IMF: Risks to global stability rise

Falling market confidence has led to money fleeing peripheral eurozone nations such as Spain and mounting pressure on banks, raising the risks of a credit crunch and recession, the International Monetary Fund said in a report released Wednesday at meetings in Tokyo.

While moves in September by the European Central Bank to buy government bonds have helped stabilize markets, governments need more action to return market confidence, according to the IMF's Global Financial Stability Report. "If they do not, the result will be an acceleration in deleveraging, which raises the risk of a credit crunch as banks make fewer loans, and an ensuing economic recession," the IMF said.

The report comes after the chief economist for the IMF told CNN Tuesday that there are two great threats to the global economy: the "fiscal cliff" in the United States and the eurozone debt crisis.

"I think a (global) recession is not very likely except for two possible tail risks: The first one is a possible fiscal cliff in the U.S. If for some reason we actually jump all the way down the cliff, this would be an enormous fiscal contraction," said Olivier Blanchard, IMF economist. "It would be a U.S. recession, and God knows what would happen to the world."

The U.S. fiscal cliff refers to $7 trillion worth of tax increases and spending cuts that start taking effect in January.

"The other which has a slightly higher probability is if the Europeans don't quite get their act together," Blanchard said. "They have promised a number of things, they have started putting in place a number of things, but whether they implement it is not absolutely sure."

Markets were buoyed last month after European Central Bank president Mario Draghi outlined the details of a plan to buy euro area government bonds, reiterating his pledge to do "whatever it takes" to preserve the euro.

The move was aimed mainly at Spain and Italy, which struggled with unsustainable borrowing costs earlier this year. So far, neither Madrid nor Rome has officially requested support from the bailout funds.

Greece, Portugal and Ireland -- much smaller eurozone economies -- have received aid to help offset crippling borrowing costs due to ballooning sovereign debt in the wake of the 2008-2009 financial crisis.

The IMF on Monday revised its global growth prediction to 3.3% this year, down from 0.2% in July, saying the global recovery "has suffered new setbacks, and uncertainty weigh heavily on the outlook." The IMF also revised its predicted growth to 3.6% in 2012, down from its previous forecast of 3.9%.

By Kevin Voigt, CNN, October 10, 2012

The little cube that changed the world

There's one solution out of 43 quintillion possible combinations, and even the man who invented it spent a month of solid research trying to figure it out. But that hasn't stopped the Rubik's Cube from becoming the most popular toy in history.

The colorful puzzle, consisting of small blocks rotating on a central axis, has sold an estimated 350 million units since its conception nearly 40 years ago. And yet the man whose name it bears -- Erno Rubik -- only ever intended it to be a teaching aid for his small class of design students.

The son of a poet mother and a father who manufactured glider planes, Rubik grew up in Soviet-era Hungary, studying both sculpture and architecture.

His life-changing idea arrived when he was in his late 20s, a young professor still living at home with his parents.

Starting off with just chunks of wood and rubber bands, Rubik set about trying to create a structure that would permit individual blocks to move independently of one another without the whole thing falling apart.

It took six years to go from prototype to market, but when it finally hit the shelves at the start of the 1980s, it became the fastest selling puzzle of all time.

It stills retains its appeal to this day. Last year alone it sold seven million units and so-called "speed cubing" competitions -- where contestants attempt to solve the puzzle against the clock -- are as popular as ever.

In a rare interview, the publicity-shy Rubik retraces the journey of his iconic toy.

CNN: What do you think it is about the cube that continues to capture the public imagination?

Erno Rubik: I believe probably the most characteristic part of the cube is the contradiction between simplicity and complexity. I love the simplicity of the cube because it's a very clear geometrical shape and I love geometry because it's the study of how the whole universe is structured.

I think probably that's part of the key to the success of the cube -- you are able to have a connection with this order and chaos.

CNN: You had the idea in 1974 and at the time you were a lecturer in interior design, what set you off on this invention?

ER: I was searching to find a good task for my students.

When you are studying from a book, lots of people go straight to the end to look for the answers. But that's not my style. For me, the most enjoyable part is the puzzle, the process of solving, not the solution itself.

Also, we were playing with geometry, which is not a static subject. It's a very mobile thing, it's changeable.

So, I was looking for a mobile structure and I found the geometry of a cube very exciting because of the high level of symmetries it has and the fact that you can do a lot of things with it.

CNN: What was the puzzle you were trying to pose?

ER: Usually structures are pieces that are connected in some way or another and usually these connections are stable things. So all the time "A" is connected to "B". But with the structure of the Rubik's Cube, you realize these elements are moving very freely, but you don't understand what keeps the whole thing together, so that was a very interesting part of it.

CNN: How did you go about building the prototype?

ER: Nowadays you've got three-dimensional printing and CAD [computer-aided design] programs on computers, but I was working at a very different time.

There was a workshop in the school, and I just used wood as a material because it is very simple to use and you don't need any sophisticated machines.

So I made it just by using my hands -- cutting the wood, drilling holes, using elastic bands and those kind of very simple things.

CNN: How does the internal mechanism actually work?

ER: Usually people are surprised by how simple it is, but it is also very difficult to explain. So the best way to discover it is to take it apart!

CNN: How long did it take you to solve the cube once you'd created the prototype?

ER: It took more than a month of research, facing the problem, trying to understand it, building up theories, testing them, thinking to myself things like: "I have one side and one turn is 90 degrees and if you turn it four times I'll be back where I was," and so on. You have to find rules and then you find the law of symmetry, the law of movements.

CNN: Do you remember the moment when you solved it?

ER: I remember it was very emotional, but I don't remember what time it was exactly. I don't make notes on that and I have no diary about it, but I remember it was a very emotional feeling.

But then it's not something like a jigsaw puzzle where you start to work on it, spend some time on it and in the end it's solved, it's finished. If you find a solution with the cube, it doesn't mean you find everything, it's only a starting point. You can work on and find something else, you can improve your solution, you can make it shorter, you can go deeper and deeper and collect knowledge and many other things.

CNN: What did you do next?

ER: I showed it to the people in the school and my students liked it very much.

And I had the feeling that because it has very simple structure, it can be manufactured easily and it can be a product that is available for others. And so I applied for a patent because I had some experience of my father's work and he has got several patents.

After that I was searching to find a manufacturer here in Hungary. But the country was a very different place from how it is today. We were behind the Iron Curtain, we had different social circumstances -- so it was not an easy task.

But I found a small company who was working with plastic - their main line was manufacturing chess sets -- and we started to negotiate.

CNN: Did you make any mistakes with the patent application, would you do it differently given what you know now?

ER: You know, there is a Hungarian saying that it's easy to be clever after the event.

One problem was the speed of the process because from the beginning to the real marketing [point] was six years. Six years is too long because there is a rule on how you can patent: when you start the process, you need to make the next step within a year, because otherwise you lose the patent.

But, in the end we partly solved the problem because we used my name as a trademark and this too is a good tool for protection. I was lucky because in the New York phone book there is less than five people who have the same name!

CNN: What would you advise an inventor now to do to protect themselves?

ER: That's a very difficult question. There are many more protection possibilities than in that time. One thing is, you need to find partners, you can't do it alone. You need professionals; you need advisors and you need partners who are capable of helping you both on the legal part and also the financial part as well.

And naturally it is very important to realise you product. You can protect your patent but if you don't develop the product it's meaningless.

CNN: In a couple of years, it'll be 40 years old, how do you feel about it? Are you still discovering things about it?

ER: Yeah, nowadays my discoveries come from watching the impact of the cube. I'm wondering how people are so creative and how many things were born out of and inspired by the cube. That's a very interesting thing.

CNN: The final question: Are you a good Rubik's Cube player?

ER: I am really not a speedcuber. My best time when I was practicing was about a minute.

Usually people say if you can create a piano, you must be a good piano player, but it is not true. They are different type of human activities and need different capabilities.

By George Webster, CNN, October 10, 2012 

Cash-strapped farmers feed candy to cows

Cattle farmers struggling with record corn prices are feeding their cows candy instead.

That's right, candy. Cows are being fed chocolate bars, gummy worms, ice cream sprinkles, marshmallows, bits of hard candy and even powdered hot chocolate mix, according to cattle farmers, bovine nutritionists and commodities dealers.

"It has been a practice going on for decades and is a very good way to for producers to reduce feed cost, and to provide less expensive food for consumers," said Ki Fanning, a livestock nutritionist with Great Plains Livestock Consulting, Inc. in Eagle, Neb.

Feeding candy to cows has become a more popular practice in tandem with the rising price of corn, which has doubled since 2009, fueled by government-subsidized demand for ethanol and this year's drought. Thrifty and resourceful farmers are tapping into the obscure market for cast-off food ingredients. Cut-rate byproducts of dubious value for human consumption seem to make fine fodder for cows. While corn goes for about $315 a ton, ice-cream sprinkles can be had for as little as $160 a ton.

"As the price of corn has climbed, farmers either sold off their pigs and cattle, or they found alternative feeds," said Mike Yoder, a dairy farmer in Middlebury, Ind. He feeds his 400 cows bits of candy, hot chocolate mix, crumbled cookies, breakfast cereal, trail mix, dried cranberries, orange peelings and ice cream sprinkles, which are blended into more traditional forms of feed, like hay.

The farmer said that he goes over the feed menu every couple of weeks with a livestock nutritionist who advised him to cap the candy at 3% of a cow's diet. He said that the sugar in ice cream sprinkles seems to increase milk production by three pounds per cow per day.

Sugar also helps to fatten up beef cattle, according to livestock nutritionist Chuck Hurst, owner of Nutritech, Inc., in Carmen, Idaho, without any ill effects to the cow, or to the person consuming its meat or milk. He said that it's the sugar in the candy that's important, and that it provides "the same kind of energy as corn."

He added that farmers feed their cows a wide assortment of byproducts beyond candy to save money.

"One guy in Montana bought a whole carload of soda crackers as feed," he said. "He had to hire a guy to open all the boxes of soda crackers."

Yoder and other farmers buy their feed from brokers like Midwest Ingredients, Inc., of Princeville, Ill., which offers a wide assortment of byproducts, including cherry juice, fish meal, peanut butter, fruit fillings, tapioca and left-over grain from distilleries.

"The buyers of corn, or feed in general, are paying a lot of money so they're definitely out there shopping around looking for cheaper stuff," said Eric Johnson of Eagan, Minn., who owns MidWest Feed Ingredient Trading. "People are price conscious and they're resourceful. Stuff comes up and they hunt it down and try to save a little bit of money."

But there is a catch -- as the demand for candy-feed goes up, so does the price. Yoder said that he has become "more aggressive in bidding for [candy-feed] because of the high price of corn." But he added that the candy "started getting expensive because other people want it too."

Yoder said he's seen the price of sprinkles rise from $160 per ton -- which was about half the price of corn -- to about $240. But he still buys the candy.

"Any time I can make a change to save two cents or three cents a cow, that makes a difference," said Yoder. "Farming is a game of inches sometimes, or half-inches. Every little penny you can find to save, you do." 

By Aaron Smith @CNNMoney October 10, 2012

Morocco's 'liquid gold' liberates Berbers

In Agadir, the arid heartland of Morocco's indigenous Berber population, a quiet oil boom is gaining momentum, one drop at a time.

Argan oil, crushed from the seeds of the short, spiky argan tree, has been used for centuries as a medicine and staple ingredient in local cooking -- drizzled on salads and couscous or mixed with almonds and honey to make amlou, a dip for bread.

But now the oil is generating buzz as a high-end commodity in the lucrative global cosmetics market. Rich in vitamin E and essential fatty acids, it's believed to help all sorts of skin conditions -- including acne, psoriasis and age-related wrinkles.

Argan trees, which are well adapted to drought and other extreme weather conditions, are endemic to the southwestern part of Morocco around Agadir.

As such, the rise in demand has turned Agadir -- famed for its beautiful beaches and laid-back culture -- into a hive of small-scale worker co-ops, each dedicated to squeezing oil from the notoriously hard-shelled argan nut.

Traditionally, it was uncommon for Berber women to work outside the home. But times have changed, and according to the Argan Oil Society, all the co-operatives are now staffed and run by local women.

"When we started in '96 we had got only 16 women who believed in our project. Most of them were divorced or without a husband," said Zoubida Charrouf, a university professor who helped found one of the first cooperatives in the region.

Ethnic Berbers -- the indigenous inhabitants of North Africa whose culture predominated in the region prior to the 7th century Arab invasion -- were among Morocco's earliest inhabitants, and government figures show that at least one third of the country's population of 32 million speak a Berber dialect.

However, according to the U.N. Refugee Agency, Morocco's Berbers also face habitual cultural discrimination. It was only last year that the state finally recognized Tamazight, the Berber language, as an official language alongside Arabic.

Charrouf says that the new-found international popularity of argan oil -- which she describes as "liquid gold" -- has not only provided about 5,000 jobs for Berber women across 170 co-ops, but also an important social lifeline.

"We've started relying on ourselves," said Ichou Aisha, a co-op worker. "Now, we can provide for our children on our own."

Argan oil hasn't just improved the region's economic and social standing, Charrouf says it's played a vital role sustaining its ecology too.

"The purpose of this work is to preserve the argan tree, because it was in decline," she said.

Indeed, 30 years ago, extensive deforestation left the tree on the brink of extinction.

Today, UNESCO has designated the 26,000 square-kilometer Argan-growing region as a "biosphere reserve."

Besides the Argan tree's various human uses, UNESCO notes, it has had an historical role as a buffer against northern expansion of the Sahara desert.

Charrouf says it's for all these reasons that 60,000 new trees are now planted each year.

The co-op women certainly have their work cut out. It takes about 20 hours to produce just one liter by hand.

First they use jagged stones to crack the shells. They then place the kernels between two rocks, grinding them into a brown, peanut butter-like paste.

This is then kneaded to extract the oil, leaving a solid block that is sent off to a mechanical press where even more oil can be extracted.

To match the pace of global demand, however, many of these processes have become mechanized. But as yet, there is no machine that can do a better job at cracking open the argan nuts than the women.

For now at least, the work is steady.

"I am very happy," said Charrouf. "Economically, (because) the price is increasing; socially, because the women can get outside the house and learn; and environmentally, because we can plant these trees."

From Leone Lakhani and George Webster, CNN, October 9, 2012

Facebook agrees to pay $10 to each 'Sponsored Stories' victim

Facebook is agreeing to pay up to $10 each to users who appeared in the social-networking site's "Sponsored Stories" advertising program without their permission.

The revised settlement agreement (.pdf) to a class action, lodged Saturday, comes two months after a federal judge said he had "serious concerns" with the deal, which originally had provided a $10 million payout to attorneys suing Facebook and $10 million to activist and research groups in what is known as a cy pres award.

Under the new plan offered for U.S. District Judge Richard Seeborg's approval, Facebook and class-action attorneys are proposing that the same size $20 million pot be shared by charity, the class-action attorneys and the 125 million U.S. Facebook users who appeared in a "Sponsored Story" without consent.

Only a small fraction of plaintiffs in a class-action usually fill out the necessary paperwork to collect their rewards. If everybody did in this instance, that would amount to 2 cents each.

Under California law, Seeborg said each plaintiff could be awarded as much as $750 if the case went to trial. Under the new plan, Seeborg has the power to reduce the amount to each victim or give the pot to charity in the event of overwhelming response from class members.

Under the old deal and the new one lodged Saturday, Facebook agreed to give its adult users the right to "control" but not eliminate how the social-networking site uses their faces in ads under Facebook's "Sponsored Stories" program. Minors have the ability to completely opt out.

"Sponsored Stories" basically turns the act of pressing the Facebook "Like" button into a potential commercial endorsement. If a Facebook user clicks the "Like" button for a product or service with a Facebook page, that user's profile picture and name may be automatically used in advertisements for that product or service that appear in the their friends' Facebook pages. Facebook also reserves the right to show such ads on sites other than Facebook.

The suit, (.pdf) filed in April 2011, claimed Facebook did not adequately inform people of the "Sponsored Stories" feature or give them a way to opt out of the advertising program, which began in January 2011. Under the deal, in which Facebook admits no wrongdoing, Facebook agrees to clarify its terms of service:

You give us permission to use your name, profile picture, content, and information in connection with commercial, sponsored, or related content (such as a brand you like) served or enhanced by us. This means, for example, that you permit a business or other entity to pay us to display your name and/or profile picture with your content or information. If you have selected a specific audience for your content or information, we will respect your choice when we use it.

While the deal offers little future protection to Facebook users, about a dozen privacy groups and universities stand to reap millions under the accord if Facebook users and the class-action attorneys don't exhaust the $20 million pot. Under the deal, the attorneys said they would submit their fee request within three weeks after Seeborg approves the deal.

A hearing before Seeborg in San Francisco is scheduled for Oct. 25.

How much do Google, Facebook profit from your data?

Savvy Internet users know that all the great stuff they get from the Internet us for "free"—the searches, the social networks, the games, even the news—isn't really free. It's an exchange, where companies are able to take user data, sell it to advertisers, and make money that allows them to give themselves a paycheck while keeping you afloat in free digital services.

So that data you're giving away online is worth something, but have you ever taken a stab at figuring out how much? A just-released privacy add-on for Firefox and Chrome, Privacyfix, gives it the old college try. Both Congress and the executive branch have been talking more about online privacy in the past couple years.

The estimates for Google and Facebook are imprecise, as the program's creator, Privacy Choice founder Jim Brock, readily admits. "We wanted people to understand, it is a value exchange" when they use these sites, said Brock.

Privacyfix measures your last 60 days of activity on Google, extrapolates that to a year, and uses a value-per-search estimate. Analysts believed Google was making $14.70 per 1,000 searches in 2010, and possibly less in 2011. Of course, if you spend all your time searching for luxury hotels or mesothelioma lawyers—and then clicking through the advertised links—you're much more valuable than the average user.

Brock says his estimated annual Facebook value was a mere $1.68. His daughter, perhaps unsurprisingly, is at $12. His Google value checks in at more than $700 per year, though.

The add-on also tells you how many of the websites you visit feed data back to Facebook and Google. I was surprised to see that Facebook is tracking me across 87 percent of the Internet, despite the fact that I'm a minimal user of Facebook.

Privacyfix has a checklist for Facebook privacy settings, with orange warning signs near settings that users might want to take a look at. Unless you're a complete privacy hawk already—or you don't care at all—you'll probably find something new on that list that you weren't aware of. Did you know Facebook automatically shares your profile info when you visit certain sites? Did you know your profile details are sometimes shared not just with your friends, but often with the makers of your friends' apps?

Privacyfix also gives you a heads-up on things you should be doing anyhow, like deleting Facebook apps you no longer use so that they stop gathering data. The add-on links you directly to those Facebook settings so you can fix them immediately, navigating you through a maze of privacy options some find arcane; it has a similar function for Google. "I haven't had anyone go through this process who was not surprised by something [they saw]," said Brock.

While it isn't Brock's intention that all users should tightly clamp down their privacy controls, that's what most of the users of Privacyfix have chosen to do so far, he said. Future plans include similar privacy controls for Twitter and LinkedIn, as well as a mobile app.

By Joe Mullin, October 9, 2012

Mobile revolution brings mixed benefits to Brazil

A picture of popular Brazilian actress Juliana Paes climbing up onto a roof to catch a kite from the scene of TV soap opera "Gabriela" recently went viral online in the country.

But the online image had been doctored and instead of a kite, Paes is seen clutching a smartphone and the caption reads: "I finally got a TIM signal!"

It is an internet joke based on a catalog of complaints by Brazilian consumers against wireless carrier TIM, angry about its patchy coverage.

In a survey on its Facebook page in July, Rio de Janeiro-based technology review site, TechTudo, asked: "Which is the operator with the worst mobile signal?"

TIM, the second largest cell phone company in Brazil, was voted the worst with 2,127 people selecting it. The runner up was Oi with just 337 votes.

Meanwhile a spoof video of Brazilian comic Fabio Porchat wearing blue make-up and acting as someone having a nightmare trying to cancel a TIM subscription, has attracted nearly three million views.

The Blue Man Group, whose trademark is blue make-up, has done a series of commercials for TIM in Brazil.

Brazilian mobile network operators have been in the firing line from the Brazilian telecoms watchdog in recent months following consumer complaints about poor service including calls suddenly disconnecting and customers unable to get a signal.

In July, the telecoms regulator Anatel banned three mobile operators from selling new cellphone plans in certain states, telecoms market research firm TeleGeography reported.

TIM, the Brazilian subsidiary of Telecom Italia, was barred from 19 states; Oi SA from five; and Telecom Américas (Claro) from three, according to TeleGeography.

The ban was lifted in early August. Penetration of mobile subscriptions in Brazil stands at 131%, with 258 million mobile phone users, out of a population of approximately 200 million, but analysts have criticized operators for not investing in infrastructure while riding the mobile boom.

According to the World Bank, 98% of the population of Latin America now have a mobile phone signal, with Argentina and Panama in particular seeing an explosive growth in subscriptions.

Predictions are that by 2015, at least half of Brazil's population, or 100 million people, will have a mobile phone with internet access.

Blogger Anthony Hurtado also thinks that despite having sky-high tariffs on mobiles and too much legislation and regulation, Brazil will soon see a smartphone revolution.

Meanwhile the favelas, the illegal settlements in Brazil that spring up on the fringes of urban areas, known as shanty towns, which tend to be crowded, lack basic amenities and sanitation, and have informal market conditions, have experienced their own mobile revolution -- but not always a legitimate one.

In the same way that they are havens for "gatos" (illegal connections to legal sources of water and electricity), they have become havens for selling and buying stolen handsets as well as special sim cards that allow you to make international calls for free for three months -- known as "diretão." These are especially popular among drug barons who run their drugs empires using them, according to Mobile Phone Appropriation in the Favelas of Rio de Janeiro, published in New Media & Society.

About 20% of the population of Rio de Janeiro live in favelas, according to the Brazilian Institute of Geography and Statistics and there are more than 6,000 favelas across Brazil in more than 300 cities.

However mobile technology has also been a force for good in them.

Brazilian NGO Viva Rio has been running the Viva Favela project since 2001. It started with 20 favela-based community correspondents in Rio and now has more than 300 from across Brazil who produce text, photos, audios and videos about their lives, news and cultural activities for its online magazine and website, read by favela residents.

The cell phone has enabled those residents who cannot read and write well, to participate in the project, by submitting video stories and pictures created on their cell phones -- all at a low-cost as the charity does not have the funds to purchase camcorders, explains Editorial Coordinator of Viva Favela Viktor Chagas.

"Cell phones are a massive platform of inclusion," he says. "With these new technologies there are more and more people producing culture, news and content."

Guilherme Junior, 31, an arts teacher and correspondent for the site, who lives in Bangu, Rio de Janeiro, explains: "We have to make an extra effort to create positive news as the newspapers always show only bad things about our communities."

"We have helped people perceive favelas differently and we have helped favela dwellers identify themselves differently. Favelado had such a pejorative meaning in the 80s and 90s. Now the residents use their identity to strengthen their sense of belonging," Chagas adds.

Viva Favela also trains the residents in how to make films and take photographs on their cell phones.

A photograph and audiovisual workshop that Viva Favela held at the abandoned vandalized movie theater Cine Guaraci in Rocha Miranda in Rio even inspired residents to start a campaign to get it reopened, Chagas says -- and they were recently successful.

The Alô Cidadão! (Hello Citizen!) project which ran until 2009, enabled low-income residents, who often did not leave their favelas because of gang violence, to subscribe and receive free SMS messages each day about everything from community news, job openings and vaccination drives to cultural events that they otherwise would have missed.

It was created by the non-profit Institute Hartmann Regueira (IHR) and funded by Oi Futuro, the social arm of the largest Brazilian telecommunications company Oi and Spring Wireless.

The content was generated from local newspapers and partnerships with community groups and businesses. IHR is now looking at rolling out a new project with Oi using a smartphone application to counteract bullying in schools in the Brazilian city of Belo Horizonte.

Rede Jovem, another social project, led by NGO Solidaritas, runs Mobile Rede Jovem: SMS for Social Change, which sends daily messages about job opportunities, cultural events, sports, courses and free public services to members of poor communities.

It also runs WikiMapa, a program, in which favela residents, known as wiki-reporters, use GPS-enabled camera smartphones, with a WikiMapa mobile application, to map unregistered streets and add photos and videos of local points of interest such as hospitals, churches and stores, taken on their cell phones. 

The project has so far mapped 29 favelas in Rio de Janeiro, funded by Fundación Telefónica, the social investment arm of the Brazilian wireless provider Vivo.

Many slums and low-income areas do not exist on official online maps so the initial goal was to add the narrow, winding, often-chaotic, unregistered streets of the favelas onto virtual maps.

This had a big impact on the favelados.

"This is the only project that we have to identify and cast good things within one of the slums already considered as the most dangerous in Rio de Janeiro" says Camila Santos, 26, a wiki-reporter and resident of the Complexo do Alemao favela.

"The sense of marginalization after not even finding a reference to where they lived on virtual maps has been replaced by a twinkle in their eyes now that they can spot their streets and schools among many other used services locally available," says Natalia Santos, Executive Director of Rede Jovem.

"The results are a strengthened sense of identity and increased self-esteem," she adds.

By Naomi Canton, for CNN, October 9, 2012

Analysis: Why Iran is caught in currency crisis

Iran is in possession of the building blocks to construct a promising, fast growing, developing economy.

The basics are all there -- a sizable population of 78 million people, with a median age of just 27. A highly cultured and educated society, and by its own geological surveys the country is blessed with 9% of the world's oil reserves. Utilizing a conservative IMF calculation of $75 a barrel, that means Iran sits on $10 trillion of oil reserves and another $3.5 trillion of gas reserves.

Iran, minus the intense sanctions put forward by the West starting in mid-2010, would warrant a slot in the N-11 group of countries -- this is the next wave of the most promising economies within the emerging market sphere of Jim O'Neill at Goldman Sachs.

That is the promise, but the reality today with its devalued rial is the polar opposite.

According to economist Steve Hanke, Professor of Applied Economics, at Johns Hopkins University, the Republic is the first country in the Middle East to ever have hyperinflation -- defined as an economy seeing its monthly inflation rate soar 50% or more each month.

Iran joins Zimbabwe (2008) and North Korea (2009-2011) as the only three in the 21st Century to experience that fate and at the same time share a common link of being subject to international sanctions.

Iranian President Mahmoud Ahmadinejad in his United Nations address toned down the rhetoric from the recent past and suggested the post-war institutions are not benefiting all citizens.

"There is no doubt that the world is in need of a new order and a fresh way of thinking," he said in his eighth and final address to the General Assembly as President.

But that call for a new global order may ring hollow with those struggling on the ground. With daily insights from our reporter Shirzad Bozorgmehr in Tehran, we know that the costs of staples in society are soaring. Chicken prices have risen three-fold in the past year, barbari bread a five fold increase. This is directly linked to its currency.

When U.S. President Barrack Obama signed the sanctions legislation into law in July 2010, the rial was trading at just over 10,000 to the dollar. It is recovering from a low last week of 37,500 on the black market, but at 28,500 the currency is still down nearly 70% in the last year.

In 2010, Iran began removing subsidies for fuel, from heating oil to engine petrol, which amounted to $4,000 per year for the average family of four according to the IMF. This was a sign Iran was starting to normalize its economy and at the same time began introducing a privatization program to reduce the size of the state. That effort, economists say, stalled since it clashed with Iran's isolation from the global economy due to its pursuit of its nuclear development plan.

It has been a toxic result for the average Iranian who is caught in the middle of a "cat and mouse" game of uranium enrichment and negotiations with the Vienna based agency, the IAEA. All the while, the screws linked to sanctions are being tightened.

Oil makes up 90% of the country's export earnings, but their customers have trimmed back volumes due to the sanctions and difficulty getting systems insured. China, South Korea, Japan and India are big customers. Beijing, energy consultants say, is using the plight of sanctions to reduce the price they pay.

Iran's daily production, according to OPEC, is the lowest in over two decades. It is down nearly a million barrels a day in the last five years. The sanctions also limit any new investment by the international oil giants who are already operating in Iran. So the sanctions of today will leave a terrible aftertaste for years to come.

With rising import prices due to a plummeting currency, Iran Inc. is also no longer able to compete. There are reports that the industrial sector has laid off up to 800,000 workers this year and those who have kept their jobs are seeing their wages eroded by skyrocketing prices.

This is a critical window for Iranians. President Ahmadinejad's term expires in June of next year. Most candidates, whether moderate or not, are keeping their heads down during this flashpoint of anger being expressed on the streets linked to the falling rial.

Meanwhile, Iranians must be asking the question: What if we joined the global economic community, even with its imperfections after the 2008 debt crisis? At this juncture it is far too early to answer that question, but most would likely say Iran's isolation to date has not been the answer to their financial woes.

By John Defterios, CNN, October 8, 2012

BAE's biggest shareholder slams EADS merger

Plans to create a European aerospace and defense giant through the merger of EADS and BAE Systems make no strategic sense, BAE's biggest shareholder said on Monday.

A merger with EADS, which is controlled by France and Germany, would damage the British defense manufacturer's privileged access to the lucrative market for U.S. military contracts, fund manager Invesco Perpetual said.

Invesco, which owns about 13.3% of BAE, said it had significant reservations about the proposal and its impact for BAE, which generates over 40% of its revenue in the United States.

The deal would bring together the maker of Airbus planes and Europe's largest arms manufacturer. The companies believe the combination will allow them to generate growth by achieving a better revenue balance between civil aviation and defense.

France and Germany each control 22.5% of EADS. Those stakes would be diluted in a merger with BAE but still leave both countries with significant influence.

"Invesco is very concerned that the level of state shareholding in the combined group will heavily impair its commercial prospects -- especially in the United States -- and result in governance arrangements driven more by political considerations than shareholder value creation," the fund manager said in a statement. (Related: $2 trillion divides candidates on defense spending)

The stinging rejection of the current structure of the deal comes just before a Wednesday deadline for EADS and BAE to reveal more details of the combination, which would create a global rival to US defense contractors such as Lockheed Martin (LMT, Fortune 500), Northrop Grumman (NOC, Fortune 500) and Boeing (BA, Fortune 500).

French media group Lagadere, which owns 7.5% of EADS, has also expressed concern at the proposed terms, according to which EADS would end up with 60% of the combined group.

Britain could block the $45 billion deal if its concerns about political influence are not addressed, defense minister Philip Hammond said on Sunday.

By Mark Thompson @CNNMoneyInvest October 8, 2012

World Bank slashes Asia forecast

The World Bank lowered its growth outlook for Asia on Monday, and warned that a major unraveling in Europe could knock 2% off Asia's GDP growth next year.

The institute now expects economic growth in Asia to be 7.2% in 2012, down from the 7.6% projection made in May and lower than last year's rate of 8.2%. However, growth is expected to rebound next year, spurred by strong demand in developing countries.

"Weaker demand for East Asia's exports is slowing the regional economy, but compared to other parts of the world, it's still growing strongly," Pamela Cox, World Bank East Asia and Pacific regional vice president, said in a statement.

The World Bank also forecasts a slowdown in China, where growth has been relatively tepid. GDP growth will fall to 7.7% this year, the institute predicts, before ticking up to 8.1% next year as global trade improves.

The downgrade is latest in a series as economists adjust expectations for China. Swiss banking giant UBS last month lowered its China GDP forecast to 7.5% from 8%. And Goldman Sachs has issued a slightly less dour outlook for China growth -- dropping it to 7.6% from 8.0%.

While China is still growing fast, especially compared to less than 2% growth in the United States, it marks an uncomfortable soft patch for the world's second largest economy. Over the last three decades, China has barreled ahead at an average growth rate of about 10% a year.

"Economic momentum [in China] is expected to be weak during the coming months with limited policy easing, a property market correction, and faltering external demands," wrote economists for the World Bank in a report issued Monday.

Still, the institute warned of even slower growth in China and Asia if the eurozone debt crisis were to cause a disruption of financial markets in Europe, or the so-called fiscal cliff in the United States went unresolved.

A "major" eurozone crisis could reduce growth in Asia by 2% next year, while the fiscal cliff would erase another 1%, it said.

By Charles Riley @CNNMoney October 8, 2012

Tehran bazaar reopens after currency protests

Tehran's main bazaar reopened for its first full day of activity after demonstrations this week over the country's plummeting currency.

The bazaar was open Saturday, as were money exchange shops.

"The price of the dollar on the open market today dropped to (between) 28,500 and 29,000 rials, but the price of all foreign currencies, including the dollar, is still fluctuating and only a few transactions took place today," Mohammad Kashtiarai, head of the National Gold and Jewel Association, told the semi-official Mehr News Agency.

Sixteen people were arrested Thursday, a day after police dispersed a crowd at the bazaar, where protesters were blaming President Mahmoud Ahmadinejad for the high price of the dollar and goods in general.

Demonstrators chanted slogans opposing firebrand President Mahmoud Ahmadinejad and decrying the skyrocketing cost of basic goods.

The rial's plummet to historic lows is the result of international sanctions, imposed largely by the United States and the European Union in an effort to pressure Iran to sit down for talks on its nuclear program.

Ahmadinejad has insisted that sanctions hurt the people, not the government, and that the country's economy "has become a tool for psychological warfare."

The rial's value was cut in half from September of last year through last month, the Congressional Research Service said in a report. It has fallen even further since, including a sharp nosedive this week, reaching historic lows against the value of the dollar.

But protesters in Tehran blamed Ahmadinejad, chanting slogans against his regime and complaining about high prices.

Those arrested "were the main players in the recent fluctuations in the foreign currency market," the Tehran Judiciary said in a statement.

From Shirzad Bozorgmehr, CNN, October 6, 2012

EU braced for budget fight with UK

Brussels is bracing itself for a battle with David Cameron as fears grow that the British prime minister will block a proposed €1tn seven-year spending plan and push for a two-tier EU budget.

Mr Cameron is understood to be interested in Brussel's longer-term plan of a separate spending programme for the eurozone, with UK and European officials considering a compromise that would see the EU budget split in two -- marking a further acceleration towards a divided Europe.

"This idea is gaining momentum," said a British official. "It could mean restraint in the overall EU budget but still provide eurozone countries with more funding from Brussels to support restructuring measures."

European diplomats are growing increasingly concerned that Mr Cameron is serious about demanding a freeze in the budget at next month's budget summit, with one saying: "He'd be delighted to veto a deal -- he'll be greeted at home like a hero."

As the Conservative party gathers for its annual conference in Birmingham, Mr Cameron is being urged by ministerial colleagues to relive his "veto moment" of last December, when he won plaudits in Britain for opposing an EU fiscal pact.

A move to veto the budget could be politically attractive to Britain, as it would allow Mr Cameron to argue that the UK was not propping up the eurozone. The UK is also suggesting moving to a five-year budget because of economic uncertainty.

Mr Cameron had hoped for French and German support, but British diplomats fear the November summit could turn into a classic confrontation between London and most of the rest of the EU.

The prime minister believes a two-tier Europe is inevitable and has talked of seeking the "fresh consent" of the British people of this new relationship in the next parliament in a clear signal that he favours a referendum.

William Hague, foreign secretary, told Saturday's Daily Telegraph this consent is likely to be in "a general election or referendum". However, Tory MPs are demanding a straight European plebiscite.

Michael Fallon, Tory business minister, told the Financial Times: "We haven't had a referendum on Britain's continuing membership of the EU since 1975." He said that Mr Cameron's so-called "veto" at last December's summit was "very refreshing".

David Lidington, Britain's Europe minister, told colleagues in Luxembourg last month: "When the prime minister talks about the real-terms freeze being a red line to him and not a negotiating position -- that is the stark truth."

To further exacerbate tensions, Mr Cameron is refusing to surrender the British rebate -- an EU refund secured in perpetuity by Margaret Thatcher in 1984.

Germany believes the British threat of a veto is counterproductive. One Berlin official said: "We need fair burden-sharing, and therefore the British [budget] rebate is no longer acceptable. That has been made clear by Germany in Brussels and in London."

By George Parker and Joshua Chaffin, FT.com, October 6, 2012

September jobs report: Unemployment rate tumbles

Friday's monthly jobs report changed the picture of the U.S. economy in more ways than one, showing the unemployment rate fell to the lowest level in more than three years and hiring was stronger than originally reported throughout the summer.

Unemployment unexpectedly fell to 7.8% in September, down from 8.1%, as a survey of U.S. households showed 873,000 more Americans had jobs compared to a month earlier.

The last time the unemployment rate was that low was in January 2009, the month President Obama was inaugurated.

A separate survey of employers, considered the key metric that Wall Street watches, showed businesses added 114,000 jobs in September. It marked a slowdown in hiring, after July and August were revised significantly higher.

Those revisions added 86,000 more jobs than originally reported in the summer.

Ever since the financial crisis, the monthly jobs report has been the most intensely watched economic indicator, but in election season, attention surrounding the numbers has reached new heights.

The Labor Department collects the data monthly, using both a survey of employers and a smaller survey of households. The two surveys don't always tell the same story on the first read, but over time, the data is revised to reflect more comprehensive information.

In the most recent household survey, the biggest hiring gains came in the form of 582,000 new part-time jobs in September. Part of that number can be explained by young workers, ages 16 to 24. The data show this age group saw a huge pickup in jobs in September, due almost entirely to seasonal adjustments by the Labor Department.

Meanwhile, the employer survey showed the health care sector added 43,500 jobs, transportation and warehousing added 17,100 jobs and restaurants and bars added 15,700 jobs. Manufacturers cut 16,000 jobs -- the second month in a row they've slashed workers.

The government added jobs for the third month in a row.

Commentators from both sides of the political spectrum were quick to jump on the numbers Friday morning as both a sign that the job market has improved recently, and that economic growth remains far too slow to pull millions of Americans out of unemployment.

Both points are correct.

Although the unemployment rate is right back to where it was when Obama entered office, the U.S. economy has still not recovered all the jobs lost before his inauguration.

Of the 8.8 million jobs lost during the financial crisis, about 4.3 million have been added back. The Labor Department signaled last week that it may revise the job gains higher, but even so, the job market still has a long way to go before it's fully healed.

About 12.1 million people were unemployed in September, and 40% of them have been so for six months or more.

The so-called "underemployment rate," which includes people who are working part time for economic reasons, and those who have recently stopped looking for a job, was 14.7% in September.

Most economists expect the economy to remain slow for the foreseeable future, growing around 2% a year through 2013.

Growth at that rate is consistent with about 150,000 jobs created each month -- just enough to keep up with population growth.

By Annalyn Censky @CNNMoney October 5, 2012

Jack Welch questions jobs numbers

 The big drop in the unemployment rate a month before the presidential election brought cries of disbelief and conspiracy theories from Jack Welch and other critics of the Obama administration Friday. But the Labor Department was quick to dismiss such claims.

"Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers," tweeted Welch, the former CEO of General Electric (GE, Fortune 500).

Welch did not respond to a request for further comment. In an interview later in the day on MSNBC, he admitted that he had no evidence that the jobs numbers were manipulated, but said they "defy logic."

The unemployment rate fell to 7.8% in September, down from 8.1% a month earlier. The drop was due to the Bureau of Labor Statistics' survey of households showing that 873,000 more people had jobs than in the previous month. That was the biggest one-month gain in more than nine years.

Labor Secretary Hilda Solis criticized the conspiracy theories Friday.

"This is a methodology that's been used for decades. And it is insulting when you hear people just cavalierly say that somehow we're manipulating numbers," Solis told CNN's Richard Quest.

Welch wasn't alone in raising questions about the jobs numbers.

Americans for Limited Government, a conservative group that has been a steady critic of the Obama administration, issued a statement that said the numbers the BLS "used to calculate the unemployment rate are wrong, or worse manipulated. Given that these numbers conveniently meet Obama's campaign promises one month before the election, the conclusions are obvious. Anyone who takes this unemployment report serious is either naive or a paid Obama campaign adviser."

Conn Carroll, a senior writer at the conservative Washington Examiner suggested a slightly less nefarious form of manipulation of the data.

"I don't think BLS cooked numbers. I think a bunch of Dems lied about getting jobs. That would have same effect," he tweeted. "Would love to see the partisan breakdown of the 873,000 Americans who say they got new jobs."

BLS denied there was any manipulation of the data or anything out of the ordinary about the unemployment rate calculation.

"No political appointee is involved in the collecting, processing and analyzing of the data," said Thomas Nardone, the associate commissioner for employment and unemployment statistics.

Nardone said the Council of Economic Advisers doesn't get the numbers until Thursday afternoon, and that the Secretary of Labor he rself doesn't see them until Friday morning.

Even some conservative economists defended the BLS's integrity and legitimacy of the numbers.

"The jobs #'s may look fishy to some, but if you step back, it's just a plow horse economy lumbering along," tweeted Brian Wesbury, chief economist at First Trust.

By Chris Isidore @CNNMoney October 5, 2012

Netiquette: Texting or tweeting, time may not be on your side

Timestamps are all over the ever-loving place on the Web: on your tweets, Facebook posts, text messages, ill-thought-out, angry e-mails to exes, etc.

And let me tell you, true friends and trolls, those little numbers matter more than you think.

Let's consider the aforementioned ill-thought-out, angry e-mail to an ex (because who hasn't sent one of those): Send it at 3 p.m. on a Monday, and you come off as righteous and wronged. Send it at 3 a.m. on a Saturday, and you come off as dangerous and deranged.

And that's just the tip of the numerical iceberg, kids. Read on for four instances in which timing is everything.

Texting a potential date
You're a notorious night hawk, a rebel with a very good cause: monitoring the feeding habits of a very rare species of owl.

Consequently, you are mostly nocturnal. However, you still manage to meet a lovely "daylight person" (as you call people who adhere to the mainstream constraints of timekeeping) at jury duty one day.

A few nights pass, and you finally work up the urge to text her an invite to coffee, a missive you shoot off in between watching one owl rip off a mouse's head and sorting through another owl's freshly deposited pellets. Three nights later, she still has not responded, perhaps because the timestamp of your text read 3:30 a.m.

Look, we get that everyone is on a different clock and not all denizens of this thing we call Earth are 9-to-5ers, but let's just get this straight right now: If you text a romantic interest after, say, 10 p.m., they're going to think you're (a) drunk, (b) horny, (c) drunk and horny. Save your declarations of like for the daylight hours -- or else seek out a mate with similarly night owl-esque tendencies.

Sending a business e-mail
It's Saturday afternoon, and you have the bestest idea ever about how to totally and completely revolutionize the company's overall productivity -- and it includes five rubber bands, two clown masks and roughly 15,000 bobblehead dolls.

Practically sweating glee, you fire up your work inbox and shoot off an e-mail to your entire department, outlining the plan in great detail. Almost as an afterthought, you scrawl, "No need to respond to this right now. I know that it's the weekend."

You're right, o genius of productivity, it is the weekend -- which means the only people who will see your e-mail are (a) people with no lives, (b) people who are paranoid and anxious, or (c) people with no lives who are paranoid and anxious.

Must you stress said people out even more with your idle ruminations? Plus, when everyone else gets to work on Monday, faced with the grim task of sorting through all the e-mail that has accumulated over the past few days, there your message will be, buried among the rubble and, consequently, forgotten.

When struck with lazy day inspiration, we suggest dashing off your e-mail and then scheduling it to be sent out on Monday morning -- there are plenty of apps, like Boomerang, that will let you do so. That way, your idea will shine through the tempest of weekend missives like the glorious beacon that it is -- plus, everyone won't hate you.

Calling a family member
You're at the local thrift store, and you happen upon the most darling china doll with a lovely, delicate face reminiscent of your treasured only son, who now works so, so far away in the crumbling asphalt jungle that is the city.

He's a high-powered man, you know, the founder of an ingenious app that promises to revolutionize the shambles that is modern-day romance (or so he tells you; in actuality, it's a mobile tool that catalogs all the best public restrooms for hooking up with randoms).

As you gaze into the oh-so-sweet face of Francis the Goatherd -- as his tag reads -- you feel the overwhelming urge to call up your own china doll and tell him about his dolly doppelganger. You pull out your ancient cracked flip phone and dial his number ... and recoil in horror as your loving son answers on the first ring with an enraged, "What, Mom? Who died?"

Although it would be easy to blame the broken doll shards -- you dropped Francis in your frenzied distress -- on your ungrateful son, one only has to look to one of the many synchronously ticking clocks on the thrift store wall to realize that 2 p.m. on a Tuesday is not exactly the best time for a check-in call with your pride and joy. Especially if he or she has lived up to that title by securing him/herself a cherry job.

Unless Francis the Goatherd has been possessed by the devil and is currently choking you to death, save any and all ruminations about his porcelain fingers for after work hours.

Tweeting about your super rad beach day ...
... after calling in sick. Unless they're utter Luddites, your bosses know how to use Twitter, too.

By Andrea Bartz and Brenna Ehrlich, Special to CNN, October 4, 2012

Samsung operating profit up 85%

Strong smartphone sales helped Samsung Electronics beat market expectations in the third quarter, as the world's biggest technology company by sales achieved an operating profit increase of more than 85 per cent.

The strong results came despite the fact that during the third quarter Samsung was embroiled in a fierce US court battle with Apple, its main smartphone rival, which left it facing a damages bill of more than $1bn for patent infringement.

But strong global sales of its Galaxy smartphones -- the main subject of Apple's intellectual property infringement claims -- enabled Samsung to record strong increases in both revenue and profit, revealed in earnings guidance issued on Friday.

Revenue for the quarter was between $46bn and $47.7bn, up from $37.2bn a year before. Operating profit was between $7.1bn and $7.5bn, up from $3.8bn. A Bloomberg poll of analysts had produced a consensus forecast of $6.8bn for operating profit.

Despite the outperformance of the consensus forecast, Samsung's shares were trading only 0.15 per cent higher at 1.37m won in mid-morning trading in Seoul.

Marcello Ahn, an analyst at Nomura, said investors were taking profits amid concerns that Samsung would not repeat the positive surprise in the fourth quarter. Shares in the company have risen 62 per cent in the past 12 months.

Mr Ahn said strong smartphone sales contrasted with weaker performance at the semiconductor division. This was due to muted demand for memory chips from the PC market, and a later than expected launch for Apple's iPhone 5, for which Samsung is the biggest supplier of components.

But Mr Ahn forecast another strong quarter in the final three months of the year, citing the recent launch of the Galaxy Note 2 tablet and an improved contribution from European sales as a result of a stronger euro.

Samsung and Apple are continuing to tussle over the fallout from August's California court decision. Last month, Apple asked the judge to increase the damages award by $707m. Samsung responded this week by adding the iPhone 5 to a list of products that it says infringe its patents on data transfer technology. On Wednesday, Samsung also called for a new trial in the high-profile US patent case, citing concerns about one of the jurors.

By Simon Mundy, FT.com, October 5, 2012 

Facebook ad celebrates 1 billion users, chairs

Fresh off the news that it's reached a huge milestone -- 1 billion users -- Facebook on Thursday rolled out a video comparing the social network to other things that bring people together.

Like airplanes. And bridges. And chairs.

Yep ... chairs.

The video, posted by CEO Mark Zuckerberg and other Facebook brass on their pages, came as the site announced it had reached 1 billion accounts that are active at least once a month. It took the social media juggernaut six years to hit 500 million and only another two to double that.

Zuckerberg said the video, titled "The Things That Connect Us," is the first time Facebook has ever created a "brand video" and that it is designed "to express what our place is on this Earth."

"We believe that the need to open up and connect is what makes us human," he wrote. "It's what brings us together. It's what brings meaning to our lives."

The 90-second video takes the unlikely tack of comparing the site, famously birthed in Zuckerberg's Harvard dorm room, to everyday items. It begins with the image of a red chair levitating in a forest, but quickly moves on to show other chairs being used as children play and adults rest, dance and chat.

"Chairs are made so that people can sit down and take a break," the narrator says over a stirring musical arrangement. "Anyone can sit on a chair. And if the chair's large enough, they can sit down together and tell jokes, or make up stories or just listen."

Doorbells, airplanes and bridges "are things people use to get together so they can open up and connect about ideas and music and other things people share," the narrator continues.

In a universe that can make us feel alone, "maybe the reason we make all these things is to remind ourselves that we are not," the video concludes.

Marketing analysis site Ad Age reported that Facebook doesn't plan to air the ad on television, instead using it on its own advertising platforms and a website that anyone can visit.

While it's a celebration of the milestone, Facebook also clearly hopes the ad will help attract its next billion users. Facebook plans to advertise in 13 markets -- the U.S., UK, France, Germany, Italy, Spain, Mexico, Brazil, India, Philippines, Indonesia, Japan and Russia.

"We're creating this for our users, but we think it's a message that will be interesting and relevant to non-users as well," Rebecca Van Dyck, Facebook's head of consumer marketing, told the site. "We feel like we need to be respectful and introduce ourselves and to say 'This is what we believe in' and 'Come on board.' "

By Doug Gross, CNN, October 4, 2012

Georgia's ruling party concedes defeat in parliamentary elections

Georgian President Mikheil Saakashvili conceded his party's defeat Tuesday, setting the stage for the nation's first peaceful, democratic transition through election since the breakup of the Soviet Union.

Victory in the parliamentary elections went to a coalition headed by billionaire businessman Bidzina Ivanishvili.

Ivanishvili is set to become the next prime minister. Saakashvili will remain president until presidential elections next year.

The result of Monday's election means Georgia will have a multi-party parliament, boosting democracy in the nation, observers said.

The vote also is a reflection of how the people feel about Saakashvili. He took power in 2004 after the Rose Revolution, the name given to widespread protests over disputed parliamentary elections.

Saakashvili is credited with having changed the country by moving toward integration with the West, with steps such as seeking membership in the European Union and NATO. He also revamped the nation's economy, retooling it to reflect a free market system.

But critics said that beneath the surface, his government was dominated by Soviet-style "administrative measures."

Ivanishvili, whose Georgian Dream alliance won a majority of seats in the 150-member parliament, said the new government would seek to mend the country's troubled relations with Russia. The two nations fought a brief but bitter war four years ago over the breakaway region of South Ossetia.

"Restoring relations with the Kremlin is one of our main tasks and we will strive in every way to do this," he told CNN. "I think it's achievable but not easy. First we have to convince the Kremlin that our strategy toward NATO and Europe is not harmful to and does not contradict Russian interests."

NATO ambitions

His coalition shares the outgoing government's ambitions to join the NATO alliance, he said.

Russia and Georgia would also need to work together in the future to resolve the issue of separatist territories, Ivanishvili said.

"The Caucasus is a very complex and explosive region. I think, here, we will find common interests in the future," he said.

In a statement released by his office, Saakashvili said he would assist the transition to a new government and that his party, the United National Movement, would now assume the role of the main opposition.

"It is well known to you that for us, and for me personally, the ideas of the coalition are fundamentally unacceptable. There are very deep differences between us, and we think that they are extremely wrong," he said. "However, democracy works so that the Georgian people make decisions by majority and this is what we hugely respect."

Saakashvili paid tribute to the country's achievements over the past eight years, citing progress in fighting crime and corruption as well as in building new institutions, and said his party would fight in opposition to protect those advances.

Russian Prime Minister Dmitry Medvedev said the results indicate the people of Georgia want change.

"If these results become a reality, then the Georgian political landscape will be more diverse," he said. "It should be welcome because it probably means that more responsible and constructive forces are entering the parliament."

CNN iReporter Andro Kiknadze, 31, shot video of jubilant opposition voters waving flags and honking car horns near Freedom Square in the Georgian capital, Tbilisi.

He said he had voted for Saakashvili because he thought the president stabilized the country.

"Many things have changed since he came to power," Kiknadze said. "We are more stable and peaceful than before."

The United States hailed the election as a "significant step in the consolidation of Georgian democracy."

"Georgian citizens have set a regional and global example by conducting a competitive campaign, freely exercising their democratic rights, and affirming their commitment to undertake a peaceful transfer of power," the White House said in a statement, adding that much work remains in coming days and months.

The vote in the parliamentary election had not been fully tallied, with Georgia's Central Electoral Commission continuing to count.

The commission's performance has been lauded as professional and independent, said Lorne Craner, president of the International Republican Institute, a democracy support organization funded by the U.S. Congress.

"There's no question in my mind ... the election commission can be relied upon," he said from Tbilisi.

iReporter Jonathan Hackett, an American teacher living in the Imereti region in central Georgia, said the scene was calm Monday night and Tuesday morning, despite the large amount of support for Saakashvili in the region.

"It turns out the election was considered free and fair, at least in our little village," he said. "People were gathered outside the local convenience store discussing the outcome."

Power shift to prime minister

The new system will shift power from the president to the new prime minister, according to Thomas de Waal, an expert on Georgia and a senior associate at the Carnegie Endowment for International Peace in Washington.

"The prime minister will be chosen by parliament, which thus hands important powers to whichever political force obtains a majority in parliament in the ... elections," de Waal said.

Until recently, Saakashvili and the United National Movement have controlled much of the political life in this country of 4.5 million people. Saakashvili has been praised by U.S. and European officials for making progress in the fight against corruption and for continuing economic reform.

But critics, who coalesced behind Ivanishvili, said reform was only skin deep, and charged that Saakashvili has been pulling all the levers of Soviet-style "administrative measures."

During the election campaign, they raised concerns about a level playing field for the opposition, alleging harassment and limitations over access to the media.

Money was also a major issue during the campaign, experts said.

For example, the government tried to regulate how much could be spent on corporate contributions and that affected how much Ivanishvili could spend.

"I think that the government, at times, overstepped when it created an entity called the Chamber of Control and Fines to watch over these new regulations," said Stephen Nix, the director of Eurasia at the International Republican Institute and an expert on Georgia.

"This means, overall, that there is a closer approach to democracy which will be felt about one year from now, in October 2013, when a presidential election happens," Nix added, speaking from Tbilisi.

For his part, Saakashvili has referred to the opposition leader Ivanishvili as that "big money guy."

The president accused Ivanishvili of wanting to "buy the whole system," and said he saw behind him the hand of Russia.

The president said he was concerned by the amount of wealth that Ivanishvili has accrued in Russia, and whether that money was used to influence the elections.

"We know what Russian money is all about," he said. "How it was made, what kind of methods were used, and certainly it is a source of concern," he said.

False stereotypes, Ivanishvili says

A self-made businessman who made his money in Russia after the fall of the Soviet Union, Ivanishvili left Russia shortly after Vladimir Putin came to power.

His staff confirms his status as Georgia's richest man, with a fortune estimated at approximately $6.4 billion, equal to almost half of Georgia's economic output.

But he said "it's not money and wealth which is my capital. It's trust from the people toward me. Money has nothing to do with this."

The billionaire said he had sold all his Russian assets, and defended his reputation.

But Saakashvili insisted that not only Ivanishvili but Putin himself was trying to undermine Georgia.

"Vladimir Putin said clearly that he is interested in the Georgian election outcome. He clearly said that he wanted the Georgian government out. He clearly said that he wanted me to be physically destroyed, he said it publicly," Saakashvili said.

Georgia's electoral waters were roiled by a shocking video that emerged last month showing abuse in a Georgian prison, including one male prisoner being sexually assaulted. The opposition claimed the video was proof of a repressive system put in place by Saakashvili and his government.

Saakashvili said his government had responded quickly and decisively to the video, citing an investigation that has led to arrests.

"Not only were the immediate perpetrators arrested," he said, "but two government ministers resigned because they shared political responsibility for allowing the system to fail."

The torture shown on the video is no accident, but part of a system that is shameful, Ivanishvili said.

De Waal said the video is significant, as the prison population has quadrupled over the past eight or nine years.

"I do think it (the video) supports the opposition narrative that the government is arrogant and unaccountable. And this is obviously a war of two narratives over Georgia that we're seeing in this election," he said.

From the CNN Wire Staff, October 3, 2012