High commodity prices

Medium term crude oil prices, (not adjusted for inflation). The decade of the 2000s saw a commodities boom, in which the prices of primary commodities rose again after the late-twentieth century commodities recession of 1980-2000. But in 2008, the prices of many commodities, notably oil and food, rose so high as to cause genuine economic damage, threatening stagflation and a reversal of globalisation.

In January 2008, oil prices surpassed $100 a barrel for the first time, the first of many price milestones to be passed in the course of the year. By July the price of oil reached as high as $147 a barrel although prices fell soon after.

The food and fuel crises were both discussed at the 34th G8 summit in July. Sulfuric acid (an important chemical commodity used in processes such as steel processing, copper production and bioethanol production) increased in price 6-fold in less than 1 year whilst producers of sodium hydroxide have declared force majeur due to flooding, precipitating similarly steep price increases.

In the second half of 2008, the prices of most commodities fell dramatically on expectations of diminished demand in a world recession.
Trade
In mid-October 2008, the Baltic Dry Index, a measure of shipping volume, fell by 50% in one week, as the credit crunch made it difficult for exporters to obtain letters of credit.

Inflation

In February 2008, Reuters reported that global inflation was at historic levels, and that domestic inflation was at 10-20 year highs for many nations. “Excess money supply around the globe, monetary easing by the Fed to tame financial crisis, growth surge supported by easy monetary policy in Asia, speculation in commodities, agricultural failure, rising cost of imports from China and rising demand of food and commodities in the fast growing emerging markets,” have been named as possible reasons for the inflation.

In mid-2008, IMF data indicated that inflation was highest in the oil-exporting countries, largely due to the unsterilized growth of foreign exchange reserves, the term “unsterilized” referring to a lack of monetary policy operations that could offset such a foreign exchange intervention in order to maintain a country´s monetary policy target. However, inflation was also growing in countries classified by the IMF as “non-oil-exporting LDCs” (Least Developed Countries) and “Developing Asia”, on account of the rise in oil and food prices.

Inflation was also increasing in the developed countries, but remained low compared to the developing world.

Unemployment

The International Labour Organization predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis - mostly in “construction, real estate, financial services, and the auto sector” - bringing world unemployment above 200 million for the first time.

Return of volatility

For a time, major economies of the 21st century were believed to have begun a period of decreased volatility, which was sometimes dubbed The Great Moderation, because many economic variables appeared to have achieved relative stability. The return of commodity, stock market, and currency value volatility are regarded as indications that the concepts behind the Great Moderation were guided by false beliefs.

Economic governance

In the final quarter of 2008, the financial crisis saw the G-20 group of major economies assume a new significance as a locus of economic and financial crisis management.

Number of U.S. household properties subject to foreclosure actions by quarter
The United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value. In February, 63,000 jobs were lost, a 5-year record. In September, 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September of 2008.

Possible recession

In the early months of 2008, many observers believed that a U.S. recession had begun. As a direct result of the collapse of Bear Stearns, Global Insight increased the probability of a worse-than-expected recession to 40% (from 25% before the collapse). In addition, financial market turbulence signaled that the crisis will not be mild and brief.

Alan Greenspan, ex-Chairman of the Federal Reserve, stated in March 2008 that the 2008 financial crisis in the United States is likely to be judged as the harshest since the end of World War II.  A chief economist at Standard & Poor’s, said in March 2008 he has a worst-case-scenario in which the country could endure a double-dip recession in which the economy would briefly recover in the summer 2008. Under this scenario, the economy’s total output, as measured by the gross domestic product, would drop by 2.2 percentage points, making it the third worst recession in the post World War II period.

The former head of the National Bureau of Economic Research said in March 2008 he believed the country was then in a recession, and it could be a severe one. A number of private economists generally predicted a mild recession ending in the summer of 2008 when the economic stimulus checks going to 130 million households started being spent. A chief economist at Moody’s predicted in March 2008 that policymakers would act in a concerted and aggressive way to stabilize the financial markets, and that then the economy would suffer but not enter a prolonged and severe recession.[citation needed] It takes many months before the National Bureau of Economic Research, the unofficial arbiter of when recessions begin and end, makes its own ruling.
According to numbers published by Bureau of Economic Analysis in May 2008, the GDP growth of the previous two quarters was positive. As one common definition of a recession is negative economic growth for at least two consecutive fiscal quarters, some analysts suggest this indicates that the U.S. economy was not in a recession at the time. However this estimate has been disputed by some analysts who argue that if inflation is taken into account, the GDP growth was negative for the past two quarters, making it a technical recession. In a May 9, 2008, report, the chief North American economist for investment bank Merrill Lynch wrote that despite the GDP growth reported for the first quarter of 2008, “it is still reasonable to believe that the recession started some time between September and January”, on the grounds that the National Bureau of Economic Research’s four recession indicators all peaked during that period.

New York’s budget director concluded the state of New York was officially in a recession. Governor David Paterson called an emergency economic session of the state legislature for August 19 to push a budget cut of $600 million on top of a hiring freeze and a 7 percent reduction in spending at state agencies already implemented by the Governor.  An August 1 report, issued by economists with Wachovia, said Florida was officially in a recession.

White House budget director Jim Nussle said the U.S. avoided a recession following revised GDP numbers from the Commerce Department showing a 0.2 percent contraction in the fourth quarter of 2007 down from a 0.6 percent increase and a downward revision to 0.9 percent from 1 percent in the first quarter of 2008. The GDP for the second quarter was placed at 1.9 percent below an expected 2 percent. Martin Feldstein, who headed the National Bureau of Economic Research until June and serves on the group’s recession-dating panel, said he believed the U.S. was in a very long recession and that there was nothing the Federal Reserve could do to change it.

In a CNBC interview at the end of July 2008 Alan Greenspan said he believed the U.S. was not yet in a recession, but that it could enter one due to a global economic slowdown.

A study released by Moody’s found two-thirds of the 381 largest metropolitan areas in the United States were in a recession. The study also said 28 states were in recession with 16 at risk. The findings were based on unemployment figures and industrial production data.

In March 2008, Warren Buffett stated in a CNBC interview that by a “common sense definition”, the U.S. economy is already in a recession. Warren Buffett has also stated that the definition of recession is flawed and that it should be 3 quarters of GDP growth that is less than population growth. However, the U.S. only experienced two consecutive quarters of GDP growth less than population growth.

Rise in unemployment

On September 5, 2008, the United States Department of Labor issued a report that its unemployment rate rose to 6.1%, the highest in five years. The news report cited the Department of Labor reports and interviewed Jared Bernstein, an economist:

The unemployment rate jumped to 6.1 percent in August, its highest level in five years, as the erosion of the job market accelerated over the summer. Employers cut 84,000 jobs last month, more than economists had expected, and the Labor Department said that more jobs were lost in June and July than previously thought. So far, 605,000 jobs have disappeared since January. The unemployment rate, which rose from 5.7 percent in July, is now at its highest level since September 2003. Jared Bernstein, economist at the Economics Policy Institute in Washington, said eight months of consecutive job losses had historically signaled that the economy was in a recession. “If anyone is still scratching their head over that one, they can stop,” Mr. Bernstein said. Stocks fell after the release of the report, with the Dow Jones industrials down about 100 points after about 40 minutes of trading.
—New York Times

CNN also reported the news, quoted another economist, and placed the news in context:

“Job losses are still mild by recession standards, but the losses are relentless and they are accumulating,” said Bob Brusca of FAO Economics. “If job growth had paced with population growth during this year, it would have meant 1.3 million new jobs would have been created. Instead 605,000 were lost. That means about 2 million fewer people are working than if the economy were on a steady path. And that’s a big number.” But while economists generally study the payroll numbers most closely, it’s the unemployment rate that registers with most Americans when they think about the labor market.

Liquidity crisis

In early July, depositors at the Los Angeles offices of IndyMac Bank frantically lined up in the street to withdraw their money. On July 11, IndyMac - the largest mortgage lender in the US - was seized by federal regulators. The mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. That day the financial markets plunged as investors tried to gauge whether the government would attempt to save mortgage lenders Fannie Mae and Freddie Mac. The two were placed into conservatorship on September 7, 2008.

During the weekend of September 13–14, Lehman Brothers declared bankruptcy after failing to find a buyer, Bank of America agreed to purchase Merrill Lynch, the insurance company AIG sought a bridge loan from the Federal Reserve, and a consortium of 10 banks created an emergency fund of at least $70 billion to deal with the effects of Lehman’s closure, similar to the consortium put forth by J.P. Morgan during the stock market panic of 1907 and the crash of 1929. Stocks on “Wall Street” tumbled on September 15.

On September 16, news emerged that the Federal Reserve may give AIG an $85 billion (£48 billion) rescue package; on September 17, 2008, this was confirmed. The terms of the rescue package were that the Federal Reserve would receive an 80% public stake in the firm. The biggest bank failure in history occurred on September 25 when JP Morgan Chase agreed to purchase the banking assets of Washington Mutual.

The year 2008 as of September 17 has seen 81 public corporations file for bankruptcy in the United States, already higher than the 78 in 2007. Lehman Brothers being the largest bankruptcy in U.S. history also makes 2008 a record year in terms of assets with Lehman’s $691 billion in assets all past annual totals. The year also saw the ninth biggest bankruptcy with the failure of IndyMac Bank.

The Wall Street Journal states that venture capital funding has slowed down which in the past led to unemployment and slowed new job creation.

Financial markets
January 2008 was an especially volatile month in world stock markets, with a surge in implied volatility measurements of the US-based S&P 500 index, and a sharp decrease in non-U.S. stock market prices on Monday, January 21, 2008 (continuing to a lesser extent in some markets on January 22). Some headline writers and a general news columnist called January 21 “Black Monday” and referred to a “global shares crash,” though the effects were quite different in different markets.
American stock markets were closed on Monday, January 21 for Martin Luther King, Jr. Day. Seemingly in response to the fall in non-U.S. markets, the U.S. Federal Reserve announced a surprise rate cut of 0.75% on Tuesday at 8 a.m. This rate cut is believed to have been influential in preventing large declines in the American stock markets, with the Dow Jones Industrial Average down only 1.1% for the day, never closing that week worse than a 1.6% decrease from the previous Friday, and indeed closed up for the week. Later it was announced that Société Générale, one of the largest banks in Europe, accused its employee Jérôme Kerviel of fraudulent trades costing it €4.9 billion, and causing it to sell approximately €50 billion in European equity derivatives from January 21–23.

The effects of these events were also felt on the Shanghai Composite Index in China which lost 5.14 percent, most of this on financial stocks such as Ping An Insurance and China Life which lost 10 and 8.76 percent respectively. Investors worried about the effect of a recession in the US economy would have on the Chinese economy. Citigroup estimates due to the number of exports from China to America a one percent drop in US economic growth would lead to a 1.3 percent drop in China’s growth rate.

Market downturn Fall 2008

As of October 2008, stocks in North America, Europe, and the Asia-Pacific region had all fallen by about 30% since the beginning of the year.  The Dow Jones Industrial Average had fallen about 37% since January 2008.

There were several large Monday declines in stock markets world wide during 2008, including one in January, one in August, one in September, and another in early October.

The simultaneous multiple crises affecting the US financial system in mid-September 2008 caused large falls in markets both in the US and elsewhere. Numerous indicators of risk and of investor fear (the TED spread, Treasury yields, the dollar value of gold) set records.

Russian markets, already falling due to declining oil prices and political tensions with the West, fell over 10% in one day, leading to a suspension of trading, while other emerging markets also exhibited losses.

On September 18, UK regulators announced a temporary ban on short-selling of financial stocks. On September 19 the United States’ SEC followed by placing a temporary ban of short-selling stocks of 799 specific financial institutions. In addition, the SEC made it easier for institutions to buy back shares of their institutions.

On September 22, the Australian Securities Exchange (ASX) delayed opening by an hour [161] after a decision was made by the Australian Securities and Investments Commission (ASIC) to ban all short selling on the ASX.  This was revised slightly a few days later.

Causes of the crises

On October 15, 2008, Anthony Faiola, Ellen Nakashima, and Jill Drew wrote a lengthy article in the Washington Post titled, “What Went Wrong”. In their investigation, the authors claim that former Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and SEC Chairman Arthur Levitt vehemently opposed any regulation of financial instruments known as derivatives. They further claim that Greenspan actively sought to undermine the office of the Commodity Futures Trading Commission, specifically under the leadership of Brooksley E. Born, when the Commission sought to initiate regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security, that triggered the economic crises of 2008.

On October 17, 2008, attorney Timothy D. Naegele wrote an article in the American Banker entitled, “Greenspan’s Fingerprints All Over Enduring Mess,” which argues that Alan Greenspan’s actions and inactions triggered the economic crises of 2008. The article discusses ‘the economic tsunami that has been rolling worldwide with devastating effects’; and the author asserts that ‘Greenspan is the architect of the enormous economic “bubble” that burst globally’. The author cites Giulio Tremonti, Italy’s Minister of Economy and Finance, who said: “Greenspan was considered a master. Now we must ask ourselves whether he is not, after [Osama] bin Laden, the man who hurt America the most.”

While Greenspan’s role as Chairman of the Federal Reserve has been widely discussed (the main point of controversy remains the lowering of Federal funds rate at only 1% for more than a year which, according to the Austrian School of economics, allowed huge amounts of “easy” credit-based money to be injected into the financial system and thus create an unsustainable economic boom), there is also the argument that Greenspan actions in the years 2002-2004 were actually motivated by the need to take the U.S. economy out of the early 2000s recession caused by the bursting of dot-com bubble - although by doing so he did not help avert the crisis, but only postpone it.

Many libertarians, including Congressman and former 2008 Presidential candidate Ron Paul and Peter Schiff in his book Crash Proof, predicted the crisis prior to its occurrence. They are critical of theories that the free market caused the crisis and instead argue that the Federal Reserve’s printing of money out of thin air and the Community Reinvestment Act are the primary causes of the crisis. However Alan Greenspan himself has conceded he was partially wrong to oppose regulation of the markets, and expressed “shocked disbelief” as the failure of the self interest of the markets, which according to neo-liberal economic theory should have protected shareholder equity.
It has also been argued that the root cause of the crisis is overproduction of goods caused by globalization. Professor Herman Daly suggests that it is not actually an economic crisis, but a crisis of overgrowth beyond sustainable ecological limits.

List of Countries which experienced recession in 2008

Many countries experienced a recession in 2008.

Denmark and Iceland went into recession in the first quarter of 2008, but came out again in the second quarter.

The following countries went into recession in the second quarter of 2008: Estonia, Latvia, Ireland and New Zealand.

The following countries went into recession in the third quarter of 2008: Japan, Hong Kong, Singapore, Italy  and Germany.

As a whole the fifteen nations in the European Union that use the euro went into recession in the third quarter.

Official forecasts

On November 3, 2008, according to all newspapers, the EU-commission in Brussels predicted for 2009 only an extremely low increase by 0.1% of the BIP, for the countries of the Euro-zone (France, Germany, Italy, etc.). They also predicted negative numbers for the UK (-1.0% !), Ireland, Spain, and other countries of the EU. Three days later, the IMF at Washington, D.C., predicted for 2009 a worldwide decrease, -0.3%, of the same number, on average over the developed economies (-0.7% for the US, and -0.8% for Germany). Economically, the car industry is especially concerned; as a consequence, several countries have already launched immediate help-packages, each involving several billions of dollars, euros or pounds.



Corruption and bribery are not victimless crimes. They hit the poorest people hardest and undermines economic development.

No country is immune from corruption.  It flourishes where the criminal justice system and governance are weak, where decision-making is unaccountable and access to decision-makers is dependent on restricted social networks, where pay is low and where management controls are weak.

Poor people are the worst affected by corruption

The World Bank notes that the poor suffer the most from the petty corruption for the provision of public services: “Empirical analysis has shown that the poor pay a higher share of their income on bribes than the rich” An IMF study shows that an increase of just 0.78 per cent in corruption reduces the income growth of the poorest 20 per cent of the people in a country by 7.8 per cent a year. The Final Communiqué from the 2006 G8 St. Petersburg Summit is clear: “The net effect of corruption is felt most directly, and disproportionately, by the poor.”

Corruption compromises the effectiveness of aid

An estimated $100 billion of World Bank loans have been lost to corruption since the Bank’s foundation in December 1945; when other multilateral development banks are included, the figure rises to $200 billion. Such ‘leakage’ leads to aid ‘disappearing’ before it reaches the poor.
Corruption diverts expenditure away from health, education and the maintenance of infrastructure to high ‘kickback’ areas such as new construction and defence
The World Bank points out that “while this corruption hurts society in general, it hurts the poor most since they are more vulnerable and dependent on the quality of governance and state support.”

Corruption creates incentives for investment in capital-intensive projects at the expense of labour-intensive industries, which traditionally employ poorer people.

Corruption reduces a government’s tax revenue by as much as half, thereby reducing income available for reducing poverty

Corruption increases the cost of projects

In the construction industry, project costs typically increase by more than 25 per cent as a result of corruption. Similar mark-ups have been reported in the defence and finance sectors. The Asian Development Bank (ADB) states that “corruption can add between 20 per cent and 100 per cent to the procurement of government goods and services”. Overall corruption-related losses can total “more than a country’s foreign debt”.

“Corruption is a key element in economic under performance and a major obstacle to poverty alleviation and development”
 - UN Convention against Corruption

Overpriced and poorly planned projects increase unsustainable nation debt. When countries cannot keep up with the debt repayments, cuts in public services fall disproportionately on poorer people.

The arms trade is the most corrupt business in the world. Every year, some $40 billion worth -- give or take a few billion dollars – of tanks, artillery, bombs, grenades, rocket launchers, attack helicopters, fighters and other lethal weapons are traded around the world. Of that total, an estimated $3 billion is thought to consist of bribes, generally paid through ‘agents’ in the form of ‘commissions’. Without these bribes, many arms deals would simply not happen.

Corruption deprives countries of finance for development

The impacts of corruption on investment and economic growth are complex. Multilateral Development Banks estimate that some $400 billion has been looted from African states and stashed in foreign bank accounts, around $140 billion from Nigeria alone. The African Unions estimates the $148 billion a year leaves the continent because of corruption, and 80-90 per cent of the illicit overflows never return to the continent. Between $20-40 billion of corrupt money is estimated to flow from transition and developing countries into Western banks annually.

Improved governance benefits poorer people

“countries that improve on control of corruption and rule of law can expect (on average), in the long run, a four-fold increase in incomes per capita. Thus, a country with an income per capita of US $ 2,000 could expect to attain US $ 8,000 in the long run by making strides to control corruption. Similarly, such a country could expect, on average, a 75% reduction in child mortality”. - World Bank


By Charles Wilson, USA

I have seen many people around who most of the times hesitate to make a public speech. Many of the times it happens because those people really have fear in their minds for public speaking. I have personally experienced the feeling of inferiority or fear of not having much knowledge about the topic of speech.

These are the major reasons for having public speaking fear. And after a lot of hard work and continuous practice I managed to overcome my public speaking fear. Here are my 5 super tips for you people who want to get rid of their public speaking fear.

1) Don’t get scared to make mistakes: Yes when it comes to public speaking you are bound to make some minor or major mistakes. But it is the part and parcel of public speech. Don’t be afraid of doing mistakes during your public speech. Only thing is that you should learn from your mistakes and try not to make those next time when you are presenting. Even if you make a mistake during your speech then don’t get panic and try to remain calm and cool which will definitely help you to present yourself in a better way.

2) Be creative and select your topic which you are most passionate about: When you are going to present yourself in public speaking, it is the primary thing that the topic of the speech should be the one which you know very well and you have a real passion about that topic. Because when you are going to speak about that topic then your heart and mind will produce the most effective and most creative presentation you have ever presented. This is very important as you already are very confident and well knowledgeable about the subject and your audience will also take keen interest in your presentation.

3) Build a strong, positive attitude in yourself: When it comes to any kind of public speech it is mandatory that you should have the requisite confidence in yourself and you should have as strong belief in your abilities. This will only come when you will look at yourself as a most knowledgeable and highly positive person in your life. So it is the most important factor in making your public speech successful and without any fear.

4) Practice in front of your mirror: This is the most successful idea behind making your public speech successful. This activity will really boost your confidence because you have already rehearsed what you want to speak in front of your audience. And this is the most successful technique which many well known speakers were using it. This is the most important confidence building method I have ever seen in my life. Believe me after 4-5 practice sessions in front of your home mirror; it will tremendously increase your confidence and belief in yourself.

5) Use props creatively during your presentation: This is truly confidence boosting method. You get enough time to calm your nerves and build confidence in yourself as you effectively use props during presentation. Using PowerPoint slides and other props gives your audience visual aid to make them comfortable with the topic and that can also increase the interest of your audience in the topic and most importantly it gives you enough time to prepare yourself with the next points to be delivered which also reduces the fear and nervousness in your mind.

By applying these simple tips you can easily overcome your public speaking fear and can confidently present yourself in front of your audience.



SWOT Analysis- To Make Your Business More Profitable

By Crack Marketing, USA



SWOT Analysis is a well-known method for describing a business or business propositions in terms of those factors that can have the maximum impact. The business owner does this analysis in order to improve the current position of the business. The Strengths and Weaknesses of the business are considered to be the internal aspects of a business, such as the quality of the product or the managerial skills. Whereas the Opportunities and Threats are the external factors, like the development of a completely new market or the arrival of new competitors.

The strengths and weaknesses of a business can be found in the following:

. Management sector: The over dependence of an employee on a manager or an owner is one of the major weaknesses in a business that often leads to the requirement of more managers. This area needs to be worked upon in order to reduce the expense of the organization and to improve the business.

. The work force: The difficulty in finding skilled staff as well as the employee turnover has to be handled efficiently to help a business grow successfully.

. Sales: The strength of sales, how dependent your sales are on external factors, and cyclical sales are some of the factors that affect the business.

. Financial: The factors affecting the financial condition of your business determine its strengths and weaknesses. The major aspects related to finance are the flow of cash, time to collect on invoices, and the ease of obtaining loans.

. Operations: Strengths and weaknesses are also determined by the internal efficiency as well as the speed of manufacture and delivery of goods.

Opportunities and threats are found in the following categories:

. Threats posed by the new rivals in the market: A new entrant in the market, selling a similar product or service, is considered to be one of the greatest threats, as you might not have a patent that could put a brake on new competitors.

. Bargaining power of suppliers: Suppliers can pose a major threat for the business as they might force you to take large deliveries. Many times they are also difficult to find, or the supply may not be available.

. Customer influence: There are some businesses that rely on a handful of customers, which include a lot of late payers. In addition, many customers bargain for lower prices. (Cont Page - 22)                     (See Page 17) In such cases, the business tends to either face the threat of loss of customers or of being unprofitable.

. Substitution: People often get bored using a particular brand of product and tend to opt for a change. The market usually has a number of similar products of similar quality. So the major threat is that people might try a product other than yours, and eventually end up substituting your product with it.

You can use two methods to grade these strengths, weaknesses, opportunities or threats, namely, pictorial and numerical.

If you opt for the pictorial way, you need to first create four sectors on a writing pad, putting the titles Strengths, Weaknesses, Opportunities and Threats in each sector, and a large question mark in the center. Now place each of the SWOTs in each sector, with the most problematic factors being farthest away from the question mark, and the better factors closer to it. The closer the display is bunched towards the center of the grid, the better the shape of your business.

However, if you pick the numerical method of assessment, you need to rate each item from 1 to 5 according to how important each is to your business. In this rating, 5 is considered to be the most important. Besides, each factor should also be rated from A to E according to its impact on the business, where E would indicate the highest impact. Then, check how many Es and 5s you end up with. If there are bad factors then you need to change or work on them. And, if there are strengths and opportunities, then it is important to build upon those factors. This would help to boost your business.



IBM, Academics Seek to Create a Computer That’s More Like Us

By Erika Morphy


Computers can calculate at speeds and scales that far outstrip what an ordinary person can manage, but they still aren’t anywhere near as complex as a human brain. IBM and five major universities plan to change that through a DARPA-funded initiative designed to build a computer that can mimic the way the mind works.
 
IBM (NYSE: IBM)  and five universities are receiving funding from a government agency to build a supercomputer  -- but not just any supercomputer. They’ve been tasked with building hardware and software that mimics the human brain.

“There are no computers today that can even remotely approach the robust and versatile functionality of the brain,” said Dharmendra Modha, manager of cognitive computing at IBM Research.

“The mind is a collection of mental processes dealing with sensation, perception, action, cognition, emotion and interaction,” he told TechNewsWorld. “It can integrate senses such as sight, hearing, touch, taste and smell. And it can act in a context-dependent way in real-world complex environments in the presence of ambiguity, while requiring very low power consumption and being very compact.”

Cognitive computing, explained Modha, is the quest to engineer mind-like intelligent business machines by reverse engineering the computational function of the brain and packaging it in a small, low-power chip.

DARPA Funding: IBM and top researchers from Stanford University, University of Wisconsin-Madison, Cornell University, Columbia University Medical Center and University of California-Merced have received US$4.9 million in funding from the Defense Advanced Research Projects Agency for the first phase of DARPA’s  Systems of Neuromorphic Adaptive Plastic Scalable Electronics, or SyNAPSE, initiative.

The research will build on the IBM cognitive computing team’s recent work with the BlueGene supercomputer: the near-real-time simulation of a brain the size of a small mammal, using cognitive computing algorithms to develop mathematical hypotheses of brain function and structure.

Besides Modha, other members of the team include Stanford University’s Kwabena Boahen, H. Phillip Wong and Brian Wandell; University of Wisconsin-Madison’s Gulio Tononi; Rajit Manohar of Cornell; Columbia’s Stefano Fusi; and Christopher Kello of the University of California-Merced. IBM researchers include Stuart Parkin, Chung Lam, Bulent Kurdi, J. Campbell Scott, Paul Maglio, Simone Raoux, Rajagopal Ananthanarayanan, Raghav Singh, and Bipin Rajendran.

Artificial Intelligence vs. Cognitive Computing: The goal of cognitive computing is to engineer holistic intelligent machines that can connect huge amounts of sensory data.

“The underlying issue driving this is that as computers become used for increasingly complex and large problems, you run into some serious challenges with how to approach those problems in traditional linear computational fashion,” Charles King, principal with Pund-IT  , told TechNewsWorld.

“Artificial intelligence starts with a problem -- not a question -- and then seeks to develop an algorithm to solve that problem. Cognitive computing approaches it backwards; the idea is to create a mechanism that is capable of acting like a brain for assembling pieces of complex puzzles and then speed decision making.”

Real world applications might include a computer that can assemble and digest the massive volumes of information from the global financial system -- and then make decisions based on that input, King said. “It is virtually impossible for a human to make that kind of calculation.”

Another possibility might be an application that can identify areas of the world that will be affected by climate change to a much higher degree of accuracy, suggested King. Sensors can now be deployed by the millions to measure changes in ocean levels -- but there is no way to effectively monitor and then analyze all of that data.

On the consumer level, Modha said, it is conceivable that a small device -- an “iBrain,” let’s call it -- could be developed to alert the user when something untoward happens, based on the sensory information it receives. For instance, a portable device could monitor an unoccupied home and alert the homeowner when a system or situation requires attention.

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