Krugman Says U.S. Economy Is Facing a ‘Long Siege’

Washington -- Nobel Prize-winning economist Paul Krugman said the U.S. should have a “kitchen-sink strategy” that uses all fiscal and monetary policies possible to prevent the economy from sliding back into a recession.

“We are looking at what could be a very long siege here,” Krugman said in an interview today in Princeton, New Jersey, with Carol Massar of Bloomberg Television’s “Street Smart.” “We really are at a stage where we should have a kitchen-sink strategy. We should be throwing everything we can get at this.”


At a time when European countries such as Germany are calling for austerity measures to rein in budget deficits, Krugman is calling for more stimulus to prevent a repeat in the U.S. of Japan’s decade of economic malaise in the 1990s.

“The most effective things you can do, in terms of actual bang for the buck, is actually having the federal government go out and hire people,” he said. “We are deep in the hole here, and you need to be unconventional to get out of it.”

He said too many policy makers and commentators are overly concerned that the ballooning U.S. deficit would set off a crisis of confidence similar to Europe’s sovereign debt crisis. Krugman said he’s concerned U.S. policy makers would be unable to agree to short-term stimulus for the economy along with long- term measures to curtail the deficit.

“I worry about the politics,” he said. “I worry about our ability to get a consensus to do the pretty straight-forward things we need to do to balance our budget in the long run.”

Long-Term Deficits

The projected U.S. budget gap in 10 years can be brought under control with a “combination of modest tax increases and reasonable spending cuts,” particularly on health care, Krugman said, adding it’s “extremely unlikely” the U.S. would ever default on its debt.

“I’m not aware of any example of a country that got into fiscal difficulty because it began a stimulus program and couldn’t take away the stimulus program,” he said. “If you’re serious about fiscal responsibility, you should not be saying, ‘let’s skimp on aid to the economy in the middle of a financial crisis.’”

Krugman forecast the economy will grow at about a 1 percent pace or slightly faster within six months, and that job growth would be less than the rate of growth of the population. He said in six months, the U.S. would be facing a “labor market that’s getting worse not better.”

Job Gains

The U.S. Labor Department reported last week that employment fell by 125,000 workers in June, the first jobs decline this year, because of layoffs of temporary census workers. Private companies added 83,000 people, a smaller-than- forecast gain that capped a month of data indicating weakness in industries from housing to manufacturing.

Other reports last month showed a plunge in home sales, a slump in consumer confidence, cooler manufacturing and less growth in the first quarter.

The lack of jobs will curtail consumer spending, which accounts for about 70 percent of the world’s largest economy, and restrain sales at retailers including Barnes & Noble Inc. The rebound from the worst recession since the 1930s faces risks from the European debt crisis and slower growth in China at the same time that fiscal stimulus measures fade.

“We are, I think, sliding into a situation where we’re likely to see several bad years ahead,” Krugman said. “Given what I see in the political process, the odds are against us avoiding a really prolonged bad period.”

By Bob Willis and Carol Massar
Bloomberg

Americans Adopt Chinese Web Habits

Paul DenlingerBio |

Paul Denlinger is an internet consultant specializing in the China market who is based in Hong Kong and Beijing.  

When it comes to revenue on the U.S. Internet, it has traditionally come from three sources:

• Display (banner) advertising;
• Search advertising, made popular through Google Adwords;
• E-commerce, with Amazon.com being the most outstanding success story;

The collapse of display advertising revenue for leading companies such as Yahoo!, which at their peak relied on large banner buys and campaigns from new Internet startups accounting for 1/3 - 1/2 of total income, was the single greatest cause of the popping of the Internet bubble in early 2000.
Lately though, something different has happened. These are:

• The rise of social game publishers, led by Zynga;
• The rise of group-buying, lead by Groupon;

In contrast to the U.S., online games have been popular in China since 2002 when Shanda Online Entertainment popularized the South Korean fantasy game title "Legend" in China. Almost single-handedly, that title made Shanda the single most successful IPO in 2004. Later, Shanda used its IPO cash to buy other studios and titles, becoming the single largest gaming network in the world.

A large reason for the success of online games in China was because consoles such as Nintendo's Wii, Sony's Playstation and Microsoft's xBox were never popular in China. A combination of high console prices, fear of game piracy on the part of publishers and government policy opened up an opportunity for online gaming.

In the U.S., Zynga has grown just as fast as Shanda, seemingly coming out of nowhere. Like Shanda, it is becoming a network too, leveraging the popularity of Farmville among many social game players. One could argue that Zynga is like Shanda, except it is starting from the U.S. market.


Groupon has leveraged the popularity of group buying, an activity which has long been popular in China since at least 2004. In China, group buying is called tuangou, and was an early popular use of the Internet for organizing. In China, the authorities have been wary of uses of the Internet which allow people to organize, but organizing for commercial purposes, such as group buying, are considered harmless, and thus are not obstructed. So effective was the tuangou movement that some retailers first sought to reject volume tuangou purchases of white goods and autos, but all eventually caved in, with some eventually setting up group purchasing departments to specially serve tuangou buyers. Now, they are a natural part of the Chinese retail landscape.

So, it is doubly ironic that Groupon's success in the U.S. has set off a flurry of Chinese startups who copy the Groupon model in China. It makes one wonder...

As gaming and group buying become more popular in the U.S., some trends to watch are:

• Will social gaming eat into the popularity of console game titles and their publishers' revenue?
• Will more game publishers move into social game publishing, seeking to duplicate Zynga's success?
• How popular will social gaming become on the Android and Apple iPhone mobile platforms?
• As social games take off, will display advertising revenues fall, maybe even to China levels? (In China, online game revenues have always been higher than display advertising revenue.)
• If social gaming becomes popular, will in-game advertising ever take off? (In-game advertising has been a promise for years, but has never taken off.)
• Will U.S. retailers embrace group buying groups the way Chinese retailers have embraced tuangou?
• Will e-commerce in China overtake U.S. e-commerce in five years, as PwC has predicted, and will China become the largest IPO market this year?

Tags: America, android, Apple, China, Gaming, Google, Groupon, Internet, Microsoft, Nintendo, PlayStation, shanda, Sony, U.S., Web, Wii, xBox, Zynga

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Tips for Seniors to Prevent Falls

This Week’s Question: I had an aging aunt who fell and broke her hip. She was never the same after that. Now that I’m old, myself, I’m worried about falling. What should I do about this?
 
Well, first of all, you can’t go around worrying about falling or you won’t be relaxed; that can lead to a fall. So, you should concentrate on employing techniques to avoid falls and then don’t let the fear take over you mind.

But a respect for the dangers of falling is justified by the statistics.

Among older adults, falls are the leading cause of injury deaths and the most common cause of nonfatal injuries and hospital admissions for trauma. Of all fall-related fractures, hip breaks cause the greatest number of deaths and lead to the most severe health problems and reduced quality of life.

As we age, the power of our senses, reflexes and coordination diminishes. Maladies and the medicines we take for them can contribute to balance problems. Then there's osteoporosis—a disease that makes bones more likely to snap.

There are many steps you can take to prevent a fall and the possibility of breaking a bone.  I’m dedicating the remainder of this column to the best tips I collected from a variety of experts:

* Get your bones tested. Your doctor can prescribe medications that will make your bones harder to break.

* Regular exercise makes you stronger and keeps your joints, tendons, and ligaments flexible. Weight-bearing exercise such as walking may slow bone loss from osteoporosis.

* Alcohol impacts your reflexes and balance. Elaboration is unnecessary.

* Get up slowly from lying and sitting to avoid feeling light-headed.

* Avoid temperature extremes in your home; they can make you dizzy.

* Wear rubber-soled, low-heeled shoes.

* Always hold the handrails on stairways.

* Don't stand on a chair to get to something. Buy a “reach stick,” a grabbing tool you can find at many hardware stores.

* Clear floors where you walk.

* Never carry any package that will obstruct your view of the next step.

* Mount grab bars near toilets, tubs and showers.

* Place non-skid mats, strips, or carpet on all surfaces that may get wet, especially bathtubs and shower stalls.

* Let the soap suds go down the drain before you move around in the shower. If you are prone to falling, use a shower chair and a handheld shower attachment.

* Put night lights and light switches close to your bed.

* Use bright bulbs in your home.

* Keep your telephone near your bed. During the day, keep a portable phone with you so you won’t have to walk to answer it.

* Tack down all carpets and area rugs.

* Close cabinet doors and drawers so you won't run into them.

* When it rains or snows, consider using a cane.

* Use a shoulder bag, fanny pack, or backpack to leave hands free.

* Check curb heights before stepping down.

* When entering rooms, look for differences in floor levels.

* Insure that every room in your home has a light switch near the entrance.

* Practice balancing. Hold onto something such as a countertop and stand on one leg at a time for a minute. Gradually increase the time. Try balancing with your eyes closed. Stand on your toes, then rock back to balance on your heels. Hold each position for a count of 10.

* Be especially careful around pets.

• 10 Things You Didn't Know About You 
• Do Men Get Osteoporosis?
• Can You Have Bones Like Wolverine's?

By Fred Cicetti, The Healthy Geezer,

The Healthy Geezer column publishes each Monday on LiveScience.
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Insurance Need to improve fraud detection standards

By DALJIT DHESI
daljit@thestar.com.my

Insurers must adopt international best practices and share data, information

KUALA LUMPUR: Insurance fraud will continue to be a threat unless fraud-detection standards are improved and the public are made more aware of this menace.

Deputy Home Minister Datuk Lee Chee Leong said insurers must continue to improve their standards in fraud detection by adopting international best practices and share data and information relating to fraud activities among insurers.

“The regulators and law enforcers have to continuously assess the effectiveness of the law as to whether they are adequate and can at least discourage people from committing insurance fraud.

“Strong cooperation has to be extended to other jurisdictions, too, especially Asean, as organised crime operates in multiple countries and locations. With concerted effort by all parties, I am confident that this activity can be successfully minimised,” he said in his speech at the International Insurance Fraud Conference 2010 yesterday.

Datuk Lee Chee Leong ... 

‘Insurance fraud pushes up the cost of everything one buys.’

 

Lee urged all agencies, from the private and government sectors, including the public, to play their roles effectively in combating insurance fraud.

He said the relevant associations and the Malaysian Insurance Institute (MII) could take the lead by educating society on the consequences of promoting insurance fraud and how they could help to combat it.

Lee said some authorities estimated the cost of insurance fraud ran as high as 10% of the total claims cost. An estimate done in the Unites States by the Coalition Against Insurance Fraud showed that the cost of insurance fraud was about US$80bil a year and this trend would keep escalating.

Insurance fraud, he said, pushed up the cost of everything one bought and used as every company that produced goods or services paid for insurance as a cost of doing business.

Phillip K.F. Fong, who is Crawford Group director for global markets-Asia Pacific and managing director for Malaysia, said based on global figures, it was estimated that about 3% to 5% of total gross premiums worldwide had an element of fraud.

He said during difficult times, as in the case of an economic downturn, the tendency for insurance fraud would be on the rise, for example, in property, household and motor-related claims.

Fong said insurers needed to upgrade their skills and improve their fraud-detection capabilities.

Phillip K.F. Fong ... ‘The insurance industry needs to be vigilant at all times.’

 

“Loss adjusters like us are the eyes and ears for insurers. If we detect glaring cases, we will notify them immediately. We also need forensic scientists and those with strong expertise to handle fraud cases as fraudsters are becoming more innovative. The insurance industry needs to be vigilant at all times,” he told StarBiz.

Fong categorised fraudsters into three different types – opportunistic, repeat and organised ones. He said to have an effective fraud strategy, three golden rules should be upheld – detection (identification of high risk/suspicious claims), investigation (management and customer-focused investigation of claims once labelled “high risk”) and articulation (production of accurate management information).

Apart from making people more conscious of fradulent claims, insurers must not be publicity-shy as those who fear adverse publicity are invariably the subject of a greater proportion of dishonest claims. MII CEO Khadijah Abdullah said a more structured way of capturing information on insurance fraud was needed via cooperation from Bank Negara, insurers and other relevant parties.

Related Stories:

Insurance fraud in M'sia estimated at RM1.74bil last year

KUALA LUMPUR: Insurance fraud, estimated at RM1.74 billion in Malaysia last year, is clearly a "big business" and more alarming is, the public apathy surrounding it.

"This apathy at times, unfortunately, even finds its way into our criminal justice system," Deputy Minister of Home Affairs, Datuk Lee Chee Leong said on Monday.

Research on the public perception of insurance fraud concluded that on average, 30 per cent of the public respondents believed, it is acceptable to pad an insurance claim, he added.

"(Hence), there seems to be a great willingness among normally law abiding people to tolerate low levels of insurance fraud.

"However, the burden of combating such crime should not merely rest with the public sector alone, but also the private sector, particularly, the insurers themselves," Lee said in his opening remarks at the International Insurance Fraud Conference 2010, here, on Monday.

He also said that the Association of Malaysian Loss Adjusters (AMLA) and the Malaysian Insurance Institute (MII) should perhaps take the lead to educate society on the consequences of promoting insurance fraud and how they can help combat the issue.

According to the National Insurance Crime Bureau of the Unites States, fraud inflates the cost of each consumer's insurance premiums by US$200 to US$300 annually.

"Insurance fraud pushes up the cost of everything you buy and use because every company that produces goods or services, pays for insurance as a cost of doing business.

"Going forward, the insurers must also continue to improve their standards of fraud detection by adopting the international best practices and share data and information relating to fraud activities among themselves," Lee said.

Meanwhile, the MII's Chief Executive Officer, Khadijah Abdullah suggested that there should be a unified statutory body to oversee fraud in the industry and compile appropriate data.
"Currently, associations and Bank Negara Malaysia, have their own supervision over the issue but there is no single body that can help compile the information," she said. - BERNAMA

U.S.’s Startup Myth; China’s ‘Ford Moment’: Commentary Review

Job-Creation Faith Is Misplaced

Recently an acquaintance at the next table in a Palo Alto, California, restaurant introduced me to his companions: three young venture capitalists from China. They explained, with visible excitement, that they were touring promising companies in Silicon Valley. I’ve lived in the Valley a long time, and usually when I see how the region has become such a draw for global investments, I feel a little proud.

Not this time. I left the restaurant unsettled. Something didn’t add up. Bay Area unemployment is even higher than the 9.7 percent national average. Clearly, the great Silicon Valley innovation machine hasn’t been creating many jobs of late -- unless you are counting Asia, where American technology companies have been adding jobs like mad for years.

The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups. (July 2)

Andy Grove

{NSN L4W13G1A1I4H <GO>}

So Far, Capitalism Rules

If these factory strikes continue, China may have to go Communist.

It’s tempting to wonder which way China will go. Will it side with demands for higher pay and let strikes broaden? Might it clamp down on this budding Solidarity-style movement to protect the all-important export machine? Or will workers demand a true Communism -- not just one that abhors Google?

So far, China has taken the first path, going more the way of capitalism than Communism. It raises the specter of a “Henry Ford moment” in the most populous nation, with both good and bad implications for the global economy.

First, the good news. China’s leaders are taking a page from the industrialist who built Ford Motor Co. In 1914, Ford doubled the average automaker’s wage to $5 a day. It made his Model T more affordable to them and provided a model for a stable workforce that formed the core of the U.S. middle class.

It’s a dynamic China needs more of, and signs are that it’s spreading before our eyes. The positive domino effect it unleashes would create a growing domestic market for products factory workers produce. It would accelerate China’s shift from exports to a consumer-led economy. (June 28)

William Pesek

{NSN L4NN5307SXKX <GO>}

Banking Bill Invites Meltdown

The financial overhaul bill set for passage sometime next week is supposed to “bring accountability to Wall Street.” In announcing an agreement between the House and Senate last week, Senator Christopher Dodd noted that “the American people have called on us to set clear rules of the road for the financial industry to prevent a repeat of the financial collapse that cost so many so dearly.”

The final bill, though, does little to prevent a systemically important bank from failing, and makes it far more difficult for regulators to assist one seeking to avoid failure. This all but insures that the system-wide calamity the bill should be trying to prevent will, in fact, occur again.

Most of the systemic risk in the U.S. is now carried in the six largest bank-holding companies (Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley). The bill lets them off easy: none is to be broken up and the effort to lower the risk they take on was diluted. (June 28)

Roy C. Smith

{NSN L4MNEP0UQVI9 <GO>}

EU Mulls Sovereign Default

The notion that default might be the only sensible exit strategy for an indebted euro nation is finally gaining traction with the authorities. With global financial markets still in a state of disrepair, investors would be wise to tread softly amid the potential nightmares.

A draft European Union document, dated June 25 and scheduled for discussion July 12-13, was obtained this week by Bloomberg reporter Meera Louis. The draft suggests the forthcoming stress tests planned for the region’s banks should assess the dangers posed by “exposures to sovereign risk.”

That’s a euphemism for asking whether banks would blow up if a government couldn’t pay its debts. Including that scenario in the analysis is an admission that the prospect of restructuring has, in the minds of the euro’s apparatchiks, moved up the scale to “possible” from “out of the question.”

On June 28, the Bank for International Settlements weighed in with its annual report. Cheery reading it is not. (July 1)

Mark Gilbert

{NSN L4U63E07SXKX <GO>}

--Editors: John Lear

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The Chinese economy’s secret recipe

Comment by FAN GANG

CHINA’S GDP growth this year may approach 10%. While some countries are still dealing with economic crisis or its aftermath, China’s challenge is – once again – how to manage a boom.

Thanks to decisive policy moves to pre-empt a housing bubble, the real estate market has stabilised, and further corrections are expected soon.

This is good news for China’s economy, but disappointing, perhaps, to those who assumed that the government would allow the bubble to grow bigger and bigger, eventually precipitating a crash.

Whether or not the housing correction will hit overall growth depends on how one defines “hit.” Lower asset prices may slow total investment growth and GDP, but if the slowdown is (supposedly) from 11% to 9%, China will avoid economic over-heating yet still enjoy sustainable high growth. Indeed, for China, the current annualised growth rate of 37% in housing investment is very negative. Ideally, it would slow to, say, 27% this year!

China has sustained rapid economic growth for 30 years without significant fluctuations or interruption – so far. Excluding the 1989-1990 slowdown that followed the Tiananmen crisis, average annual growth over this period was 9.45%, with a peak of 14.2% in 1994 and 2007, and a nadir of 7.6% in 1999.

While most major economies in their early stages of growth suffered crises, China’s story seems abnormal (or accidental), and has elicited periodic predictions of an “upcoming crash.” All such predictions have proved wrong, but the longer the story lasts, the more people forecast a bad end.

For me, there is nothing more abnormal about China’s unbroken pattern of growth than effective macroeconomic intervention in boom times.

To be sure, both economic development and institutional reforms may cause instability. Indeed, the type of central government inherited from the old planned economy, with its overstretched growth plans, causes fluctuations, and contributed significantly to instability in the early 1980s.

But the central government must be responsible for inflation in times of overheating, lest a bursting bubble fuel unemployment. Local governments and state-owned enterprises do not necessarily have those concerns. They want high GDP growth, without worrying much about the macroeconomic consequences.

They want to borrow as much as possible to finance ambitious investment projects, without worrying much about either repayment or inflation.

Indeed, the main cause of overheating in the early 1990s was over-borrowing by local governments. Inflation soared to 21% in 1994 – its highest level over the past 30 years – and a great deal of local debt ended up as non-performing loans, which amounted to 40% of total credits in the state banking sector in the mid-1990s.

This source of vulnerability has become less important, owing to tight restrictions imposed since the 1990s on local governments’ borrowing capacity.

Now, however, the so-called “animal spirits” of China’s first generation of entrepreneurs have become another source of overheating risk. The economy has been booming, income has been rising, and markets have been expanding: all this creates high potential for enterprises to grow; all want to seize new opportunities, and every investor wants to get rich fast.

They have been successful and, so far, have not experienced bad times. So they invest and speculate fiercely without much consideration of risk.

The relatively high inflation of the early 1990s was a warning to central government policymakers about the macroeconomic risks posed by fast growth. The bubble bursts in Japan’s economy in the early 1990s, and the South East Asian economies later in the decade, provided a neighbourly lesson to stop believing that bubbles never burst.

Since then, the central government’s policy stance has been to put brakes on the economy whenever there is a tendency toward overheating. Stringent measures were implemented in the early 1990s to reduce the money supply and stop over-investment, thereby heading off hyperinflation.

In the recent cycle, the authorities began cooling down the economy as early as 2004, when China had just emerged from the downturn caused by the SARS scare in 2003. In late-2007, when GDP growth hit 13%, the government adopted more restrictive anti-bubble policies in industries (steel, for example) and asset markets (real estate), which set the stage for an early correction.

Economic theory holds that all crises are caused by bubbles or over-heating, so if you can manage to prevent bubbles, you can prevent crises. The most important thing for “ironing out cycles” is not the stimulus policy implemented after a crash has already occurred, but to be proactive in boom times and stop bubbles in their early stages.

I am not quite sure whether all Chinese policymakers are good students of modern economics. But it seems that what they have been doing in practice happened to be better than what their counterparts in some other countries were doing – a lot on “de-regulation,” but too little on cooling things down when the economy was booming and bubbles were forming.

The problem for the world economy is that everybody remembered Keynes’ lesson about the need for countercyclical policies only when the crisis erupted, after demanding to be left alone – with no symmetric policy intervention – during the preceding boom. But managing the boom is more important, because it addresses what causes crises in the first place.

In a sense, what China has been doing seems to me to be the creation of a true “Keynesian world” – more private business and freer price competition at the micro level, and active countercyclical policy intervention at the macro level.

There may be other factors that could slow down or interrupt China’s growth. I only hope that policymakers’ vigilance will prevail (and be improved upon), enabling China’s high-growth story to continue for another 10, 20 or 30 years. – © Project Syndicate

Fan Gang is Professor of Economics at
Beijing University and the Chinese Academy of Social Sciences, director of China’s National Economic Research Institute, Secretary-General of the China Reform Foundation, and a member of the Monetary Policy Committee of the People’s Bank of China.

Migrants from new EU states increase London homeless tally

• UK capital's homeless now 4,000, from 2,500 three years ago
• Growth in new rough sleepers attributed to economic tailspin

 

Rough sleeping in central London. Photograph: Martin Godwin for the Guardian

Almost a quarter of London's rough sleepers are from new EU states, a trend exacerbated by rising unemployment that is reversing a decline in homelessness in the capital, a report says .

Most of those sleeping on the streets come for a better life but many find limited opportunities, and, in some cases, become destitute. While the number of homeless British nationals in the capital has stabilised at about 2,500, citizens of the 10 central and eastern European states account for hundreds more added to the most authoritative tally of rough sleepers. The database Chain, or Combined Homeless and Information Network, which is maintained by Broadway, a homeless charity, tomorrow publishes figures showing that London ‑ the location of more than half of the country's rough sleepers ‑ has almost 4,000 homeless people, a figure up from the 2,500 listed three years ago.

The biggest single factor contributing to growth in the newly homeless is the tiny fraction of 1.5 million migrants who came in search of work from the EU's new border regions but who ended up on the streets as the economy went into a tailspin.

These people are often left to fend for themselves; unless they have worked full-time for a year, migrants from former eastern bloc countries that joined the EU in 2004 and 2007 have no right to public funds and only limited access to services. The outcome is often isolation and homelessness.

British charities say that while the tide of largescale migration from eastern Europe has largely reversed, many people are staying on thinking there is a only a limited safety net in their own country.

This assertion has been denied by Krzysztof Lisek, a Polish MEP who has helped homeless Poles in the UK. He said that if it were a question of social security then "the migrants would probably choose the Nordic countries".

Last week during a series of interviews in London where homeless people queued for breakfast provided by charities, many of those on the streets shrugged off the hardships. Most sleep outside, often on church steps. They scavenge at markets because "so much good food is thrown away", and their days are spent traipsing between shelters or begging; an hour seems to yield a less than a pound.

"You can buy a baguette after a few hours of begging," said Roman Maciejewski, a 39-year-old former hospital porter from Poznan, west Poland, who arrived this year looking for work but ended up sleeping under a tarpaulin. "It is a open air apartment by the Thames. The weather is much harder in Poland than here."
Broadway's chief executive, Howard Sinclair, said: "Clients live on bendy buses, scrounge for scraps, have to endure snow and rain. The life expectancy of a homeless person on London streets is 42. That is not something that should be happening in 21st century London."

Sinclair said that if the problem were not tackled, Boris Johnson, London's mayor, would find it "very difficult" to make good his promise that by 2013 that no one would be living on the city's streets. Unlike the government figures, which count the number on the streets on one night of the year, and which have been criticised by some homeless charities for providing only a partial snapshot of the problem, Chain tallies the homeless throughout the year.

The spurt in rough sleeping has led to some radical measures. Since June 2007 more than 1,000 eastern and central Europeans have been flown home, at taxpayer expense. Many flock to the capital's most prosperous parts; the City of London "reconnected" 130 people with their families last year.

Ewa Sadowska, chief executive of Barka UK, a project that aims to help European migrants, said that those arriving here did not realise that their own governments now helped homeless people. She said that in Poland homeless people were paid cash benefits and got free access to services in "social integration centres".

She added: "Many of the homeless come from a generation that went through communism, they are scarred and don't trust authority. They drink and find a group that behaves like them. It becomes a lifestyle, and not an easy one to get out off." 

• Randeep Ramesh, social affairs editor
• The Guardian, Monday 5 July 2010

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