The Hindu - OPCW winning Nobel Peace

In awarding the Nobel Peace Prize to the Organisation for the Prohibition of Chemical Weapons, the Norwegian Nobel Committee has given another leg up to the goal of ridding the world of weapons of mass destruction. In 2005, the Peace Prize went to the International Atomic Energy Agency. Though it is tempting to see the 2013 Prize as an acknowledgement simply of the OPCW’s difficult and ongoing mandate to monitor the destruction of Syria’s chemical munitions, the organisation has done a commendable job since it came into being in 1997 as the custodian of the Chemical Weapons Convention. As many as 189 countries are party to the CWC’s ban on chemical munitions; under the treaty’s terms, they are obliged to declare and destroy any stockpiles they possess within a clear timeframe. Unlike the Nuclear Non-Proliferation Treaty, which gives the United States, Russia, China, France, and Great Britain special status, the CWC is non-discriminatory. Unfortunately, as the Nobel Committee observes in its citation for the OPCW, “certain states have not observed the deadline, which was April 2012, for destroying their chemical weapons. This applies especially to the U.S. and Russia.” The U.S. has sought another decade to destroy its arsenal, while Russia is expected to complete the process only by 2018. The irony of thrashing out a deal to eliminate Syria’s CW stocks while lagging behind on their own commitments must not be lost on both countries. For its part, India has complied fully with the treaty, having eliminated its chemical stockpile four years ago.

Apart from living up to their disarmament commitments, the big powers must also ensure there is no interference with the OPCW’s functioning. The organisation relies both on technical and diplomatic expertise to fulfil its objectives. Yet, it has been impeded by partisan politics in the past: in the run-up to the illegal U.S. invasion of Iraq in 2003, the Bush administration managed to oust OPCW Director-General José Maurício Bustani when it emerged the Brazilian diplomat would stand in its way. Mr. Bustani had sought to engage Saddam Hussein, with a view to ensuring Iraq’s accession to the CWC. By bottling the OPCW and using entities like the U.N. Special Commission for Iraq to further its own interests, the U.S. has done no service to the goal of eliminating WMDs. The role of the OPCW in Syria — given the limited time it has for its mission — will now be thrown into sharp relief. The stakes are high and the organisation must be allowed to do its job without coercion or meddling from outside. The quick and effective elimination of Syria’s chemical weapons would reinforce the world’s faith in multilateralism and vindicate the Nobel Committee’s choice for what is arguably its most prestigious prize.

DNA - Obama - Manmohan talks in US

- Reuters

Even as Prime Minister Manmohan Singh and President Barack Obama vowed to make the next decade "equally transformative" for their relations as the last one, for India the focus at their third summit was unmistakably on terrorism emanating from Pakistan.
Meeting under the shadow of a terrorist attack in Samba in Jammu and Kashmir on the eve of the summit, Obama acknowledged India's concerns over the menace of terrorism as Manmohan Singh lowered expectations from his upcoming meeting with Pakistan Prime Minister Nawaz.
While he looked forward to meeting Sharif in New York Sunday, he told the president "the expectations have to be toned down given the terror arm which is still active in our subcontinent" and terrorists' presence "still remain focused in Pakistan"
Affirming their deep concern over the continuing threat posed by terrorism, a joint statement not only "strongly condemned" the Sep 26 attack, but also called for Pakistan to work toward bringing the perpetrators of the November 2008 Mumbai attacks to justice.
The two leaders also stressed the need "for joint and concerted effort, including dismantling of terrorist safe havens, and disrupting all financial and tactical support for terrorism."
They "decided to significantly expand information sharing and intelligence cooperation to address threats to their respective nations including strengthening the bilateral relationship to exchange information on known and suspected terrorists."
Amid perceptions of a drift in their relations, the two leaders also notched up a couple of other successes with the first commercial agreement signed under their landmark civil nuclear and a pledge to expand defence relationship. Both governments, the joint statement noted "are committed to reduce impediments, ease commercial transactions, and pursue co-production and co-development opportunities to expand this relationship."
Noting the transformation of US-India relations during the last decade, the two leaders pledged to "make the next decade equally as transformative, challenging their governments to reach the full potential of this partnership." The joint statement specifically highlighted areas of security cooperation, bilateral trade and investment, energy and environment, higher education, and global architecture.
The Leaders called for expanding security cooperation between the US and India to "address 21st century challenges in the areas of counter-terrorism, cyber, space, and global health security," the joint statement said.
Noting that two-way trade has increased fivefold since 2001 to nearly $100 billion, Obama and Manmohan Singh agreed that "there are no insurmountable impediments to bilateral trade increasing an additional fivefold."
Acknowledging corporate America's concerns about what they called India's "unfair trade practices" they reaffirmed their commitment to concluding a high-standard Bilateral Investment Treaty. Such a treaty will "foster openness to investment, transparency, and predictability, and thereby support economic growth and job creation in both countries," they said. Both sides also agreed to consider establishing a Joint Committee on Investment in Manufacturing "to address all trade and investment policy issues of bilateral concern so as to remove obstacles and improve the business environment in both countries."
Given their "shared democratic values and the capabilities the United States and India have to work together across Asia and around the globe," the joint statement said stressin that the "two countries have crossed a threshold in their relations where both recognise that successes at home and abroad are further advanced by their cooperation."
Friday's summit, the joint statement said "demonstrates that the interests of the United States and India continue to converge, and this partnership will indeed be a defining one for the 21st Century."

The Hindu - probable war on syria

There is neither any justification for the West's imminent military intervention nor any substance to its claim that the assault will be limited and short-lived.

An air strike on Damascus and other strongholds of the Bashar al-Assad regime in Syria, led by the U.S, U.K. and France, seems imminent. In the days and weeks to come, we will be duly informed by pundits that Syria is not Iraq - and hence not a shambolic intervention - what with its proven arsenal of weapon of mass destruction (WMDs). This military assault, we will be told, will be quick and decisive, and intended only to deter Mr. Assad and other war criminals from using chemical weapons. Above all, the familiar refrain of the United Nations’ “inability to act” on Syria will be sold as the primary motivation behind this illegal intervention.

For starters, the claim that a Western air strike will be short-lived – according to a Washington Post report, lasting for all of two days – is absurd. It is incredulous to suggest a “drive-by” attack will somehow make the Syrian government think twice before using chemical weapons, if it has not already done so. On the contrary, Bashar al-Assad made it clear last year he will resort to them if Syria is attacked from outside. History too bears adversely on such claims. In 1998, the US and UK bombed Iraq without UN Security Council sanction, with the goal of taking out its WMD manufacturing facilities. Operation Desert Fox, which lasted for four days, not only went well beyond its mandate of targeting WMD-specific installations in Iraq, but also set back UN efforts at disarming the regime. In its aftermath, former Secretary of State Henry Kissinger famously said, “I would be amazed if a three-day campaign made a decisive difference, or if we can even precisely define what we meant by WMDs that we were going after [...].” The fog of war that persisted after this bombing allowed the Western military-industrial complex in 2003 to invade Iraq, on the pretext of destroying WMDs.

The NATO attack on Yugoslavia in 1999 - which in the backdrop of a deadlocked Security Council, is being held up as a precedent to justify an assault on Syria - too began with the objective of halting President Slobodan Milosevic’s aggression. In the carpet bombing that followed, NATO’s deplorable targeting of civilian facilities, including hospitals and embassies, to attain its objective has been well documented. As with the NATO’s 2011 intervention in Libya, we can be sure Syria’s broadcasting agencies and media outlets, especially the Syrian Arab News Agency, will be targeted in this attack.

No intervention against the regime can be successful without taking out its powerful propaganda machine. Make no mistake: whatever the Obama administration may have us believe, the military intervention in Syria is not going to be quick, decisive or limited in scope.

Unilateral intervention predicated on the use of WMDs by a regime finds no backing in international law. Whether the West likes it or not, there is no alternative to legitimising the use of force in Syria but through express sanction from the UN Security Council. The Obama administration’s attempts to circumvent the UN Charter in this regard represent one of the greatest threats to the comity of nations since the Second World War. As Ian Hurd, a political scientist at North-western University, notes, the United States has always been careful to justify its aggression under the Article 2(4) of the Charter, which generally prohibits unauthorised intervention. Even the egregious unilateralism of the Bush years saw the United States trying to mount a defence, however indefensible, of the Iraqi invasion under the UN Charter. President Barack Obama instead plans to justify his attack on Syria based on principles contained in the Geneva Conventions and the Chemical Weapons Convention, neither of which is applicable in this context. Syria is not even a signatory to the CWC. In effect, the United States is asking a sovereign state to comply with the provisions of a treaty it has not signed, failing which it will intervene militarily. How’s that for sound legal precedent?

The West has sought to advertise this intervention as its stepping in where the UN failed. If airstrikes do occur as planned, it is unlikely the international community will get to know if Ds were ever used in Syria, either by the Assad regime or by the rebels. The UN, which has dispatched an inspection team to verify such claims, will not have had an opportunity to present its findings at the Security Council. The Wall Street Journal has reported how the Obama administration in fact tried to convince the UN to pull its team out from Damascus. This is now a recurrent pattern: the UN Monitoring team in Iraq, which in 2003 found little evidence to substantiate the Bush administration’s WMD claims, was discredited by the West for standing up to its warmongering. NATO’s bombing of Libya offered no chance for the Security Council to hear on-the-ground reports from the UN Secretary General’s Special Representative. The French intervention in Mali earlier this year came after Paris failed to address the African International Support Mission’s (AFISMA) long-standing request – endorsed by the UNSC – for financial and logistical assistance. The quick and dirty multilateralism that the West wants and achieves through “coalitions of the willing” is no substitute for the UN’s deliberative process. Hans Blix, head of the 2003 UN inspection team in Iraq, rightly suggested in an interview to Huffington Post recently, “political dynamics are running ahead of due process.”

Those who assert the United States and its allies have been reluctant to intervene in this conflict perhaps suffer from selective memory loss. As early as October 2011, and in July 2012, the West put forth draft resolutions in the Security Council that invoked Chapter VII measures under the UN Charter – their passing would have effectively allowed for military intervention in Syria. The dogs of war have thus far only been allowed to bark. It is imperative the international community steps in immediately, before they are unchained.

The Hindu - bitter are the fruits of Arab spring

Over the weekend of August 16-18, 30,0000 Syrians crossed into Iraq over the Peshkhabour Bridge that spans River Tigris. They left the towns of Aleppo, Efrin, Hassake and Qamishly for the Kurdish region, where UNHCR field officers were stunned to see them. “The factors allowing this sudden movement are not fully clear to us,” said spokesperson Adrian Edwards. Thousands continue to make the transit, leaving a Syria paralysed by what U.N. envoy Lakhdar Brahimi calls “a civil war, a sectarian war, and a proxy war,” and entering Iraq, where a string of car bombs over the past month has brought the highest death toll since 2008. A major bomb blast in Beirut’s southern district of Dahieh (which means suburb) rattled Lebanon, where one million Syrians have sought refuge — now one in four of the people who live in this small Levantine country. Sounds of gunfire and bombs have become routine from the Mediterranean coast to the Iranian border, from the souqs of Egypt to the small coastal towns of Libya.

Since the Arab Spring of 2011 opened up in North Africa, all eyes are focused there once more as events seem to turn the clock backwards. In Tunisia, assassinations of left-wing leaders (Chokri Belaid and Mohammed Brahmi) convulsed the country into recriminations. Next-door Libya has been beset with major security challenges, and the new government of Ali Zeidan finds his Interior Ministers and his defence chiefs playing an uneasy game of musical chairs. The most dramatic events are reserved for Egypt, the self-defined centre of the Arab world. The massacres of August 14 portend for many a turn in Egypt toward the kind of slide into darkness that took place in Syria through the second half of 2011. Crackdowns against peaceful protests, there as well, morphed into a major collapse of state hegemony and the development of a serious and unending civil war.

Keeping the lines open

A year ago, the U.N. turned to its veteran Lakhdar Brahimi to start a political process in Syria. Its previous envoy, former U.N. Secretary-General Kofi Annan, had failed, as had every detachment from the Arab League. Already catastrophic numbers of dead and of injured filled the rosters of the U.N. agencies tasked with relief. When Mr. Brahimi began he was sceptical, but nonetheless met with the various opposition groups as well as Syrian President Bashar al-Assad. After a meeting with the latter in December 2012, Mr. Brahimi found himself the brunt of a hostile speech by Mr. Assad the next month. The Syrian state media, Mr. Brahimi said in an interview this month, was “not only critical of my declarations — which would be perfectly acceptable — but insulting, at times in the most vulgar terms.” Mr. Brahimi’s deputy, Mokhtar Lamani, maintains an office in Damascus and keeps an open line to the regime. The myriad and fractious opposition groups are also in touch with Mr. Brahimi, whose calls for an end to the supply of arms to both sides has led to some conflict with the rebel groups. There is no question that the war inside Syria remains asymmetrical, despite some defections from the armed forces to the rebellion, and that the destruction of the cities and the killing of civilians have proceeded apace. “The biggest concern,” Mr. Brahimi says mournfully, “is that one day Syrians and everyone else will wake up to find that Syria has been completely destroyed.”

Unwilling to relent

Does an exit remain for the carnage that has claimed over 100,000 lives? Neither side in the conflict is genuine about a ceasefire and a peace process. Mr. Brahimi called for a four-day ceasefire over the Id al-Adha holiday, which was accepted by all parties. But it did not hold. The Assad regime believes that it has the upper hand on the ground, with the rebels defeated in several strongholds along their logistical supply chain (notably when the regime took back Al Qusayr and Homs). The local geo-politics has also altered to Mr. Assad’s favour. The Gezi Park protests in Turkey as well as the revival of the Kurdish resistance have dampened the Erdogan government’s neo-Ottoman policy. The new emir of Qatar has had to drawdown the ambitions of the small emirate as their ally has fallen in Egypt and as their old rivalry with Saudi Arabia has given the advantage to the latter. The Syrian opposition, on the other hand, is undaunted as Saudi Arabia presses its advantage amongst them with its funds and as the North Atlantic states continue to give verbal support to their ambitions.

Sucked into the vortex

The powers that live far from the region (the U.S. and Russia) play their Cold War type antics in Syria, whose neighbours will have to suffer the consequences of its social haemorrhage. Lebanon, Jordan and Iraq are being sucked into the vortex of the civil war, says Mr. Brahimi. But they are not the only ones who will suffer. “Remember 11 September 2001,” asks Mr. Brahimi chillingly. “That was the direct result of the neglect of the conflict in Afghanistan.” The U.S. and Russia have committed themselves to a process that is called Geneva II, whose meeting has been repeatedly postponed because, as Mr. Brahimi notes, “the conditions for starting that conference with a reasonable chance of success are not there yet.” The reason Mr. Brahimi did not create a peace plan over the course of the year is that he believes Mr. Annan’s plan is sufficient. It is not the lack of a peace plan that stops the process; it is the lack of trust between the parties to agree to any plan. A U.S.-Russia meeting in The Hague next week is unlikely to result in any forward motion.

If the far powers (U.S./Russia) cannot or will not broker such a peace, two other blocs exist for the task. One of them, the Syria Contact Group (Egypt, Iran, Saudi Arabia and Turkey), worked in 2012 with no support from the international community. In fact, the U.S. and the Russians consistently undermined it. With the turmoil in Egypt and Turkey, and with an ascendant Saudi Arabia, it is unlikely that the Contact Group will be revived. Prince Bandar bin Sultan, head of the Saudi Intelligence Directorate, travelled to Moscow to insert the Kingdom into the process but returned with nothing concrete. It is a sign that Riyadh wants to have a seat at the table with Moscow and Washington, rather than be part of a regional platform.

If the regional players have failed, convulsed by the implosion of the Arab Spring, and the far powers are uninterested in a foundation for peace, it is perhaps appropriate for the Non-Aligned Movement (NAM) to send envoys to both the Assad regime and the opposition. India could play a crucial role in such an endeavour.

India's advantage

The Syrian government and the opposition see India as a sober party. India’s votes at the U.N. have depended on the merits of each vote rather than based on partisan support in one direction or another. Prime Minister Manmohan Singh’s statement at the 2012 NAM meeting in Tehran set out a course that appeals to all sides: “India supports popular aspirations for a democratic and pluralistic order. Nevertheless, such transformations cannot be prompted by external intervention, which exacerbate the suffering of ordinary citizens.” Verbal support is no longer enough. India needs to push for a NAM, a BRICS delegation or a Sino-Indian delegation to visit all sides and press for a ceasefire and a new peace process. It is the kind of initiative that Mr. Brahimi needs, anything to revive the dialogue and prevent Syria from slipping into a social coma.

The Economist - US and Europe and PRISM

NOBODY likes to be spied on, especially by their allies, so it is hardly surprising that Europeans are angry about American espionage operations conducted against them, on their territory. These include spying on the European Union embassy in Washington, DC (with a bug in the fax machine), and on the governments of France, Germany and other countries, as well as the collection of large amounts of electronic data—in Germany’s case half a billion phone calls, e-mails and text messages every month. In a country where Gestapo and Stasi crimes still leave dark shadows, and privacy rights have near-religious significance, that causes outrage (see article).

Many Europeans see in the disclosure further evidence of American arrogance and unaccountability—just another episode in a story that includes an illegal war in Iraq, drone strikes, “extraordinary rendition”, waterboarding and secret prisons. Some European politicians want a punitive response. One idea is to suspend agreements on sharing financial and other data between intelligence and law-enforcement agencies. Another is to halt talks on a big new transatlantic trade deal. A third is to offer asylum to Edward Snowden, the source of the leaks about his former employer, America’s National Security Agency. He is now marooned at a Moscow airport.

In this section

• Egypt’s tragedy
• The lives of others
• Of fences and good sense
• Let’s try to catch up with Mali
• Money will find a way

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Related topics

• Politics
• Government and politics
• World politics
• European politics
• German politics

But any of these grandstanding approaches would be a mistake. One reason is hypocrisy. France has formidable foreign-intelligence services that spy on America, for economic and political advantage. Much of the intelligence that America gathers—especially in counter-terrorism—is shared with European countries. And much of the American activity in Europe happens in partnership with local agencies, even in Germany. Some of this co-operation may be of borderline legality in the countries concerned. Its disclosure may be embarrassing for politicians there. But that is hardly America’s fault.

A second reason is self-interest. America’s security umbrella allows European countries to feel safe from, for instance, the possibility of future Russian aggression while spending little on defence. But Europeans cannot take such protection for granted. In many American eyes, Europeans are already wobbly, tiresome free-riders who do not police their Islamist extremists properly, breach sanctions, flirt with dictatorships and leak secrets to the Russians and Chinese. America’s armed forces are already draining away from Europe because of Barack Obama’s “pivot” to Asia and a shortage of cash. The last tanks left in April. A petulant European response to the spy row risks speeding the pull-out.

Europe also has most to gain from a transatlantic trade deal. It desperately needs the extra economic growth an agreement would bring (see article). America wants it too—but it is already enjoying a moderate economic revival of the sort the Europeans would kill for, and is also involved in negotiating a similar, transpacific pact, on which it can focus its efforts if the spying row makes dealing with the Europeans too difficult.

It won’t stop the snooping

Finally, there is the pointlessness of the threat. Even if European governments did cut intelligence links with the Americans, that would not stop the spying. America would continue to conduct operations against all but a handful of truly close allies, such as Canada and Britain. Better to work alongside the Americans, than to treat them as enemies.

None of this changes America’s need to discipline its spies for its own sake. As this newspaper made clear when the Snowden scandal broke, Americans need a much clearer idea of what is being done in their name. But Europe has most to lose from a transatlantic row. So why start one?

TIME - US-Israel-Egypt

As Washington debates whether to cut off America’s $1.5 billion in annual assistance to Egypt, few countries are watching with more interest than Israel. On Monday the Tel Aviv newspaper Haaretz reported that Israeli officials have urged President Barack Obama to keep subsidizing Cairo despite the legal prohibition on U.S. aid to governments installed by military coup. That’s no surprise: “Israel has always been a very strong proponent of the assistance program,” says Frank Wisner, a former U.S. ambassador to Cairo. “It is in Israel’s interest that the U.S. maintain a very strong relationship with Egypt.” But understanding why that is goes to the heart of America’s relationship with Egypt–and why Obama is so reluctant to disrupt it.

Israel is the prime reason why Egypt has for nearly 25 years been the second-largest recipient of U.S. foreign aid. (The top recipient is–you guessed it–Israel.) American largesse began flowing to Cairo in 1979, after Egypt’s then-president, Anwar Sadat, signed the September 1978 Camp David accords establishing peace between Egypt and Israel. That was a remarkable development, considering the two nations had conducted four armed conflicts in the first 25 years of Israel’s existence, and given the deep hostility within Egypt towards the Jewish state.

(MORE: Obama’s Egypt Test: Just What Is ‘Democracy,’ Anyway?)

With his country economically stagnant, however, Sadat saw the accords as a new hope for Egypt. They would reclaim the Sinai desert lost to Israel in 1967; end a constant state of war on its border; move Cairo from Moscow’s orbit into Washington’s; and help to advance the Palestinian cause. But Sadat’s people didn’t see the final product that way: “Peace with Israel had become a betrayal,” writes Steven A. Cook of the Council on Foreign Relations in his 2011 book The Struggle for Egypt. Indeed, signing the American-brokered peace deal would cost Sadat his life when an Islamist army soldier gunned him down as he reviewed a military parade on October 6, 1981.

But the peace deal survived the murder of the man who sealed it. And so did the generous American aid that soon began as a result of the accords (in what Cook, via email, calls “an informal payoff”). That aid has actually grown less generous, however. Since 1998, Congress has cut non-military assistance to Egypt from $815 million to $250 million. Meanwhile the $1.3 billion in military funds that Washington grants Cairo has not increased in 30 years; its inflation-adjusted value has dropped by more than half. That still allows Egypt to purchase state of the art equipment, largely consisting of M-1 Abrams tanks and F-16 fighter jets. But thanks to a lack of trained personnel, not to mention peace on its borders, “most of the time these tanks and aircraft are just gathering dust,” says Tarek Radwan of the Rafik Hariri Center for the Middle East at the Atlantic Council. (On Wednesday Reuters reported that the U.S. will allow the delivery to Egypt of four already-purchased F-16s.)

More important, then, is the symbolic goodwill and very tangible direct relations with the Egyptian army that money purchases. That’s in the interest of Washington officials who want influence within the Arab world’s most populous country. And it’s most welcome in Israel, which, far from fearing Egypt’s armed forces, sees them as a buffer against extremists who might prefer a return to hostilities. “Israel sees the Egyptian military as a pro-peace lobby inside the Egyptian political system,” says David Makovsky, a senior fellow at the Washington Institute for Near East Policy.

(MORE: With Egypt in Crisis, Is Obama Playing It Too Safe?)

The peace deal, and Washington’s influence over Egypt, helps Israel in other ways. Egyptian forces secure Egypt’s border with Israeli in the Sinai, as well as the nearby border with Gaza, likely preventing terrorist attacks on Israel from the area. Makovsky also notes Egypt’s influence with Palestinian leaders. While its ousted president, Mohamed Morsi, tilted towards the radicals of Hamas, Egypt’s military and its political allies are closer to the moderate Palestinian president, Mahmoud Abbas, who was quick to “congratulate the Egyptian leadership in this transitional phase of its history.”

No one thinks a cutoff of American aid would lead to another war between Israel and Egypt. Anti-Semitism is rampant in Egypt, and Israeli diplomats live and work under tight security. But a pragmatic peace endures: Makovsky recalls being in Cairo with then-Israeli Prime Minister Yitzhak Rabin and hearing Sadat’s successor, Hosni Mubarak, declare that war with Israel knocks out a generation of economic development for Egypt. “The U.S. and Israel don’t want wars,” Makovsky says. “Egypt doesn’t want war. Everybody’s happy. There’s no incentive for anybody to change that.” Even Morsi, who once urged Egyptians “to nurse our children and grandchildren on hatred towards those Zionists and Jews, and all those who support them,” didn’t try to end peace with Israel.

Even so, Israel would prefer not to tinker with a formula that has served its interests quite well for a generation–particularly when it has growing threats from Syria and Iran to worry about. Moreover, as Jeffrey Goldberg notes, Pakistan offers a cautionary lesson in what can become of a foreign military’s officer corps when U.S. aid is suddenly withdrawn.

“This is when you need influence with the military,” says Wisner, whom Obama tapped as a special envoy to Mubarak during the 2011 crisis that toppled the former Egyptian leader. “You don’t give it away by cutting your ties.” Israel is clearly hoping that Obama will heed that message.

Read more: http://swampland.time.com/2013/07/11/obamas-egypt-policy-the-israel-factor/#ixzz2Yoydm7xY

Economist - QE by Fed

http://www.economist.com/news/finance-and-economics/21580166-investors-fear-loss-central-bank-support-cut-their-sugar-daddy

THE pattern is wearily familiar. In every year since 2010 global markets have started the year in optimistic mood only to run into trouble in the late spring and early summer. This time there is little doubt about the cause. The Federal Reserve has suggested that, unless the American economy deteriorates, it may start to slow the pace of its asset purchases—currently running at $85 billion a month—later this year. The purchases may stop altogether sometime in 2014.

Ever since the Fed began its latest round of quantitative easing (QE) last year, investors have felt they had a one-way bet. As David Simmonds of Royal Bank of Scotland remarked: “In this period the imperative was to venture forth with liquidity and to find some risk-seeking home for it, some extra yield, some enhanced return. This was a great rotation out of any remaining cash and into anything and everything else.”

In this section

• Start me up
• Cut off by their sugar daddy
• Rolling with the punches
• Administer with care
• A little less tangled
• Disparate times
• Levying the land

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• Quantitative Easing
• Monetary Policy
• Political policy
• Economic policy
• Domestic policy

Investors reacted to the potential loss of this support like trust-fund kids warned that Daddy is about to cut off their allowance. They panicked. What is striking is the breadth of assets that have fallen in price in recent weeks (see chart). Equities have dropped around the globe, with some markets (including China’s) now 20% below their recent peaks. Government bonds have suffered: yields have risen sharply in safe, liquid markets like America and Germany, in troubled euro-zone members such as Italy and Spain, and in developing countries. And there has been a rout in the gold and silver markets, as well as a sell-off in economically sensitive raw materials such as copper.

Why would a reduction in the pace of QE by the Fed be a global problem? Other central banks may compensate, after all. The Bank of Japan has started a programme of rapid monetary expansion. There are hopes that Mark Carney, the new Bank of England governor, will ease policy. Some believe that even the European Central Bank will eventually be forced into QE.

One issue is the dominance of American investors on the global stage. As Jim Reid, a strategist at Deutsche Bank, comments: “The problem we face is that the US tends to set the price of debt everywhere.” With the yield on ten-year Treasury bonds rising by a percentage point since early May, other yields have been forced up in tandem. The effect is a global tightening in monetary policy. A spike in Chinese money-market rates has not helped, especially as investors were already concerned about a slowdown in Chinese growth.

What makes the markets harder to read is that bond yields are rising even though global growth forecasts have been revised lower and inflation is generally falling. This may reflect the determination of investors to stay one step ahead of the authorities. Rationally, if the end of QE is bound to result in a huge rise in yields, it makes sense to sell now rather than later.

But if yields rise far enough to dent the economy, or if stockmarkets collapse and undermine consumer confidence, the Fed may be forced to keep QE going. (That explains why shares rose on June 26th after a downward revision to America’s first-quarter GDP.) “Markets tend to test things,” Richard Fisher of the Dallas Federal Reserve told the Financial Times this week, comparing investors to “feral hogs…If they detect a weakness or a bad scent, they’ll go after it.”

The potential withdrawal of QE support also forces equity investors to focus on the fundamentals, which are not that supportive. According to Citigroup, downgrades of earnings forecasts are outpacing upgrades by a ratio of three to two. Equities look cheap relative to government bonds but not in their own right: the cyclically adjusted price-earnings ratio on the American market is 23.6, well above the historical average.

It is possible to put a positive spin on all this. The Fed’s hints of a “tapering” of QE, and the subsequent rise in bond yields, may simply signal a return to normal. Although growth in developing countries seems to have slowed, there have been better signs in the rich world: a good first quarter in Japan, falling unemployment in America and even glimmers that the worst may be over in Europe.

The more bearish possibility is that the developed economies will struggle to maintain momentum if emerging markets are slowing; that the rich world has still not managed to reduce its high debt levels; and that the sell-off represents a recognition by investors that they are in deep trouble without the crutch of central-bank support. It is a nice irony that the titans of fund management, who consider themselves robust champions of the free-market system, are so dependent on handouts from the monetary authorities.

Guard- US China summit

The Chinese contrition over cyber-attacks that Washington had hoped for failed to materialise, but historic talks between presidents Obama and Xi Jinping lived up to their billing in other regards with agreement on issues ranging from climate change to North Korea.

Meeting in the baking heat of a Palm Springs country estate, the two leaders broke with protocol for two days of informal talks aimed at creating a new spirit of co-operation between the world's two economic superpowers.

The common ground they found, however, was not quite what the White House expected as talks on cyber-espionage were overshadowed byrevelations of Washington's own cyberwarfare strategy.

Both leaders discussed the issue for several hours, according to aides, but the best that the US was able to boast afterwards was that Beijing was no longer unaware of the depth of feeling on the subject.

"It's quite obvious now that the Chinese senior leadership understand clearly the importance of this issue to the United States," said Obama's national security adviser, Tom Donilon.

Washington stressed that it wished only to discuss "cyber-enabled economic theft" – the theft of intellectual by entities based in China of property and other kinds of property in the public and private realm – rather than broader espionage and surveillance activity, but the nuance may have been lost. Xi chastised US media for failing to report equally on attacks made against China.

The two leaders appeared to make progress in other areas, seemingly aware they faced increasingly shared challenges and responsibilities.

Under the climate deal, the US and China – the world's two biggest emitters of greenhouse gases – said they would work with other countries to reduce the fastest growing source of emissions, the hydrofluorocarbons (HFCs) used in air conditioners and refrigerators.

HFCs are an extremely potent class of greenhouse gas – up to 1,000 times more so than carbon dioxide – but they clear out of the atmosphere relatively quickly, in about 10 or 15 years.

That short lifespan means cutting HFCs can deliver almost immediate results, avoiding up to six times as much warming by 2050 as reductions in carbon dioxide.

The White House said on its website that the deal reached on Saturday could potentially reduce the equivalent of some 90 gigatonnes of carbon dioxide by 2050, or about a year's worth of current greenhouse gas emissions.

"Left unabated, HFC emissions growth could grow to nearly 20% of carbon dioxide emissions by 2050, a serious climate mitigation concern," the White House said.

The potential significance of the co-operation between Washington and Beijing on climate issues could be even broader. China has in the past argued that cutting emissions would compromise its economic growth, while the US has typically has countered that it would not act on climate change until China did.

In the case of HFCs, there was already momentum building towards such a deal before Obama and Xi's meeting. More than 100 countries have shown support for using the Montreal protocol, an agreement reached in 1987 to phase out substances that were depleting the ozone layer, to act on reducing HFCs.

Donilon said the Chinese also reaffirmed their anxiety about nuclear proliferation in North Korea and pledged to work together to encourage regional talks.

"I think what you have essentially underway here is a shared threat analysis and a shared analysis as to what the implications and impact would be of North Korea pursuing a nuclear weapons programme," said Donilon.

Detailed quotes were less forthcoming from the Chinese delegation. Xi's senior foreign policy adviser, Yang Jiechi, simply said the two leaders "talked about co-operation and did not shy away from differences".

The bonhomie was also punctured by a last-minute decision from the Chinese delegation not to stay with Obama at the historic Sunnylands estate, favouring a downtown hotel – reputedly to minimise the risk of electronic eavesdropping.