Thoughts to You from Yours Truly ( TYYT ) - ( 4 ) - FORGIVENESS ( 寬恕 ) - Entry # 2 of Sept., 30, 2010.
See others' faults as your own image in a mirror and forgiveness will be a matter of course.
視他人的錯為自己在鏡子中的寫照，寬恕便是理所當然的事。
JKHC.
Wednesday, September 29, 2010
Thoughts to you from yours truly ( 3 ) - Entry # 1 of Sept., 30, 2010
Thoughts to You from Yours Truly ( TYYT ) - ( 3 ) - EGO ( 自我 ) - Entry # 1 of Sept., 30, 2010
Life is so full of antithesis. By deflating one's ego one can actually inflate one's potentials in all directions.
生命是充滿着許多對立面的。把自我縮小了，反能擴充自己各方面的潛能，為因空間多了。
JKHC.
Life is so full of antithesis. By deflating one's ego one can actually inflate one's potentials in all directions.
生命是充滿着許多對立面的。把自我縮小了，反能擴充自己各方面的潛能，為因空間多了。
JKHC.
Tuesday, September 28, 2010
Thoughts to you from yours truly ( 2 ) - Entry # 2 of Sept., 29 , 2010
Thoughts to You from Yours Truly ( TYYT ) - ( 2 ) - CONSCIOUSNESS ( 意識 ) - Entry # 2 of Sept., 29 , 2010.
A message to all scientists and philosophers : - " Find out what consciousness is and you will solve every scientific or philosophical problem you can possibly have. "
給所有科學家和哲學家的信息 : 找出意識的本質，你便能解決每一個科學或哲學的疑難。
JKHC.
A message to all scientists and philosophers : - " Find out what consciousness is and you will solve every scientific or philosophical problem you can possibly have. "
給所有科學家和哲學家的信息 : 找出意識的本質，你便能解決每一個科學或哲學的疑難。
JKHC.
Thoughts to you from yours truly ( 1 ) - Entry # 1 of Sept., 29, 2010
Thoughts to You from Yours Truly ( TYYT ) - ( 1 ) - TRUE WISDOM ( 真正的智慧 ) - Entry # 1 of Sept., 29 , 2010
There are matters for the head and those for the heart. True wisdom is knowing which is which.
某些事情是應用腦袋去處理的，但某些卻應從感性角度埋手。真正的智慧，是能把它們分辨出來。
JKHC.
There are matters for the head and those for the heart. True wisdom is knowing which is which.
某些事情是應用腦袋去處理的，但某些卻應從感性角度埋手。真正的智慧，是能把它們分辨出來。
JKHC.
Monday, September 6, 2010
Clean up your act and cherish your scond lease of life
The painful wait for Australians is finally over. As a matter of fact, the agonizing wait is only 17 days after the close of the polls at 6.00 p.m. of August, 21 and just one week after the political negotiations between the 1 Green and 4 independent MPs with the other 2 main parties - The Australian Labour Party and the Liberal / National Party Coalition had started. The necessary horse trading having been completed a new coalition Australian Federal government between Labour , 1 Green & 3 independents MPs ( with Queensland independent MP Bob Katter supporting the opposition Liberal / National Party coalition ) can now be formed.
With Labour's 72 and the Coalition's 73 seats Labour has now got the magic number of 76 ( 72 + 1 + 3 ) versus the Coalition's 74 seats ( their own 73 + 1 independent MP , namely, Bob Katter ). Labour is expected to form a new coalition government within the next 24 hours with the consent of the Governor General - The Hon. Quentin Bryce AC.
While I am glad that my prediction as set out in my previous blog entry have proven to be correct I have a mixed feeling because if Labour does not clean up its acts Australians and a few generations down the line will still be paying for the deficit black hole created by their barely 3 years in power up to the August 21 Federal election.
I sincerely hope for the good of all Australian citizens that Labour will clean up its acts and appreciate this second lease on their political life to make amends on all its previous follies. If Labour has truly learned its lesson from the August 21 election it may yet earn its place in Australian history. It will be an uphill battle for them though with their new coalition partners ( 1 Green and 3 independent MPs ). Labour's hands will be more securely tied by a new coalition agreement undertaking to form a stable government. This agreement must be executed before the Governor General will give her consent and blessing to the new coalition government as required under the Australian constitution. There will definitely be greater accountability on the party of the new government which is the desired result of a healthy democratic system though at the expense of a bit reduced efficiency. This is understandable because more negotiations may be required to pass some controversial legislation in future. I guess this is the necessary price we have to pay for democracy.
Politicians beware ! The people have spoken and shown their displeasure and they will speak again if the circumstances warrant their so doing. Let us hope that there is no need for us to go to the polls again in the near future.
JKHC ( Sept., 7, 2010 )
With Labour's 72 and the Coalition's 73 seats Labour has now got the magic number of 76 ( 72 + 1 + 3 ) versus the Coalition's 74 seats ( their own 73 + 1 independent MP , namely, Bob Katter ). Labour is expected to form a new coalition government within the next 24 hours with the consent of the Governor General - The Hon. Quentin Bryce AC.
While I am glad that my prediction as set out in my previous blog entry have proven to be correct I have a mixed feeling because if Labour does not clean up its acts Australians and a few generations down the line will still be paying for the deficit black hole created by their barely 3 years in power up to the August 21 Federal election.
I sincerely hope for the good of all Australian citizens that Labour will clean up its acts and appreciate this second lease on their political life to make amends on all its previous follies. If Labour has truly learned its lesson from the August 21 election it may yet earn its place in Australian history. It will be an uphill battle for them though with their new coalition partners ( 1 Green and 3 independent MPs ). Labour's hands will be more securely tied by a new coalition agreement undertaking to form a stable government. This agreement must be executed before the Governor General will give her consent and blessing to the new coalition government as required under the Australian constitution. There will definitely be greater accountability on the party of the new government which is the desired result of a healthy democratic system though at the expense of a bit reduced efficiency. This is understandable because more negotiations may be required to pass some controversial legislation in future. I guess this is the necessary price we have to pay for democracy.
Politicians beware ! The people have spoken and shown their displeasure and they will speak again if the circumstances warrant their so doing. Let us hope that there is no need for us to go to the polls again in the near future.
JKHC ( Sept., 7, 2010 )
Tuesday, August 31, 2010
Where do Australians go from here ?
With a hung parliament arising from the August 21 Federal election the two main parties now have 73 seats for the Liberal / National Party coalition and 72 seats for the caretaker Labour government respectively. Just on the numbers the coalition seems to have the upper hand but I think otherwise.
The key for the successful formation of a new Australian government seems to rest in the 4 independents and 1 Green Party MP in the House of Representatives as well as the 9 Green senators in the Senate. Prior to the election Green and Labour had signed an agreement to allocate the Green votes under the party preference system over to Labour in constituency where the Green had become the second best party in terms of votes. This was done because Green and Labour have a more similar political philosophy compared to the coalition's more conservative or right wing thinking. This being the case Labour has achieved a marginal majority in terms of popular votes over the coalition. Although there has been reports that the coalition has now edged over Labour in this respect by a few thousand popular votes. The final position with regard to the distribution of the popular votes will be known when all counting is completed by September 3.
Despite this seeming catching up by the coalition which could be interpreted as having a marginally better people's mandate the practical result would still depend on the stance of the 4 independent MP and 1 Green who could safely be counted as a Labour supporter as with the preferential vote arrangement between the two parties as mentioned above.
Furthermore 3 out of 4 of the independents are break away members of the National Party ( a member party of the coalition ) which mainly represents rural interests. Each independent MP has his own axe to grind with the National Party. Therefore, the likelihood of a successful co-operation agreement between these independents and the coalition is very much in doubt.
In the Senate, the Green Party now has 9 senators. This commands a delicate balance of power in the upper house. Thus, if Labour can forged an alliance with 3 out of the 4 independents plus 1 Green MP the caretaker Labour government will achieve the required 76 seats in the lower house. Based on the above line of thinking a new Labour minority government in coalition with 1 Green and 3 other independents ( if these are agreeable ) could possibly be formed.
Constitutionally, two things can happen with a hung parliament. First, a minority government could be formed in coalition with the 4 independents or 1 Green MP with 3 of the 4 independent MPs. Second, the caretaker Labour could recommend to the Governor General to hold another general election in the immediate future if the Liberal / National Party coalition also fails to reach a minority government agreement with the 1 Green MP and any 3 of the 4 independent MPs as the Labour Party is trying to do.
The second scenario is unlikely due to the huge cost of another immediate election. Also, there is the paramount concern over voter fatigue.
Should the first scenario materialize the newly formed government could possibly be unstable. If any new legislation which has been initially passed in the Senate is rejected by the House of Representatives twice even after modification this will trigger a double dissolution of the legislature. Another general election must be held forthwith to obtain another voters mandate for the incumbent government ( be it a Labour minority or Liberal / National Party minority government ). This will become a make or break situation for the then incumbent government.
My humble prediction is that Labour has a better chance of forming a minority government but it will seek the earliest possible opportunity to call another election when the opinion polls show a substantial improvement in favour of Labour. Of course, the main obstacle to this cunning move could be prevented by the independents joining the new government to obtain an undertaking from Labour that an early election cannot be called without the independents' consent.
Australians just have to keep their fingers crossed to let the horse trading take its course. Whoever run the next Australian Federal government must learn their lesson from this hung parliament and clean up their acts. Good luck to all Australians. May you be blessed with a better government that the lucky country deserves.
JKHC ( 1/9/10 )
The key for the successful formation of a new Australian government seems to rest in the 4 independents and 1 Green Party MP in the House of Representatives as well as the 9 Green senators in the Senate. Prior to the election Green and Labour had signed an agreement to allocate the Green votes under the party preference system over to Labour in constituency where the Green had become the second best party in terms of votes. This was done because Green and Labour have a more similar political philosophy compared to the coalition's more conservative or right wing thinking. This being the case Labour has achieved a marginal majority in terms of popular votes over the coalition. Although there has been reports that the coalition has now edged over Labour in this respect by a few thousand popular votes. The final position with regard to the distribution of the popular votes will be known when all counting is completed by September 3.
Despite this seeming catching up by the coalition which could be interpreted as having a marginally better people's mandate the practical result would still depend on the stance of the 4 independent MP and 1 Green who could safely be counted as a Labour supporter as with the preferential vote arrangement between the two parties as mentioned above.
Furthermore 3 out of 4 of the independents are break away members of the National Party ( a member party of the coalition ) which mainly represents rural interests. Each independent MP has his own axe to grind with the National Party. Therefore, the likelihood of a successful co-operation agreement between these independents and the coalition is very much in doubt.
In the Senate, the Green Party now has 9 senators. This commands a delicate balance of power in the upper house. Thus, if Labour can forged an alliance with 3 out of the 4 independents plus 1 Green MP the caretaker Labour government will achieve the required 76 seats in the lower house. Based on the above line of thinking a new Labour minority government in coalition with 1 Green and 3 other independents ( if these are agreeable ) could possibly be formed.
Constitutionally, two things can happen with a hung parliament. First, a minority government could be formed in coalition with the 4 independents or 1 Green MP with 3 of the 4 independent MPs. Second, the caretaker Labour could recommend to the Governor General to hold another general election in the immediate future if the Liberal / National Party coalition also fails to reach a minority government agreement with the 1 Green MP and any 3 of the 4 independent MPs as the Labour Party is trying to do.
The second scenario is unlikely due to the huge cost of another immediate election. Also, there is the paramount concern over voter fatigue.
Should the first scenario materialize the newly formed government could possibly be unstable. If any new legislation which has been initially passed in the Senate is rejected by the House of Representatives twice even after modification this will trigger a double dissolution of the legislature. Another general election must be held forthwith to obtain another voters mandate for the incumbent government ( be it a Labour minority or Liberal / National Party minority government ). This will become a make or break situation for the then incumbent government.
My humble prediction is that Labour has a better chance of forming a minority government but it will seek the earliest possible opportunity to call another election when the opinion polls show a substantial improvement in favour of Labour. Of course, the main obstacle to this cunning move could be prevented by the independents joining the new government to obtain an undertaking from Labour that an early election cannot be called without the independents' consent.
Australians just have to keep their fingers crossed to let the horse trading take its course. Whoever run the next Australian Federal government must learn their lesson from this hung parliament and clean up their acts. Good luck to all Australians. May you be blessed with a better government that the lucky country deserves.
JKHC ( 1/9/10 )
Tuesday, August 24, 2010
A short message to the so-called Australian Kingmakers - the newly elected independent MPs
With a hung parliament resulting from Australia's August 21 federal election the 4 confirmed independent MPs become the key to the formation of the next federal parliament. The election results clearly indicate that there is a trend for voters to shun the mainstream political parties. While democracy has delightfully prevailed in Australia we have also created another unhealthy political situation in which the successful formation of the next federal government will be left to the decision of the 4 independent MPs as to which main party they will support. This is supreme power in their hands. As power corrupts without any exception there could possibly be unreasonable demands from these so-called Kingmakers.
Here is my short message to them. The NATION IS WATCHING closely at your actions and decisions. Remember that the outgoing government owes its downfall to getting out of touch with the citizens' needs and aspirations. Wasteful and rash spending decisions resulting from an obsession to become the only advanced economy to stay out of recession after the 2008 financial tsunami at the nation's expense. The evil and sinister move of the party power brokers to dethrone a prime minister who though has become egocentric Kevin 07 was nevertheless given a people's mandate in the 2007 election. The voters should decide their own prime minister in the then upcoming election and to hell with all power brokers who are nothing but shadowy instigators treating themselves as uncrowned kings of the nation.
While it is understandable that the newly elected independent MPs are obligated to get a better deal for their electorate out of the necessary horse-trading in the process of negotiating with the mainstream parties they must not hold the country at ransom for the purpose of achieving personal glory or selfish ends. The wider interests of the country at large must be equally served.
As most of the so-called Kingmakers represent Australian rural interest issues such as broadband coverage, irrigation and health services could be key issues on the negotiation table. Tough bargaining will be on the cards. Nevertheless, the ultimate Kingmakers are the voters so never attempt to disfranchise the small people by serving narrow group, party or personal interests. Voters have put the so-called Kingmakers where they are now and so can they remove them if the so-called Kingmakers are out of line.
Given the fact that independents usually have very specific reasons be they personal or policy issues to stand as independent candidates it is very easy for them to treat this Kingmaker opportunity as payback time. Mind you don't get intoxicated by your momentary crown of control but rather do the right thing and serve the wider interests of the people and you just might become kings of people's hearts.
I attach herewith a link to the press interview of one so-called Kingmakers as he arrived at the Australian capital city of Canberra. Do we have to worry about them being intoxicated by their momentary power and glory ? Make your own judgment :- http://www.abc.net.au/news/video/2010/08/24/2992392.htm
JKHC ( 25/8/10 )
Here is my short message to them. The NATION IS WATCHING closely at your actions and decisions. Remember that the outgoing government owes its downfall to getting out of touch with the citizens' needs and aspirations. Wasteful and rash spending decisions resulting from an obsession to become the only advanced economy to stay out of recession after the 2008 financial tsunami at the nation's expense. The evil and sinister move of the party power brokers to dethrone a prime minister who though has become egocentric Kevin 07 was nevertheless given a people's mandate in the 2007 election. The voters should decide their own prime minister in the then upcoming election and to hell with all power brokers who are nothing but shadowy instigators treating themselves as uncrowned kings of the nation.
While it is understandable that the newly elected independent MPs are obligated to get a better deal for their electorate out of the necessary horse-trading in the process of negotiating with the mainstream parties they must not hold the country at ransom for the purpose of achieving personal glory or selfish ends. The wider interests of the country at large must be equally served.
As most of the so-called Kingmakers represent Australian rural interest issues such as broadband coverage, irrigation and health services could be key issues on the negotiation table. Tough bargaining will be on the cards. Nevertheless, the ultimate Kingmakers are the voters so never attempt to disfranchise the small people by serving narrow group, party or personal interests. Voters have put the so-called Kingmakers where they are now and so can they remove them if the so-called Kingmakers are out of line.
Given the fact that independents usually have very specific reasons be they personal or policy issues to stand as independent candidates it is very easy for them to treat this Kingmaker opportunity as payback time. Mind you don't get intoxicated by your momentary crown of control but rather do the right thing and serve the wider interests of the people and you just might become kings of people's hearts.
I attach herewith a link to the press interview of one so-called Kingmakers as he arrived at the Australian capital city of Canberra. Do we have to worry about them being intoxicated by their momentary power and glory ? Make your own judgment :- http://www.abc.net.au/news/video/2010/08/24/2992392.htm
JKHC ( 25/8/10 )
Saturday, August 21, 2010
Lesson on democracy from the Australian federal elections 2010
I have just voted in the the Australian federal election 2010 which is currently underway. Based on the confirmed voting trend by the Electoral Commission it is most likely that there will be a hung federal parliament.
There are 150 seats in the House of Representatives so that an absolute majority is 76. The way things are going it would appear that the incumbent Labour government and the opposition Coalition ( between the Liberal and National Party ) will get 73 for Labour, 72 for the Coalition , 3 or 4 for independent candidates ( who are break-away members of the National Party mainly representing rural Queensland interest ) plus 1 or 2 for the Green Party ( the environmental protection party with international connection to all Green Parties worldwide ).
With no clear majority for either the incumbent Labour or the opposition Coalition parties either of them can only form a new government if the independent elected members agree to go into another ruling coalition with either major party. This will take a lot of horse trading because the Governor General will only swear in a coalition government after the minor members ( in this case the independents ) of that coalition have first entered into a charter with the main coalition party to ensure that the new government is a stable and workable governing team. So, the 3 or 4 independent elected members of parliament will have a decisive say to make a new ruling coalition a possibility. This could be a long drawn out process.
Political technicality aside, this election has already proven that the incumbent Labour government is suffering from a severe backlash from some failed policies as well as the dramatic and perhaps sinister circumstances surrounding the sudden change of the former Labour Party leader, Kevin Rudd in late June, 2010. Many voters see the last event as the result of Labour Party power brokers calling the shots by ousting the originally popular former Prime Minister, Kevin Rudd through internal party dirty politics. So much so that the press has dubbed Mr. Rudd's sudden resignation from office a political assassination of the former Prime Minister.
Out of this political high drama emerged the first woman Prime Minister of Australia Julia Gillard in late June. At first it was hailed by society as well as staunch supporters of the equality of the sexes as a great victory for Australian society which is still male dominant. This euphoria quickly died down and the press started talking about the present female Prime Minister, Julia Gillard's role in the political assassination. It transpired that when Kevin Rudd's popularity poll nose dived in May and June after a few failed policies ( to be discussed below ) culminating in the proposed introduction of the 65% super tax on Australian mining companies to fill in the incumbent Labour government's huge deficit black hole Julie Gilliard had made a personal undertaking to Kevin Rudd to support him in his imminent party leadership challenge. This highly confidential arrangement was probably exposed by the Rudd camp in retaliation of the so-called back-stabbing by Julia Gillard.
The allegation of political assassination is well supported by some hard circumstantial evidence. Just 3 days before Julia Gillard became the Labour Party leader upon Rudd's sudden departure she was publicly talking to the press that it was more likely for her to be going to Mars than becoming the next Australian Prime Minister implying that she was not going to challenge Rudd's leadership. It was further alleged that on the evening of the day before Mr. Rudd's sudden resignation Gillard had reassured Rudd again that she would not challenge Rudd at the Labour Party central committee meeting the next day. Within 2 hours of that pledge and after receiving several phone calls from Labour Party power brokers advising Gillard that she had enough committee member votes as canvassed by the brokers to replace Rudd , Gillard called Rudd to advise that she had enough votes to replace him. To avoid an open showdown and preserve the image of party unity in the face of a looming election Rudd was forced to resign forthwith.
This scenario has proved that the Labour Party power brokers can remove the incumbent Prime minister at will regardless of the Australian voters' choices that would have been manifested in the forthcoming election. Furthermore, the personal integrity of Gillard was called into question as she had openly expressed to the press that she would not become Prime Minister by challenging Rudd a few days before she got the job on the behest of the power brokers.
Kevin Rudd did have a lot to do with his own downfall. The final straw came with the proposed super tax on mining companies. Prior to this, the spending rot on the failed 10 billion plus roof insulation scheme and solar panels rebate project that had led to 5 under skilled roof insulation workers being electrocuted and numerous house fires resulting from improper installation work had taken their toll. How could it be possible to properly train enough skilled workers to install insulation properly in over 1.5 million homes in a few short months ? The blame was put on the former environment minister, Peter Gerrard, a past member of the pop music band Midnight Oil.
Then, there was the complete waste of another few billion dollars on rebuilding school facilities many of which are not yet due for redevelopment. It has been reported that some schools are forced to rebuild their facilities against their protest and some had to close classes early in the school year to enable reconstruction to start right away in line with the incumbent Labour government's crash plans to support the economy by creating numerous job in the face of the 2008 financial tsunami no matter what. This is a highly irresponsible attitude which is all geared to the empty fame of becoming the only economy in the developed world to avoid recession. This is so typical of politicians to get their names in the history book at the expense of the ordinary, honest & hard-working citizens. When I see single mothers at the supermarket check-outs returning candy bars meant for the kids and cutting their basic necessities due to the shortage of just one or two dollars I simply jump in anger for the tremendously irresponsible wastes such as the above spending rots not to mention the huge army of the entourage of some 130 members ( including a personal official photographer for Kevin Rudd ) at the Copenhagen World Environment Summit in 2009 bearing in mind that even the USA contingent was smaller than that of Australia. In the face of such sheer waste of taxpayers' dollars, Rudd's downfall ( most probably due to his easy win against John Howard of the former Coalition government back in November, 2007 that has gotten to his head ) is inevitable. Power corrupts and intoxicates. I see few exceptions in politics. Other examples of self-destructive egos can be seen in John Howard and even Margaret Thatcher.
Coming back to the working of the democratic process I am glad to say that it is alive and kicking in my adopted country which I reluctantly accepted due to the the June 4, Tiananmen Massacre and the totalitarian regime in my homeland. According to the latest reports there has been a swing of over 400,000 ( about 3% of voters ) of the primary votes from Labour to the Coalition. However, this should not be construed as the Coalition's success but rather a protest vote because the Coalition has no better offer in terms of policies. I originally plan to cast a blank ballot paper but on second thought that would be dodging my responsibility as a voter. So, I voted for the Green Party instead with the hope of getting a hung parliament which is the way things are heading. Whoever forms the next coalition government cannot have an absolute majority and absolute say in terms of their own party policies. That will be a check and balance on any ruling government run on inflated egos. Democracy means holding your government accountable and I am glad that citizens can still do that effectively in Australia. The great saying of President Abraham Lincoln still rings loud in our ears : - " No man is good enough to govern another man without that other's consent . "
The readers' comments and inputs are warmly welcome !
JKHC
( 22/8/10 at 12.45 a.m. Australian East Coast Standard Time )
There are 150 seats in the House of Representatives so that an absolute majority is 76. The way things are going it would appear that the incumbent Labour government and the opposition Coalition ( between the Liberal and National Party ) will get 73 for Labour, 72 for the Coalition , 3 or 4 for independent candidates ( who are break-away members of the National Party mainly representing rural Queensland interest ) plus 1 or 2 for the Green Party ( the environmental protection party with international connection to all Green Parties worldwide ).
With no clear majority for either the incumbent Labour or the opposition Coalition parties either of them can only form a new government if the independent elected members agree to go into another ruling coalition with either major party. This will take a lot of horse trading because the Governor General will only swear in a coalition government after the minor members ( in this case the independents ) of that coalition have first entered into a charter with the main coalition party to ensure that the new government is a stable and workable governing team. So, the 3 or 4 independent elected members of parliament will have a decisive say to make a new ruling coalition a possibility. This could be a long drawn out process.
Political technicality aside, this election has already proven that the incumbent Labour government is suffering from a severe backlash from some failed policies as well as the dramatic and perhaps sinister circumstances surrounding the sudden change of the former Labour Party leader, Kevin Rudd in late June, 2010. Many voters see the last event as the result of Labour Party power brokers calling the shots by ousting the originally popular former Prime Minister, Kevin Rudd through internal party dirty politics. So much so that the press has dubbed Mr. Rudd's sudden resignation from office a political assassination of the former Prime Minister.
Out of this political high drama emerged the first woman Prime Minister of Australia Julia Gillard in late June. At first it was hailed by society as well as staunch supporters of the equality of the sexes as a great victory for Australian society which is still male dominant. This euphoria quickly died down and the press started talking about the present female Prime Minister, Julia Gillard's role in the political assassination. It transpired that when Kevin Rudd's popularity poll nose dived in May and June after a few failed policies ( to be discussed below ) culminating in the proposed introduction of the 65% super tax on Australian mining companies to fill in the incumbent Labour government's huge deficit black hole Julie Gilliard had made a personal undertaking to Kevin Rudd to support him in his imminent party leadership challenge. This highly confidential arrangement was probably exposed by the Rudd camp in retaliation of the so-called back-stabbing by Julia Gillard.
The allegation of political assassination is well supported by some hard circumstantial evidence. Just 3 days before Julia Gillard became the Labour Party leader upon Rudd's sudden departure she was publicly talking to the press that it was more likely for her to be going to Mars than becoming the next Australian Prime Minister implying that she was not going to challenge Rudd's leadership. It was further alleged that on the evening of the day before Mr. Rudd's sudden resignation Gillard had reassured Rudd again that she would not challenge Rudd at the Labour Party central committee meeting the next day. Within 2 hours of that pledge and after receiving several phone calls from Labour Party power brokers advising Gillard that she had enough committee member votes as canvassed by the brokers to replace Rudd , Gillard called Rudd to advise that she had enough votes to replace him. To avoid an open showdown and preserve the image of party unity in the face of a looming election Rudd was forced to resign forthwith.
This scenario has proved that the Labour Party power brokers can remove the incumbent Prime minister at will regardless of the Australian voters' choices that would have been manifested in the forthcoming election. Furthermore, the personal integrity of Gillard was called into question as she had openly expressed to the press that she would not become Prime Minister by challenging Rudd a few days before she got the job on the behest of the power brokers.
Kevin Rudd did have a lot to do with his own downfall. The final straw came with the proposed super tax on mining companies. Prior to this, the spending rot on the failed 10 billion plus roof insulation scheme and solar panels rebate project that had led to 5 under skilled roof insulation workers being electrocuted and numerous house fires resulting from improper installation work had taken their toll. How could it be possible to properly train enough skilled workers to install insulation properly in over 1.5 million homes in a few short months ? The blame was put on the former environment minister, Peter Gerrard, a past member of the pop music band Midnight Oil.
Then, there was the complete waste of another few billion dollars on rebuilding school facilities many of which are not yet due for redevelopment. It has been reported that some schools are forced to rebuild their facilities against their protest and some had to close classes early in the school year to enable reconstruction to start right away in line with the incumbent Labour government's crash plans to support the economy by creating numerous job in the face of the 2008 financial tsunami no matter what. This is a highly irresponsible attitude which is all geared to the empty fame of becoming the only economy in the developed world to avoid recession. This is so typical of politicians to get their names in the history book at the expense of the ordinary, honest & hard-working citizens. When I see single mothers at the supermarket check-outs returning candy bars meant for the kids and cutting their basic necessities due to the shortage of just one or two dollars I simply jump in anger for the tremendously irresponsible wastes such as the above spending rots not to mention the huge army of the entourage of some 130 members ( including a personal official photographer for Kevin Rudd ) at the Copenhagen World Environment Summit in 2009 bearing in mind that even the USA contingent was smaller than that of Australia. In the face of such sheer waste of taxpayers' dollars, Rudd's downfall ( most probably due to his easy win against John Howard of the former Coalition government back in November, 2007 that has gotten to his head ) is inevitable. Power corrupts and intoxicates. I see few exceptions in politics. Other examples of self-destructive egos can be seen in John Howard and even Margaret Thatcher.
Coming back to the working of the democratic process I am glad to say that it is alive and kicking in my adopted country which I reluctantly accepted due to the the June 4, Tiananmen Massacre and the totalitarian regime in my homeland. According to the latest reports there has been a swing of over 400,000 ( about 3% of voters ) of the primary votes from Labour to the Coalition. However, this should not be construed as the Coalition's success but rather a protest vote because the Coalition has no better offer in terms of policies. I originally plan to cast a blank ballot paper but on second thought that would be dodging my responsibility as a voter. So, I voted for the Green Party instead with the hope of getting a hung parliament which is the way things are heading. Whoever forms the next coalition government cannot have an absolute majority and absolute say in terms of their own party policies. That will be a check and balance on any ruling government run on inflated egos. Democracy means holding your government accountable and I am glad that citizens can still do that effectively in Australia. The great saying of President Abraham Lincoln still rings loud in our ears : - " No man is good enough to govern another man without that other's consent . "
The readers' comments and inputs are warmly welcome !
JKHC
( 22/8/10 at 12.45 a.m. Australian East Coast Standard Time )
Monday, April 20, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 20 ) - Revolutionary Reasoning for Revival
http://www.nytimes.com/2009/04/22/business/22markets.html?ref=business
My comments on the updated position of the global financial crisis :-
My comments on the update situation :
It has been some 5 years since the global financial crisis first started to engulf the world and caused unspeakable misery on the human race as a whole. Most unfortunately, my humble predictions as set out in the conclusion of my economic essay ( Section ( 14 ) ) below has become a sad reality. Specifically, I predicted that it may take up to 5 years for the world economy to start its upward trend from the dismal depression caused by the global financial crisis.
There are definitely evidence of a bottoming out but only feeble signs of a sustained recovery. I sincerely hope that my worst case scenario prediction of a 10 years recovery cycle will not come true.
In view of the continuing crisis, it may serve a good purpose to revisit my essay on the basic economic principles from the lay person's point of view. Needless to say, your comments will be most appreciated.
JKHC ( May 31, 2013 ).
My comments on the latest situation :
According to the US Treasury the employment situation in USA is steadily on the recovery track. Therefore, they had previously indicated that the quantitative easing measure of Government bonds buying might be slowly wound down. However, they also decided to delay its implementation at this point in time which is a welcoming move. So, the long awaited recovery is finally on the way and my humble prediction of the 5 years' global economic recovery from the 2008 global financial crisis seems to be realising to my great delight ( certainly everyone should be delighted ). Please refer to the following news link from The New York Times for further details :-
http://www.nytimes.com/2013/09/19/business/economy/fed-in-surprise-move-postpones-retreat-from-stimulus-campaign.html?nl=todaysheadlines&emc=edit_th_20130919&_r=1&
JKHC ( Sept., 22, 2013 )
Link to my economic essay - 2008 Economic & Financial Tsunami - An Overview for the Lay Person :-
https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxqa2hjbGlmZXN0eWxlfGd4OjY4MWY3YTM5ZDFmY2NmZTU
After all the excitement generated by the G20 summit has died down we are still faced with the stark reality of a volatile stock market as well as a growing army of the unemployed ( see above link to The New York Times report ). This kind of roller coaster rides in the financial market can be expected before the optimistic sentiments supported by a complete restoration of consumer confidence in the financial system return for good. It will take a tremendous push in confidence to revive the Wall Street bull which seems to be dead to many investors at the moment.
I am not retracting my assertion that the recession has bottomed out nor am I saying that the results of the G20 summit are not generating the required uplifting effects on the global economy. Apart from the fact that positive economic measures take time to work ( this is the famous or infamous - depending on how you look at it - time lag concept in economics ) there is also the most important element of consumer confidence not having been fully restored. The time lag in the manifestation of the positive results of the good economic measures lead to consumers doubting that the recession has actually bottomed out. Therefore, most of them will hold back their spending plans out of conservatism and hold a wait and see attitude. This unfortunate but understandable consumer reaction has the undesirable effect of counteracting the positive efforts of all government spending aimed at revitalizing the economy. This is also the main reason why no interference with the normal working of the economy should be made unless it is absolutely necessary in a market or capitalistic economy. It also highlights the defect of a planned or socialist economy. Nobody is to blame for this less than perfect situation which must be rectified before the global economy can get back on an upward trend.
So, where does the key to breaking this vicious circle created by the time lag effect lie ? In my humble opinion, the key lies in the rethinking or realignment of our value judgment or our value system. The concept of maximization of utility ( satisfaction ) or profit as has been generally accepted for more than 240 years since Adam Smith is actually letting us down. This maximization concept while holding true with the individual ( microeconomics ) spells disaster for the economy as a whole ( macroeconomics ). The hard lesson economists have learned from the Great Depression of the 1930s is this. Savings are good for the individual but bad for the economy at large. This is a well known paradox in economics called the PARADOX OF THRIFT. Being thrifty at the micro level is a virtue but it is a public vice when practiced by society as a whole on the macro level because the latter situation inevitably leads to a multiple ( under the ECONOMIC MULTIPLIER EFFECT - in this particular case, NEGATIVE MULTIPLIER EFFECT ) or more than proportional reduction in total national consumption that creates a miserable army of the unemployed. All these basic economic concepts are explained in the lay person's terms in my article - 2008 Economic & Financial Tsunami - An Overview for the Lay Person - here ( http://sites.google.com/site/jkhclifestyle/Home/2008-economic---financial-tsunami ) or access my website by clicking on the title of this blog and going to the navigation bar on the left hand side of my home page.
So, what is this rethinking or realignment of value that I am advocating ? It is simply this. While maximization of utility and profit is good and is a basic human economic right there is no need to maximize 100% which will bring about sorrow and misery for everyone. In fact, I would go so far as to argue that 100% maximization of utility or profit is another form of greed that the black sheep of the financial world have been guilty of and that has brought us to our present predicament.
Let us take a simple example. As the global economy free falls as in the past 8 months or so the property prices also fall drastically. All the prospective buyers will maintain a wait and see attitude. As some desperate sellers are eager to sell due the need for cash brought about by the financial tsunami prices of properties will crash. This is because buyers want to own a house for a song. In other words, buyers want to benefit ( as they are fully entitled to ) at the misfortune of sellers. Of course, there is a bottom line to any fall which is the cost of building those houses. When the bottom line is reached no one will build any new houses because no profit can be made. This will ultimately cause a shortage of supply and a gradual rise of the house prices due to deferred or built up demand. Sadly though millions of building workers and those in related industries will join the growing army of the unemployed before the bottom line is reached at which time the value of the properties currently owned by the well off sector of the population will also hit the bottom doing nobody any good. The message here is to buy when there is a reasonable rate of return on your investment. You can't win them all ( 100% ). Let us say you may not be able to buy the house you like when the price falls further because others may grab the bargain before you do. Also, if you earn every single cent from everyone on earth you will lose all your business ( in the case of running a business ) because you are such a perfect ( 100% ) business entrepreneur that you make the entire global population go bankrupt. Again, the clear message is leave something for others or you will ultimately suffer from your 100% maximization of profit at others' expense. The same reasoning applies to the ideal situation of an exact balance of payment in international trade between countries ( see my article mentioned above ).
Similarly, to hold back your original travelling plans, buying a new car every 5 years or reducing the frequency of your restaurant patronage will create the same multiple shrinkage in consumer spending and hence greater unemployment. Am I advocating spending beyond our means then ? Certainly not. I am just appealing to the still well off sector of the population to stick to your original spending patterns. This is the best and most moral thing to do to save the world from a deep recession and to help alleviate unemployment. I appreciate the financial hurt you rich guys have suffered through the endless greed of the black sheep of Wall Street. Yours truly has also met the same fate. My wife has bought a lot of HSBC Bank shares at around $100 ( Hong Kong currency ) per share. Now, the share is just half of that value. I contributed the entire sum for the current rights issue just to heal her wounded pride. Really, it is nothing more than their pride that the well off sector of the global village was hit badly by the financial tsunami. Most rich people cannot spend all their wealth in their own life time anyway. Besides, if we don't stick to our original spending plans we can never be certain whether or not we will be healthy enough or still alive to enjoy using our hard earned dollars when the present crisis is over. Of course, I sincerely hope and pray that we all will be. The only certain thing at this point in time is that the global financial crisis will never be over without our earnest efforts to save it from further free fall. In my humble opinion, any successful rescue plan must entail some revolutionary reasoning or a revaluation of our value system as outlined above.
To recapitulate, the realignment of our value judgment needed to overcome the financial tsunami is this. Don't aim at 100% maximization of our utility or profit. If we wait for others to spend first and they wait for us to do the same the economy will never improve regardless of how much government spending is injected into the economy. Furthermore, private consumption is always superior to government spending because the individual knows exactly what he or she needs so that there will not be any wastage. Then, the main bulk of private consumption is related to consumer products that can create immediate employment and a direct boost to business and consumer confidence. Besides, what the government spends will be ultimately borne by all of us - the taxpayers. Rather do our part in the normal way by keeping to our original spending plans. This is my earnest appeal to the rich and privileged sector of the global village. Of course, faith in the market system and the goodwill of our fellow citizens is required. A lack of faith in the future of our economy reflects on a lack of confidence in the collective power and potential of the whole human kind especially in ourselves. Please spend and prop up the economy and the global economy will be back to her healthy and normal self in no time !
JKHC.
My comments on the updated position of the global financial crisis :-
My comments on the update situation :
It has been some 5 years since the global financial crisis first started to engulf the world and caused unspeakable misery on the human race as a whole. Most unfortunately, my humble predictions as set out in the conclusion of my economic essay ( Section ( 14 ) ) below has become a sad reality. Specifically, I predicted that it may take up to 5 years for the world economy to start its upward trend from the dismal depression caused by the global financial crisis.
There are definitely evidence of a bottoming out but only feeble signs of a sustained recovery. I sincerely hope that my worst case scenario prediction of a 10 years recovery cycle will not come true.
In view of the continuing crisis, it may serve a good purpose to revisit my essay on the basic economic principles from the lay person's point of view. Needless to say, your comments will be most appreciated.
JKHC ( May 31, 2013 ).
My comments on the latest situation :
According to the US Treasury the employment situation in USA is steadily on the recovery track. Therefore, they had previously indicated that the quantitative easing measure of Government bonds buying might be slowly wound down. However, they also decided to delay its implementation at this point in time which is a welcoming move. So, the long awaited recovery is finally on the way and my humble prediction of the 5 years' global economic recovery from the 2008 global financial crisis seems to be realising to my great delight ( certainly everyone should be delighted ). Please refer to the following news link from The New York Times for further details :-
http://www.nytimes.com/2013/09/19/business/economy/fed-in-surprise-move-postpones-retreat-from-stimulus-campaign.html?nl=todaysheadlines&emc=edit_th_20130919&_r=1&
JKHC ( Sept., 22, 2013 )
Link to my economic essay - 2008 Economic & Financial Tsunami - An Overview for the Lay Person :-
https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxqa2hjbGlmZXN0eWxlfGd4OjY4MWY3YTM5ZDFmY2NmZTU
After all the excitement generated by the G20 summit has died down we are still faced with the stark reality of a volatile stock market as well as a growing army of the unemployed ( see above link to The New York Times report ). This kind of roller coaster rides in the financial market can be expected before the optimistic sentiments supported by a complete restoration of consumer confidence in the financial system return for good. It will take a tremendous push in confidence to revive the Wall Street bull which seems to be dead to many investors at the moment.
I am not retracting my assertion that the recession has bottomed out nor am I saying that the results of the G20 summit are not generating the required uplifting effects on the global economy. Apart from the fact that positive economic measures take time to work ( this is the famous or infamous - depending on how you look at it - time lag concept in economics ) there is also the most important element of consumer confidence not having been fully restored. The time lag in the manifestation of the positive results of the good economic measures lead to consumers doubting that the recession has actually bottomed out. Therefore, most of them will hold back their spending plans out of conservatism and hold a wait and see attitude. This unfortunate but understandable consumer reaction has the undesirable effect of counteracting the positive efforts of all government spending aimed at revitalizing the economy. This is also the main reason why no interference with the normal working of the economy should be made unless it is absolutely necessary in a market or capitalistic economy. It also highlights the defect of a planned or socialist economy. Nobody is to blame for this less than perfect situation which must be rectified before the global economy can get back on an upward trend.
So, where does the key to breaking this vicious circle created by the time lag effect lie ? In my humble opinion, the key lies in the rethinking or realignment of our value judgment or our value system. The concept of maximization of utility ( satisfaction ) or profit as has been generally accepted for more than 240 years since Adam Smith is actually letting us down. This maximization concept while holding true with the individual ( microeconomics ) spells disaster for the economy as a whole ( macroeconomics ). The hard lesson economists have learned from the Great Depression of the 1930s is this. Savings are good for the individual but bad for the economy at large. This is a well known paradox in economics called the PARADOX OF THRIFT. Being thrifty at the micro level is a virtue but it is a public vice when practiced by society as a whole on the macro level because the latter situation inevitably leads to a multiple ( under the ECONOMIC MULTIPLIER EFFECT - in this particular case, NEGATIVE MULTIPLIER EFFECT ) or more than proportional reduction in total national consumption that creates a miserable army of the unemployed. All these basic economic concepts are explained in the lay person's terms in my article - 2008 Economic & Financial Tsunami - An Overview for the Lay Person - here ( http://sites.google.com/site/jkhclifestyle/Home/2008-economic---financial-tsunami ) or access my website by clicking on the title of this blog and going to the navigation bar on the left hand side of my home page.
So, what is this rethinking or realignment of value that I am advocating ? It is simply this. While maximization of utility and profit is good and is a basic human economic right there is no need to maximize 100% which will bring about sorrow and misery for everyone. In fact, I would go so far as to argue that 100% maximization of utility or profit is another form of greed that the black sheep of the financial world have been guilty of and that has brought us to our present predicament.
Let us take a simple example. As the global economy free falls as in the past 8 months or so the property prices also fall drastically. All the prospective buyers will maintain a wait and see attitude. As some desperate sellers are eager to sell due the need for cash brought about by the financial tsunami prices of properties will crash. This is because buyers want to own a house for a song. In other words, buyers want to benefit ( as they are fully entitled to ) at the misfortune of sellers. Of course, there is a bottom line to any fall which is the cost of building those houses. When the bottom line is reached no one will build any new houses because no profit can be made. This will ultimately cause a shortage of supply and a gradual rise of the house prices due to deferred or built up demand. Sadly though millions of building workers and those in related industries will join the growing army of the unemployed before the bottom line is reached at which time the value of the properties currently owned by the well off sector of the population will also hit the bottom doing nobody any good. The message here is to buy when there is a reasonable rate of return on your investment. You can't win them all ( 100% ). Let us say you may not be able to buy the house you like when the price falls further because others may grab the bargain before you do. Also, if you earn every single cent from everyone on earth you will lose all your business ( in the case of running a business ) because you are such a perfect ( 100% ) business entrepreneur that you make the entire global population go bankrupt. Again, the clear message is leave something for others or you will ultimately suffer from your 100% maximization of profit at others' expense. The same reasoning applies to the ideal situation of an exact balance of payment in international trade between countries ( see my article mentioned above ).
Similarly, to hold back your original travelling plans, buying a new car every 5 years or reducing the frequency of your restaurant patronage will create the same multiple shrinkage in consumer spending and hence greater unemployment. Am I advocating spending beyond our means then ? Certainly not. I am just appealing to the still well off sector of the population to stick to your original spending patterns. This is the best and most moral thing to do to save the world from a deep recession and to help alleviate unemployment. I appreciate the financial hurt you rich guys have suffered through the endless greed of the black sheep of Wall Street. Yours truly has also met the same fate. My wife has bought a lot of HSBC Bank shares at around $100 ( Hong Kong currency ) per share. Now, the share is just half of that value. I contributed the entire sum for the current rights issue just to heal her wounded pride. Really, it is nothing more than their pride that the well off sector of the global village was hit badly by the financial tsunami. Most rich people cannot spend all their wealth in their own life time anyway. Besides, if we don't stick to our original spending plans we can never be certain whether or not we will be healthy enough or still alive to enjoy using our hard earned dollars when the present crisis is over. Of course, I sincerely hope and pray that we all will be. The only certain thing at this point in time is that the global financial crisis will never be over without our earnest efforts to save it from further free fall. In my humble opinion, any successful rescue plan must entail some revolutionary reasoning or a revaluation of our value system as outlined above.
To recapitulate, the realignment of our value judgment needed to overcome the financial tsunami is this. Don't aim at 100% maximization of our utility or profit. If we wait for others to spend first and they wait for us to do the same the economy will never improve regardless of how much government spending is injected into the economy. Furthermore, private consumption is always superior to government spending because the individual knows exactly what he or she needs so that there will not be any wastage. Then, the main bulk of private consumption is related to consumer products that can create immediate employment and a direct boost to business and consumer confidence. Besides, what the government spends will be ultimately borne by all of us - the taxpayers. Rather do our part in the normal way by keeping to our original spending plans. This is my earnest appeal to the rich and privileged sector of the global village. Of course, faith in the market system and the goodwill of our fellow citizens is required. A lack of faith in the future of our economy reflects on a lack of confidence in the collective power and potential of the whole human kind especially in ourselves. Please spend and prop up the economy and the global economy will be back to her healthy and normal self in no time !
JKHC.
Tuesday, April 14, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 19 ) - Scattering of the Stars
http://www.nytimes.com/2009/04/12/business/12wall.html?_r=1&th&emc=th
According to the New York Times ( see above link ) the top talents on Wall Street are scattering to the wind because of government scrutiny of the top financial firms ( in particular the crackdown on excessive remuneration packages to top executives ) where our present predicament of the global financial crisis has originated.
There seems to be a sense of sympathy and a lot of lamentation on this scattering of the star performers on Wall Street as if the new regulatory measures had forced the exodus of our best financial talents and that we had done them a great injustice.
This kind of attitude we can do better without. If the so called talents left their fold for greener pastures ( or more greenbacks - unlimited remuneration ) they are totally justified in pursuing their personal goals. However, we must respect history and learn from our mistakes or else we all risk endless future catastrophes of a similar nature.
The basis for both democracy and free enterprise is the sanctity of basic human rights but that is not to say that the public interest must be sacrificed for the unfettered exercise of our insatiable greed for individual wealth at the expense of our fellow citizens. It is time for a more moral team of financial talents to take the helm of the Wall Street financial engine - an enlightened bunch who do not labour purely for personal gains but do hold the ideal of striving for the greater good of society as a whole and a fair go for our fellow citizens. By all means reward the talented. After all, this is the best part of a market economy in terms of incentive for personal efforts which will ultimately lead to efficiency and an optimum distribution and utilization of always limited economic resources including the most valuable category of them all - brain power or talented human resources. The catch word here is " LIMITED " without which there would not have been any need for the vital discipline of ECONOMICS. If our resources were unlimited we could just waste them to our heart's content without the fear of hanging ourselves high and dry in times of scarcity because there would never be any shortage.
Similarly, there can be no unlimited reward of efforts. The top financial talents are all supposed to be experts in economics so how could they have missed this most basic of all economic concepts of " LIMITED " everything ? The short and simple answer lies in another evil concept - DOUBLE STANDARDS. For the black sheep of our talented financial genius it has always been " LIMITED " reward for everyone else but themselves based on the basic economic principle of SCARCITY. Perhaps, I have underrated their wisdom. They are, in fact, working hard on applying this sacred economic principle. Based on the principle of SCARCITY, the less for other people the more for themselves - this is perfect logic !
I have yet to hear from any Wall Street star performer about their talented ideas on how to save ourselves from our present predicament so graciously bestowed upon us by the SCATTERING STARS OF WALL STREET. Not to say positive proposals to save the world from another Great Depression just give us their insights into their dirty tricks that had reaped themselves billions of dollars in remuneration would be a good start. This would help us to put in the right kind of regulatory system in the global financial system to prevent more future disasters.
I hereby challenge any one of the SCATTERING STARS OF WALL STREET to put up an open defense for their heinous crimes if you dare ! Or are you all standing by your Fifth Amendment right on silence lest you may incriminate yourselves ?
JKHC.
According to the New York Times ( see above link ) the top talents on Wall Street are scattering to the wind because of government scrutiny of the top financial firms ( in particular the crackdown on excessive remuneration packages to top executives ) where our present predicament of the global financial crisis has originated.
There seems to be a sense of sympathy and a lot of lamentation on this scattering of the star performers on Wall Street as if the new regulatory measures had forced the exodus of our best financial talents and that we had done them a great injustice.
This kind of attitude we can do better without. If the so called talents left their fold for greener pastures ( or more greenbacks - unlimited remuneration ) they are totally justified in pursuing their personal goals. However, we must respect history and learn from our mistakes or else we all risk endless future catastrophes of a similar nature.
The basis for both democracy and free enterprise is the sanctity of basic human rights but that is not to say that the public interest must be sacrificed for the unfettered exercise of our insatiable greed for individual wealth at the expense of our fellow citizens. It is time for a more moral team of financial talents to take the helm of the Wall Street financial engine - an enlightened bunch who do not labour purely for personal gains but do hold the ideal of striving for the greater good of society as a whole and a fair go for our fellow citizens. By all means reward the talented. After all, this is the best part of a market economy in terms of incentive for personal efforts which will ultimately lead to efficiency and an optimum distribution and utilization of always limited economic resources including the most valuable category of them all - brain power or talented human resources. The catch word here is " LIMITED " without which there would not have been any need for the vital discipline of ECONOMICS. If our resources were unlimited we could just waste them to our heart's content without the fear of hanging ourselves high and dry in times of scarcity because there would never be any shortage.
Similarly, there can be no unlimited reward of efforts. The top financial talents are all supposed to be experts in economics so how could they have missed this most basic of all economic concepts of " LIMITED " everything ? The short and simple answer lies in another evil concept - DOUBLE STANDARDS. For the black sheep of our talented financial genius it has always been " LIMITED " reward for everyone else but themselves based on the basic economic principle of SCARCITY. Perhaps, I have underrated their wisdom. They are, in fact, working hard on applying this sacred economic principle. Based on the principle of SCARCITY, the less for other people the more for themselves - this is perfect logic !
I have yet to hear from any Wall Street star performer about their talented ideas on how to save ourselves from our present predicament so graciously bestowed upon us by the SCATTERING STARS OF WALL STREET. Not to say positive proposals to save the world from another Great Depression just give us their insights into their dirty tricks that had reaped themselves billions of dollars in remuneration would be a good start. This would help us to put in the right kind of regulatory system in the global financial system to prevent more future disasters.
I hereby challenge any one of the SCATTERING STARS OF WALL STREET to put up an open defense for their heinous crimes if you dare ! Or are you all standing by your Fifth Amendment right on silence lest you may incriminate yourselves ?
JKHC.
Thursday, April 2, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 18 ) - One Giant Leap for Mankind
http://news.bbc.co.uk/2/hi/business/7979606.stm
Amid all the unfavourable talks of unbridgeable differences and threatened walkouts by France and strong opposition in further fiscal spending by Germany the G20 summit in London ended happily as ONE GIANT LEAP FOR MANKIND ! A big sigh of relief from every global citizen is now on the cards. Nor is this relief just a psychological one. Like a sweetener to any national budget this global budget for our future presented something positive for each one of us. I seldom praise the politicians but I have to say for once that G20 leaders did not let us down at the extremely critical moment which could mean make or break to our world economy. Luckily, thanks to the prevailing of common sense among all participating countries representing two-thirds of the total global population, 90% of world productive power and 80% 0f total world trade WE HAVE MADE It at least for the time being. I can comfortably say as I so boldly predicted in my article - " 2008 Economic & Financial Tsunami - An Overview for the Lay Person " ( accessible on my website by clicking on the title of this blog or any other blog on this FORUM ) that a stablization of the global economic tailspin within 3 months of the inauguration of the Obama administration should lead to a relatively bearable recession of possibly 3 years. I am really optimistic that my prediction will more or less hold true.
The implications of the measures declared in the G20 joint communique ( as per link above ) will certainly be far reaching. It is not an overstatement in any sense to say that it is ONE GIANT LEAP FOR MANKIND. Never before have the world leaders shown such common sense and wisdom coupled with foresight and great humanity. There is, indeed, a unity of purpose and forsaking of narrow national interest and pride. It is also pragmatic and far reaching and thus should form a solid foundation for the strengthening of global co-operation in future that will hopefully give rise to some form of proto global utopia operating on an enlightened form of capitaliism ( not just laissez faire devoid of human feelings and consisting of raw materialism motivated by greed and a blind search for efficiency ).
Having sung praises for the positive and encouraging measures outlined in the G20 statement I must raise some, shall we say, comments on the less than perfect aspects of the G20 proposals. For one thing, there is not yet a formal admission ( in the statement at least ) that the present dysfunctional mechanism of the international financial institutions like IMF, World Bank and other Multilateral Development Banks ( Asia Development Bank, etc. ) is the result of unfair representation of the majority of countries affected by the policies of such organizations. They are mainly private vehicles for the rich countries which have all the say. The only reference to this sensitive subject is in clause ( 20 ) : - " We agree that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based process ". This is definitely an improvement but does not correct the " rich boys club " syndrome in a fundamental way. Perhaps, the abolition of veto rights of the rich nations ( as I humbly suggested ) will enable these international financial institutions to function properly for the greater good than simply serving narrow national interest of the rich countries.
The second of my comments or reservations on the G20 statement is their rather empty " to do whatever is necessary " stance in fiscal spending to revive the global economic growth. In clause ( 6 ) of the statement G20 declared that : - " We are committed ( did not say how ? ) to deliver the scale of sustained fiscal effort to restore growth." Nor was there any definite promise to co-ordinate those efforts. Without overall planning and each country setting her own priority I am afraid there is an unacceptable risk of overall failure in stimulating growth based on scattered and isolated fiscal spending plans left to the fancy of individual nations. Although it would be too much to ask of every nation to give up their own budgetary policies I would expect at least some small % such as 10% to 15 % of each country's budget for the next 3 years be planned on a joint internationally coordinated efforts. When the global economy has recovered to her old healthy self such strict international budgetary co-ordination could then be relaxed.
All in all, the G20 summit has done exceedingly well and its achievement is beyond our most optimistic expectations. If all the measures are successfully implemented there will be a really bright future for the global economy and a completely new page for international co-operation. The world will undoubtedly be a better place operating on an enlightened market mechanism with a human heart and a higher level of moral code. My sincere congratulations to all world leaders for exercising their wisdom and common sense. I will be writing a more detailed analysis and implications of the G2o communique but before finishing today's blog I must compare my own proposals to those in the communique to hopefully improve my understanding of the rationale behind the declared G20 measures. So, here it is : -
The paramount goals of the G20 summit are clearly set out in clause (4 ) : - They are as follows
( a ) Restore confidence - ( my ( A ) ( 1 ) )
( b ) Repair financial system - ( my ( A ) ( 2 ) )
( c ) Reform financial regulatory system - ( my ( A ) ( 3 ) )
( d ) Reject protectionism - ( my ( B ) ( 1 ) )
( e ) Build a green and sustainable recovery - ( my ( B ) ( 6 ) )
I am so glad to say that I have not missed any of these paramount goals. These are so basic in economics that I should have my degree in economics stripped off had I missed anyone of the above. My related proposals ( reference number in my yesterday's blog are given in parenthesis after each of the above goals ).
My proposals that are " accepted " or appearing in the relevant clause of the G20 communique : -
( 1 ) Keep the credit flowing - ( A ) ( 2 ) - Clause ( 8 ) : - " Our actions to restore growth cannot be effective until we restore domestic lending and international capital flow."
( 2 ) Overhaul the financial regulatory system - ( A ) ( 4 ) : -
I proposed the setting up of international financial regulatory and monitoring body. Clause ( 15 ) : - " - to establish a new Financial Stability Board ( FSB ) with a strengthened mandate .....that FSB should collaborate with IMF to provide early warning of marcroeconomic and financial risks and actions needed to address them ".
( 3 ) Under my ( A ) ( 4 ) I also moved to regulate hedge funds and crack down on tax havens. Clause ( 15 ) also proposed : - " to extend our regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds ."
( 4 ) Under my ( A ) ( 4 ) I proposed crackdown on tax haven operations. Clause ( 15 ) likewise proposed this : - " to take actions against non-cooperative jurisdictions including tax havens ."
( 5 ) Again, under my ( A ) ( 4 ) I proposed banning of conflict of interests in respect of multiple financial roles. Clause ( 15 ) said this : - " to extend regulatory oversight and registration of Credit Rating Agencies to ensure they meet the international code of practice, in particular to prevent unacceptable conflicts of interest ."
( 6 ) Refrain from accusations and counter accusations - my proposal in ( B ) ( 3 )
No finger pointing or even implications of fault finding can be found in the communique to create a total sense of unity and pragmatism.
( 7 ) Promote an enlightened form of capitalism - one of my long-term proposals in ( B ) ( 5 )
By helping the poor nations for whom 100 billion have been set aside mainly through sale of IMF gold and international contribution to 500 billion extra SDR to IMF to boost total available emergency funding for countries in trouble through IMF rescue efforts the foundation of an enlightened form of capitalism has been solidly laid. There were many repeated mention of taking the interests of poor nations and the underprivileged sectors of the global population as well into consideration. This is truly a new era for raising the standard of international morality and social responsibility.
( 8 ) Don't delay the environmental measures in the name of expedience - another one of my long-term proposals in ( B ) ( 6 ).
Clause ( 4 ) clearly stated in paramount goal ( e ) of G20 that " build a green and sustainable recovery. "
My proposals not appearing in G20 communique are as follows :-
( i ) The issue of FT rescue bonds to raise rescue fund in a wise manner. My proposal in ( A ) ( 6 ).
( ii ) The capping and investigation of CEO remuneration. My proposal in ( A ) ( 4 ).
( iii ) Boost public spending on the rescue package wisely - my proposal in ( A ) ( 5 ). There was, in fact, disappointingly little on this important aspect of the rescue efforts probably because of French & German opposition to further fiscal spending before the reformed financial regulatory system is put in place. Hopefully, the important topic will feature prominently in the Fall 2009 follow-up summit and the G20 financial ministers meeting in early 2010.
Perhaps, the most encouraging consensus was the setting of a 2 % global economic growth rate by the end of 2010 as declared in clause ( 10 ). All in all the G20 summit in London is successful beyond preliminary expectations. I would not hesitate to award a 70 % grading for the G20 efforts. As for my own proposals and predictions, it is for the readers to decide. See you all soon at my next blog !
JKHC.
Amid all the unfavourable talks of unbridgeable differences and threatened walkouts by France and strong opposition in further fiscal spending by Germany the G20 summit in London ended happily as ONE GIANT LEAP FOR MANKIND ! A big sigh of relief from every global citizen is now on the cards. Nor is this relief just a psychological one. Like a sweetener to any national budget this global budget for our future presented something positive for each one of us. I seldom praise the politicians but I have to say for once that G20 leaders did not let us down at the extremely critical moment which could mean make or break to our world economy. Luckily, thanks to the prevailing of common sense among all participating countries representing two-thirds of the total global population, 90% of world productive power and 80% 0f total world trade WE HAVE MADE It at least for the time being. I can comfortably say as I so boldly predicted in my article - " 2008 Economic & Financial Tsunami - An Overview for the Lay Person " ( accessible on my website by clicking on the title of this blog or any other blog on this FORUM ) that a stablization of the global economic tailspin within 3 months of the inauguration of the Obama administration should lead to a relatively bearable recession of possibly 3 years. I am really optimistic that my prediction will more or less hold true.
The implications of the measures declared in the G20 joint communique ( as per link above ) will certainly be far reaching. It is not an overstatement in any sense to say that it is ONE GIANT LEAP FOR MANKIND. Never before have the world leaders shown such common sense and wisdom coupled with foresight and great humanity. There is, indeed, a unity of purpose and forsaking of narrow national interest and pride. It is also pragmatic and far reaching and thus should form a solid foundation for the strengthening of global co-operation in future that will hopefully give rise to some form of proto global utopia operating on an enlightened form of capitaliism ( not just laissez faire devoid of human feelings and consisting of raw materialism motivated by greed and a blind search for efficiency ).
Having sung praises for the positive and encouraging measures outlined in the G20 statement I must raise some, shall we say, comments on the less than perfect aspects of the G20 proposals. For one thing, there is not yet a formal admission ( in the statement at least ) that the present dysfunctional mechanism of the international financial institutions like IMF, World Bank and other Multilateral Development Banks ( Asia Development Bank, etc. ) is the result of unfair representation of the majority of countries affected by the policies of such organizations. They are mainly private vehicles for the rich countries which have all the say. The only reference to this sensitive subject is in clause ( 20 ) : - " We agree that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based process ". This is definitely an improvement but does not correct the " rich boys club " syndrome in a fundamental way. Perhaps, the abolition of veto rights of the rich nations ( as I humbly suggested ) will enable these international financial institutions to function properly for the greater good than simply serving narrow national interest of the rich countries.
The second of my comments or reservations on the G20 statement is their rather empty " to do whatever is necessary " stance in fiscal spending to revive the global economic growth. In clause ( 6 ) of the statement G20 declared that : - " We are committed ( did not say how ? ) to deliver the scale of sustained fiscal effort to restore growth." Nor was there any definite promise to co-ordinate those efforts. Without overall planning and each country setting her own priority I am afraid there is an unacceptable risk of overall failure in stimulating growth based on scattered and isolated fiscal spending plans left to the fancy of individual nations. Although it would be too much to ask of every nation to give up their own budgetary policies I would expect at least some small % such as 10% to 15 % of each country's budget for the next 3 years be planned on a joint internationally coordinated efforts. When the global economy has recovered to her old healthy self such strict international budgetary co-ordination could then be relaxed.
All in all, the G20 summit has done exceedingly well and its achievement is beyond our most optimistic expectations. If all the measures are successfully implemented there will be a really bright future for the global economy and a completely new page for international co-operation. The world will undoubtedly be a better place operating on an enlightened market mechanism with a human heart and a higher level of moral code. My sincere congratulations to all world leaders for exercising their wisdom and common sense. I will be writing a more detailed analysis and implications of the G2o communique but before finishing today's blog I must compare my own proposals to those in the communique to hopefully improve my understanding of the rationale behind the declared G20 measures. So, here it is : -
The paramount goals of the G20 summit are clearly set out in clause (4 ) : - They are as follows
( a ) Restore confidence - ( my ( A ) ( 1 ) )
( b ) Repair financial system - ( my ( A ) ( 2 ) )
( c ) Reform financial regulatory system - ( my ( A ) ( 3 ) )
( d ) Reject protectionism - ( my ( B ) ( 1 ) )
( e ) Build a green and sustainable recovery - ( my ( B ) ( 6 ) )
I am so glad to say that I have not missed any of these paramount goals. These are so basic in economics that I should have my degree in economics stripped off had I missed anyone of the above. My related proposals ( reference number in my yesterday's blog are given in parenthesis after each of the above goals ).
My proposals that are " accepted " or appearing in the relevant clause of the G20 communique : -
( 1 ) Keep the credit flowing - ( A ) ( 2 ) - Clause ( 8 ) : - " Our actions to restore growth cannot be effective until we restore domestic lending and international capital flow."
( 2 ) Overhaul the financial regulatory system - ( A ) ( 4 ) : -
I proposed the setting up of international financial regulatory and monitoring body. Clause ( 15 ) : - " - to establish a new Financial Stability Board ( FSB ) with a strengthened mandate .....that FSB should collaborate with IMF to provide early warning of marcroeconomic and financial risks and actions needed to address them ".
( 3 ) Under my ( A ) ( 4 ) I also moved to regulate hedge funds and crack down on tax havens. Clause ( 15 ) also proposed : - " to extend our regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds ."
( 4 ) Under my ( A ) ( 4 ) I proposed crackdown on tax haven operations. Clause ( 15 ) likewise proposed this : - " to take actions against non-cooperative jurisdictions including tax havens ."
( 5 ) Again, under my ( A ) ( 4 ) I proposed banning of conflict of interests in respect of multiple financial roles. Clause ( 15 ) said this : - " to extend regulatory oversight and registration of Credit Rating Agencies to ensure they meet the international code of practice, in particular to prevent unacceptable conflicts of interest ."
( 6 ) Refrain from accusations and counter accusations - my proposal in ( B ) ( 3 )
No finger pointing or even implications of fault finding can be found in the communique to create a total sense of unity and pragmatism.
( 7 ) Promote an enlightened form of capitalism - one of my long-term proposals in ( B ) ( 5 )
By helping the poor nations for whom 100 billion have been set aside mainly through sale of IMF gold and international contribution to 500 billion extra SDR to IMF to boost total available emergency funding for countries in trouble through IMF rescue efforts the foundation of an enlightened form of capitalism has been solidly laid. There were many repeated mention of taking the interests of poor nations and the underprivileged sectors of the global population as well into consideration. This is truly a new era for raising the standard of international morality and social responsibility.
( 8 ) Don't delay the environmental measures in the name of expedience - another one of my long-term proposals in ( B ) ( 6 ).
Clause ( 4 ) clearly stated in paramount goal ( e ) of G20 that " build a green and sustainable recovery. "
My proposals not appearing in G20 communique are as follows :-
( i ) The issue of FT rescue bonds to raise rescue fund in a wise manner. My proposal in ( A ) ( 6 ).
( ii ) The capping and investigation of CEO remuneration. My proposal in ( A ) ( 4 ).
( iii ) Boost public spending on the rescue package wisely - my proposal in ( A ) ( 5 ). There was, in fact, disappointingly little on this important aspect of the rescue efforts probably because of French & German opposition to further fiscal spending before the reformed financial regulatory system is put in place. Hopefully, the important topic will feature prominently in the Fall 2009 follow-up summit and the G20 financial ministers meeting in early 2010.
Perhaps, the most encouraging consensus was the setting of a 2 % global economic growth rate by the end of 2010 as declared in clause ( 10 ). All in all the G20 summit in London is successful beyond preliminary expectations. I would not hesitate to award a 70 % grading for the G20 efforts. As for my own proposals and predictions, it is for the readers to decide. See you all soon at my next blog !
JKHC.
Tuesday, March 31, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 17 ) - Golden Gifts for the G20 Global Summit
I must start with an apology for the lapse of 2 weeks before resuming my blogging. As advised in earlier blogs I was working on my proposals for the G20 Economic Summit to be held in London on 2nd April to decide on the joint international efforts that should be made to rescue the world from falling in to a deep recession akin to or possibly worse than the Great Depression of the 1930s.
Today's blog contains a summary of the more detailed proposals that are set out in a separate article written on the same important subject to be linked to this blog in the next few days. I have attempted to categorize my proposals under different headings for easy reference. Important advantages and disadvantages to each proposal are also briefly set out together with the relevant economic principle or rationale behind them. It is highly recommended that the reader should study my more detailed discussions in the linked article referred to at the beginning of this paragraph in due course.
Link to my economic essay :- 2008 Economic & Financial Tsunami - An Overview for the Lay Person
https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxqa2hjbGlmZXN0eWxlfGd4OjY4MWY3YTM5ZDFmY2NmZTU
( A ) Urgent Measures to be taken :-
( 1 ) Restore public confidence in the financial system.
Specific measure recommended : - Reconfirm existing government guarantee on all personal bank deposits and extend it to all countries. Those governments not in a strong financial position to do so must be supported by the IMF to which all leading and developed countries must contribute to a special FT emergency fund (IMF-SEF ) set up ASAP for this purpose. The existing contributions to IMF by member countries in the form of credit facilities are called Special Drawing Rights ( SDR ) to be allocated to all countries in need. Thus, IMF is,in fact, acting as the international lender of last resort just as the central bank is to the banking system of each individual country.
Advantage :- Consumer confidence in the financial system in every corner of the world is immediately propped up. The FT was started by the failure of just a few large US merchant banks. Any further failures in even some smaller countries may trigger another FT.
The fact that there will be no weakest link ensures that there will not be any need to utilize the special drawing rights relating to this proposed IMF-SEF.
Disadvantage : - At a time of great upheaval in every financial market and in most countries the leading nations may be reluctant to increase their contribution to IMF.
( 2 ) Keep the credit flowing
The drastic lowering of interest rates by all leading countries has not succeeded in the resumption of commercial credit flow. The reasons are two fold. Firstly, monetary policy relating to the interest rate mechanism is by nature passive. By lowering interest rate it is hoped that consumers and businesses will take advantage of the lower costs for capital thus leading to higher spending in both sectors. In reality consumer confidence is so low that business investment decisions are also adversely impacted. Secondly, even with partial government guarantee on a large range of consumer and small business loans by some government banks are still reluctant to extend credit because even a 90% guarantee by government may lead to a 10 % loss if the business or consumer loans under 90% government guarantee go bad. Thus, credit flow has been stagnant so far despite drastic reduction in the lending and deposit rates.
Specific measure recommended : - a drastic proposal to guarantee 100% by government on loans extended by banks of up to say, US$ 1,000,000.
Advantages :- This will definitely cause credit flow to smaller businesses to restart. More business activities in all sectors will create a positive atmosphere which is a great help to consumer confidence. At present the government such as USA are favouring collapsing giant corporations like those in the motor industry and the banking sector to the detriment of the small businesses. Understandably governments are under more public pressure to rescue large firms where many more jobs are at stake. The congregation of job losses under one roof ( or corporation ) attracts a lot of political attention while smaller individual groups of job losses over a wide cross section of small businesses could make an even bigger total number of job losses. The only difference is that the latter case though equally tragic does not attract as much political attention and pressure as those in the well known giant corporations.
Disadvantages : - Politicians are less inclined to give priority to small businesses which have less political bargaining power.
( 3 ) Overhaul the financial regulatory system
Specific measure recommended : - Disallow multiple roles with potential conflict of interests. For example, the same CPA firm cannot act as act both as independent auditors and financial advisers and account keeping for the same client corporation. Fund mangers & merchant bankers cannot become financial commentators and credit rating agencies at the same time. They can only do one or the other. Directors cannot vote on their own remuneration package. It must be approved by shareholders in AGM.
Set up an international monitoring and regulatory body ( possibly a branch of IMF ) to review existing and the reformed financial system in all countries especially the major financial markets and to investigate complaints on irregularities.
Put a cap on the remuneration package that can be paid to top executives. Disallow any incentive scheme that favours high risks investment activities.
Disallow multiple and inter-related derivative financial products that can be traced to tax heaven as the ultimate ownership control. For example, hedge funds based on multiple linkage of derivatives that make their true and fair market values quite impossible to be ascertained.
Dubious financial products like CDO should be banned altogether.
Advantage : - restore confidence of the general public in the financial system and prevent future recurrence of FT.
Disadvantage : - It could be a long and arduous process with heavy resistance from all interested parties.
( 4 ) Investigate and annul unreasonable remuneration packages already paid out to CEO & Top Executives
Specific measure recommended : - Investigate all excessive remuneration packages with a view to seeking a refund and annul any unreasonable remuneration contracts concluded under dubious circumstances including collusion between board of directors and top executives under corrupt corporate cultures.
Advantage : - raise the morale of the depressed general public and deter future rip off by top executives. This is also an important part of the overhaul of the whole financial system.
Disadvantage : - With the help of their cunning legal advisers these black sheep of the financial world will definitely make use of the gray areas in the law to try and get themselves off the hook. In such a likely scenario a lot of time consuming and legal efforts are required to successfully punish these criminals but it is worth our while to do so.
( 5 ) Boost public spending on the rescue package wisely
Massive spending by all leading countries has been underway since the beginning of 2009 but it has been a trial and error process unfortunately. For example, US rescue of the car industry has been a poor show of throwing good money after bad. Only now has the Obama administration just started to impose strict conditions on any further funding by requiring the resignation of incompetent CEOs and compulsory amalgamation with foreign but more efficient operators like FIAT in the case of Chrysler.
Specific measure recommended : - Try to divert part of the rescue package to directly making interest free loans to consumers on some useful items such as upgrading home computer equipment, environmentally friendly cars, etc. This is a more direct boost to consumer spending. China is making this smart move to subsidize Chinese citizens in purchasing home appliances thus raising the living standard of the village population.
Advantage : - This is a direct stimulus to consumer spending unlike indirect boost through the passive reduction of interest rates working through the banking system which is very sluggish for reasons given above. Furthermore, direct consumer spending can generate jobs and confidence through the positive multiplier effect.
Disadvantage : - It could be difficult and tedious to assess who is in need of what unless some kind of across the board cash subsidy like what the Australian government have done twice so far. Then, there is the possibility that people will just hoard the cash because of failing confidence about the future economic outlook. This can, however, be remedied by issuing spending coupons like the step taken by Taiwan but with related administrative costs.
( 6 ) Raise the rescue funds wisely
So far, the US government has relied mainly on money printing ( which it has unwisely publisied on a high profile basis to apparently reassure the financial circle of enough liquidity in the system ) and issuing more treasury bonds in the normal commercial way. The bonds are usually auctioned off in lots. As they are fixed interest instruments, the fall in their prices would mean a higher indicative interest rate which is bad for economic recovery. To a certain extent the fall in bond prices ( implying the undesirable rise in indicative interest rates ) are inevitable with more of them being supplied to the financial market to raise much needed rescue funds.
Regarding the above two rescue funds raising measures I would humbly recommend a lower profile and less reliance on money printing which simply means Uncle Sam robbing the pockets of every US Dollar holder. This is a morally questionable move. It is also a fast track to becoming a 5th class nation ( just look at Zimbabwe ). As for the increase in the issue of treasury bonds which could lead to the undesirable effect of raising the indicative interest rate their issue can be supplemented again by the issue of fixed interest rate FT RESCUE BONDS not subject to auction but promoted to fight this financial war just as Uncle Sam had done in WWII.
Specific measure recommended : - This measure of which we have plenty of experience and with existing governing laws and readily available mechanism to save much time in implementation can provide the urgently needed rescue funds for the rescue package. Besides, it is the scared duty of every citizen to defend his or her country in time of war. Heavy propaganda must be carried out to provide an atmosphere of patriotic duty to pressure the rich to channel their still abundant savings into rescue funds for rejuvenating the economy to everyone's benefit including their ( the wealthy sector of society ) own. Why have I never hear about this simple and ancient idea discussed during the whole of the FT , I wonder ? It should be done on a global basis.
Advantage : - This is a controversy free measure with existing legal, philosophical and historical basis for its immediate implementation. It also provides a beautiful opportunity on educating the public and our younger generation as regards our social responsibility.
Disadvantage : - With the interest paid on these FT RESCUE BONDS all going to the rich but ultimately financed by taxation on everyone this measure is not conducive to a fair distribution of income but this shortcoming has to be accepted in times of emergency like the present crisis.
( B ) Longer term measures
( 1 ) Fight protectionism
This is public enemy no. 1 for the growth of world economy. Historically, it has led to devastating wars and extreme poverty for all as in the Great Depression of the 1930s. It is a recipe for certain world economic disaster. Unfortunately, very few politicians can stand up to the political pressure from their electorate. Already there are signs of its raising its ugly head again in the aftermath of the FT. France protecting its motor industry, US Congress pushing for the " buy American " clause in legislation to approve rescue funds to large US firms are just a few unfortunate examples of the petty politicians at work flying in the face of the public interest of the world at large.
Specific measure recommended : - strengthening the functions of international trade organizations such as WTO and forming an impartial and effective panel to mediate trade complaints between nations. The decision of the panel must be binding and the process must work quickly before the disputes spill over to the whole world.
Advantage : - This is an ideal vehicle to set trade dispute and for the prevention of protectionism. In theory, this must be done and soon.
Disadvantage : - The rich nations have an undue weight on all trade and, in deed, world issues. Perhaps the abolition of the right of veto is a first step to remedy this less than desirable situation in international affairs.
( 2 ) Set up a separate body under WTO to organize frequent multilateral discussing and monitoring of trade unbalance
Meetings should be held say, every 6 months before the situation like the China -USA unbalance that has been dragging on for over a decade ( why is trade balance important - please read my article on 2oo8 Economic & Financial Tsunami - An Overview for the Lay Person by clicking on the title of this blog to reach my website ) runs of of control.
Advantage : - Prevention is better than cure.
Disadvantage : - Same as in ( 1 ).
( 3 ) Refrain from accusations and counter accusations
Pointing the finger and passing the buck do not solve any problems especially in the midst of this devastating aftermath of the FT. It serves everyone better to for get about differences and embrace co-operation. Nowadays, the global village is so intricately intertwined that no single country can isolate herself fro the madding crowd. Let us face the crisis with pragmatism, a sense of fairness and wisdom.
Specific measure recommended : - Put any accusations or complaints up for arbitration by an international panel set up along the line as set out above. Meanwhile, the G20 summit should carry on with discussions with a view to reaching consensus on the urgent measures required to arrest the downward spiraling world economy. global unity and consensus is the key to the success of this very important economic summit.
Advantage :- Hopefully, this no accusation policy will hasten the reaching of consensus.
Disadvantage : - Same as (B ) ( 1 ) & ( 2 ) above.
( 4 ) Don't overlook the positive multiplier effects of public spending
Everyone knows that with her over 2 trillion in reserve China will play a major role in the rescue efforts. As a matter of fact, 50% of China's reserve is tied up in US treasury bonds. This again proves the intricate relation in the world economy. There is a negative feeling and tendency toward China probably because of the Chinese government's ( mind you, not the Chinese people ) less than democratic system. I for one hates Communism ( which is actually no more ! ) or any repressive regimes. That is the sole reason for my emigration to Australia after the infamous June 4, 1989 Tiananmen Massacre of the students & workers demanding democracy and an end to corruption in the Chinese Communist Party.
As I have just said this is no time for politics or ideology. Although the GDP of China is only roughly 10% of USA according to IMF data China's positive moves such as putting forward infrastructure projects and subsidizing domestic purchases of the village population are very helpful to the world economy in terms of boosting consumer confidence and providing a positive economic outlook for the world. The multiplier effect on China's spending will be a deciding factor in the success or failure of the FT rescue. When it comes to finance and economics the multilateral interaction between individual economic units plus contingency decision making ( more popularly known as the Flock of Sheep Psychology ) imply a more than one-to-one relationship. It is not an exact science so that one plus one can be far more than two.
Advantage : - The Multiplier effect ensures the more than proportional result form any given amount of spending. Hopefully, China's contribution can ( not on her own though ) save the day.
Disadvantage : - It could give China more political leverage which can give a misleading impression of the success of a less than democratic regime.
( 5 ) Promote an enlightened form of capitalism
Capitalism is still the lesser of two evils compared to a totally planned economy in terms of economic efficiency and incentive to personal efforts but it is the latter goal that has been far too excessively overdone in Wall Street. So much so that greed has become the sole driving force hence the FT. This coupled with an almost criminal negligence in failing to regulate the US financial market and letting its corrupt corporate culture run wild are the ultimate origins of the FT. A more balanced and less materialistic but higher moral standard based incentive system should be put in place if the FT is to be avoided in future. An enlightened form of market or capitalistic system where human beings are treated as such is urgently needed. Our future survival totally depends on that !
Advantage :- An enlightened capitalistic system is the only way to save us from our present predicaments for good.
Disadvantage : - It will take a long, long time, perhaps a few generations to achieve this noble goal. Every long journey starts with the first step. We will never get there if we hesitate to take the first step.
( 6 ) Don't delay environmental protection measures under the excuse of expedience
For the long term welfare of mankind none of the existing proposals on environmental protection should be delayed because of the FT. For one thing some damages to Mother Earth are irreversible. Secondly, do not forget that environmental measures can generate economic benefits and employment as well. Kill off a few black sheep of the financial world and we are home free.
I sincerely hope and pray that some decisive and positive measures can come out of the G20 summit in London later today and that common sense will prevail for the good of the entire global village.
JKHC.
Today's blog contains a summary of the more detailed proposals that are set out in a separate article written on the same important subject to be linked to this blog in the next few days. I have attempted to categorize my proposals under different headings for easy reference. Important advantages and disadvantages to each proposal are also briefly set out together with the relevant economic principle or rationale behind them. It is highly recommended that the reader should study my more detailed discussions in the linked article referred to at the beginning of this paragraph in due course.
Link to my economic essay :- 2008 Economic & Financial Tsunami - An Overview for the Lay Person
https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxqa2hjbGlmZXN0eWxlfGd4OjY4MWY3YTM5ZDFmY2NmZTU
( A ) Urgent Measures to be taken :-
( 1 ) Restore public confidence in the financial system.
Specific measure recommended : - Reconfirm existing government guarantee on all personal bank deposits and extend it to all countries. Those governments not in a strong financial position to do so must be supported by the IMF to which all leading and developed countries must contribute to a special FT emergency fund (IMF-SEF ) set up ASAP for this purpose. The existing contributions to IMF by member countries in the form of credit facilities are called Special Drawing Rights ( SDR ) to be allocated to all countries in need. Thus, IMF is,in fact, acting as the international lender of last resort just as the central bank is to the banking system of each individual country.
Advantage :- Consumer confidence in the financial system in every corner of the world is immediately propped up. The FT was started by the failure of just a few large US merchant banks. Any further failures in even some smaller countries may trigger another FT.
The fact that there will be no weakest link ensures that there will not be any need to utilize the special drawing rights relating to this proposed IMF-SEF.
Disadvantage : - At a time of great upheaval in every financial market and in most countries the leading nations may be reluctant to increase their contribution to IMF.
( 2 ) Keep the credit flowing
The drastic lowering of interest rates by all leading countries has not succeeded in the resumption of commercial credit flow. The reasons are two fold. Firstly, monetary policy relating to the interest rate mechanism is by nature passive. By lowering interest rate it is hoped that consumers and businesses will take advantage of the lower costs for capital thus leading to higher spending in both sectors. In reality consumer confidence is so low that business investment decisions are also adversely impacted. Secondly, even with partial government guarantee on a large range of consumer and small business loans by some government banks are still reluctant to extend credit because even a 90% guarantee by government may lead to a 10 % loss if the business or consumer loans under 90% government guarantee go bad. Thus, credit flow has been stagnant so far despite drastic reduction in the lending and deposit rates.
Specific measure recommended : - a drastic proposal to guarantee 100% by government on loans extended by banks of up to say, US$ 1,000,000.
Advantages :- This will definitely cause credit flow to smaller businesses to restart. More business activities in all sectors will create a positive atmosphere which is a great help to consumer confidence. At present the government such as USA are favouring collapsing giant corporations like those in the motor industry and the banking sector to the detriment of the small businesses. Understandably governments are under more public pressure to rescue large firms where many more jobs are at stake. The congregation of job losses under one roof ( or corporation ) attracts a lot of political attention while smaller individual groups of job losses over a wide cross section of small businesses could make an even bigger total number of job losses. The only difference is that the latter case though equally tragic does not attract as much political attention and pressure as those in the well known giant corporations.
Disadvantages : - Politicians are less inclined to give priority to small businesses which have less political bargaining power.
( 3 ) Overhaul the financial regulatory system
Specific measure recommended : - Disallow multiple roles with potential conflict of interests. For example, the same CPA firm cannot act as act both as independent auditors and financial advisers and account keeping for the same client corporation. Fund mangers & merchant bankers cannot become financial commentators and credit rating agencies at the same time. They can only do one or the other. Directors cannot vote on their own remuneration package. It must be approved by shareholders in AGM.
Set up an international monitoring and regulatory body ( possibly a branch of IMF ) to review existing and the reformed financial system in all countries especially the major financial markets and to investigate complaints on irregularities.
Put a cap on the remuneration package that can be paid to top executives. Disallow any incentive scheme that favours high risks investment activities.
Disallow multiple and inter-related derivative financial products that can be traced to tax heaven as the ultimate ownership control. For example, hedge funds based on multiple linkage of derivatives that make their true and fair market values quite impossible to be ascertained.
Dubious financial products like CDO should be banned altogether.
Advantage : - restore confidence of the general public in the financial system and prevent future recurrence of FT.
Disadvantage : - It could be a long and arduous process with heavy resistance from all interested parties.
( 4 ) Investigate and annul unreasonable remuneration packages already paid out to CEO & Top Executives
Specific measure recommended : - Investigate all excessive remuneration packages with a view to seeking a refund and annul any unreasonable remuneration contracts concluded under dubious circumstances including collusion between board of directors and top executives under corrupt corporate cultures.
Advantage : - raise the morale of the depressed general public and deter future rip off by top executives. This is also an important part of the overhaul of the whole financial system.
Disadvantage : - With the help of their cunning legal advisers these black sheep of the financial world will definitely make use of the gray areas in the law to try and get themselves off the hook. In such a likely scenario a lot of time consuming and legal efforts are required to successfully punish these criminals but it is worth our while to do so.
( 5 ) Boost public spending on the rescue package wisely
Massive spending by all leading countries has been underway since the beginning of 2009 but it has been a trial and error process unfortunately. For example, US rescue of the car industry has been a poor show of throwing good money after bad. Only now has the Obama administration just started to impose strict conditions on any further funding by requiring the resignation of incompetent CEOs and compulsory amalgamation with foreign but more efficient operators like FIAT in the case of Chrysler.
Specific measure recommended : - Try to divert part of the rescue package to directly making interest free loans to consumers on some useful items such as upgrading home computer equipment, environmentally friendly cars, etc. This is a more direct boost to consumer spending. China is making this smart move to subsidize Chinese citizens in purchasing home appliances thus raising the living standard of the village population.
Advantage : - This is a direct stimulus to consumer spending unlike indirect boost through the passive reduction of interest rates working through the banking system which is very sluggish for reasons given above. Furthermore, direct consumer spending can generate jobs and confidence through the positive multiplier effect.
Disadvantage : - It could be difficult and tedious to assess who is in need of what unless some kind of across the board cash subsidy like what the Australian government have done twice so far. Then, there is the possibility that people will just hoard the cash because of failing confidence about the future economic outlook. This can, however, be remedied by issuing spending coupons like the step taken by Taiwan but with related administrative costs.
( 6 ) Raise the rescue funds wisely
So far, the US government has relied mainly on money printing ( which it has unwisely publisied on a high profile basis to apparently reassure the financial circle of enough liquidity in the system ) and issuing more treasury bonds in the normal commercial way. The bonds are usually auctioned off in lots. As they are fixed interest instruments, the fall in their prices would mean a higher indicative interest rate which is bad for economic recovery. To a certain extent the fall in bond prices ( implying the undesirable rise in indicative interest rates ) are inevitable with more of them being supplied to the financial market to raise much needed rescue funds.
Regarding the above two rescue funds raising measures I would humbly recommend a lower profile and less reliance on money printing which simply means Uncle Sam robbing the pockets of every US Dollar holder. This is a morally questionable move. It is also a fast track to becoming a 5th class nation ( just look at Zimbabwe ). As for the increase in the issue of treasury bonds which could lead to the undesirable effect of raising the indicative interest rate their issue can be supplemented again by the issue of fixed interest rate FT RESCUE BONDS not subject to auction but promoted to fight this financial war just as Uncle Sam had done in WWII.
Specific measure recommended : - This measure of which we have plenty of experience and with existing governing laws and readily available mechanism to save much time in implementation can provide the urgently needed rescue funds for the rescue package. Besides, it is the scared duty of every citizen to defend his or her country in time of war. Heavy propaganda must be carried out to provide an atmosphere of patriotic duty to pressure the rich to channel their still abundant savings into rescue funds for rejuvenating the economy to everyone's benefit including their ( the wealthy sector of society ) own. Why have I never hear about this simple and ancient idea discussed during the whole of the FT , I wonder ? It should be done on a global basis.
Advantage : - This is a controversy free measure with existing legal, philosophical and historical basis for its immediate implementation. It also provides a beautiful opportunity on educating the public and our younger generation as regards our social responsibility.
Disadvantage : - With the interest paid on these FT RESCUE BONDS all going to the rich but ultimately financed by taxation on everyone this measure is not conducive to a fair distribution of income but this shortcoming has to be accepted in times of emergency like the present crisis.
( B ) Longer term measures
( 1 ) Fight protectionism
This is public enemy no. 1 for the growth of world economy. Historically, it has led to devastating wars and extreme poverty for all as in the Great Depression of the 1930s. It is a recipe for certain world economic disaster. Unfortunately, very few politicians can stand up to the political pressure from their electorate. Already there are signs of its raising its ugly head again in the aftermath of the FT. France protecting its motor industry, US Congress pushing for the " buy American " clause in legislation to approve rescue funds to large US firms are just a few unfortunate examples of the petty politicians at work flying in the face of the public interest of the world at large.
Specific measure recommended : - strengthening the functions of international trade organizations such as WTO and forming an impartial and effective panel to mediate trade complaints between nations. The decision of the panel must be binding and the process must work quickly before the disputes spill over to the whole world.
Advantage : - This is an ideal vehicle to set trade dispute and for the prevention of protectionism. In theory, this must be done and soon.
Disadvantage : - The rich nations have an undue weight on all trade and, in deed, world issues. Perhaps the abolition of the right of veto is a first step to remedy this less than desirable situation in international affairs.
( 2 ) Set up a separate body under WTO to organize frequent multilateral discussing and monitoring of trade unbalance
Meetings should be held say, every 6 months before the situation like the China -USA unbalance that has been dragging on for over a decade ( why is trade balance important - please read my article on 2oo8 Economic & Financial Tsunami - An Overview for the Lay Person by clicking on the title of this blog to reach my website ) runs of of control.
Advantage : - Prevention is better than cure.
Disadvantage : - Same as in ( 1 ).
( 3 ) Refrain from accusations and counter accusations
Pointing the finger and passing the buck do not solve any problems especially in the midst of this devastating aftermath of the FT. It serves everyone better to for get about differences and embrace co-operation. Nowadays, the global village is so intricately intertwined that no single country can isolate herself fro the madding crowd. Let us face the crisis with pragmatism, a sense of fairness and wisdom.
Specific measure recommended : - Put any accusations or complaints up for arbitration by an international panel set up along the line as set out above. Meanwhile, the G20 summit should carry on with discussions with a view to reaching consensus on the urgent measures required to arrest the downward spiraling world economy. global unity and consensus is the key to the success of this very important economic summit.
Advantage :- Hopefully, this no accusation policy will hasten the reaching of consensus.
Disadvantage : - Same as (B ) ( 1 ) & ( 2 ) above.
( 4 ) Don't overlook the positive multiplier effects of public spending
Everyone knows that with her over 2 trillion in reserve China will play a major role in the rescue efforts. As a matter of fact, 50% of China's reserve is tied up in US treasury bonds. This again proves the intricate relation in the world economy. There is a negative feeling and tendency toward China probably because of the Chinese government's ( mind you, not the Chinese people ) less than democratic system. I for one hates Communism ( which is actually no more ! ) or any repressive regimes. That is the sole reason for my emigration to Australia after the infamous June 4, 1989 Tiananmen Massacre of the students & workers demanding democracy and an end to corruption in the Chinese Communist Party.
As I have just said this is no time for politics or ideology. Although the GDP of China is only roughly 10% of USA according to IMF data China's positive moves such as putting forward infrastructure projects and subsidizing domestic purchases of the village population are very helpful to the world economy in terms of boosting consumer confidence and providing a positive economic outlook for the world. The multiplier effect on China's spending will be a deciding factor in the success or failure of the FT rescue. When it comes to finance and economics the multilateral interaction between individual economic units plus contingency decision making ( more popularly known as the Flock of Sheep Psychology ) imply a more than one-to-one relationship. It is not an exact science so that one plus one can be far more than two.
Advantage : - The Multiplier effect ensures the more than proportional result form any given amount of spending. Hopefully, China's contribution can ( not on her own though ) save the day.
Disadvantage : - It could give China more political leverage which can give a misleading impression of the success of a less than democratic regime.
( 5 ) Promote an enlightened form of capitalism
Capitalism is still the lesser of two evils compared to a totally planned economy in terms of economic efficiency and incentive to personal efforts but it is the latter goal that has been far too excessively overdone in Wall Street. So much so that greed has become the sole driving force hence the FT. This coupled with an almost criminal negligence in failing to regulate the US financial market and letting its corrupt corporate culture run wild are the ultimate origins of the FT. A more balanced and less materialistic but higher moral standard based incentive system should be put in place if the FT is to be avoided in future. An enlightened form of market or capitalistic system where human beings are treated as such is urgently needed. Our future survival totally depends on that !
Advantage :- An enlightened capitalistic system is the only way to save us from our present predicaments for good.
Disadvantage : - It will take a long, long time, perhaps a few generations to achieve this noble goal. Every long journey starts with the first step. We will never get there if we hesitate to take the first step.
( 6 ) Don't delay environmental protection measures under the excuse of expedience
For the long term welfare of mankind none of the existing proposals on environmental protection should be delayed because of the FT. For one thing some damages to Mother Earth are irreversible. Secondly, do not forget that environmental measures can generate economic benefits and employment as well. Kill off a few black sheep of the financial world and we are home free.
I sincerely hope and pray that some decisive and positive measures can come out of the G20 summit in London later today and that common sense will prevail for the good of the entire global village.
JKHC.
Monday, March 23, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 17 ) - The Trillion $ Trick
http://news.bbc.co.uk/2/hi/business/7958501.stm
It is a good move for the Obama administration to launch the trillion dollar plan to buy toxic assets jointly with private investors by giving them a lot of inducements. There is also the welcoming news that China has pledged to continue her acquisition of US Treasury bonds despite adverse comments on China's worries over those bonds by the Chinese Prime Minister Yun Jar Bao earlier.
While commending the Obama administration on the above move I must also a sound the warning of avoiding too much expectation and complacency in counting on an early return to normalcy in the global financial market because there are still numerous obstacles to be overcome on the road to full recovery.
The trillion $ trick as I call it has still a few pitfalls although it is a positive measure in the right direction.
It is a good move for the Obama administration to launch the trillion dollar plan to buy toxic assets jointly with private investors by giving them a lot of inducements. There is also the welcoming news that China has pledged to continue her acquisition of US Treasury bonds despite adverse comments on China's worries over those bonds by the Chinese Prime Minister Yun Jar Bao earlier.
While commending the Obama administration on the above move I must also a sound the warning of avoiding too much expectation and complacency in counting on an early return to normalcy in the global financial market because there are still numerous obstacles to be overcome on the road to full recovery.
The trillion $ trick as I call it has still a few pitfalls although it is a positive measure in the right direction.
Monday, March 16, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 16 ) - Blocking Bonuses is the Best Bet
http://news.bbc.co.uk/2/hi/business/7945774.stm
Obama was literally choked with anger in condemning the proposed payment of huge bonuses to the derivatives managers and other high ranking executives of the embattled AIG insurance giant which is receiving enormous amounts of rescue funds approved by the US Congress ( please refer to above news video from BBC ). When it comes to money people have will not give a damn whatsoever to decency or proper restraint. Enough is enough. What kind of logic is behind this payment of bonuses to the custodian of a failed financial institutions through greed and possibly fraud and incompetence ? Some black sheep corporate custodians are now public enemy number one who should be severely punished instead of richly rewarded.
No doubt these black sheep will fall back on their so called legal contracts of employment and their claim on the sacred protection of the law to justify their claim to the proposed bonuses. Mind you if any contract is drawn up unfairly the court has the power to annul it. Just think about the general circumstances under which most corporate employment contracts of CEOs and their likes are concluded. They are approved by the board of directors who are all ( with the fewest of exceptions ) aiming at maximizing their own remunerations at the expense of shareholders that are mostly absentee owners. Even when the directors are major shareholders of the corporation in question they can still benefit by drawing huge remuneration packages part of which will be born by the minority absentee owners. This is the basic pitfall of all limited liability companies as explained in my article on the FT ( entitled " 2008 Economic & Financial Tsunami - An Overview for the Lay Person ). The reader can access my article by clicking on the title of this blog to reach my website or click on my complete profile.
Let me put it this way. If I were the CEO of a big corporation how else can I justify my own out of proportion remuneration package if I do not hire my subordinates with substantial amount of salary and bonuses ? Let me quantify this for you. If my assistant does not get $5 million a year how can I justify my $10 to $15 million annual salary ? It is all a matter of you scratch my back I scratch yours kind of situation. Furthermore, who votes for the unreasonable amount of most CEO remuneration packages at the board of directors' meeting ? Of course, it is the directors themselves. There is a clear conflict of interest here which I will propose to disallow in my summary proposal for the reference of the G20 summit to be held early next month. You may say that some CEO may not even be a board member. True in so cases but the prevailing corporate culture makes it easy for a collusion between directors and high ranking executives to stick together to benefit themselves at the expense of shareholders and now the society as a whole as a result of their greed and callous behaviour. In short, it is an exclusive boys club that teams up to rip off shareholders. Basic reform on corporate law is urgently needed.
By challenging the remuneration contracts of these greedy executives despite their skill ( with the help of their black sheep legal advisers ) in manipulating through the gray areas of the law we can force them to justify their claim and so learn their dirty tricks for our future reference when planning the regulatory reforms. Needless to say, bringing them to court and hopefully getting the court to annul their contract because of their bad performance will no doubt raise the morale of the struggling public who are all suffering tremendously as a result of their evil deeds.
I have delayed the summary ( which is in progress ) of my proposals to combat the FT so as to draw everyone's attention to the basic weakness of the limited liability concept which unfortunately we cannot do without in our modern market economy. Since this concept is indispensable to economic growth and full employment by channeling savings into investment we had better improve our regulatory system in the right way to deal with this problem if the FT is not to be repeated.
JKHC.
Obama was literally choked with anger in condemning the proposed payment of huge bonuses to the derivatives managers and other high ranking executives of the embattled AIG insurance giant which is receiving enormous amounts of rescue funds approved by the US Congress ( please refer to above news video from BBC ). When it comes to money people have will not give a damn whatsoever to decency or proper restraint. Enough is enough. What kind of logic is behind this payment of bonuses to the custodian of a failed financial institutions through greed and possibly fraud and incompetence ? Some black sheep corporate custodians are now public enemy number one who should be severely punished instead of richly rewarded.
No doubt these black sheep will fall back on their so called legal contracts of employment and their claim on the sacred protection of the law to justify their claim to the proposed bonuses. Mind you if any contract is drawn up unfairly the court has the power to annul it. Just think about the general circumstances under which most corporate employment contracts of CEOs and their likes are concluded. They are approved by the board of directors who are all ( with the fewest of exceptions ) aiming at maximizing their own remunerations at the expense of shareholders that are mostly absentee owners. Even when the directors are major shareholders of the corporation in question they can still benefit by drawing huge remuneration packages part of which will be born by the minority absentee owners. This is the basic pitfall of all limited liability companies as explained in my article on the FT ( entitled " 2008 Economic & Financial Tsunami - An Overview for the Lay Person ). The reader can access my article by clicking on the title of this blog to reach my website or click on my complete profile.
Let me put it this way. If I were the CEO of a big corporation how else can I justify my own out of proportion remuneration package if I do not hire my subordinates with substantial amount of salary and bonuses ? Let me quantify this for you. If my assistant does not get $5 million a year how can I justify my $10 to $15 million annual salary ? It is all a matter of you scratch my back I scratch yours kind of situation. Furthermore, who votes for the unreasonable amount of most CEO remuneration packages at the board of directors' meeting ? Of course, it is the directors themselves. There is a clear conflict of interest here which I will propose to disallow in my summary proposal for the reference of the G20 summit to be held early next month. You may say that some CEO may not even be a board member. True in so cases but the prevailing corporate culture makes it easy for a collusion between directors and high ranking executives to stick together to benefit themselves at the expense of shareholders and now the society as a whole as a result of their greed and callous behaviour. In short, it is an exclusive boys club that teams up to rip off shareholders. Basic reform on corporate law is urgently needed.
By challenging the remuneration contracts of these greedy executives despite their skill ( with the help of their black sheep legal advisers ) in manipulating through the gray areas of the law we can force them to justify their claim and so learn their dirty tricks for our future reference when planning the regulatory reforms. Needless to say, bringing them to court and hopefully getting the court to annul their contract because of their bad performance will no doubt raise the morale of the struggling public who are all suffering tremendously as a result of their evil deeds.
I have delayed the summary ( which is in progress ) of my proposals to combat the FT so as to draw everyone's attention to the basic weakness of the limited liability concept which unfortunately we cannot do without in our modern market economy. Since this concept is indispensable to economic growth and full employment by channeling savings into investment we had better improve our regulatory system in the right way to deal with this problem if the FT is not to be repeated.
JKHC.
Thursday, March 12, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 15 ) - The Madness of the Madoff Mess
http://news.bbc.co.uk/2/hi/business/7939145.stm
The above link to a BBC report on Madoff's road to perdition reveals huge loop holes in the US financial regulatory system. It was a tragic story from rags to riches and then falling from grace due to a pathetic fraud. As usual greed is the culprit but the story has also revealed the lack of effectiveness of the US financial regulatory system. It is not as if Madoff's operation is so perfectly planned that it has completely evaded detection. Instead, the US financial regulatory body - the Securities & Exchange Commission ( SEC ) has investigated Madoff's operations 8 times in total during his 16 years in operation and failed to detect any wrong doing. This is the hardest part to swallow.
There are three logical inferences to be drawn from these circumstances. Firstly, Madoff's deception is highly skillful. This does not seem to be the case. Preliminary assessment of the facts simply show that the so-called investment portfolios did not exist. He simply used new investors' funds to pay back to old investors so it is just like the crude carry over method very often used in cash embezzlement by some third grade petty cashier. Any standard audit procedures of requesting for third party independent documentary confirmation would have unearthed the sinister scheme. This points conspicuously to possible collusion between Madoff and some professional regulators along the way in respect of the annual statutory audits of Madoff's investment accounts.
The second logical inference that could possibly be drawn is an outright neglect of the SEC's regulatory functions. It would amount to a total dereliction of duty and a fragrant violation of the principles of due care and diligence on the part of the US regulatory authorities. My theoretical conjecture in this respect would be tragic if proven true. I must not speculate further until the case has been heard in court. However, with Madoff's guilty plea to all 11 charges that carry a total maximum sentence of 150 years' imprisonment the details may never be officially known except through a congressional hearing. I strongly support this move to see what lessons could be learned for the benefit of the financial regulators and in the public interest.
The third possible logical inference is the worst case scenario. And that is the existing regulatory procedures are totally inadequate to detect even the most simple kind of fraudulent scheme. This is not likely to be the case which reflects on the higher possibility of possible corruption and collusion. In any event, a public inquiry seems to be the best move to restore public confidence in the regulatory system through further enlightenment from the circumstances of this tragic case. Madoff has be nicked named " the Jewish T- Bill ". T- Bill stands for US Treasury bills meaning his investment policy has been so secured and reliable. If T-Bill could be faked what could happen to the whole US financial system ? This is again one of my rhetorical questions that does not require a response.
JKHC.
The above link to a BBC report on Madoff's road to perdition reveals huge loop holes in the US financial regulatory system. It was a tragic story from rags to riches and then falling from grace due to a pathetic fraud. As usual greed is the culprit but the story has also revealed the lack of effectiveness of the US financial regulatory system. It is not as if Madoff's operation is so perfectly planned that it has completely evaded detection. Instead, the US financial regulatory body - the Securities & Exchange Commission ( SEC ) has investigated Madoff's operations 8 times in total during his 16 years in operation and failed to detect any wrong doing. This is the hardest part to swallow.
There are three logical inferences to be drawn from these circumstances. Firstly, Madoff's deception is highly skillful. This does not seem to be the case. Preliminary assessment of the facts simply show that the so-called investment portfolios did not exist. He simply used new investors' funds to pay back to old investors so it is just like the crude carry over method very often used in cash embezzlement by some third grade petty cashier. Any standard audit procedures of requesting for third party independent documentary confirmation would have unearthed the sinister scheme. This points conspicuously to possible collusion between Madoff and some professional regulators along the way in respect of the annual statutory audits of Madoff's investment accounts.
The second logical inference that could possibly be drawn is an outright neglect of the SEC's regulatory functions. It would amount to a total dereliction of duty and a fragrant violation of the principles of due care and diligence on the part of the US regulatory authorities. My theoretical conjecture in this respect would be tragic if proven true. I must not speculate further until the case has been heard in court. However, with Madoff's guilty plea to all 11 charges that carry a total maximum sentence of 150 years' imprisonment the details may never be officially known except through a congressional hearing. I strongly support this move to see what lessons could be learned for the benefit of the financial regulators and in the public interest.
The third possible logical inference is the worst case scenario. And that is the existing regulatory procedures are totally inadequate to detect even the most simple kind of fraudulent scheme. This is not likely to be the case which reflects on the higher possibility of possible corruption and collusion. In any event, a public inquiry seems to be the best move to restore public confidence in the regulatory system through further enlightenment from the circumstances of this tragic case. Madoff has be nicked named " the Jewish T- Bill ". T- Bill stands for US Treasury bills meaning his investment policy has been so secured and reliable. If T-Bill could be faked what could happen to the whole US financial system ? This is again one of my rhetorical questions that does not require a response.
JKHC.
The Financial Tsunami ( FT ) - The Way Forward ( 14 ) - The Day of Reckoning is at Hand !
http://www.nytimes.com/2009/03/12/business/12crime.html?th&emc=th
The above news headline from today's New York Times brings encouraging news that the US Justice Department is getting tough with mortgage fraud. Reportedly, a few dozen mortgage brokers, bankers and officers of some financial institutions have been booked to face court in the near future to demonstrate the determination of the Obama administration to exercise zero tolerance on mortgage fraud. This is really welcomed news. Apart from deterring future perpetrators from proceeding to their evil ways this will also uplift the morale of the general public who feel a deep sense of betrayal by the black sheep of the financial sector.
However, I must voice my earnest hope that this is only the beginning of the reckoning process because those have been prosecuted are really the small flies. The Wall Street black sheep of the highest ranks are the real culprits of the present global disaster. These cunning lot with their devilish helpers in the legal profession are experts in manipulation through the grey areas of the law. To prosecute and successfully convicting these financial criminals are the true litmus test for the efficiency and tanacity of the Obama administration. This is one battle that the Obama administration cannot afford to lose.
I am working on a concise summary of all the effective measures I have proposed to combat the FT put forward by me in my blog thus far. This will be the highlight of my next blog which should hopefully see the light in the very near future. In any event, my summary of proposed measures to counteract the devastation of the FT must be systematically set out before the start of the G20 summit in April.
JKHC.
The above news headline from today's New York Times brings encouraging news that the US Justice Department is getting tough with mortgage fraud. Reportedly, a few dozen mortgage brokers, bankers and officers of some financial institutions have been booked to face court in the near future to demonstrate the determination of the Obama administration to exercise zero tolerance on mortgage fraud. This is really welcomed news. Apart from deterring future perpetrators from proceeding to their evil ways this will also uplift the morale of the general public who feel a deep sense of betrayal by the black sheep of the financial sector.
However, I must voice my earnest hope that this is only the beginning of the reckoning process because those have been prosecuted are really the small flies. The Wall Street black sheep of the highest ranks are the real culprits of the present global disaster. These cunning lot with their devilish helpers in the legal profession are experts in manipulation through the grey areas of the law. To prosecute and successfully convicting these financial criminals are the true litmus test for the efficiency and tanacity of the Obama administration. This is one battle that the Obama administration cannot afford to lose.
I am working on a concise summary of all the effective measures I have proposed to combat the FT put forward by me in my blog thus far. This will be the highlight of my next blog which should hopefully see the light in the very near future. In any event, my summary of proposed measures to counteract the devastation of the FT must be systematically set out before the start of the G20 summit in April.
JKHC.
Saturday, March 7, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 13 ) - Thundery Cloud Before the Storm
http://www.nytimes.com/2009/03/07/business/economy/07jobs.html?th&emc=th
The above link to today's headline in the New York Times points to a thundery cloud on the global economic horizon that could easily lead to a devastating tempest. The current unemployment rate in USA has reached a staggering 8.1 % the worst in 47 years. It rightly said that the whole economic scene is about to change in the biggest economic system of the world. On top of the fact that GM is at the brink of a total collapse with the potential loss of hundreds of thousand of jobs there is now the possibility of huge corporations withdrawing from some of their traditional lines of trade permanently, again resulting in the same catastrophic loss of jobs.
Everyone in the financial circle is correct in appealing for bigger spending but so far the main emphasis of the call has been on the Government to raise a bigger rescue package. This is a lob-sided call because most governments of countries operating on a market economy ( the capitalistic system ) generally account for only 15 % or thereabouts of the GDP. In any event, it will be labeled socialistic if the government budget reaches 20 % or more of GDP. Let us say there is a drop of 10 % in total consumer spending due to the FT. This will mean a 8.5 % drop in GDP ( being 10 % of 85 % of private sector spending in GDP ). It will take an increase of 56% of government spending to make up the short fall ( 8.5 / 15 ). Even if this is done the increase will partly be spent in infrastructure projects that are not directly consumer or retail spending. Thus, the consumer sector will not immediately get the confidence boost. There will only be a delayed consumer spending effect through the marginal propensity to spend ( the % income that will be spent at a given income level ) and its subsequent multiplier effect on the actual increase in consumer spending. At this point of our crisis , consumer confidence especially those who still have the savings to spend is of top priority. To hit the nail on the head, what I am saying is that we cannot depend on the Government alone to do the job of rescuing the tumbling economy.
So, what am I recommending ? Well , it is simply this. I am appealing to the well off sector of society to keep up their normal spending pattern. If you usually change to a new car every 4 years or upgrade your computer equipment in 3 keep to your original schedule. If your wealth has been drastically reduced by say, 50 % as a result of the FT what was actually hurt is not your ability to survive financially but a badly wounded pride and a sense of betrayal. I honestly do not believe that people have to change their spending schedule simply because their wealth has been reduced from say, US$10 million to US$5 million. Besides, one cannot know for certain when heaven calls or one's health can always keep up its level 5 to 10 years down the road. Without the intention of spreading a pessimistic view, this is your truly's private guess of the possible duration of the present crisis. Money is stored up value which is not yours until it is spent.
My second recommendation is to suggest to governments not to finance the rescue package by taking the seemingly easy way out - simply by printing more money. This is morally dubious and could possibly lead down the path to a becoming a fifth rate country. The fact that the US$ is still stable despite all her economic woes is mainly due to the situation that too many people and countries are holding US$ denominated assets both for investment and as a reserve currency. No people would like to see the US$ depreciate in value to their own detriment. People are not fools as the great President Lincoln wisely said :- " You can only fool most people some of the time but you can definitely not fool all the people all the time ! " If this money printing trend goes on people will ultimately find another haven or reserve currency one of these days.
What to do then with the much needed funds for the Government's urgent economic rescue package ? I think the short and sweet answer is to issue FT rescue bonds which must be promoted like WWII war bonds for we are, indeed, fighting a financial war of an enormous magnitude. It is high time that the well off sector of society and, indeed, every patriotic citizen should share in this rescue burden in whatever way they can contribute. Besides, your Government will guarantee the repayment of such interest bearing bonds. It is also a good opportunity for civic duty education. As all the theoretical justification and implementation mechanism are already in place this is the fastest way to channel savings into investment and create employment with the related boost to consumer confidence.
It is time for immediate action both by Governments and the responsible citizen. Further delays will spell certain global disaster and a second gigantic wave from the unabated FT. As for yours truly, I am planning my usual holidays with the possibility of a side trip to the UK for a get together of amateur astronomers of the Galaxy Zoo community. What is the Galaxy Zoo ? Please refer to the Web Encyclopedia - WIKIPEDIA ( click on link below ) and see my astronomy research in my personal website by clicking on the ( green coloured title of any one of my blog postings ). Please act on my above recommendations now, both Uncle Sam & citizens of the home of the brave before it is too late !!!
( http://en.wikipedia.org/wiki/Galaxy_Zoo )
JKHC.
The above link to today's headline in the New York Times points to a thundery cloud on the global economic horizon that could easily lead to a devastating tempest. The current unemployment rate in USA has reached a staggering 8.1 % the worst in 47 years. It rightly said that the whole economic scene is about to change in the biggest economic system of the world. On top of the fact that GM is at the brink of a total collapse with the potential loss of hundreds of thousand of jobs there is now the possibility of huge corporations withdrawing from some of their traditional lines of trade permanently, again resulting in the same catastrophic loss of jobs.
Everyone in the financial circle is correct in appealing for bigger spending but so far the main emphasis of the call has been on the Government to raise a bigger rescue package. This is a lob-sided call because most governments of countries operating on a market economy ( the capitalistic system ) generally account for only 15 % or thereabouts of the GDP. In any event, it will be labeled socialistic if the government budget reaches 20 % or more of GDP. Let us say there is a drop of 10 % in total consumer spending due to the FT. This will mean a 8.5 % drop in GDP ( being 10 % of 85 % of private sector spending in GDP ). It will take an increase of 56% of government spending to make up the short fall ( 8.5 / 15 ). Even if this is done the increase will partly be spent in infrastructure projects that are not directly consumer or retail spending. Thus, the consumer sector will not immediately get the confidence boost. There will only be a delayed consumer spending effect through the marginal propensity to spend ( the % income that will be spent at a given income level ) and its subsequent multiplier effect on the actual increase in consumer spending. At this point of our crisis , consumer confidence especially those who still have the savings to spend is of top priority. To hit the nail on the head, what I am saying is that we cannot depend on the Government alone to do the job of rescuing the tumbling economy.
So, what am I recommending ? Well , it is simply this. I am appealing to the well off sector of society to keep up their normal spending pattern. If you usually change to a new car every 4 years or upgrade your computer equipment in 3 keep to your original schedule. If your wealth has been drastically reduced by say, 50 % as a result of the FT what was actually hurt is not your ability to survive financially but a badly wounded pride and a sense of betrayal. I honestly do not believe that people have to change their spending schedule simply because their wealth has been reduced from say, US$10 million to US$5 million. Besides, one cannot know for certain when heaven calls or one's health can always keep up its level 5 to 10 years down the road. Without the intention of spreading a pessimistic view, this is your truly's private guess of the possible duration of the present crisis. Money is stored up value which is not yours until it is spent.
My second recommendation is to suggest to governments not to finance the rescue package by taking the seemingly easy way out - simply by printing more money. This is morally dubious and could possibly lead down the path to a becoming a fifth rate country. The fact that the US$ is still stable despite all her economic woes is mainly due to the situation that too many people and countries are holding US$ denominated assets both for investment and as a reserve currency. No people would like to see the US$ depreciate in value to their own detriment. People are not fools as the great President Lincoln wisely said :- " You can only fool most people some of the time but you can definitely not fool all the people all the time ! " If this money printing trend goes on people will ultimately find another haven or reserve currency one of these days.
What to do then with the much needed funds for the Government's urgent economic rescue package ? I think the short and sweet answer is to issue FT rescue bonds which must be promoted like WWII war bonds for we are, indeed, fighting a financial war of an enormous magnitude. It is high time that the well off sector of society and, indeed, every patriotic citizen should share in this rescue burden in whatever way they can contribute. Besides, your Government will guarantee the repayment of such interest bearing bonds. It is also a good opportunity for civic duty education. As all the theoretical justification and implementation mechanism are already in place this is the fastest way to channel savings into investment and create employment with the related boost to consumer confidence.
It is time for immediate action both by Governments and the responsible citizen. Further delays will spell certain global disaster and a second gigantic wave from the unabated FT. As for yours truly, I am planning my usual holidays with the possibility of a side trip to the UK for a get together of amateur astronomers of the Galaxy Zoo community. What is the Galaxy Zoo ? Please refer to the Web Encyclopedia - WIKIPEDIA ( click on link below ) and see my astronomy research in my personal website by clicking on the ( green coloured title of any one of my blog postings ). Please act on my above recommendations now, both Uncle Sam & citizens of the home of the brave before it is too late !!!
( http://en.wikipedia.org/wiki/Galaxy_Zoo )
JKHC.
Thursday, February 26, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 12 ) - Enough is Enough !!!
CEO ! Oh , CEO ! Where is your conscience ?
After loads and loads of scandalous corporate practices having been unearthed in the USA, Australia has also come under the unwanted limelight of corporate scandalous practices. The Australian corporation, PACIFIC BRANDS has just been accused of excessively remunerating the CEO and other top management corporate officials. After announcing a plan to lay off 1,800 workers it has been revealed that the CEO has trebled her annual salary from some A$ 600,000 to over A$ 1.8 million. Human greed has no bounds or is unlimited, a concept condemned by the fundamental principle of market economics or capitalism. If resources were unlimited there would not have been any need for economics, a discipline cater for the efficient distribution and consumption of economic resources. Yet the leaders and vanguards of capitalism such as CEOs of huge corporations resort to a motto like " sky is the limit " when it comes to their own remuneration and self interest. They always say that let the best person win. Let the top dogs earn whatever amount possible if the corporate profit ( or even losses ) can sustain their greed to fill their piggy bank. The silly defense provided by PACIFIC BRANDS in this incident is that the previous CEO had drawn A$3.6 million in salary per annum so the existing " generous " CEO is giving the corporation and its shareholders a dirt cheap bargain by drawing A$1.8 million. Should the shareholders and employees not pass a motion of thanks to the CEO in the annual general meeting of shareholders, then ? It is as if the murderer who has killed one person is innocent because other murderers have killed plenty more. " C'MON " as the Australian star tennis player, Lleyton Hewitt very often shouts. What do you take us for - suckers ?
Of course, another strong argument put forward by CEOs and their likes is that only the best remunerative package can attract the best talents to head the corporation. Some talent ! I must admit they are the best lot to rip the shareholders and their workers off to their selfish personal advantage. Where is your conscience ? I ask again. I think I am qualified to say something about scandalous corporate practices as I used to make my living in auditing and management & tax consultancy for 30 odd years before my retirement in 2006.
There is yet another strong and seemingly unassailable argument put forward by CEOs and their likes in defense of their ridiculously excessive remuneration package. It is legal and they acted within their rights provided by the law. Ah, ha, a very clever, logical and most importantly LEGAL argument but sorry, no dice ! If the law is inadequate to protect the public interest against greedy little creatures society must change the law into a more just and effective set of corporation laws. I will venture to propose some legal improvements to allow more effective regulation of corporate malpractices in my next blog. Yours truly as a voter who cast my vote for Kevin Rudd in the last Australian Federal election I have the right to appeal to the Rudd Government to do something about this less than ideal situation especially in the wakes of the FT. To feed one's own personal vice of GREED by creating unemployment at such a critical time of financial turmoil is a heartless, despicable and treacherous crime against society !
The argument of getting the best talent by unlimited amount of pecuniary reward is flawed. It will only attract the most greedy of the wolf pack which we can do better without. We want our corporate leaders to be clean, honest and they should be people with a social conscience. Such candidates are seldom seen on the corporate scene anywhere precisely because our present " sky is the limit " principle in remunerating corporate custodians is dead wrong in principle. It will not be an unwise move to place a cap on top management remunerative package as a matter of law. I will put forward my own suggestion in upcoming blogs. Obama is doing it to US corporations receiving the rescue package. Why can't this be extended, may be, to a less stringent degree to corporations in general ? ( There is no need for an answer to a rhetorical question, is there ? .... yet another rhetorical question !!!)
The other important issue which is relevant to all legal matters including corporate law is the manipulations by black sheep corporate custodians in the grey areas of the law to fatten their own pockets. This can be remedied by better legislation and developing a more balanced sense of value by steering away from the purely materialistic outlook on life. Australia should be well placed to achieve this grand moral goal having regards to the community spirit so eminently demonstrated by the tremendous support from the public in the recent bushfire appeal to assist victims of the tragedy.
If the reader is interested in knowing more about the pitfalls in the working of corporations in general please access my article on the basic working principles of economics and finance entitled :- " 2008 Financial & Economic Tsunami - An Overview for the Lay Person " highlighted on the navigation bar in my website by clicking on the ( green coloured ) title of this blog or any other blog in this FORUM.
See you all in my next blog on my suggestions on exercising an effective control over corporations.
Yours truly,
JKHC.
After loads and loads of scandalous corporate practices having been unearthed in the USA, Australia has also come under the unwanted limelight of corporate scandalous practices. The Australian corporation, PACIFIC BRANDS has just been accused of excessively remunerating the CEO and other top management corporate officials. After announcing a plan to lay off 1,800 workers it has been revealed that the CEO has trebled her annual salary from some A$ 600,000 to over A$ 1.8 million. Human greed has no bounds or is unlimited, a concept condemned by the fundamental principle of market economics or capitalism. If resources were unlimited there would not have been any need for economics, a discipline cater for the efficient distribution and consumption of economic resources. Yet the leaders and vanguards of capitalism such as CEOs of huge corporations resort to a motto like " sky is the limit " when it comes to their own remuneration and self interest. They always say that let the best person win. Let the top dogs earn whatever amount possible if the corporate profit ( or even losses ) can sustain their greed to fill their piggy bank. The silly defense provided by PACIFIC BRANDS in this incident is that the previous CEO had drawn A$3.6 million in salary per annum so the existing " generous " CEO is giving the corporation and its shareholders a dirt cheap bargain by drawing A$1.8 million. Should the shareholders and employees not pass a motion of thanks to the CEO in the annual general meeting of shareholders, then ? It is as if the murderer who has killed one person is innocent because other murderers have killed plenty more. " C'MON " as the Australian star tennis player, Lleyton Hewitt very often shouts. What do you take us for - suckers ?
Of course, another strong argument put forward by CEOs and their likes is that only the best remunerative package can attract the best talents to head the corporation. Some talent ! I must admit they are the best lot to rip the shareholders and their workers off to their selfish personal advantage. Where is your conscience ? I ask again. I think I am qualified to say something about scandalous corporate practices as I used to make my living in auditing and management & tax consultancy for 30 odd years before my retirement in 2006.
There is yet another strong and seemingly unassailable argument put forward by CEOs and their likes in defense of their ridiculously excessive remuneration package. It is legal and they acted within their rights provided by the law. Ah, ha, a very clever, logical and most importantly LEGAL argument but sorry, no dice ! If the law is inadequate to protect the public interest against greedy little creatures society must change the law into a more just and effective set of corporation laws. I will venture to propose some legal improvements to allow more effective regulation of corporate malpractices in my next blog. Yours truly as a voter who cast my vote for Kevin Rudd in the last Australian Federal election I have the right to appeal to the Rudd Government to do something about this less than ideal situation especially in the wakes of the FT. To feed one's own personal vice of GREED by creating unemployment at such a critical time of financial turmoil is a heartless, despicable and treacherous crime against society !
The argument of getting the best talent by unlimited amount of pecuniary reward is flawed. It will only attract the most greedy of the wolf pack which we can do better without. We want our corporate leaders to be clean, honest and they should be people with a social conscience. Such candidates are seldom seen on the corporate scene anywhere precisely because our present " sky is the limit " principle in remunerating corporate custodians is dead wrong in principle. It will not be an unwise move to place a cap on top management remunerative package as a matter of law. I will put forward my own suggestion in upcoming blogs. Obama is doing it to US corporations receiving the rescue package. Why can't this be extended, may be, to a less stringent degree to corporations in general ? ( There is no need for an answer to a rhetorical question, is there ? .... yet another rhetorical question !!!)
The other important issue which is relevant to all legal matters including corporate law is the manipulations by black sheep corporate custodians in the grey areas of the law to fatten their own pockets. This can be remedied by better legislation and developing a more balanced sense of value by steering away from the purely materialistic outlook on life. Australia should be well placed to achieve this grand moral goal having regards to the community spirit so eminently demonstrated by the tremendous support from the public in the recent bushfire appeal to assist victims of the tragedy.
If the reader is interested in knowing more about the pitfalls in the working of corporations in general please access my article on the basic working principles of economics and finance entitled :- " 2008 Financial & Economic Tsunami - An Overview for the Lay Person " highlighted on the navigation bar in my website by clicking on the ( green coloured ) title of this blog or any other blog in this FORUM.
See you all in my next blog on my suggestions on exercising an effective control over corporations.
Yours truly,
JKHC.
Saturday, February 21, 2009
The Financial Tsunami ( FT) - The Way Forward ( 11 ) - Mastering the Mad Dog ? Madoff
After the uncovering of what I called the MAD DOG AFFAIR involving over US$ 80 billion in alleged financial fraud we are again confronted by the further bad news of the STANDFORD alleged financial irregularities involving his small banking chain. Notwithstanding the small size of Stanford's banks the psychological blow on consumer confidence is not at all minor. The scandal has severely affected banking operations in South American ( Venezuela, etc. ) and there are also rumours of instability in the EU banking system as well. The latter development is especially worrying because it may lead to the collapse of the whole EU monetary system which is up to now still holding up reasonably well. If the worst should be proven true a second gigantic wave of the FT is poised to strike with even more devastating power because the delicate financial systems in EU countries have already been weakened by the first wave from the FT.
Unless we can master the MAD DOG and the like no complete recovery for the tattered global financial system is possible. There appears to be a lot of possibilities for collusion and even corruption involved because many big banks and financial houses are victims despite their usual prudence. Why haven't professional auditing practices and verification procedures detect the alleged fraud much earlier ? This big question has a huge bearing on the effectiveness of our regulatory system regarding the financial institutions. Are there gross negligence and even collusion involved at different stages of the whole MAD DOG scenario ?
Apart from the stricter enforcement of more effective financial regulations there is also the concern about the best way to avoid grey areas in the financial laws & regulations from being manipulated to the advantage of the greed of MAD DOG operators and the like. The ultimate solution has to be, as I said in earlier blogs, the attainment of a generally accepted but less materialistic value system in which pure financial rewards on efforts are not the sole motivating factor. Perhaps the raising of over A$ 120 million by private charities alone within a matter of 10 days of the Victorian Black Saturday ( 7th February, 2009 ) Bushfire disaster despite the FT will bring a positive message on the value of and the need to have a less materialistic value system for the global village.
JKHC.
Unless we can master the MAD DOG and the like no complete recovery for the tattered global financial system is possible. There appears to be a lot of possibilities for collusion and even corruption involved because many big banks and financial houses are victims despite their usual prudence. Why haven't professional auditing practices and verification procedures detect the alleged fraud much earlier ? This big question has a huge bearing on the effectiveness of our regulatory system regarding the financial institutions. Are there gross negligence and even collusion involved at different stages of the whole MAD DOG scenario ?
Apart from the stricter enforcement of more effective financial regulations there is also the concern about the best way to avoid grey areas in the financial laws & regulations from being manipulated to the advantage of the greed of MAD DOG operators and the like. The ultimate solution has to be, as I said in earlier blogs, the attainment of a generally accepted but less materialistic value system in which pure financial rewards on efforts are not the sole motivating factor. Perhaps the raising of over A$ 120 million by private charities alone within a matter of 10 days of the Victorian Black Saturday ( 7th February, 2009 ) Bushfire disaster despite the FT will bring a positive message on the value of and the need to have a less materialistic value system for the global village.
JKHC.
Wednesday, February 18, 2009
The Financial Tsunami ( FT ) - The Way Forward ( 10 ) - Homing on Homes
One of Obama's wisest moves on his rescue package so far has just been unveiled. A home rescue fund of US$ 275 billion will be set aside to help refinance the home mortgages of up to 9 million " responsible homeowners " to allow them to stay in their house and avoid foreclosure by banks. Those who lost their speculative investments through greed and misjudgment at the peak of the property bubble in the USA will not be included in the rescue package and so will those who bought beyond their means. This is a fair condition in applying precious and limited taxpayers' funds.
Economically speaking, the logical thing to do is to let people bear the consequences of their own economic decisions. If they had bought at the wrong time let them lose their homes and stay in rented property. However, strict economic principles may be too harsh on the ordinary citizens who acted honestly and spent within their means. Speculators and greedy opportunists apart, most honest and hard working folks are mostly victims of an impersonal capitalistic system run wild. Sometimes, pure logic and dogmatic adherence to rigid economic principles are not user friendly. Take for example. We are in the desert with only a limited supply of precious water and there is a millionaire among the travellers. According to the strict operation of the sacred economic law of supply and demand the millionaire can bid the highest price and so is theorectically capable of getting all the water for himself to save his own life. However, common human decency and generally accepted moral standards will dictate a fair rationing of the precious and limited water supply. That is where the enlightened form of capitalism should come in. No single consideration or working principle relating to any public issue should dominate relevant decisions on the matter.
Economic considerations aside, the psychological effects on boosting the morale and confidence of the general population through such a home rescue package are bound to be far reaching to the point of arresting the rapid decline of consumer confidence. This will in turn produce its desired economic stimulus in terms of consumer spending especially from those who still have savings that are horded because of a gloomy economic outlook. So, it can be easily seen that everything is inter-related in all human affairs and, hence, my personal motto of " ONLY CONNECT " borrowed from the famous and beloved British novelist - E. M. Forster - in his revered novel Howards End.
Three cheers for Obama for landing an effective punch on the Financial Tsunami. This is just a start but hopefully it will be a good start for all global citizens' sake.
JKHC.
Economically speaking, the logical thing to do is to let people bear the consequences of their own economic decisions. If they had bought at the wrong time let them lose their homes and stay in rented property. However, strict economic principles may be too harsh on the ordinary citizens who acted honestly and spent within their means. Speculators and greedy opportunists apart, most honest and hard working folks are mostly victims of an impersonal capitalistic system run wild. Sometimes, pure logic and dogmatic adherence to rigid economic principles are not user friendly. Take for example. We are in the desert with only a limited supply of precious water and there is a millionaire among the travellers. According to the strict operation of the sacred economic law of supply and demand the millionaire can bid the highest price and so is theorectically capable of getting all the water for himself to save his own life. However, common human decency and generally accepted moral standards will dictate a fair rationing of the precious and limited water supply. That is where the enlightened form of capitalism should come in. No single consideration or working principle relating to any public issue should dominate relevant decisions on the matter.
Economic considerations aside, the psychological effects on boosting the morale and confidence of the general population through such a home rescue package are bound to be far reaching to the point of arresting the rapid decline of consumer confidence. This will in turn produce its desired economic stimulus in terms of consumer spending especially from those who still have savings that are horded because of a gloomy economic outlook. So, it can be easily seen that everything is inter-related in all human affairs and, hence, my personal motto of " ONLY CONNECT " borrowed from the famous and beloved British novelist - E. M. Forster - in his revered novel Howards End.
Three cheers for Obama for landing an effective punch on the Financial Tsunami. This is just a start but hopefully it will be a good start for all global citizens' sake.
JKHC.
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