The Cave: 11/08/09

Tuesday, November 17, 2009

TheAge.com.au | 'Cosmic rays' may have caused Qantas jet's plunge

ANDREW HEASLEY AND ARI SHARP

November 18, 2009 - 1:39PM

Cosmic rays are being considered by air safety investigators as a possible cause of a Qantas plane plunging twice in quick succession on its way from Singapore to Perth in October last year.

Air safety investigators this morning brought down their second interim report into the flight QF72 incident, which left one flight attendant and 11 passengers with serious injuries, finding that an equipment glitch with one of three data collectors was a likely cause.

But the reason for the problems with the air data inertial reference unit, which gathers data from outside the plane and feeds it into the cockpit, remains unclear.

One explanation being considered for the October 7 incident is that cosmic or solar rays interfered with the system, noting that a single particle can cause problems with integrated circuits such as the one used in the data equipment.

"There is a constrant stream of high-energy galactic and solar radiation interacting with the Earth’s upper atmosphere," the report noted. "This interaction creates a cascade of secondary particles. Some of the secondary particles, in particular neutrons, can affect aircraft avionics systems."

The Airbus A330-303 was flying at 37,000 feet with 303 people on board when it plunged 650 feet before recovering to its original height and then plunging 400 feet.

The pilot declared a "mayday" an sought an emergency landing at Learmonth, Western Australia.

The data device experienced significant spikes in nine different categories of information, leading to the dramatic movements in the aircraft, which was using its autopilot system.

In releasing the report this morning, Australian Transport Safety Bureau safety investigator Ian Sangston said while the spikes could not yet be explained, changes to equipment had been taken to filter out extreme data.

"We don’t know the methodology of those spikes, however we understand the result of those spikes and how the upset occurred and there’s good safety action in place to ensure any spikes in future will not have that effect," he told reporters in Canberra. FULL STORY

Real-time Magnetosphere Simulation | Earth's Protective Magnetsophere Update - November 17, 2009 7:45 PM CDT

http://www2.nict.go.jp/y/y223/simulation/realtime/index.html

Bloomberg.com | Insurers Face $23 Billion Loss on Commercial Property

Nov. 17 (Bloomberg) -- U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., may lose as much as $22.6 billion on investments in commercial real estate through 2011, Fitch Ratings said.

Losses on investments in apartment buildings, offices, shopping malls and other commercial real estate will begin to increase in the next 6 months to a year as rents decline and vacancies increase, said Fitch Senior Director Andrew Davidson. Life insurer losses on commercial real estate have been “virtually nil” so far, he said.

“It will be more of a 2010 and 2011 issue,” Davidson said in an interview today. “It will put some stress on the capital positions as they realize the losses.”

Life insurers held more than $450 billion in commercial loans and mortgage-backed securities at the end of 2008, Fitch said in a related report. The delinquency rate on U.S. CMBS rose to 4.01 percent at the end of October, almost seven times what it was a year ago, Moody’s Investors Service said yesterday.

MetLife has recorded three straight quarterly losses and Hartford Financial Services Group Inc. has lost money since June 2008 as investments that include those backed by commercial and residential mortgages dropped in value. New York-based MetLife and Prudential have said commercial mortgage defaults will climb in the next year.

‘Worst to Come’

“Losses in our commercial mortgage portfolio are going to accelerate over the next 18 months,” Bernard Winograd, executive vice president of Newark, New Jersey-based Prudential, said in an August conference call. “The fact that there have been very little in the way of delinquencies so far should not be taken as an indication that there won’t be losses.” FULL STORY>>>>

Arabs go for air power to counter Iran - but also to arms suppliers - United States, Britain, France & Russia wanting a piece of the action

http://www.upi.com/Business_News/Security-Industry/2009/11/17/Arabs-go-for-air-power-to-counter-Iran/UPI-46241258504355/
DUBAI, United Arab Emirates, Nov. 17 (UPI) -- Arab states, particularly in the Gulf, are seeking to build up their air power and missile defenses to counter any challenger from Iran.

Mostly they're looking to their traditional arms suppliers in the West, the United States, Britain and France, but Russia is pushing hard for a piece of the action.

This year's biennial Dubai air show, which opened Sunday in the United Arab Emirates, provided a showcase for the latest technology on offer.

Air power has been the deciding factor in most Middle Eastern conflicts since the 1967 Arab-Israeli conflict, when Israeli warplanes annihilated the air forces of Egypt, Syria and Jordan, largely on the ground, in pre-emptive strikes at the outset.

And for the Gulf states that lie across the waterway from Iran, air power and their ability to counter the Islamic republic's ballistic missile arsenal will be crucial in any conflict that erupts.

"Acquisition of the best air assets as politically and economically feasible -- be these fighter aircraft, helicopters, transports or unmanned aerial vehicles -- has thus become a priority in the Middle East," an analysis by Germany's Defense Professionals group concluded.

It stressed that the six states of the Gulf Cooperation Council -- Saudi Arabia, the United Arab Emirates, Kuwait, Oman, Qatar and Bahrain -- have given top priority to building up their air power.

"Political decision-makers in the region are acutely aware of the importance of air assets and the need to upgrade them with better firepower and/or expanded numbers whenever required," it said.

The combined air strength of the Gulf Arab states greatly outnumber the Iranian air force, which has suffered tremendously from U.S.-led arms embargoes on the Islamic republic over the last 30 years.

However, air power is needed not only as a deterrent but as a critical element to counter Iran's overwhelming strength on the ground if hostilities erupt, with GCC energy industries a key target.

The GCC states, along with Egypt and Jordan, are the recipients of U.S. military systems worth more than $20 billion under a package unveiled by President George W. Bush in 2007 to bolster Arab capabilities against Iran's nuclear program and its expansionist policies.

Under this they will be able to acquire advanced systems, some of them long denied Arab states because of Israeli opposition, such as the Patriot air-defense missile, the over-the-horizon AMRAAM air-to-air missile as well as fighter upgrades and electronic systems that outclass anything Iran is known to have.

The United Arab Emirates, one of the world's major oil producers, has built up an impressive air strength that rivals the Saudi air force and is currently spending $3.3 billion of the Patriot system manufactured by the Raytheon company of Massachusetts.

U.S. government-to-government arms sales rose 4.7 percent in 2008 to a record $38.1 billion and are expected to total about the same this year, the Pentagon announced Nov. 7.

Among the top buyers were the United Arab Emirates with $7.9 billion, Saudi Arabia with $3.3 billion, Egypt with $2.1 billion and Iraq with $1.6 billion.

Leading U.S. arms manufacturers Lockheed Martin Corp., the Boeing Co., Northrop Grumman Corp., Raytheon and the General Dynamics Corp are all seeking to boost sales in the Middle East to counter U.S. budget cuts that are likely to slow big-ticket purchases by the Pentagon.

Iran has sought to counter the air and missile threat, not just from the United States and Israel but the GCC states as well, with Russian air-defense systems.

The Saudis, apparently with the encouragement of Washington, have offered Moscow an arms-buying package worth more than $2 billion if it tears up a 2007 contract to supply Iran with the advanced S-300PMU air-defense system, considered one of the most effective in operation.

So far, the Russians have held up deliveries, much to Tehran's annoyance. The Saudis are offering to buy the S-400 air-defense system, successor to the S-300 and far more dangerous, along with tanks and other systems if Moscow plays ball.

That would crack open the lucrative Gulf arms market for the Russians. If the Americans have indeed agreed to Riyadh's offer to Moscow, it demonstrates just how far they are prepared to go to ensure that Iran is contained.

EarthObservatory.NASA.gov | Latest - November 17, 2009

Russia Today | Blood money: world banks invest in cluster bombs

17 November, 2009, 09:38

Over 90 countries have pledged to ban cluster bombs, which claim thousands of lives even years after a conflict. Activists say change is unlikely, as long as major world banks continue to invest in weapons development.

Cluster bombs kill and maim indiscriminately and are hard to detect. They open mid-air and scatter hundreds of smaller explosives over a wide area. They can remain dormant for years, eventually striking innocent civilians as they go about their daily lives.

“One bomb can cover a couple of football fields in one shot and so many of them fail to explode,” said Thomas Nash of the Cluster Munition Coalition. “You end up with basically fields of land mines that can remain for decades, killing and injuring people long after the conflict.”

Despite global calls for a ban, banks continue pumping billions into cluster munitions, including two of Britain’s biggest names: HSBC has underwritten $665 million bonds for Textron, the US firm which claims its products leave a “clear battlefield.” Barclays Bank lent $222 million, as well as funding Lockheed Martin.

While nations sign up to a convention to outlaw clusters, lenders are dodging the detail.

”The convention itself does not explicitly ban investment in cluster munitions,” said Roos Boer of IKV Pax Christi organization for peace. “It does however contain one prohibition on assistance on production. We feel very strongly that assistance on production means investing. If you invest in a company you assist [in] the production of these deadly weapons.”

There are currently 77 nations who stock cluster bombs.
With 31 countries still polluted and suffering the after effects of the munitions.
98% of cluster bomb casualties are civilians.
And 30% of those are children.
That's according to Handicap International.

Britain is not alone. Citigroup and Deutsche Bank have loaned more than a billion dollars between them. Campaigners say if their everyday customers knew where their money was going, they would be furious.

“They have customers worldwide who have given their trust in these companies and we feel it is up to these banks to end this involvement because these customers do not want their money to be invested in these producers of cluster munitions,” said Esther Vanderbroek of Netwerk Vlaanderen.

The activists’ protests demanded answers from London’s banks. Only Barclays responded, touting its anti-cluster policy, but admitting it lent money to Textron as a “broad-based weapons manufacturer.”

90 countries have committed to banning clusters by next year, but only a quarter have so far made it law. The US has not even signed up. Israel used them against Lebanon in 2006, and they have been used in both Iraq and Afghanistan.

Governments and weapons manufacturers undoubtedly have blood on their hands over cluster munitions. But although lawmakers may be in charge, it is the banks which hold the keys to the cash. Campaigners say that, until they work together, there is little to stop the trade in gruesome, horrific death.

Latin American Herald Tribune | November 17, 2009

Venezuelan Exports to U.S. Fall 60%

More details

Venezuela (Click here for more Venezuela news)

11/15/2009	Venezuela’s Chavez Calls Colombia’s Uribe a “Mobster”
11/14/2009	Venezuelan Troops Halt Opposition Mayor After Chavista Squatters Seize Town Property
11/13/2009	Prison Riot in Venezuela Leaves Two Dead
11/13/2009	Venezuela Secret Police Officer and Chavez Family Bodyguard Caught with Explosives

Colombia (Click here for more)

11/16/2009	11 Arrested on People-Trafficking Charges in Colombia
11/16/2009	Mob Frees Guerrilla Being Arrested in Colombia
11/15/2009	Colombian Navy Captures Militiaman Wanted on Drug Charges
11/15/2009	Colombia to Build Ethanol Plant Near Venezuela
11/15/2009	Colombian Troops Kill 5 FARC Rebels

Panama (Click here for more)

11/16/2009	Police Seize 688 Kilos of Cocaine, Over $1 Million in Panama
11/14/2009	Panama Canal Expansion Work to Begin in January

Ecuador (Click here for more)

11/15/2009	Siamese Twin Dies During Surgery in Ecuador
11/13/2009	Ecuador Eases Power Rationing
11/11/2009	Drought Blamed for Blackouts in Ecuador
11/9/2009	Police Rescue Kidnapped Woman in Ecuador
11/8/2009	Correa Defends Alliance Between Petroecuador and PDVSA

Bolivia

11/11/2009	Bolivia Mulls Bridges Over Lake Titicaca
11/11/2009	Bolivian Gov’t Seeks Financing for Two Wind-Energy Plants
11/11/2009	India’s Jindal to Export 80,000 Tons Per Month of Bolivian Iron
11/9/2009	Two Youngsters Drown in Bolivia’s Lake Titicaca

Central America

11/16/2009	Death Toll Stands at 194 in Rains in El Salvador
11/16/2009	El Salvador Recalls Murder of Jesuit Priests
11/16/2009	Cop Accused of Extortion Lynched in Guatemala
11/16/2009	Nicaragua Seizes Guns from Mexican Drug Cartel
11/16/2009	40% of Guatemala’s Elderly Living in Poverty

Cuba

11/16/2009	Cuban Government Announces Annual Military Exercises
11/13/2009	Cuban Dissident Said Seriously Ill
11/12/2009	Swiss Delegation Visits Cuba to Bolster Relations
11/12/2009	Nobel Laureate Leads U.S. Scientists’ Delegation to Cuba
11/11/2009	Cuban Daily Cites Fidel’s 1970 Lament About Low Productivity

Brazil (Click here for more)

11/16/2009	Brazilians Credit Ethanol with Stopping 75 Million Tons of CO2
11/16/2009	Lula Disappointed with U.S.-China Stance on Climate Change
11/16/2009	Three Die in Mudslide in Brazil
11/15/2009	Judge Prohibits Minors from Participating in Gay Pride Parade in Brazil
11/14/2009	Sarkozy, Lula Set Common Goals for Copenhagen Climate Summit

Mexico

11/16/2009	Crime-Fighting Mexican Mayor Sends Family Abroad for Safety
11/15/2009	Hitmen Kill Police Officer and Daughter in Northern Mexico
11/15/2009	Mexico Closes Embassy in Pakistan
11/14/2009	Mexico’s Unemployment Rate at 6.2% in 3rd Quarter
11/13/2009	Guns, $2 Million Cash Found in Northern Mexico

Caribbean

11/16/2009	Puerto Rico Lawmakers Approve Bill Extending Store Hours
11/15/2009	Haitian Murdered in Dominican Republic
11/11/2009	One Killed Amid Protests in Dominican Republic
11/11/2009	Dominican Press Unions Denounce Attacks on Journalists
11/10/2009	British Couple Arrested for Bomb Threat at Dominican Republic Airport

Argentina

11/16/2009	Argentina Offers to Mediate Between Israel, Palestinians
11/16/2009	Argentine Actress Renounces Her Seat in Congress
11/10/2009	Metro Strike Strands a Million Argentine Commuters
11/8/2009	Spain’s Deputy Prime Minister Visits Argentina
11/1/2009	Drought Affects 90 Percent of Argentina

Chile

11/16/2009	Chilean Indians Denounce Police Brutality
11/14/2009	Chile Government Denies Peru Allegations of Spying
11/13/2009	Chile Authorizes Duty-Free Transshipment of LNG to Argentina
11/13/2009	Strong Quake Causes Power Outages in Northern Chile
11/12/2009	President Cuts Ribbon for Chile’s Pavilion in Shanghai

Peru

11/16/2009	Peruvian Accused of Spying for Chile Held in Top-Security Prison
11/13/2009	Incas Practiced Ritual Decapitation of Enemies, Archaeologists Say
11/12/2009	Pitbull Kills Elderly Owner in Peru
11/11/2009	Nine Dead as Peru Bus Plunges Into Ravine
11/9/2009	Peru Guerrillas Growing Stronger, Former Top Cop Says

Uruguay

11/7/2009	Three Uruguayan Kids Drowned in Montevideo Storm
11/1/2009	Gunman, Cop Die in Uruguay Shootout

Latin America (Click here for more)

11/16/2009	Paraguayan Indians Say They Were Poisoned by Pesticides
11/16/2009	Two Die in Paraguay Fire
11/15/2009	Venezuela’s Chavez Calls Colombia’s Uribe a “Mobster”
11/14/2009	Calderon Warns of Threat of Protectionism at APEC Summit
11/11/2009	Israel's Shimon Peres Urges Brazil to Join Mideast Peace Efforts

World (Click here for more)

11/16/2009	Islamists Planned Attack on Barcelona Metro, Spanish Court Hears
11/14/2009	Algerian Arrested in Pamplona for Suspected Islamist Network Ties
11/13/2009	Chicago Youths Protest to Block Student’s Deportation
11/13/2009	Obama Aide: “Congress Will Have to Act” on Immigration Reform
11/12/2009	Spanish Prince New Breed of European Royals, Paris Match Says

Business & Economy (Click here for more)

11/12/2009	Iberia, BA Announce Merger Deal
11/10/2009	40,000 Passengers Affected by Spanish Airline Strike
11/9/2009	Spain No. 1 in Bulk Wine Sales by Volume
11/4/2009	Telefonica Improves Offer for Brazil’s GVT

Oil & Minerals (Click here for more)

11/16/2009	Repsol Says Reserve Replacement Ratio Nearing 90%
11/15/2009	Colombia to Build Ethanol Plant Near Venezuela
11/14/2009	Petrobras’ Net Income Down 25.8% in Third Quarter
11/13/2009	Petrobras Well Confirms Pre-Salt Field’s Potential
11/11/2009	Brazil’s Petrobras Announces Oil Find in Angolan Waters

Opinion (Click here for more)

11/16/2009	VenEconomy: Primaries or No Primaries?
11/16/2009	VenEconomía: ¿Primarias o No Primarias?
11/15/2009	Las Líneas de Chávez – “Si quieres la paz, prepárate para la guerra”
11/13/2009	VenEconomy: Sabotaging Those Who Are Building Up the Country
11/13/2009	VenEconomía: Saboteando a Quien Construye País

Sports (Click here for more)

11/16/2009	Mexican Soccer Player Antonio de Nigris Dies
11/15/2009	FIFA Suspends Maradona for 2 Months
11/14/2009	Nadal No Match for Red-Hot Djokovic in Paris Semis
11/13/2009	Nadal Raises His Game to Advance to Paris Semis
11/12/2009	Nadal Rallies from the Brink Again to Reach Paris Quarters

Living (Click here for more)

11/16/2009	Perez Dominguez Tells Story of Spanish Republicans at Nazi Death Camp
11/15/2009	Mexico Big Winner at Mar del Plata Film Festival
11/14/2009	Mexico’s Jordi Soler Digs Up Family Roots in “La Fiesta del Oso”
11/14/2009	Mexico's Susana Garcia Wins Aura Estrada International Novel Prize
11/14/2009	Madonna in Tears Over Multimillion-Dollar Donation by Brazil Tycoon

New Scientist | Mystery 'dark flow' extends towards edge of universe

SOMETHING big is out there beyond the visible edge of our universe. That's the conclusion of the largest analysis to date of over 1000 galaxy clusters streaming in one direction at blistering speeds. Some researchers say this so-called "dark flow" is a sign that other universes nestle next door.

Last year, Sasha Kashlinsky of the Goddard Space Flight Center in Greenbelt, Maryland, and colleagues identified an unusual pattern in the motion of around 800 galaxy clusters. They studied the clusters' motion in the "afterglow" of the big bang, as measured by the Wilkinson Microwave Anisotropy Probe (WMAP). The photons of this afterglow collide with electrons in galaxy clusters as they travel across space to the Earth, and this subtly changes the afterglow's temperature.

The team combined the WMAP data with X-ray observations and found the clusters were streaming at up to 1000 kilometres per second towards one particular part of the cosmos (The Astrophysical Journal Letters, vol 686, p L49).

Many researchers argued the dark flow would not turn up in later observations, but now the team claim to have confirmed its existence. Their latest analysis reveals 1400 clusters are part of the flow, and that it continues to around 3 billion light years from Earth, a sizeable fraction of the distance to the edge of the observable universe (arxiv.org/abs/0910.4958). This is twice as far as seen in the previous study.

The dark flow appears to have been caused shortly after the big bang by something no longer in the observable universe. It has no effect today because reaching across this horizon would involve travelling faster than light.

One explanation for the flow would be the gravity of a huge concentration of matter, but this is very unlikely. Within the standard big bang picture, massive cosmic structures were "seeded" by random quantum fluctuations, so overall, matter should be spread evenly.

There could be an exotic explanation. Laura Mersini-Houghton of the University of North Carolina, Chapel Hill, thinks the flow is a sign of a neighbouring universe. If the tiny patch of vacuum that inflated to become our universe was quantum entangled with other pieces of vacuum - other universes - they could have exerted a force from beyond the present-day visible horizon (see "Nosey neighbours"). FULL STORY>>>>

Reuters | GM says 10,000 jobs could go in European shake-up

Portfolio.com | AOL and Time Warner End Relationship on Dec 6

Washington Business Journal | Northern Virginia adds more than 8,000 government jobs

UPI | International Security Industry Headlines - November 17, 2009

Portuguese contract for locator beacons

SO. ST. PAUL, Minn., Nov. 17 (UPI) -- The Portuguese air force has contracted Digital Angel to deliver its personal beacon technologies to support emergency location requirements.

Shaw selected for Defense Dept. IDIQ

BATON ROUGE, La., Nov. 17 (UPI) -- The U.S. Defense Department has contracted Shaw Group Inc. to compete for construction task orders at naval facilities in six states.

New head appointed for Textron Systems

PROVIDENCE, R.I., Nov. 17 (UPI) -- U.S. defense contractor Textron Inc. announced the appointment of a new president and chief executive officer of its Textron Systems unit.

Army contracts Alion for UAS R&D support

MCLEAN, Va., Nov. 17 (UPI) -- The U.S. Army has awarded Alion Science and Technology a contract to support manned and unmanned ground vehicles' lifecycle engineering requirements.

BAE to deliver armor bar kits for MRAPs

AUSTIN, Texas, Nov. 17 (UPI) -- The U.S. Army has contracted BAE Systems for its bar armor kits for integration with mine-resistant, ambush-protected vehicles to increase troop survivability.

Navy contracts for avionic IFF systems

CARLSTADT, N.J., Nov. 17 (UPI) -- The U.S. Navy has contracted Tel-Instrument Electronics Corp. to deliver its avionics test identification friend-or-foe technologies.

VirTra contracted for simulator tech

TEMPE, Ariz., Nov. 17 (UPI) -- Police authorities in Georgia and Tennessee have selected VirTra Systems to deliver its firearms simulator technologies to support realistic training.

MCC releases next-gen Rambo computer

HOUSTON, Nov. 17 (UPI) -- Houston-based MCC Computer Co. announced the launch of its next-generation ruggedized handheld modular computer technology.

Stark opens new facility in Mississippi

COLUMBUS, Miss., Nov. 17 (UPI) -- Unmanned aircraft systems developer Stark Aerospace announced the opening of its new Columbus-based facility in Mississippi.

XTec to support DHS logistical access

RESTON, Va., Nov. 17 (UPI) -- The U.S. Homeland Security Department has awarded XTec Inc. a task order to provide logical access support for internal agency networks.

Brazil, China build military industry ties

RIO DE JANEIRO, Nov. 17 (UPI) -- Brazil and China have agreed to build military cooperation that will include development of joint defense industries, collaboration in science and technology, and personnel training.

Israeli UAVs on an uproll

TEL AVIV, Israel, Nov. 16 (UPI) -- Israel Aerospace Industries has signed a $350 million deal with Brazil to supply Heron unmanned aerial vehicles to patrol the South American nation's borders and provide security for the 2014 World Cup tournament and the 2016 Olympic Games.

Iran warns it may produce S-300 system

TEHRAN, Nov. 16 (UPI) -- Increasingly irate over a delayed arms deal, Iran has threatened to manufacture an advanced missile system itself if Russia does not deliver it to Tehran soon.

Augusta, Crane partner on detection tech

MORGANTOWN, W.Va., Nov. 16 (UPI) -- U.S. companies Augusta Systems Inc. and Crane Wireless Monitoring Solutions have established a partnership to integrate remote monitoring technologies.

EF Johnson awarded deal for mobile radios

IRVING, Texas, Nov. 16 (UPI) -- Texas-based EF Johnson Technologies Inc. has been selected to deliver its mobile radios to support a state-wide police communication contract.

RMN.com | LAROUCHE: THERE WILL NEVER BE AN ECONOMIC RECOVERY UNDER OBAMA, A PUPPET OF FOREIGN INTERESTS

Examiner.com | G20 leaders attempt to create a new world order

On September 24 and 25, world leaders from 20 countries met to discuss the global economy and its reformation. The overall message of the summit in Pittsburgh was the plan for a new world order. This would involve reforming the the International Monetary Fund (IMF) and the World Bank in order to give developing countries more voting power.

According to the G20 research group, "voice reform" in the IMF will establish "the G20 as the new centerer of global economic governance...[which] would finally give the central role to the emerging and established powers... It would treat established and emerging powers as equals."

This would mean reducing IMF seat holders from 24 to 20 but leaving the US shareholding at 17%. In the World Bank, 3% of shareholding would move to developing countries. This change comes less than 2 years after the group added 12 developing countries to the original 8 (7 countries plus the EU).The core G8 countries announced on September 25 that they would not meet separately as an official group. Instead, the group of 8 will hold a separate gathering the night before any G20 event (NBC report).

All of this came a day after the UN General assembly where Security General Ban Ki-Moon called for a time of "Multilateral ism" and "Genuine Collective Action".

But who needs to act and what will the result be? in order to answer these questions we need to understand how the current system has developed.

THE OLD WORLD ORDER

In 1944, International leaders from 44 countries met in New Hampshire to construct a post-war international monetary system which came to include the creation of the IMF and the International Bank for Reconstruction and Development (IBRD), together known as the Bretton Woods System. The system established a global exchange rate based on the US dollar which was backed by the gold standard. The American dollar thereby became beneficial for any nation to own. When a developing country was able to increase its exports to the US, it could stockpile foreign (American) currency and invest in domestic production which in turn encouraged employment. The dollar became the chief American export. This constant outward flow of capital was extremely lucrative for the US after WWII.

Even though the dollar was supposedly backed by the gold standard, the US did not limit itself to spending the capital it could exchange for gold, and continued to pay for exports with its deficit. By the late 1950s the world began experiencing a "dollar glut" (saturation of US capital). Today, the global economy has come to rely on a floating exchange rate, meaning the US dollar depreciates when it is not in demand. However, when the dollar was still linked to gold it was unable to adjust its value to cover global inflation. In order to prevent a collapse of foreign confidence and of the US economy, President Richard Nixon suspended the gold standard.

AFTER GOLD: PROFITING FROM FICTITIOUS CAPITAL

The US dollar is again faced with the threat of losing global confidence. The collapse of major national banks along with the mortgage crisis has proven that the US economy has been paying for world leadership with interest--money it does not and has never possessed. Writing for Time magazine, Justin Fox summarized:

The advantage of having your country's currency as the world's reserve currency is that you don't really have to play by the rules: You can run big deficits financed by the rest of the world, you can spend more than you earn, and to a certain extent you can escape the consequences of your profligacy by devaluing your currency when you run into trouble. The obvious disadvantages are that running big deficits and spending more than you earn aren't really great long-term economic strategies

Until the recent depression, the world has relied on the US as the consumer of last resort-- the demand for other nations' supply. But now that the dollar has depreciated, the rest of the world, including the US, hopes China will supplement the drop in US consumption. A Morgan Stanley report stated "between now and 2018, Chinese consumers are likely to add more to global consumption than U.S. consumers, and that by 2018, Chinese consumers will be spending 40 percent as much as U.S. consumers, up from 16 percent in 2008."

The US seems to believe that Chinese consumption will raise the value of, and consequently demand for, the American dollar, thereby avoiding the need to re-evaluate US hegemony.

SEARCHING FOR MULTILATERALISM

Back in March, the People's Bank of China Governor Zhou Xiaochuan proposed a reform to the International monetary system that would replace the current role of the US dollar with an international currency based on the SDR or "Special Drawing Rights" already used by the IMF. The SDR is referred to as a "basket of currencies" because the exchange rate is calculated according to 5 national currencies which are chosen by the IMF every 5 years. SDRs act as a sort of artificial gold standard that other countries can purchase in order to participate in global transactions.

In his statement, Zhou stated

A super-sovereign reserve currency not only eliminates the inherent risks of credit-based sovereign currency, but also makes it possible to manage global liquidity. A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity. And when a country´s currency is no longer used as tn September 24 and 25, world leaders from 20 countries met to discuss the global economy and its reformation. The overall message of the summit in Pittsburgh was the plan for a new world order. This would involve reforming the the International Monetary Fund (IMF) and the World Bank in order to give developing countries more voting power.
According to the G20 research group, "voice reform" in the IMF will establish "the G20 as the new centerer of global economic governance...[which] would finally give the central role to the emerging and established powers... It would treat established and emerging powers as equals."

This would mean reducing IMF seat holders from 24 to 20 but leaving the US shareholding at 17%. In the World Bank, 3% of shareholding would move to developing countries. This change comes less than 2 years after the group added 12 developing countries to the original 8 (7 countries plus the EU).The core G8 countries announced on September 25 that they would not meet separately as an official group. Instead, the group of 8 will hold a separate gathering the night before any G20 event (NBC report).
All of this came a day after the UN General assembly where Security General Ban Ki-Moon called for a time of "Multilateral ism" and "Genuine Collective Action".
But who needs to act and what will the result be? in order to answer these questions we need to understand how the current system has developed.
THE OLD WORLD ORDER
In 1944, International leaders from 44 countries met in New Hampshire to construct a post-war international monetary system which came to include the creation of the IMF and the International Bank for Reconstruction and Development (IBRD), together known as the Bretton Woods System. The system established a global exchange rate based on the US dollar which was backed by the gold standard. The American dollar thereby became beneficial for any nation to own. When a developing country was able to increase its exports to the US, it could stockpile foreign (American) currency and invest in domestic production which in turn encouraged employment. The dollar became the chief American export. This constant outward flow of capital was extremely lucrative for the US after WWII.
Even though the dollar was supposedly backed by the gold standard, the US did not limit itself to spending the capital it could exchange for gold, and continued to pay for exports with its deficit. By the late 1950s the world began experiencing a "dollar glut" (saturation of US capital). Today, the global economy has come to rely on a floating exchange rate, meaning the US dollar depreciates when it is not in demand. However, when the dollar was still linked to gold it was unable to adjust its value to cover global inflation. In order to prevent a collapse of foreign confidence and of the US economy, President Richard Nixon suspended the gold standard.
AFTER GOLD: PROFITING FROM FICTITIOUS CAPITAL
The US dollar is again faced with the threat of losing global confidence. The collapse of major national banks along with the mortgage crisis has proven that the US economy has been paying for world leadership with interest--money it does not and has never possessed. Writing for Time magazine, Justin Fox summarized:
The advantage of having your country's currency as the world's reserve currency is that you don't really have to play by the rules: You can run big deficits financed by the rest of the world, you can spend more than you earn, and to a certain extent you can escape the consequences of your profligacy by devaluing your currency when you run into trouble. The obvious disadvantages are that running big deficits and spending more than you earn aren't really great long-term economic strategies
Until the recent depression, the world has relied on the US as the consumer of last resort-- the demand for other nations' supply. But now that the dollar has depreciated, the rest of the world, including the US, hopes China will supplement the drop in US consumption. A Morgan Stanley report stated "between now and 2018, Chinese consumers are likely to add more to global consumption than U.S. consumers, and that by 2018, Chinese consumers will be spending 40 percent as much as U.S. consumers, up from 16 percent in 2008."
The US seems to believe that Chinese consumption will raise the value of, and consequently demand for, the American dollar, thereby avoiding the need to re-evaluate US hegemony.
SEARCHING FOR MULTILATERALISM
Back in March, the People's Bank of China Governor Zhou Xiaochuan proposed a reform to the International monetary system that would replace the current role of the US dollar with an international currency based on the SDR or "Special Drawing Rights" already used by the IMF. The SDR is referred to as a "basket of currencies" because the exchange rate is calculated according to 5 national currencies which are chosen by the IMF every 5 years. SDRs act as a sort of artificial gold standard that other countries can purchase in order to participate in global transactions.
In his statement, Zhou stated
A super-sovereign reserve currency not only eliminates the inherent risks of credit-based sovereign currency, but also makes it possible to manage global liquidity. A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity. And when a country´s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.

Seven months after this statement was made, the new world order seems to be developing through the struggles of the world’s leading economies to control the flow of capital. Though the incorporation and increased potential for vocalization of developing countries into policy discussions seems to be a step in the right direction, it remains to be seen how this direction will affect the lives of global citizens.
The yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.

Seven months after this statement was made, the new world order seems to be developing through the struggles of the world’s leading economies to control the flow of capital. Though the incorporation and increased potential for vocalization of developing countries into policy discussions seems to be a step in the right direction, it remains to be seen how this direction will affect the lives of global citizens.