Catarina's World

European voters are getting rid of austerity and there is civil unrest from Madrid to Athens. England and Spain are in double-dip recession. Austerity seems to be coming to and end, but is the idea of no more nation states coming to an end as well? Watch a really interesting video looking at how the idea of one world living in peace with no borders has been tried – and failed – throughout history:

Sarkozy, as we know, lost the election in France and Greece is in turmoil with the winners being the far left as well as neo Nazis. And it looks likely that Greece will leave the Euro.

Is the one world concept just a dream?

The Roman Empire, the Catholic Church, Napoleon, The British Empire, the Soviets and Americans during the Cold War and the European Union are good examples of attempts to unite the world under "one ruler".  

People have dreamed about a united world for thousands of years. Probably since the beginning of time, actually. But so far, the concept has failed. Again, and again, the world has reverted to nation states. 

Western idealists breathed new life into the European Union when the Berlin Wall fell. We were all pro uniting Eastern and Western Europe under one entity. To European free trade was added open borders and a single currency. Simultaneously the Americans got rid of a lot of protectionism. It all looked set for finally achieving a one world free trade market area. Free movement of labour was considered essential since the market would regulate everything.  But it didn't quite work out that way, did it?

Do you believe libertarianism with the whole world united under one ruler, be it Napoleon, Hitler, the Pope or multinationals is now dead as a concept? Do we need to start dismantling everything that has been built up during the last 30 years in the name of libertarianism and go back to the way it used to be? Or do you believe we will be able to finally create a world in peace without borders? Maybe another option is that uniting the world has failed again but someone, somewhere will again in the future have a go at succeeding? Most likely, since conquering the world and be its ruler is probably the most intoxicating ego trip there is. But is it a realistic concept? It's all very well when things are working according to plan. But are people of different nationalities interested in showing solidarity with other countries in trouble? Doesn't seem to be the case in Europe at the moment. 

Video: TheBigPictureRT – You Tube

The recent inability of US politicians to compromise have lead to US credit rating being downgraded. Add to that European politicians’ inadequate response to the debt crisis in the euro zone and it’s understandable markets are in turmoil.

Hopefully politicians all over the world will now get their act together and coordinate efforts to start dealing constructively with the world economy. There is no avoiding sorting out the main problem of excessive sovereign debt. Until that’s done, any relief will be short lived.

Politicians all over the world really need to step up to the plate and do something drastic to reduce the risks to the global economy.

Is another time bomb ticking somewhere in the world?

The global system is now faced with having to adjust to the many implications and uncertainties of the once unthinkable loss of America’s AAA. US treasury bonds are actually rated lower than bonds issued by countries such as Britain, Germany and France.

China, the world’s largest holder of US debt, has condemned the “short-sighted” political wrangling in the US and are of the opinion the world needs a new and stable global reserve currency. Understandable considering the circumstances.

And I can’t help wondering if there is another time bomb waiting to explode somewhere in the world?

Politicians postponing the problems

There are economic solutions to economic problems, but so far politicians have just postponed dealing with the problems. Presumably hoping they will go away? Which, as we all know is unlikely. If anything they will, just like the US debt problem just did, get worse.

Hopefully politicians all over the world will now get their act together and coordinate efforts to start dealing constructively with the world economy. There is no avoiding sorting out the main problem of excessive sovereign debt. Until that’s done, any relief will be short lived.

S&P considering US politicians not able to govern properly

It’s interesting to note that credit rating agencies are still regarded as capable of judging credit worthiness despite their role in the sub prime crisis. Seems a bit like having drunk drivers policing the roads. Not least since their initial calculations were wrong by 2 trillion. But for some reason they are, and Moody’s will review US credit rating end of this month.

S&P are of the opinion that US policy making and political institutions have weakened and that it will have a negative impact of America’s sovereign debt and budget. They are for instance worried that the Bush tax cut will not expire end of 2012 because of Republican opposition to raise revenues.

Americans & Europeans tired of political games

Voters in both the US and Europe are unhappy with their elected leaders’ failures. But voters are part of the problem too. On both sides of the Atlantic voters want debt levels reduced but no raised taxes or cuts in government programs such as pensions and health care.

Understandable since it’s the fault of bankers and politicians rather than voters. But unfortunately all belts now have to be tightened. Otherwise the huge sovereign debts will not be reduced.

Personally I used to think the main reason for the US debt was the wars in Iraq and Afghanistan. But according to The New York Times the main reason is loss of revenue due to the Bush tax cut, followed by the costs of those wars.

Unfortunately US voters will most likely be affected by S&P’s cut of US credit rating since borrowing costs will increase not only for the American government but US companies and consumers as well.

Could the EU rescue both Spain & Italy?

In the future, a US president could consider economic sanctions, cyber-retaliation or a military strike if key US computer systems are attacked, officials said in the wake of recent attacks on the defense contractor Lockheed Martin.

The world should follow Israel’s example and offer hackers the choice of going to prison or work for the state. It’s actually an excellent way of making use of hacker’s talents instead of them being used destructively, or worse for criminal purpose.

The Pentagon is busy drawing up a cyber defense strategy to protect America from cyber attacks from foreign nations.

Leaders in cyber warfare

The Center for a New American Society published a study claiming the United States, Britain, France, Israel, Russia and China as the leaders in cyber-war. They also believe Moscow and Beijing view cyber-attacks as an attractive option in the event of a major conflict.

Alarming isn’t it? Obviously cyber warfare is a horrendous prospect that we would all like to avoid. Somehow it doesn’t seem fair. Or maybe it’s no worse than military action? Catch is it can also be carried out by any criminal organisation wanting to say black mail a government to release one of their own from prison. Or hold a corporation at ransom.

Growing concern about the reach of hackers

Internet-based attacks on critical systems such as gas, power and water have increased around the world.

The Wall Street Journal reported that the Pentagon strategy will classify major cyber-attacks as acts of war i.e. paving the way for military retaliation. It’s intended as a warning to foes that may try to sabotage the US electricity grid, subways or pipelines, officials said.

“If you shut down our power grid, maybe we will put a missile down one of your smokestacks,” a military official told the Wall Street Journal.

Considering that China and Russia are, rightly or wrongly, considered the most likely sources of such attacks I really don’t see how the United States could take military action? Unless of course they intend to start World War III?

Governments and companies open to attacks

Sony was for the third time since April this year attacked by a group of hackers calling themselves Lulz Security. According to those hackers it was child’s play to get access to Sony’s information since it wasn’t even encrypted. And China recently, again, according to Google, hacked them from a Chinese military cyber warfare unit, to get access to US and Asian senior officials’ gmail accounts.

From what I understand most information online is easy for hackers to access which is a terrifying prospect. It actually seems that most companies have only bothered to really protect credit card details, if that. No wonder it’s easy for criminals to steal identities.

Israel knows the name of the game!

Obviously drastic measures are needed to prevent cyber wars and handle attacks if and when they happen. And unfortunately sometimes go on the offensive as well.

The most intelligent solution I have come across is the way Israel is handling the problem.

Already in the 1990s they decided to conquer cyber warfare and presented Israel’s hackers with a choice of going to prison or work for the state.

That was the start of defence unit 8200 that thousands are said to have joined since. Needless to say this smart move has given Israel an advantage in a world rapidly immersed in cross border technology attacks.

Unit 8200 is a leader in high technology warfare. It’s actually widely believe that’s where the Struxnet worm was created. If so maybe they did the world a favour?

The West scrambling to bolster its capabilities

The US has, for instance, set up Cyber Command to coordinate its ability to withstand an attack. Britain has Cyber Security Operations based at GCHQ, as well as Ministry of Defence and Cabinet Office units to guard the national infrastructure.

A new cyber warfare strategy in the US will most likely mean that Nato will have to devise its own rules or response to cyber-attacks. The alliance need to examine whether or not its principle of collective defence will apply to online warfare as well.

Iran, not least because of Struxnet, is also believed to have assembled a cyber warfare crack team. Am sure that not only Iran but North Korea and other such states are at the minimum starting to build up units that can conduct cyber attacks. So it’s high time for the rest of the world to seriously increase online safety. The time when systems for gas, electricity and water didn’t need to be protected are long gone. So the rest of the world needs to wake up and follow in Israel’s footsteps. Better late than never.

Hackers, usually learn their skills engaging in illegal activity as teenagers. However, most of them are not hardened criminals. They really have a lot to offer all countries when it comes to defence against cyber warfare, or going on the offensive against an enemy. In my opinion we should all follow in Israel’s footsteps and offer our hackers a choice of going to jail or work for the state. Do you agree with me or do you have a better idea of how we can defend ourselves against cyber attacks, and hackers in general, for that matter?

photo: José Goulão – Flickr

It’s make or break for the embattled eurozone. So many of us were surprised to hear that Estonia will join the single currency in January 2011. A minute later a top UK forecasting group announced that the eurozone needs to break up for the sake of the future economic health and success of the European Union.

Does the eurozone need to break up for the sake of the future economic health and success of the European Union?

Capital Economics’ conclusion is contrary to accepted wisdom that such a move would be a disaster. They are instead convinced a break up would lead to faster growth and spare weaker members of the single currency decades of depression and deflation.

Makes you wonder if the world has gone mad doesn’t it? Why does Estonia still want to join the euro? That they wanted to in the past makes perfect sense. But considering the flaws of the euro mechanism, I can’t help wondering if Estonia’s economy would be in as good a shape today as it is if they had already joined the euro?

Adding new member states to the eurozone is contrary to what Capital Economics ordains. It believes that the return of national currencies, far from being a potential disaster that would result in economic chaos, would enable Europe to break out of a prolonged period of weak expansion.

Christopher Smallwood, author of the report, believes the problem is Germany’s refusal to expand its demand to help countries such as Greece and Portugal grow their way out of difficulty.

He added, however, that a break up would still leave a problem for other core members of the euro area, such as France, which would continue to suffer from the “deflationary bias” in German economic policy unless Berlin agreed to restore the Deutschmark.

Smallwood is convinced that the result of such a move would be a rising currency (the Deutschmark) that would wipe out Germany’s trade surplus, forcing the country to boost domestic demand and hence preventing the country sliding into deflation. “Restoring the mark would lead to the rebalancing of the German economy which cannot occur as long as it remains in the eurozone. “This is the best option for Europe”.

Contrary to that belief, Estonians hope joining the single currency will encourage foreign investment in their economy, with growth falling by 14 per cent last year. It is forecast to grow by 4 per cent next year.

What do you think is the best way forward for Europe? A break-up of the eurozone or for the project to proceed and Estonia joining in 2011? Will more countries joining actually worsen the current problems of the eurozone? Is it worth taking the pain of going through depression and deflation to save the euro? Would reverting to national currencies put Europe on track for growth?

(photo: Flickr – erikasmussen)