Fareed Zakaria - Even 'winning' in Afghanistan would include some failures

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Why has the price of gold risen 300%?

Why has the price of gold risen 300%? | Kenneth Rogoff | Comment is free | guardian.co.uk

There are sound reasons for it, like the US dollar's loss of status, but economists are warning of the risks of another price bubble
Gold ingots bearing the Credit Suisse logo Global economic shifts are certainly behind much of the price increase in gold. Photograph: Getty Images

It has never been easy to have a rational conversation about the value of gold. Lately, with gold prices up more than 300% over the last decade, it is harder than ever. Just last December fellow economists Martin Feldstein and Nouriel Roubini each penned op-eds bravely questioning bullish market sentiment, sensibly pointing out gold's risks.

Wouldn't you know it? Since their articles appeared, the price of gold has moved up still further. Gold prices even hit a record high of $1,300 recently. In December 2009 many gold bugs were arguing that the price was inevitably headed for $2,000. Now, emboldened by continuing appreciation, some are suggesting that gold could be headed even higher than that.

One successful gold investor recently explained to me that stock prices languished for a more than a decade before the Dow Jones index crossed the 1,000 mark in the early 1980s. Since then, the index has climbed above 10,000. Now that gold has crossed the magic $1,000 barrier, why can't it increase tenfold, too?

Admittedly, getting to a much higher price for gold is not quite the leap of imagination that it seems. After adjusting for inflation, today's price is nowhere near the all-time high of January 1980. Back then gold hit $850, or well over $2,000 in today's dollars. But January 1980 was arguably a "freak peak" during a period of heightened geopolitical instability. At $1,300, today's price is probably more than double very long-term, inflation-adjusted, average gold prices. So what could justify another huge increase in gold prices from here?

One answer, of course, is a complete collapse of the US dollar. With soaring deficits and a rudderless fiscal policy, one does wonder whether a populist administration might recklessly turn to the printing press. And if you are really worried about that, gold might indeed be the most reliable hedge.

Sure, some might argue that inflation-indexed bonds offer a better and more direct inflation hedge than gold. But gold bugs are right to worry about whether the government will honor its commitments under more extreme circumstances. In fact, as Carmen Reinhart and I discuss in our recent book on the history of financial crises, This Time is Different, cash-strapped governments will often forcibly convert indexed debt to non-indexed debt, precisely so that its value might be inflated away. Even the United States abrogated indexation clauses in bond contracts during the Great Depression of the 1930s. So it can happen anywhere.

Even so, the fact that very high inflation is possible does not make it probable, so one should be cautious in arguing that higher gold prices are being driven by inflation expectations. Some have argued instead that gold's long upward march has been partly driven by the development of new financial instruments that make it easier to trade and speculate in gold.

There is probably some slight truth – and also a certain degree of irony – to this argument. After all, medieval alchemists engaged in what we now consider an absurd search for ways to transform base metals into gold. Wouldn't it be paradoxical, then, if financial alchemy could make an ingot of gold worth dramatically more?

In my view, the most powerful argument to justify today's high price of gold is the dramatic emergence of Asia, Latin America, and the Middle East into the global economy. As legions of new consumers gain purchasing power, demand inevitably rises, driving up the price of scarce commodities.

At the same time, emerging-market central banks need to accumulate gold reserves, which they still hold in far lower proportion than do rich-country central banks. With the euro looking less appetising as a diversification play away from the dollar, gold's appeal has naturally grown.

So, yes, there are solid fundamentals that arguably support today's higher gold price, although it is far more debatable whether and to what extent they will continue to support higher prices in the future.

Indeed, another critical fundamental factor that has been sustaining high gold prices might prove far more ephemeral than globalisation. Gold prices are extremely sensitive to global interest-rate movements. After all, gold pays no interest and even costs something to store. Today, with interest rates near or at record lows in many countries, it is relatively cheap to speculate in gold instead of investing in bonds. But if real interest rates rise significantly, as well they might someday, gold prices could plummet.

Most economic research suggests that gold prices are very difficult to predict over the short to medium term, with the odds of gains and losses being roughly in balance. It is therefore dangerous to extrapolate from short-term trends. Yes, gold has had a great run, but so, too, did worldwide housing prices until a couple of years ago.

If you are a high net-worth investor, a sovereign wealth fund, or a central bank, it makes perfect sense to hold a modest proportion of your portfolio in gold as a hedge against extreme events. But, despite gold's heightened allure in the wake of an extraordinary run-up in its price, it remains a very risky bet for most of us.

Of course, such considerations might have little influence on prices. What was true for the alchemists of yore remains true today: gold and reason are often difficult to reconcile.

Copyright: Project Syndicate, 2010.

* Comment is free I migrated to Europe with hope. Now I feel nothing but dread

I migrated to Europe with hope. Now I feel nothing but dread | Abdelkader Benali | Comment is free | The Observer

When I arrived with my mother in Rotterdam in the late 1970s, we thought we had found a safe haven. Coming from the sharp-edged mountains of north Morocco, the streets of the Low Countries felt like a place where everything could be done better. It did not seem possible that, 30 years later, the likes of Geert Wilders would wield influence, pushing his ban on the burqa, but then there were no burqas to be seen in the street.

The Netherlands felt like a country that would never betray me. I was greeted with enthusiasm at kindergarten; my name was the longest among the pupils and it was assumed I was very proud of that. Dutch culture was like a tattoo being imprinted on my brown skin. I learned the language and delighted in excelling at it in front of my teachers. I was their dream of multiculturalism: a foreigner who showed he could adapt to their culture through language. The mothers of classmates would inform me that they loved Moroccan cuisine, especially couscous. They would speak vividly, romantically about foreign cultures such as mine, and I felt proud. The fact that I was different made me feel special. And the Dutch created wonder in me as a child. They tolerated their dogs on their couches; they gave generously to faraway peoples suffering from disaster and sickness. I didn't only read fairy tales, I lived one.

Then came the fall of the Wall, the 1990s and change. Europe decided it needed immigrants. The first change I saw was at home. My parents, growing older, gave up hope of the family returning to Morocco. Slowly, the feeling took over that we were here to stay, maintaining the privileges and opportunities of living in Europe. With that came the unease that their children would lose their identity. Already, we spoke Dutch, not Berber.

Meanwhile, the Dutch were waking up to the reality that most immigrants would never go back. Friday evening in Rotterdam saw large groups of immigrant children in the streets, estranged from their roots, trying to find solace in consumerism and urban culture, but also feeling alienated from Dutch society. Turks hung out with Turks, Moroccans with Moroccans. The melting pot didn't heat up, the elements weren't mixing. In my neighbourhood, former convicts stopped me to talk about Islam. They felt that my staunchly secular lifestyle would not only bring disaster to me, but also to the spiritual community of Islam. A young friend introduced me to his uncle who had just came back from Afghanistan. He was a mujahid.

I failed to see the shift. Immigrants had been seen by most Dutch as a marginal, colourful people from whose shops they could buy their meat and vegetables at ridiculously low prices. I knew this because my father had a butcher's shop and I would sell them their lamb chops. As the 1990s progressed, the difference between allochtoon – one "originating from another country" – and autochtoon – "one originating from this country" began to be emphasised. Allochtoon started becoming synonymous for criminality, big families, bad living and Islam. This wasn't restricted to Holland. In Germany, questions were being raised about Turkish immigrants adhering to a fundamentalist Islam. Thousands of young French-Algerian football fans stormed the pitch when France played Algeria, their way of saying: "We don't feel we belong in this country."

So what had changed? I believe it was memories of war. The mass destruction of its people had given Europe a self-image as an intolerant, cruel continent. The deep feeling of guilt towards the victims had to be made good in the attitude towards new immigrants. The immigrant became a totem of the left-wing elite, of which there could be no criticism. Multiculturalism became the catchphrase.

In the banlieus of Paris, young immigrant girls could not go out in the evening for fear of being beaten by their brothers. No criticism. Immigrants from West Africa could keep four woman in the same quarters. The elite did not intervene, for this was their culture. Society leaders believed that over time these immigrants would assimilate. A Moroccan would become Dutch, an Algerian French, a Turk Swedish.

This did not happen. They did the reverse. This was the moment the fear crept in, threatening the idea that Europe could assimilate its new citizens. If these immigrants adhered to their practices and rituals such as slaughtering their sheep on the balcony and not allowing their girls to go to school, Europe was being undermined from the inside.

It is in this context that Geert Wilders can proclaim that there is no moderate Islam, that any Muslim who calls himself a Muslim will one day become radicalised. This is not just a trick of words; when Dutch people who voted for Wilders looked out of the window, they really had this feeling that their Muslim neighbours were becoming more Muslim, not less. They saw girls in burqas, proclaiming that this was an individual decision strengthening their spiritual relationship with Allah. The Dutch wondered if somebody putting a cloth over herself could be a individual in their open society.

The burqa worried me too. But I saw Wilders's move as a dangerous way of turning populist sentiments into cold-blooded politics and creating a new sort of fear.

The place of the Second World War in all this is growing more complicated. Populist parties in the Netherlands, Denmark and France are linking Islamist ideology to fascism. Islam is the new Nazism and Muhammad is their Hitler. History has become a blueprint for a new history: the world war against Islam.

In the 1980s, this message would have made people laugh, but not now. Look around. In Sweden, the debate around Islam and migration is growing in urgency. And Islam is just a particularly toxic element in the anti-immigrant movement. Nicolas Sarkozy, who is part Jewish, is throwing out the Roma. In Germany, the country of the Holocaust, a former head of the Bundesbank, Thilo Sarazzin, is making a plea for reducing working-class immigrants because of their low IQ.

The idea that Europe is being kidnapped by an ever-growing non-western population is creating fear and populist parties are winning. But it will be impossible to stop migration. European populations are growing older, the workforces shrinking. But speaking in favour of migration – passionately, because I am a child of migration and make literature out of all its painful and comical contradictions – has become a form of blasphemy.

Certainly there is something rotten in multiculturalism, but turning the stereotypical victim into the stereotypical scapegoat is cheap and does not do justice to reality. I know that the Netherlands of my childhood will never come back. We are entering a dark period. A generation is growing up with xenophobia and the fear of Islam has become mainstream.

It's time to come up with a new idea of what Europe is, drawing on the humane Europe as defended and described by writers such as Thomas Mann and Bertol Brecht. A Europe that newcomers consider a refuge, not a hell. If not, Europe will not die for a lack of immigrants, it will die for lack of light.

Dilma Rousseff

Brazil presidential elections: Dilma Rousseff set to become world's most powerful woman | Mail Online

A former Marxist guerilla from Brazil is set to become the most powerful woman in the world - more influential than U.S. Secretary of State Hillary Clinton or German Chancellor Angela Merkel.

Dilma Rousseff, 62, represents the ruling Workers Party and is the hand-chosen successor of outgoing President Luiz Inacio Lula da Silva.

He led Brazil to unparalleled economic growth and increasing political clout on the global stage.

The Latin American country's growth rate is rivalled only by China - and is one that Europe and America can only look at with envy.
Elections: Brazil's President Luiz Inacio Lula da Silva, centre, Workers Party presidential candidate Dilma Rousseff, left, and Workers Party Sao Paulo State Governor candidate Alisio Mercadante, right, raise arms during a campaign rally yesterday

Elections: Brazil's President Luiz Inacio Lula da Silva, centre, Workers Party presidential candidate Dilma Rousseff, left, and Workers Party Sao Paulo State Governor candidate Alisio Mercadante, right, raise arms during a campaign rally yesterday

Historic: Lula and Rousseff sweep through the Brazilian town of Sao Bernardo do Campo yesterday

Historic: Lula and Rousseff sweep through the Brazilian town of Sao Bernardo do Campo yesterday
Fighter: A 1970 police mugshot of Rousseff, who was jailed and tortured for three years for her role as a Marxist guerilla against the Western-backed military regime

Fighter: A 1970 police mugshot of Rousseff, who was jailed and tortured for three years for her role as a Marxist guerilla against the Western-backed military regime

Now the latest polls show Rousseff - the former leader of a resistance against a Western-backed dictatorship that tortured her - is set to make history and become Brazil's first female president.

The mother, grandmother, and cancer survivor has been in politics since she was 16 years old.

After army generals took over Brazil in 1964, she joined the Palmares Armed Revolutionary Vanguard - a clandestine group that took up arms against what they viewed as an illegitimate military regime.

Rousseff swears she never used weapons. Even so, she was jailed for three years in Brazil's equivalent of Abu Ghraib prison, the Tiradentes prison in Sao Paulo, where she was tortured.

When she was finally freed, she went back to university and began working for the new state goverment in 1975.

From there she climbed the ranks to become Lula's chief of staff - effectively his prime minister.

Now, with a lead of about 20 percentage points over her closest rival, Jose Serra, a 68-year-old centrist from the Brazilian Social Democracy Party who was heavily defeated by Mr Silva in the 2002 election, she is on course to take the presidency.

Rousseff sailed through the last TV debate before Sunday's vote.

The former chief of staff faced few real challenges from her three main rivals in a mostly uneventful debate on TV Globo, the country's largest and most influential television network.

Unlike in other debates in this campaign, there was no mention of recent ethics scandals involving Rousseff's Workers' Party.

Serra mentioned in passing a vote-buying scandal that rocked the Lula government in 2005 but largely steered clear of attacking the frontrunner.

What's more, Rousseff and Serra did not engage each other directly at all in the late-night debate in which all four candidates failed to showcase the kind of charisma that Brazilians have become accustomed to under the wildly popular Lula, who cannot run for a third straight term.
Big day: Rousseff, shown here during the rally in the town of Sao Bernardo do Campo yesterday, is hoping her bid will succeed today

Big day: Rousseff, shown here during the rally in the town of Sao Bernardo do Campo yesterday, is hoping her bid will succeed in the elections today

Serra and the other two opposition candidates - Marina Silva of the Green Party and Plinio de Arruda Sampaio of a small socialist party - all sought to link Rousseff to the Lula government's shortcomings, ranging from shabby healthcare to a chronic housing deficit.

Silva, who has gained a few points in recent opinion polls at Rousseff's expense, looked emboldened at times, confidently challenging Serra's record at improving housing for the poor when he was governor of Sao Paulo state.

Serra seemed to stick to a campaign strategy that has proven ineffective so far -- avoiding remarks that could be construed as aggressive, which his aides fear would irk Brazilian voters.

Rousseff, for her part, was careful to tout the Lula government's achievements at every turn, clearly mindful of polls showing that most Brazilians want more of the same.

'My goal is to make Brazil a developed country,' she said.
Dilma Rousseff as a baby in an undated family photo
Dilma Rousseff as a baby in an undated family photo

The little girl who grew up to make history: Rousseff in two undated photographs from a family album

Before the debate, a survey by polling firm Datafolha showed the career civil servant with 52 per cent of valid votes, down from a peak of 57 per cent two weeks ago but above the 50 per cent threshold she needs to avoid a runoff on October 31.

Serra has struggled to sell his message 'Brazil can do better' amid the strongest economic expansion in three decades.

He had 31 per cent of valid votes in the latest Datafolha poll, slipping from 32 per cent.

TV Globo reaches the most distant corners of this continent-sized country with the biggest audience of any network, although the debate's timing after the nightly soap opera show may have put off many viewers.
Last chance: Presidential candidates Jose Serra, left, Marina Silva, centre, and Dilma Rousseff attend a live TV presidential candidate debate in Rio de Janeiro, Brazil, on Thursday night

Last chance: Presidential candidates Jose Serra, left, Marina Silva, centre, and Dilma Rousseff attend a live TV presidential candidate debate in Rio de Janeiro, Brazil, on Thursday night

The final debate has been seen as potentially important ever since a poor performance by Lula in 1989 turned the tide in favor of rival Fernando Collor de Mello in Brazil's first direct presidential elections after the end of military rule.

Lula lost to Collor then, the first of three elections the former metalworker would lose before winning in 2002.

Since then, Brazil has cast off its reputation of being unstable and become one of the world's fastest-growing emerging markets.

A decision on voting procedures by Brazil's Supreme Court on Thursday could further benefit Rousseff.

The top tribunal voted to relax a rule that required voters to present both a registration card and photo identity card at the polling booth. Now voters will only need the photo ID.

That may benefit poorer and less-educated voters, who often lack proper documentation and make up a large proportion of Rousseff's supporters.

Does slang make you sound stupid?

 | The Observer debate | Comment is free | The Observer

Last week, actor-director Emma Thompson attacked teenagers' use of slang, saying it drives her "insane". She said, "Just don't do it. Because it makes you sound stupid," adding, "We have to reinvest, I think, in the idea of articulacy as a form of personal human freedom and power." Over to our debaters…

Doc Brown: My initial response is that slang may indeed "sound stupid" if heard out of context or removed from its natural habitat. But I can guarantee a lovely bit of RP will sound pretty stupid at 3.45pm on the basketball court on my estate. As with all forms of language, there is a time and a place for slang. It is worthy, even vital, in some arenas, useless in others.

Robert McCrum: I think that's a good starting point. And I want to add another pretty crucial distinction (actually, two). The first is that we need to distinguish between the written and the spoken. Slang in literature, from Shakespeare's Falstaff to Salinger's Holden Caulfield, has an important place, and I'm emphatically not going to argue for proper English in our literary tradition. That would be bonkers. Also, second, we must draw a distinction between accent or dialect (estuary English, scouse etc) and slang (sloppy usage).

DB: Distinctions accepted, I would like to debate your description of slang as "sloppy usage" of language. It is a mistake to qualify repetition and the use of impotent words such as "like" or meaningless rhetoric such as "knowwhatimean" as slang. We are all guilty of such verbal tics to differing extents. Slang, however, for me should be set apart as a way of speaking that, while perhaps not grammatically correct, has a richness of culture and history that said tics play no part in.

RM: Every generation has its verbal tics – more or less irritating – and "like" is clearly one of those. Anyway, accepting your definition of slang – a way of speaking that articulates an alternative, rich culture – I would still want to argue that it's fine on the basketball court but serves to keep its speakers in a linguistic ghetto if used, in – for example – a school classroom, or a job interview. I would want to argue for the importance of a lively range of spoken registers, combined with an understanding that an internationally recognised norm is, well, just plain useful. No point trading zinc futures in Caribbean creole, is there ?

DB: Haha! Nice. So who are these people that transfer slang from the courtyard to the classroom? Outside of my career in music and comedy, I have worked with teenagers in songwriting workshops for nine years now. My last job was for Southwark council with eight boys all fresh out of Feltham on knife charges, and every one of them naturally switched their patter to "correct" English when addressing me and other staff (monosyllabic at times, but correct!).

Thus, from my own experience, I would question your fear of young people continuing to use slang in the formal world. If a person is idiotic enough to use slang in a job interview, for example, I would have thought the last thing the employer should worry about is the way that person speaks!

RM: Phew! So that's all right, then… Your experience suggests that Emma Thompson should chill out with her fear and loathing. But before I accept your soothing words – this is a debate, right? – let me raise the spectre of slang polluting the pure well of standard English. There's a danger (I wouldn't put it higher) that if too many new lexical items (dictionary slang for "words") creep into the mainstream, it becomes unintelligible.

So, my question to you, Doc, is: how do we accommodate slang in a culture that retains a strong sense of linguistic rightness?

Another question: are we worried about the influence of texting on the written standard?

DB: Right, so there are two points to respond to here. Let's begin with the perception of "danger" and "pollution"– perhaps you should split that chill pill with Emma and wash it down with some reality juice.

First, the fear of slang is in my opinion a manifestation of a latent fear of the working classes – a closeted sense of foreboding that our children may be corrupted by an army of hooded Eliza Doolittles raping our green and pleasant land in some kind of grotesque, inverse Pygmalion.

I wholly accept that slang can appear in the mainstream in a pop-cultural sense. We already see it in the speech of our television and radio presenters – I've actually heard Andrew Marr and Jeremy Paxman use phrases such as "diss" instead of "disrespect". But it's a drop in the ocean and that's all it will ever be. I strongly disagree that it has the ability to make English as we know it "unintelligible". Slang adds colour and humour to our language.

Second, the influence of texting. I'd be lying if I said that texting didn't have an influence and that slang isn't naturally a part of that. But I do not believe that a young person would write in an essay "I *HEART* Hamlet Xcept wen he murked Claudius *SADFACE*." Any kid with half a brain will know the difference between pens and keypads.

RM: Eliza Doolittle a hoodie? I love it! I agree with your first point, that there's a strong class element at play. Actually, I think there is also a not-so-latent prejudice against the perceived menace of a tribe of burqa-wearing, al-Qaida-supporting, Qur'an-toting foreigners whose "black" and "Asian" slang is endangering the decent, honest speech of England's horny-handed sons of toil. Fundamentally, for islanders, fear of "the other" and "the outsider" is a default position. It's part of the national DNA (though of course we should be vigilant against its influence) so on to your second point.

If I'm honest, I do think text-speak is pernicious. It's a coarse vulgarisation, and a reduction of the expressive capacity of the language. The joy of English is its extraordinary range of nuance and subtle capacity to articulate an extraordinary spectrum of feeling and meaning.

Here's another question: putting slang to one side, do you share my view that learning standard English is vital for our children, and also for those new arrivals to our shores ?

DB: Funnily enough, the one issue I do get a bit Daily Mail about is the encouragement of young children and immigrants to learn English to as high a standard as possible. I live in a Turkish area where, if so inclined, you could move from Istanbul, work in a family business and never have to learn a word of English. This saddens me on two levels because I think this dramatically lessens their ability to experience all aspects of life in the UK, but also they create an island around themselves that makes further communication between communities unnecessarily hard, which in turn can lead to prejudice and fear.

As for children, there is no greater power for a young person than the ability to communicate. Eggs is eggs!

RM: The trouble with this subject, I find, is that it's always morphing into something else: politics, culture, society – you name it – it's a moving target. What do I take away from this ? On the pro-slang side, I believe that an aggressive use of slang is essentially a form of display. It's a kind of verbal costume that says: I'm smart, distinctive and cutting-edge. Try me.

But here's the danger (on the anti side). A vigorous use of slang risks isolating the speaker, keeping him/her in a linguistic and cultural ghetto, out of the mainstream in a place where they simply cannot communicate with others. The solution? Save the slang for the weekends! Sad but true.

Now, in the words of the French, "an oeuf is an oeuf…"