy McKinsey.
The global population is currently estimated at 6.95 billion, whereas worldwide gross domestic product (GDP) reached $74.54 trillion last year.
In theory, this makes the human population a 'bankrupt' race and financially the most dangerously exposed and vulnerable in its history.
If you think this is bad, then wait for the worst news: The debt toll is rising and it will be higher next year.
The global debt trap
The global debt of $158 trillion includes $41.1 trillion incurred by governments worldwide up to last year, accounting for 69 per cent of global GDP. This is expected to rise to $46.12 trillion in 2012, according to the Economist Intelligence Unit (EIU).
"Debt also grew faster than GDP over this period, with the ratio of global debt to world GDP increasing from 218 per cent in 2000 to 266 per cent in 2010," McKinsey said.
Around $48 trillion of the total debt outstanding was that of governments and financial institutions. In both the US and Western Europe in 2010, the ratio of public debt stood at more than 70 per cent of the GDP, McKinsey said.
"Developed countries may need to undergo years of spending cuts and higher taxes in order to get their fiscal houses in order," it added.
Many governments in the developed world have resorted to massive stimulus measures to bolster their economies since the 2008 global financial meltdown.
"Public debt outstanding [measured as marketable government debt securities] stood at $41.1 trillion at the end of 2010, an increase of nearly $25 trillion since 2000. This was equivalent to 69 per cent of global GDP, or 23 percentage points higher than in 2000. In just the past two years, public debt has grown by $9.4 trillion — or 13 percentage points of GDP," McKinsey said.
The government debt worldwide was $31.7 trillion in 2008. Last year alone, government debt accounted for about 80 per cent of the overall growth in total outstanding debt.
World governments owe the money to their own citizens and lenders. The rising total debt is important for two reasons.
First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future, EIU explains in its global debt clock — which is ticking every second.
"Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week," it says.
"Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis. So the higher the global government debt total, the greater the risk of fiscal crisis, and the bigger the economic impact such crises will have."
Greece, Ireland, Portugal, Spain, the UK and the US are caught in a debt trap. For some governments, the only escape is to do the same things that an average household must do when it can't make ends meet — sell off assets, slash spending, scrape for extra earnings, downsize, and make sacrifices.
They are cutting healthcare and pensions for millions of citizens, laying off hundreds of thousands of government employees, or worse. For others, like the US, the primary response so far has been to run the money printing presses — all with untold consequences.
The national debt of the United States — the world's biggest economy — reached $14.62 trillion in recent months — close to its GDP.
According to the IMF, US public debt will reach 99 per cent of its $14.65 trillion GDP in 2011 and 103 per cent in 2012.
In the United States, debt per citizen is more than double the global average, standing at $46,884, while its burden per taxpayer has reached a whopping $130,662 — according to US Debt Clock.
Born into debt
"Every American born today owes $46,884 to the federal government the day she or he is born. And we are transferring a tremendous amount of debt to the new generation, much of it owed to overseas creditors who expect to be repaid by our children with interest," US Senator Mark Kirk said recently.
The latest push to raise America's debt limit of $14.29 trillion by $2.4 trillion earlier this month that placed the country's policymakers in direct confrontation with opposition politicians — is another example of how difficult things could become. By August 2, a possible US default was creating a worldwide panic.
But how did all this happen?
The US Treasury has borrowed trillions of dollars over the past decade, much of it from foreign investors, to help finance two long wars, rescue its financial system, and promote economic growth through fiscal stimulus.
"The government must be able to issue new debt as long as it continues to run a budget deficit — the current shortfall is about $125 billion per month," Jonathan Masters, Associate Staff Writer, of Council on Foreign Relations, says. The debt limit was instituted with the Second Liberty Bond Act of 1917, and Congress has raised the cap 74 times since 1962.
"It took the first 204 years of our nation's history to accumulate $1 trillion in debt. And now we are doing that every two or three years," Jim Cooper, US Congressman, said.
The Budget Control Act of 2011 of the US now allows up to a $2.4 trillion rise in the debt ceiling (in three tranches), and immediately institutes ten-year discretionary spending caps totalling nearly $1 trillion.
Eurozone — the trouble zone
"In recent months the major areas of uncertainty for the global economy have revolved around the crisis in the Eurozone, the future path of monetary and fiscal policy in the United States, and the fight against inflation in emerging markets," says Ira Kalish, Director of Global Economics, Deloitte Research. "Failure to resolve these issues will have a negative impact on global growth and stability."
In its report, Deloitte Research says, despite the problems in the housing market and sovereign debt in Europe, the case for growth in the United States seems to be more compelling at the moment.
"As for Europe, recovery will depend on implementing a permanent solution to the debt crisis. Lowering inflation and steadily increasing average earnings will be key to recovery in the United Kingdom," it says.
The authorities in Europe and the US must focus on radical structural reform that brings hope to the markets that the debt situation is being seriously tackled, feels Gary Dugan, chief investment officer for Private Banking at Emirates NBD.
"Investors now recognise the Eurozone is at the epicentre of the world's fears. As the dust settles on problems in the United States [at least for the moment] investors have come to recognise the Eurozone as the weakest link in the global economy," Dugan says.
"Whilst the United States faces its own problems as an integrated economy it has the ability to address its problems far quicker than the Eurozone. In Europe it is incumbent upon each government to address its problems separately with only mild pressure from the European Central Bank [ECB] or the European parliament.
"Rules that were in place about how much debt a country can have and how much of a budget deficit any country can run in any one particular year have largely been ignored and now lack credibility."
None of the rules are working anymore, it seems. In fact, the rules of managing economies have changed drastically. Where this will land the human race — no one knows, including bankers and economists.
Market volatility
The last two weeks have been a rollercoaster ride in the markets. Already concerned about signs of economic weakness, investors have reacted dramatically to the dysfunction in Brussels, Frankfurt and Washington.
European policymakers have responded to their crisis with a series of indecisive measures, including a counter-intuitive tightening of monetary policy by the European Central Bank, said a Bank of America Merill Lynch report.
"Apparently, we are told, raising interest rates can control inflation without hurting growth or financial markets.
"Closer to home, fiscal authorities have bombarded the markets with a quadraphonic message of hopelessness: 1. The US has a huge fiscal problem, 2. They are too dysfunctional to deal with it, 3. Threatening to default on the debt is an acceptable form of negotiation, and 4. We will continue to tighten policy regardless of how the economy is doing," it said.
"Unfortunately, this leaves the Fed in a familiar spot, cleaning up everyone else's mess. Back in 2008, the Fed was left to deal with the emerging financial crisis, while the ECB hiked rates and Congress refused to take any action, until the stock market was in full collapse."
Ben Bernanke, Chairman of the US Federal Reserve, has pointed out that monetary policy cannot solve all of the world's problems.
Moreover, each new round of unconventional policy is likely to have a smaller effect than the last.
"This is particularly the case when the Fed faces a bevy of dissent from both inside and outside the Committee," Ethan S. Harris, Economist at BofA Merill Lynch, said.
Nonetheless, the Fed is not impotent.
However, there are two reasons for concern. First, a number of sectors have yet to recover from the previous crisis. Banks have rebuilt their capital and are in better shape. However, both the housing sector and state and local governments are quite vulnerable. If the economy does go back into recession, it could reignite the negative feedback loop between employment, home prices and mortgage delinquencies, BofA economists argue.
Hope against hope
The best case for a recovery is that the market panic stops and some of the recent shocks fade. Oil prices have already come off their highs and Japanese supply chains are recovering from the impact of the recent earthquake and tsunami. Moreover, while the Fed has no room to cut interest rates, the ECB and most emerging market central banks have room to ease, it says.
"Europe could take the big step of fiscal integration and centralised debt financing—this is the natural end game for the union. Over the longer term, we could see a pickup in foreign investment, a re-opening of immigration to skilled workers and a productivity boom triggered by technological innovation," it says.
While risks are skewed to the downside, the economy will continue to recover slowly.
"The recovery will likely come in fits and starts, and we should not be surprised if there are more dead spots that may feel like a recession.
"We learned from historical episodes that the healing process from a balance sheet recession is slow and often bumpy," Harris says.
How and why did the world get into this huge 'trap'?
To begin with, it is the advanced or developed industrialised countries that have a huge and unsustainable debt problem, says Dr Nasser Saidi, chief economist of Dubai International Financial Centre (DIFC).
By contrast, emerging market economies (with few exceptions) have healthy national balance sheets, strong macro-economic conditions and sound fiscal policies.
The OECD forecasts that advanced economies — without major corrective changes in fiscal policies — will have debt to GDP ratios in excess of 115 per cent by 2015.
What led to this growing debt problem?
"We need to distinguish between secular, trend factors that underlie government budget deficits and debt accumulation from cyclical factors and the results of interventionist government policies," says Dr Saidi.
The trend factors are related to the demographics of ageing populations in advanced economies (Japan, Europe and to a lesser extent the US) and the role of entitlement and health policies: social security, national health programmes (Medicare, Medicaid).
The ageing population that characterises Japan, Europe and the US has contributed to the current situation in two ways.
First of all, an uneven growth of working-age and retirement-age population means that a decreasing number of tax-payers have to provide the financial resources for an increasing number of people that become eligible for old-age pensions, he explains.
"There is large transfer of resources from the young to the elderly causing the generation that is entering the job market now to finance not only their own future retirement, but also of their parents. Rather than increase the taxation burden [considered high already in Europe] politicians have taken the easy way out: increased borrowing," he says.
"The political cycle in advanced economies is heavily biased towards running deficits and increasing debt. The related issue is that people are living longer: life expectancy in the advanced economies has increased from an average 71 years in 1970 to 78 years in 2009. This results in higher public [and private] spending on health and medical as well as other entitlements and growing budget deficits."
The cyclical factors relate to the impact of the Great Contraction and the Great Financial Crisis. Recessions typically lead to increased government spending through the operation of automatic fiscal stabilisers (e.g. unemployment benefits) while tax revenues decline as a result of lower income; the result is higher deficit spending and debt accumulation.
This expected deficit increasing cyclical effect was exacerbated by unprecedented fiscal stimulus, bail-outs of banks and financial institutions and the 'socialisation' of private debt, when governments and central banks took over liabilities from insolvent banks and financial institutions and other sectors (e.g. car industry).
"In the US the situation was aggravated by loose monetary and fiscal policies after 2001, leading to both public and private sector dissaving and reversing a string of government budget surpluses from 1998 to 2001 [with a peak in 2000 when the surplus amounted to $236 billion (Dh866.8 billion]," Dr Saidi argues.
"A policy of low interest rates encouraged private sector dissaving and greater household indebtedness [mortgages in particular], while military spending surged in association with wars in Iraq and Afghanistan.
"The US moved from being a net capital exporter to a capital importer, absorbing some two thirds of global saving over the period 2004-2006, resulting in the 'global imbalance'."
What is the way out?
There is no easy way out.
Advanced economies will require deep and sweeping reforms to their taxation systems and to their entitlement programmes. Fiscal sustainability requires higher tax rates and the countering of demographic pressures, Dr Saidi says.
"The choices are stark and limited: retirement ages need to be gradually extended to 70 or higher, given increased life expectancy; this should be accompanied by a reduction in the size and coverage of entitlement programmes," he says.
For the US, the long term fiscal sustainability menu will need to include a major reduction in military expenditures and agricultural subsidies. For Europe, dealing with the demographics will also entail loosening of the strict emigration policies in place now: Europe has to draw on the relatively young populations of the Southern Mediterranean in order to pay for its pensions.
None of the above choices are politi cally palatable and we should not expect governments to willingly take hard choices.
"The lessons from history are clear: faced with large debt burdens, governments are unlikely to substantially increase taxation or effect permanent reductions in spending; they are more likely to default or reduce the real value of their obligations through inflation," he says.
To convince their creditors and financial markets, governments will need to invest in credible institutions. Increasingly, governments are turning towards setting up of independent fiscal advisory councils and the adoption of fiscal rules.
"Such fiscal councils should also be adopting new and different ways of looking at governments fiscal accounts. We should move toward 'generational accounting' systems: a method for estimating the economic impact of fiscal policy on different generations — including future ones.
"The idea is to evaluate the intergenerational effects of alternative government fiscal policies," he says.
But Saidi says to keep the economic growth momentum, governments are forced to spend, rather than repay debts.
Modern political systems — in advanced economies predominantly — have a built-in bias to deficit spending. Most spending once instituted is difficult to roll back and raising taxes is not a vote getter, he explained.
"This is exacerbated by the political cycle and short-time horizon of governments and elected politicians: if you are elected for three to four years or you are a government with a short expected lifetime, you will tend to spend, not tax in order to get re-elected or to pass the consequences of your fiscal follies to subsequent governments," he says.
Income disparity
Of the global population, nearly half or 3.25 billion earn less than $2 (Dh7.3) a day, whereas the number of millionaires has obly crossed ten million — reflecting a widening wealth gap that could threaten social stability.
According to the latest World Wealth Report by Merill Lynch and Capgemini, the population of global high networth individuals (HNWI) increased 8.3 per cent last year to 10.9 million and HNWI financial wealth grew 9.7 per cent to reach $42.7 trillion. The global population of Ultra-HNWIs grew by 10.2 per cent in 2010 and its wealth by 11.5 per cent.
"In its beginnings, the credit system sneaks in as a modest helper of accumulation and draws by invisible threads the money resources scattered all over the surface of society into the hands of individual or associated capitalists.
"But soon it becomes a new and formidable weapon in the competitive struggle, and finally it transforms itself into an immense social mechanism for the centralisation of capital."
However, the rising debt toll is becoming the single biggest headache for governments and economists worldwide and is gradually reaching a point where no one can protect humans from 'insolvency'. The Arab spring is a reminder of how things can flare up if not dealt with properly.
Must- Phrases include: "The market must…", "I must make money", or "I must trade". The market does not have to do anything and neither do you. When you use the word "must" it is hardly ever from a position of strength. The market knows when you are desperate and will take full advantage of you. Keeping your expenses as low as possible will make it easier to not make those statements.
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