Yesterday, Obama announced that he will be bringing back US troops in 18 months. Thus he has fulfilled his election promise to bring back American troop. This also herald a failed military adventure perpetuated by his predecessor Bush2. Many would have thought the American has learnt their lesson from Vietnam. But the very confident and arrogant trio of neo-conservative of Bush2, Cheney and Rumsfield have totally misjudged their ability to win this Iraq war.
But why was the American so eager to commit to a costly war. My belief is that the far right wing politicians are always insecure about their need for energy security. American is totally dependent on oil for their livelihood and prosperity. If oil is denied from Middle East, American will be literally crippled, unable to move to work and produce in the factories. It has managed to keep Saudi Arabia on its side for now, but the future is never guaranteed from this conservative Muslim country. It has also supports and coddles Israel by giving them unconditional support as well as provides billions of aids money. Of course, one can intelligently guess that in a scenario when American need a military launching pad, Israel will be featured prominently.
Before the 80s, American has an unstinting friend call Iran. The Shah of Iran was propped up by the American even though he had committed numerous human right abuses. When Ayatollah Khomeni overthrew the Shah, American has been looking for an alternative since. That’s why America was supporting Saddam Hussein of Iraq against Iran. When Saddam became over ambitious by invading Kuwait, American was forced to rethink their Middle East strategy.
Iraq has the second largest oil reserve in the world. If America could secure Iraq and Saudi Arabia, then the supply of oil is almost guaranteed. Opportunity came when Saddam turned against the US. Using excuse that Saddam had acquired WMD, Bush2 send in American troops to ‘disarm’ Iraq. Many Iraqis were grateful American got rid of their dictator, Saddam but that is all they wanted. American initially hailed and cheered the easy victory. Bush2 proudly announce “mission accomplished”. Bush2 thought he has given the greatest gift to Iraqis by giving them ‘freedom’ and ‘democracy’. That would be the stupidest fallacy Bush 2 has to learn.
Winning the war was the easy part. Winning the hearts and minds of the conquered was the most difficult task both the military brass and politician had to bear. No people were willing to be subjugated by foreigners. Not every human put the same price on freedom or democracy as American does. After the humiliating withdrawal from Vietnam, I would have thought the American had learnt an expensive lesson, but alas, history is to repeat itself.
Militarily the American has not lost. But in the perception of the rest of the world, not winning is considered a loss. But what America lost is the intangibles. She has lost more friends around the world and alienate so many. She has lost the trust, admiration and respect of many peopIe around the world. She has lost the voice of conscience in the area of human rights. I hope this lesson will be learnt by the future generation of American. Military might alone will not be able to guarantee success.
So Iraq war may be the defining moment for American dominance. This is further exacerbated by the ongoing global economic crisis where America is facing the major brunt. With high unemployment rate and buried in trillions dollars of debts, there will be very little political and military muscles left to dominate the world. I think this will mark the beginning of a new era, when America has to concede that the world does not belong to America anymore. She now needs the share the world stage with the European Union, China, India and Russia.
History will remember how Britain used to boast that the sun never set in the British Empire. But after WW2, “Great Britain” is never that way again. It is simply call UK, that’s all.
--------------------------------------------------------------
Saturday, February 28, 2009
Thursday, February 26, 2009
OBAMA TALKS, THE WORLD LISTENS
I have followed Obama speeches through the primaries of the US election. There is no doubt about this man eloquence and his oratorical skills. He has the advantage of a clean and untainted image needed in this difficult time to provide global leadership to sort this economic crisis.
His maiden speech in the Congress as president receives standing ovations and rave reviews. Of course the speech is inspiring and visionary. I felt he was over ambitious; he tried to cover all grounds from defence, education, environment, health, automakers, security and almost anything under the sun.
Noticeably, I feel it is short of specifics. Perhaps the specifics may come later. We had experienced the hot air coming out of every US presidents during crisis. Talk is free. Putting a comprehensive plan into action will need a lot more effort. Overcoming objections will be very challenging. The president must not end up with a divided nation. Then he must remained focus and stay the course without abandoning his position when it become politically unpopular. He will be very lonely in time to come.
Even as recently as last year, many economists has optimistically spell that the Asian economies are decoupled from the US. How wrong this proves to be. The sad truth is that the entire world is still under the crutches of the American economy. The world has no choice but to faithfully hope that this man, Obama can rally his citizens. The world still need his leadership to initiate global initiatives, pull all nations together and row in the same direction.
Fortunately, history seems to be on the American side. After WW2, 1973 oil shock, 87 market crash, dot-com crash, 911, America has weathered all these storms admirably and came out stronger. I honestly hope the American under the leadership of Obama has the same resolve to overcome this crisis. But this crisis requires a lot of painful adjustment and sacrifices. This is where a great leader has to be able to convince its people to swallow the bitter pills when the time comes. He has to rally, motivate and provides them with hopes.
American has over the centuries live faithfully on hopes and overcome many difficulties and made many ‘impossible’ possible. The black president itself was a “dream’ of Marther Luther King and sending a man to Moon was another dream of JFK. ‘Hope’ is the most powerful weapon in trouble time for many great American leaders. American had demonstrated the faith in hope before and Obama must live up to it.
The painful sacrifices have yet to be articulated to the American public. Obama should be upfront to tell American that they need to ‘downsize’ and cut wastages. Perhaps lower salaries and smaller cars. The truth will hurt. With the mountain of debts this crisis raked up, future taxes have to be higher. One Nobel laureate said that “US simply cannot go back to it old ways” by spending too much and saving too little to wriggle out of this crisis.
The recovery train has yet to leave the stations. I will definitely monitor the progress of this train. The journey will be long and arduous.
-------------------------Living to see the world--------------------
His maiden speech in the Congress as president receives standing ovations and rave reviews. Of course the speech is inspiring and visionary. I felt he was over ambitious; he tried to cover all grounds from defence, education, environment, health, automakers, security and almost anything under the sun.
Noticeably, I feel it is short of specifics. Perhaps the specifics may come later. We had experienced the hot air coming out of every US presidents during crisis. Talk is free. Putting a comprehensive plan into action will need a lot more effort. Overcoming objections will be very challenging. The president must not end up with a divided nation. Then he must remained focus and stay the course without abandoning his position when it become politically unpopular. He will be very lonely in time to come.
Even as recently as last year, many economists has optimistically spell that the Asian economies are decoupled from the US. How wrong this proves to be. The sad truth is that the entire world is still under the crutches of the American economy. The world has no choice but to faithfully hope that this man, Obama can rally his citizens. The world still need his leadership to initiate global initiatives, pull all nations together and row in the same direction.
Fortunately, history seems to be on the American side. After WW2, 1973 oil shock, 87 market crash, dot-com crash, 911, America has weathered all these storms admirably and came out stronger. I honestly hope the American under the leadership of Obama has the same resolve to overcome this crisis. But this crisis requires a lot of painful adjustment and sacrifices. This is where a great leader has to be able to convince its people to swallow the bitter pills when the time comes. He has to rally, motivate and provides them with hopes.
American has over the centuries live faithfully on hopes and overcome many difficulties and made many ‘impossible’ possible. The black president itself was a “dream’ of Marther Luther King and sending a man to Moon was another dream of JFK. ‘Hope’ is the most powerful weapon in trouble time for many great American leaders. American had demonstrated the faith in hope before and Obama must live up to it.
The painful sacrifices have yet to be articulated to the American public. Obama should be upfront to tell American that they need to ‘downsize’ and cut wastages. Perhaps lower salaries and smaller cars. The truth will hurt. With the mountain of debts this crisis raked up, future taxes have to be higher. One Nobel laureate said that “US simply cannot go back to it old ways” by spending too much and saving too little to wriggle out of this crisis.
The recovery train has yet to leave the stations. I will definitely monitor the progress of this train. The journey will be long and arduous.
-------------------------Living to see the world--------------------
Tuesday, February 24, 2009
NATIONALISATION OF US BANKS
Nationalisation is now a distinct possibility if further capitalisation and bailout failed to save the big banks from insolvency in US. But bank itself do not fail for lack of capital, rather a complete loss of confidence can cause a bank run and subsequent collapse. Banking system cannot survive without confidence, just like religion is not possible without faith. If confidence is lost completely even after all means of recapitalisation, then the only resort left is nationalisation. In simple term, it means the banks is effectively own by the country.
For a country which has champion free market and denounced socialism and communism, nationalisation will be the bitterest pill for the US to swallow. Many American must have remembered big countries like Egypt, India, China and Cuba under Nasser, Indira Ghandi, Mao and Fidro Castro respectively. When these leaders adopted socialism, all key enterprises were forcibly acquired by the states under nationalisation. Many American assets were confiscated through this means especially in Cuba.For this experience, many American anti-socialism and conservative politicians will be dead set against this action. However if the American do nationalise the banks, it is purely an economic imperative. It is important to note that, those nationalisations described earlier were totally politically motivated.
The likely candidates of this excercise are Citibank and Bank of America. Crushed my mountain of toxic assets, paralysed by lack of capital and deserted by investors, these once mighty institutions are just struggling to perform the basic functions of lending and underwriting. The only reason they are still alive is because taxpayers were propping them up with billions. Otherwise, they would have follow Bear Stern and Lehman Brothers to the graves.
Nationalisation has been on the mind of policy makers for some time. The fear was felt by the financial market a few days ago. Those holding substantial stakes cannot sell without triggering bigger fall have to worry of potential loss and money tied down for a very prolong period. Another problem is how to proceed. Actually the US treasury department has already taken over Mortgage giants Freddie and Fannie under word ‘conservatorships’. Perhaps, again US is ingenious in coining words to soft sell the idea of nationalisation.
From the financial perspective, nationalisation of the banks may not be a very big political nightmare for the president and the policy makers. It addresses the problems of not having to price the toxic asset, allow the bank to lend without fear and tackle the confidence factor. But this will take a great leadership skill of Obama to convince the Congress and the American public that this may be the only way to prevent the disintegration of the US banking system.
What does all this have to do with me as a Singaporean? GIC and Temasek have stakes in both Citibank and BofA. IF both these banks do get nationalised, it will means that the stakes will be further diluted as US government would has to inject more money into the banks. We may be compelled to sell back the stakes at very ridiculously low values at a great loss. It will be delisted from the stock exchange and thus there will be no ‘market value’. Technically, the value of these investment are ‘worthless’. This means this investment will have to be kept ‘under the pillow’ for a very long time. After all, they always said these are long term investment. It is not wise to speculate on the outcome of long term investment as the outcome may well be very profitable.
The lesson learnt from this economic crisis is that banks cannot be left to their own devices, barking up all the financial innovations, paying exorbitant bonuses and so on. Surely, regulators have to work harder and maybe take a page from Singapore MAS.
-----------------------------Living to see the world----------------
For a country which has champion free market and denounced socialism and communism, nationalisation will be the bitterest pill for the US to swallow. Many American must have remembered big countries like Egypt, India, China and Cuba under Nasser, Indira Ghandi, Mao and Fidro Castro respectively. When these leaders adopted socialism, all key enterprises were forcibly acquired by the states under nationalisation. Many American assets were confiscated through this means especially in Cuba.For this experience, many American anti-socialism and conservative politicians will be dead set against this action. However if the American do nationalise the banks, it is purely an economic imperative. It is important to note that, those nationalisations described earlier were totally politically motivated.
The likely candidates of this excercise are Citibank and Bank of America. Crushed my mountain of toxic assets, paralysed by lack of capital and deserted by investors, these once mighty institutions are just struggling to perform the basic functions of lending and underwriting. The only reason they are still alive is because taxpayers were propping them up with billions. Otherwise, they would have follow Bear Stern and Lehman Brothers to the graves.
Nationalisation has been on the mind of policy makers for some time. The fear was felt by the financial market a few days ago. Those holding substantial stakes cannot sell without triggering bigger fall have to worry of potential loss and money tied down for a very prolong period. Another problem is how to proceed. Actually the US treasury department has already taken over Mortgage giants Freddie and Fannie under word ‘conservatorships’. Perhaps, again US is ingenious in coining words to soft sell the idea of nationalisation.
From the financial perspective, nationalisation of the banks may not be a very big political nightmare for the president and the policy makers. It addresses the problems of not having to price the toxic asset, allow the bank to lend without fear and tackle the confidence factor. But this will take a great leadership skill of Obama to convince the Congress and the American public that this may be the only way to prevent the disintegration of the US banking system.
What does all this have to do with me as a Singaporean? GIC and Temasek have stakes in both Citibank and BofA. IF both these banks do get nationalised, it will means that the stakes will be further diluted as US government would has to inject more money into the banks. We may be compelled to sell back the stakes at very ridiculously low values at a great loss. It will be delisted from the stock exchange and thus there will be no ‘market value’. Technically, the value of these investment are ‘worthless’. This means this investment will have to be kept ‘under the pillow’ for a very long time. After all, they always said these are long term investment. It is not wise to speculate on the outcome of long term investment as the outcome may well be very profitable.
The lesson learnt from this economic crisis is that banks cannot be left to their own devices, barking up all the financial innovations, paying exorbitant bonuses and so on. Surely, regulators have to work harder and maybe take a page from Singapore MAS.
-----------------------------Living to see the world----------------
Sunday, February 22, 2009
BAILING OUT AMERICAN BANKS
Bailing out the banks will be remembered in history as the Mother of all Bailouts.
As America grapple with the enormity of the problem brought about by the global economic crisis, US have to acknowledge that if the banking system is not settle soon enough, the consequences will be hardship and pain beyond the imagination of anyone in this world.
Since the demise of Bear Stern and Lehman Brothers, I have been closely following the financial news. From the various news I have read, I understand US banks potentially faced up to $1 trillion in losses with only half realised so far. Goldman Sachs analyst estimates that banks are holding on to $5 trillion dollars of ‘trouble asset’ on their books. It is estimated that US government may need up to $2 trillion to recapitalise the banks.
US Treasury has been mulling over the idea of creating a “bad Bank”. Its role is to buy up all the toxic assets, allowing bank to be healthy again. But the challenge is how to price these assets. Banks won’t sell if it is too low and Congress won’t buy if it cost taxpayers too high. Besides the publicly listed banks, there are also many private banks. The problem is for those private banks that own toxic assets and how much does it get for the bad assets. The risk is especially high as the real estates’ prices are still plunging.
Setting up this ‘bad bank’ could be the big step to repair and save the banking system and get credit moving again. Unless the banks start to lend again, nobody can afford to buy a house, car or start a business, then the economy will not recover from recession. But just where US will get the $2 trillion funding to comprehensively bailout the banks, is really a tough question. No matter what Obama do, it won’t be easy and it won’t be painless.
If the US has no more options, then banks will failed. The world cannot afford to see the banking system disintegrate. It lubricates and keeps the world economy humming. In the present economy, the banking system is akin to the heart of a living human being. When the heart stops, man drops dead. The severity of the financial problem was compounded because it is worldwide and as the world is now so globalised, no country will be spared. For example, if CitiBank were to fail, can you imagine the queues from South American to Europe lining up to withdraw the fund? And all the banks that lend money to Citibank will also collapse in its wake. It’s a nightmare scenario no governments wish to see.
Many analysts believe that the economy will not recover until the properties market stabilised and bottom up. But then if the banking system is not fixed, there will be no loans to spur the properties market. Not only that, mortgages asset carried by the bank will continue to be stress and lead banks to more write downs. In my opinion, the US government has to pay any price to fix the banking system before any meaningful recovery of the housing market. That’s about the only way to kick-start the economy.
The entire Europe too is facing the same banking problem. The bailouts will continue in Europe. In particular, Britain’s banking system is in a big mess too. Britain has already nationalised 2 banks and RBS is sitting on trillion of pound of toxic assets.
If after all the bailouts have failed, US is only left with the unthinkable. That is, nationalisation. This will be my next topic for my blog.
---------------Living to see the world-------------------------FRA
As America grapple with the enormity of the problem brought about by the global economic crisis, US have to acknowledge that if the banking system is not settle soon enough, the consequences will be hardship and pain beyond the imagination of anyone in this world.
Since the demise of Bear Stern and Lehman Brothers, I have been closely following the financial news. From the various news I have read, I understand US banks potentially faced up to $1 trillion in losses with only half realised so far. Goldman Sachs analyst estimates that banks are holding on to $5 trillion dollars of ‘trouble asset’ on their books. It is estimated that US government may need up to $2 trillion to recapitalise the banks.
US Treasury has been mulling over the idea of creating a “bad Bank”. Its role is to buy up all the toxic assets, allowing bank to be healthy again. But the challenge is how to price these assets. Banks won’t sell if it is too low and Congress won’t buy if it cost taxpayers too high. Besides the publicly listed banks, there are also many private banks. The problem is for those private banks that own toxic assets and how much does it get for the bad assets. The risk is especially high as the real estates’ prices are still plunging.
Setting up this ‘bad bank’ could be the big step to repair and save the banking system and get credit moving again. Unless the banks start to lend again, nobody can afford to buy a house, car or start a business, then the economy will not recover from recession. But just where US will get the $2 trillion funding to comprehensively bailout the banks, is really a tough question. No matter what Obama do, it won’t be easy and it won’t be painless.
If the US has no more options, then banks will failed. The world cannot afford to see the banking system disintegrate. It lubricates and keeps the world economy humming. In the present economy, the banking system is akin to the heart of a living human being. When the heart stops, man drops dead. The severity of the financial problem was compounded because it is worldwide and as the world is now so globalised, no country will be spared. For example, if CitiBank were to fail, can you imagine the queues from South American to Europe lining up to withdraw the fund? And all the banks that lend money to Citibank will also collapse in its wake. It’s a nightmare scenario no governments wish to see.
Many analysts believe that the economy will not recover until the properties market stabilised and bottom up. But then if the banking system is not fixed, there will be no loans to spur the properties market. Not only that, mortgages asset carried by the bank will continue to be stress and lead banks to more write downs. In my opinion, the US government has to pay any price to fix the banking system before any meaningful recovery of the housing market. That’s about the only way to kick-start the economy.
The entire Europe too is facing the same banking problem. The bailouts will continue in Europe. In particular, Britain’s banking system is in a big mess too. Britain has already nationalised 2 banks and RBS is sitting on trillion of pound of toxic assets.
If after all the bailouts have failed, US is only left with the unthinkable. That is, nationalisation. This will be my next topic for my blog.
---------------Living to see the world-------------------------FRA
Saturday, February 21, 2009
BAILING OUT US AUTOMAKERS
Remember the CEOs of the big three Detroit US automakers flew in to Washington on their private jets to seek federal money to bail them out. This caused much disquiet in both the public as well as sthe Senate and the House. At the end, some $17 billion were dished out to prevent the collapse of GM and Chrysler. It was justified that if these company were not bailed out, millions of jobs will be lost and the cost will even be higher for Washington. But this sum was only a temporary relief and was just to delay the eventual bankruptcy.
But Washington was compell to offer more money if these big 3 can come up with a restructuring plan. From the political perspective, President Obama has no choice but to bailout these companies. It is a matter of how to justify to the taxpayers and making it palatable to Senate. A task force for the restructuring of the auto industries in now in place to work out a viable plan to include all parties including the unionised workers. Another $22bn is required to prevent the collapse of the big 3.
But by bailing out or subsidising the auto industries, the US will violate WTO rules. The US has been a consistent complainant against China and European Unions in recent years, arguing that government-backed loans and tax breaks to industries were illegal subsidies. Those cases are pending or were settled. These will have repercussions on free-trade agreements or risk giving in to a protectionist backlash in the US. US will lose the moral high ground to lecture the rest of the world on free market.
In the long term, even if the automakers are bailed out, the future will continue to be mired by its ability to compete with the rest of the automakers especially Japanese and Korean. Unless it can restructure its production and cost components, produce more efficient cars and priced competitively yet remained profitable, the US automakers will continue to be a liability to the US taxpayers.
--------------------------------------------------------------JFK
But Washington was compell to offer more money if these big 3 can come up with a restructuring plan. From the political perspective, President Obama has no choice but to bailout these companies. It is a matter of how to justify to the taxpayers and making it palatable to Senate. A task force for the restructuring of the auto industries in now in place to work out a viable plan to include all parties including the unionised workers. Another $22bn is required to prevent the collapse of the big 3.
But by bailing out or subsidising the auto industries, the US will violate WTO rules. The US has been a consistent complainant against China and European Unions in recent years, arguing that government-backed loans and tax breaks to industries were illegal subsidies. Those cases are pending or were settled. These will have repercussions on free-trade agreements or risk giving in to a protectionist backlash in the US. US will lose the moral high ground to lecture the rest of the world on free market.
In the long term, even if the automakers are bailed out, the future will continue to be mired by its ability to compete with the rest of the automakers especially Japanese and Korean. Unless it can restructure its production and cost components, produce more efficient cars and priced competitively yet remained profitable, the US automakers will continue to be a liability to the US taxpayers.
--------------------------------------------------------------JFK
Friday, February 20, 2009
BAILING OUT AMERICAN HOMEOWNERS
We often heard of the 'American Dream'. Today this dream has become 'American Nightmare'. Millions of Americans are losing their homes with foreclosure rate hitting historical proportion. I see this coming long ago. When politicians bullshit to the American public about the good American life, misled them year in year out of the ever bright future they have. And American naively believes the rhetoric and spends beyond their mean. Individual becomes highly leveraged by taking excessive loan through mortgages. The ever greedy banks readily and happily lend with no regards for credit worthiness. Then the mortgages are packaged into financial instrument that no investors really understood or bother to understand the risk of such investment. The outcome is now history.
President Obama unveiled his much-anticipated bailout plan to sort out this ‘make in America’ housing crisis. He pledges 275Bn dollars to help stem the wave of foreclosure sweeping the country. Accordingly to various new sources, up to 10 million homeowners may face foreclosures by 2012 if nothing is done. The president reckons that if they do nothing now, the cost will even be higher later. In my opinion, that may be true. The bursting of the housing bubble was the root cause of this economic crisis. Unless and until the prices of properties stabilised, the banking crisis will continued to be stress and will not recover. Only when both the housing and the banking recover, then America can expect to be out of this recession.
This is a smart move by Obama both politically and economically. But the outcome and repercussion is still questionable and debatable. President Obama next move is likely to fix the auto industry. Then next he should move on to fix the banking system. Here is where the core problem of the present economic crisis lies.
----------------------------------------------------------------
President Obama unveiled his much-anticipated bailout plan to sort out this ‘make in America’ housing crisis. He pledges 275Bn dollars to help stem the wave of foreclosure sweeping the country. Accordingly to various new sources, up to 10 million homeowners may face foreclosures by 2012 if nothing is done. The president reckons that if they do nothing now, the cost will even be higher later. In my opinion, that may be true. The bursting of the housing bubble was the root cause of this economic crisis. Unless and until the prices of properties stabilised, the banking crisis will continued to be stress and will not recover. Only when both the housing and the banking recover, then America can expect to be out of this recession.
This is a smart move by Obama both politically and economically. But the outcome and repercussion is still questionable and debatable. President Obama next move is likely to fix the auto industry. Then next he should move on to fix the banking system. Here is where the core problem of the present economic crisis lies.
----------------------------------------------------------------
Monday, February 16, 2009
COMMUNISM VERSUS CAPITALISM
Back in the 50s through the 80s, the world was simply divided into 2 spheres. One is free and one non-free. Of course the word ‘free’ was coined by the West to show its superiority and its better appeal. The eastern block of communist countries like to use words like ‘people’ and ‘democratic’. Example is People Republic of China and Democratic Republic of Korea.
During the early 1900, communism, with it strong egalitarian socialistic principle was gaining popularity in a period of turmoil, desperation and frustration between the poor and the rich landlord class in many part of Europe and Asia. The ideals are very noble. All men are equal and all work for the benefit of the states. The state plans and allocates the use of labour and resources. The state in return take care of all it citizens for food, health, education and housing. It became very popular with the poor and the peasants. This gain momentum after WW2 with China and many Asian countries espoused communism.
On the other hand, the West, USA and Western Europe believe in free market. All enterprises and properties are privately own. The state will have minimum interference. Market is a function of demand and supply. Allocation of resources will be based on this principle. Individual has the right to choose and meritocracy is the order. And it is believed that this system is more efficient and better in resource allocation and wealth creation. In US, citizens are responsible for their own food, health and housing. In Europe, it is moderated where the state assist in area of health, education and some basic welfare. This system is widely adopted in most part of the world like Singapore.
The profound difference is the political system. The free world had elections periodically to choose it leaders while the communism countries, the citizens do not have this luxury. It is dominated by the communist party members that govern mostly with iron hand and no dissent is allowed. Individual right and freedom of expression is nonexistent. As mentioned earlier, all enterprises in communist countries are state own, whereas there are privately own in capitalist states.
Looking at my country, Singapore, many enterprises like power, water, telecommunication, hospital, transport and properties are wholly or partially state owned. Does that make Singapore a communist country? The citizens pay for almost everything at market prices. And many enterprises and properties are privately own. Does that make Singapore a capitalist country? Some say this is socialistic democratic. But whatever we call it, what is more important is, have this system imperil or failed us? Where will Singapore be today if we are like china or we adopted the American system? In fact the Chinese has tried to emulate the Singapore system.
Communism has failed because it has lost it appeal and has been found to be unworkable as human being is never altruistic. The present economic crisis has also exposed the flaws capitalism. A lot of questions have to be answered. Do free market principles still relevant to this globalised world with news and information movement at the finger tips? The people of the world are more educated too. Skills and talents are no more limited to the developed west and is easily source globally. Movement of capital and resources move seamlessly across continent with modern transport system.
Free market principles will always be relevant. Except this time, the proponent of free market principles may be haunted by what it promotes in the past. Why a car mechanics in Thailand should be paid only 10% of what his counterparts earn in the West. Why should a factory workers in Vietnam or China are paid peanuts doing the same jobs. Since market forces will determine the best use of resource and capital, more jobs will be lost in the West. But when this reality bites, will the west change the goal post to suit its own interest. There is a very great chance; trade protectionism will be in favour among the western politicians trying to look after their constituencies.
Something I feel may be plausible. We may be moving into a period of ‘global wealth redistribution’. The west has exploited the rest of the world for far too long. It started with the ‘Opium War’ when the Chinese is forced to buy opium in the guise of free trade under the cannons of the English Navy. Also the west has been living beyond their means through easy credits. The west dominance of technology is about over as the rest of the world has caught up. The days of cheap raw materials and resources too are numbered as demand spike up as other countries like China, India, Russia and Brazil develop. As such, the west can no longer monopolised on technology and dictate it trading rules to the rest of the world.
Under the capitalistic system, wealth will always be limited to few. The income gap between the rich and the middle class will widen. With high employment rate, there will be too many poor with no social help from the government. When this happen in a democratic country, politicians cannot ignore the needs of ordinary people in a ‘one man one vote’ system. There is no way the present form of capitalistic system can benefit the majority of the people. Inevitably, the US will have to reform the present free market system.
The US can make reform to its own system but this will entail a lot of painful decisions. Or it can change or reform the trading and market system of the rest of the world to minimise its own pain. I personally think the US will find it convenient to do the latter. It is indeed ironic that China is moving away from communism and eventually US will also move away from its form of capitalism.
My point is, capitalist is definitely not having the last word and communist may be having the last laugh even though it is dead. This global economic crisis will definitely bring about a new economic and political order. Nobody knows how this will evolve.
--------------------Living to see the world---------------------
During the early 1900, communism, with it strong egalitarian socialistic principle was gaining popularity in a period of turmoil, desperation and frustration between the poor and the rich landlord class in many part of Europe and Asia. The ideals are very noble. All men are equal and all work for the benefit of the states. The state plans and allocates the use of labour and resources. The state in return take care of all it citizens for food, health, education and housing. It became very popular with the poor and the peasants. This gain momentum after WW2 with China and many Asian countries espoused communism.
On the other hand, the West, USA and Western Europe believe in free market. All enterprises and properties are privately own. The state will have minimum interference. Market is a function of demand and supply. Allocation of resources will be based on this principle. Individual has the right to choose and meritocracy is the order. And it is believed that this system is more efficient and better in resource allocation and wealth creation. In US, citizens are responsible for their own food, health and housing. In Europe, it is moderated where the state assist in area of health, education and some basic welfare. This system is widely adopted in most part of the world like Singapore.
The profound difference is the political system. The free world had elections periodically to choose it leaders while the communism countries, the citizens do not have this luxury. It is dominated by the communist party members that govern mostly with iron hand and no dissent is allowed. Individual right and freedom of expression is nonexistent. As mentioned earlier, all enterprises in communist countries are state own, whereas there are privately own in capitalist states.
Looking at my country, Singapore, many enterprises like power, water, telecommunication, hospital, transport and properties are wholly or partially state owned. Does that make Singapore a communist country? The citizens pay for almost everything at market prices. And many enterprises and properties are privately own. Does that make Singapore a capitalist country? Some say this is socialistic democratic. But whatever we call it, what is more important is, have this system imperil or failed us? Where will Singapore be today if we are like china or we adopted the American system? In fact the Chinese has tried to emulate the Singapore system.
Communism has failed because it has lost it appeal and has been found to be unworkable as human being is never altruistic. The present economic crisis has also exposed the flaws capitalism. A lot of questions have to be answered. Do free market principles still relevant to this globalised world with news and information movement at the finger tips? The people of the world are more educated too. Skills and talents are no more limited to the developed west and is easily source globally. Movement of capital and resources move seamlessly across continent with modern transport system.
Free market principles will always be relevant. Except this time, the proponent of free market principles may be haunted by what it promotes in the past. Why a car mechanics in Thailand should be paid only 10% of what his counterparts earn in the West. Why should a factory workers in Vietnam or China are paid peanuts doing the same jobs. Since market forces will determine the best use of resource and capital, more jobs will be lost in the West. But when this reality bites, will the west change the goal post to suit its own interest. There is a very great chance; trade protectionism will be in favour among the western politicians trying to look after their constituencies.
Something I feel may be plausible. We may be moving into a period of ‘global wealth redistribution’. The west has exploited the rest of the world for far too long. It started with the ‘Opium War’ when the Chinese is forced to buy opium in the guise of free trade under the cannons of the English Navy. Also the west has been living beyond their means through easy credits. The west dominance of technology is about over as the rest of the world has caught up. The days of cheap raw materials and resources too are numbered as demand spike up as other countries like China, India, Russia and Brazil develop. As such, the west can no longer monopolised on technology and dictate it trading rules to the rest of the world.
Under the capitalistic system, wealth will always be limited to few. The income gap between the rich and the middle class will widen. With high employment rate, there will be too many poor with no social help from the government. When this happen in a democratic country, politicians cannot ignore the needs of ordinary people in a ‘one man one vote’ system. There is no way the present form of capitalistic system can benefit the majority of the people. Inevitably, the US will have to reform the present free market system.
The US can make reform to its own system but this will entail a lot of painful decisions. Or it can change or reform the trading and market system of the rest of the world to minimise its own pain. I personally think the US will find it convenient to do the latter. It is indeed ironic that China is moving away from communism and eventually US will also move away from its form of capitalism.
My point is, capitalist is definitely not having the last word and communist may be having the last laugh even though it is dead. This global economic crisis will definitely bring about a new economic and political order. Nobody knows how this will evolve.
--------------------Living to see the world---------------------
Saturday, February 14, 2009
DEEPENING RECESSION
The entire Europe is in recession. Never has economic situation so dire since WW2. And the data and statistics announced shows the US recession is getting worst. More pain is expected in the near-term as bleak economic reports roll in, flagging more bankruptcies, bad debts and layoffs. Unemployment rate is climbing towards double digits. Home and properties continued to fall. Foreclosures do not seem to abate.
Across the world, manufacturing outputs and exports keep shrinking forcing factories shutdown. Cargoes carrried by both ships and aeroplanes too drop dramatically. Trade collapse and a slowdown are forcing many governments in Asia to take extraordinary measures to boost the economy.
Across the globe, from developed countries and developing countries, stimulus measures were announced. America has just announced another 800bn dollars stimulus package. In fact many countries are annoucing stimulus packages for the second or third times, like the US. Surely, behind closed doors, government officials and economists will be wondering with trepidation, whether all these measures can actually turn the economy around. The danger is what to do if it doesn’t work. Too much at are stake, both socially and politically. There will be more sleepless night for everyone from central bankers to consumers struggling to pay off their mortgages and daily bills. I too have my doubts. The economic crisis is so severe and the deterioration totally uncontrollable. Government and economist have been behind the curve and are still behind the curve.
The measures so far are simply reactive. They seem only to address the problem of boosting the economy through spending. While this is not wrong, the world leaders need to move faster to tackle the roots of the problem. In my view, the world, especially the US needs to address the failure of banking system, falling home prices and foreclosure. But the hardest part is to rebuild confidence. Confidence is the most critical part of economic recovery. With job losses and bankruptcies mounting, sentiment on the ground is at its lowest. You can put money in the pocket, but you can’t put confidence in the heart. When confidence is shattered, it likes repairing a broken glass.
The world economy is doomed. Obama said, ‘Recovery will be likely be measured in years, not months’. If the US takes unprecedented measures to have a total solution to address the banking and housing problem, there is still hope. Only great leaders with great vision can motivate it people that there is hope. Great leaders can convince its people to take the pains to achieve a better tomorrow. This responsibility now falls on the shoulders of Barack Obama.
----------------------Living to see the world--------------------------------------
Across the world, manufacturing outputs and exports keep shrinking forcing factories shutdown. Cargoes carrried by both ships and aeroplanes too drop dramatically. Trade collapse and a slowdown are forcing many governments in Asia to take extraordinary measures to boost the economy.
Across the globe, from developed countries and developing countries, stimulus measures were announced. America has just announced another 800bn dollars stimulus package. In fact many countries are annoucing stimulus packages for the second or third times, like the US. Surely, behind closed doors, government officials and economists will be wondering with trepidation, whether all these measures can actually turn the economy around. The danger is what to do if it doesn’t work. Too much at are stake, both socially and politically. There will be more sleepless night for everyone from central bankers to consumers struggling to pay off their mortgages and daily bills. I too have my doubts. The economic crisis is so severe and the deterioration totally uncontrollable. Government and economist have been behind the curve and are still behind the curve.
The measures so far are simply reactive. They seem only to address the problem of boosting the economy through spending. While this is not wrong, the world leaders need to move faster to tackle the roots of the problem. In my view, the world, especially the US needs to address the failure of banking system, falling home prices and foreclosure. But the hardest part is to rebuild confidence. Confidence is the most critical part of economic recovery. With job losses and bankruptcies mounting, sentiment on the ground is at its lowest. You can put money in the pocket, but you can’t put confidence in the heart. When confidence is shattered, it likes repairing a broken glass.
The world economy is doomed. Obama said, ‘Recovery will be likely be measured in years, not months’. If the US takes unprecedented measures to have a total solution to address the banking and housing problem, there is still hope. Only great leaders with great vision can motivate it people that there is hope. Great leaders can convince its people to take the pains to achieve a better tomorrow. This responsibility now falls on the shoulders of Barack Obama.
----------------------Living to see the world--------------------------------------
Tuesday, February 10, 2009
CAPITALISM IN TROUBLE
The fall of communism in Poland 20 years ago heralded the end of communism. The last nail in the coffin came when the Berllin Wall fell. The rest of the Russian satellites countries abandon communism one by one. There was so much hope and euphoria in Eastern Europe when western style democracy was adopted. Along with it come capitalism and free market. It was supposed to bring better life and cure the ills of communism. The perennial food shortages and long queue were gone.
The present day global economic crisis had once again brings hardship to these ‘liberated’ countries. Capitalism is supposed to bring wealth and well being to mankind. But with the shutdown of shipyards and factories, many hard questions need to be asked. Has capitalism failed? The guns (western politicians and media) have gone silent. What happens to these champions of capitalism?
Capitalism has not only failed, but has compromised the future of next generations, not only in economic term but as well as the environment. The world resources have been plundered in the name of profit. The income gap between the rich and the poor diverge even more. Yes, lot of wealth is created, but it goes to the minority. The majority continues to struggle for basic needs. Capitalism has made the world economy far more volatile and poorer nation more vulnerable. Some example was the recent spike in world crude oil and commodities prices. The ordinary citizens just couldn’t afford to pay for these basic necessities.
This failure does not mean communism is better and it will make a comeback. Communism has failed miserably as it will never work because human beings are never altruistic. During the Asian Financial crises, I remembered IMF (headed and backed by West and US) lectured the world on free market. Weak companies must be allowed to fail and market forces will support the more efficient and strong. Today, America is saying the banks and auto industries are just too big to fall, hence the need to spend billions of taxpayer money and borrowed money from Asians to bailout out these failed companies. This is an overt omission of the failure of western style capitalism.
But there is no other alternative. Communism was a total failure. Capitalism is the only viable system available today. But this system must be properly regulated for the interest of the entire world and the majority. Specifically the financial industries need new set of regulation and oversight. The rich countries must not dominate and exploit the poor countries. Regulations must not be allowed to be manipulated by lobby and interest groups for self gratification. Corruption, financial scandals and abuse of power must be punished with sentences no different from that meted out to rapists and murderers.
During Deng’s era, China said, ‘Capitalism with Chinese characteristic’ may now be food for thoughts for those who has embraced unfettered capitalism. But china is still far from perfect and fari from developed status. And the western media should stop the ranking which countries are most ‘free’. Instead, rank countries which are most successful in term education, quality of life and living environment. This could provide a benchmark for weaker country a model to emulate. The good thing about this economic crisis is that Uncle Sam will not be lecturing the world on economic issues of good governance and prudence for a long time.
------------------Living to see the world--------------
The present day global economic crisis had once again brings hardship to these ‘liberated’ countries. Capitalism is supposed to bring wealth and well being to mankind. But with the shutdown of shipyards and factories, many hard questions need to be asked. Has capitalism failed? The guns (western politicians and media) have gone silent. What happens to these champions of capitalism?
Capitalism has not only failed, but has compromised the future of next generations, not only in economic term but as well as the environment. The world resources have been plundered in the name of profit. The income gap between the rich and the poor diverge even more. Yes, lot of wealth is created, but it goes to the minority. The majority continues to struggle for basic needs. Capitalism has made the world economy far more volatile and poorer nation more vulnerable. Some example was the recent spike in world crude oil and commodities prices. The ordinary citizens just couldn’t afford to pay for these basic necessities.
This failure does not mean communism is better and it will make a comeback. Communism has failed miserably as it will never work because human beings are never altruistic. During the Asian Financial crises, I remembered IMF (headed and backed by West and US) lectured the world on free market. Weak companies must be allowed to fail and market forces will support the more efficient and strong. Today, America is saying the banks and auto industries are just too big to fall, hence the need to spend billions of taxpayer money and borrowed money from Asians to bailout out these failed companies. This is an overt omission of the failure of western style capitalism.
But there is no other alternative. Communism was a total failure. Capitalism is the only viable system available today. But this system must be properly regulated for the interest of the entire world and the majority. Specifically the financial industries need new set of regulation and oversight. The rich countries must not dominate and exploit the poor countries. Regulations must not be allowed to be manipulated by lobby and interest groups for self gratification. Corruption, financial scandals and abuse of power must be punished with sentences no different from that meted out to rapists and murderers.
During Deng’s era, China said, ‘Capitalism with Chinese characteristic’ may now be food for thoughts for those who has embraced unfettered capitalism. But china is still far from perfect and fari from developed status. And the western media should stop the ranking which countries are most ‘free’. Instead, rank countries which are most successful in term education, quality of life and living environment. This could provide a benchmark for weaker country a model to emulate. The good thing about this economic crisis is that Uncle Sam will not be lecturing the world on economic issues of good governance and prudence for a long time.
------------------Living to see the world--------------
Saturday, February 7, 2009
HO CHING STEPS DOWN
Change of Guard
Just after lunch yesterday, DJ News flashed an alert that an important announcement is pending 3.30pm. Immediately, the market forum went into overdrive with theories and rumours. Among them were big acquisitions by TH through Standard Chart and SIA losing 2 billion in fuel hedging. But none were even close to what was officially released.
At 4pm. The investing world got their truth. CEO Ho Ching will be stepping down and will be replaced by former CEO of BHP, Charles Goodyear. Then another round of rumours and theories for the reasons of the change of guard at such turbulent times begin to make its round. Of course, the market and the netizens are never short of.
Chairman Danabalan took pains to debunk the rumours that Ho Ching left not because of Temasek poor performance from the recent acquisition of Barclay, ML, Citi, Standard Chart and UBS. Ho Ching herself said that the change was planned long ago and that Temasek need new “energy”.
I do not know HC personally, except that she was a scholar and wife of our PM. Many times she was the target of pot-shots unfairly lobbed at her due to this relationship with the PM. This has kept her away from the limelight of media interviews and press conferences. That unfortunately denied Temasek the ability to effectively tell its side of the story. Temasek is the world 5th largest SWF. As it took the world stage recently when it bought huge stakes in multinationals, politicians from the developed west begin to place SWF under microscope, there is a real need to manage its public image and perception. This could be the reason why a foreign white man is asked to helm this $185B funds. Together with the 2nd in command, who is also white, will be in a better and easier position to manage the western media which are typically sceptical of Singapore.
Another reason in my opinion was more to do with domestic politics. As an early investor in troubled Merril Lynch, Standard Chart and Barclays Banks which now sit on paper loss of US$5B, US$3.2B and $4.6B respectively (source from The Edge). But these losses have to be balanced against the profit from Bank of China and CCB. This losing investment continues to bleed and the losses have yet to abate. Potentially, these losses can be explosive and become a nasty liability for the PM and it may be strategic move for this handover.It may also spare PM the unnecessary criticisms and embarrassment and allow him to concentrate his energy to deal with this economic crisis. This I think is a wise move.
Another reason I believe, could be a change in investment and portfolio philosophy. Temasek has been heavily invested in financial sector. Financial sector may have seen it best days and will no longer give superior returns in the future. Resources and commodities may be the future and now is the best time to make long term investment after the recent collapse of stock market. The ex-CEO of BHP brings with him all the credentials and inside knowledge in this sector. This will definite provide Temasek the edge and the confidence to move into this sector.
So much for my speculation.
Just after lunch yesterday, DJ News flashed an alert that an important announcement is pending 3.30pm. Immediately, the market forum went into overdrive with theories and rumours. Among them were big acquisitions by TH through Standard Chart and SIA losing 2 billion in fuel hedging. But none were even close to what was officially released.
At 4pm. The investing world got their truth. CEO Ho Ching will be stepping down and will be replaced by former CEO of BHP, Charles Goodyear. Then another round of rumours and theories for the reasons of the change of guard at such turbulent times begin to make its round. Of course, the market and the netizens are never short of.
Chairman Danabalan took pains to debunk the rumours that Ho Ching left not because of Temasek poor performance from the recent acquisition of Barclay, ML, Citi, Standard Chart and UBS. Ho Ching herself said that the change was planned long ago and that Temasek need new “energy”.
I do not know HC personally, except that she was a scholar and wife of our PM. Many times she was the target of pot-shots unfairly lobbed at her due to this relationship with the PM. This has kept her away from the limelight of media interviews and press conferences. That unfortunately denied Temasek the ability to effectively tell its side of the story. Temasek is the world 5th largest SWF. As it took the world stage recently when it bought huge stakes in multinationals, politicians from the developed west begin to place SWF under microscope, there is a real need to manage its public image and perception. This could be the reason why a foreign white man is asked to helm this $185B funds. Together with the 2nd in command, who is also white, will be in a better and easier position to manage the western media which are typically sceptical of Singapore.
Another reason in my opinion was more to do with domestic politics. As an early investor in troubled Merril Lynch, Standard Chart and Barclays Banks which now sit on paper loss of US$5B, US$3.2B and $4.6B respectively (source from The Edge). But these losses have to be balanced against the profit from Bank of China and CCB. This losing investment continues to bleed and the losses have yet to abate. Potentially, these losses can be explosive and become a nasty liability for the PM and it may be strategic move for this handover.It may also spare PM the unnecessary criticisms and embarrassment and allow him to concentrate his energy to deal with this economic crisis. This I think is a wise move.
Another reason I believe, could be a change in investment and portfolio philosophy. Temasek has been heavily invested in financial sector. Financial sector may have seen it best days and will no longer give superior returns in the future. Resources and commodities may be the future and now is the best time to make long term investment after the recent collapse of stock market. The ex-CEO of BHP brings with him all the credentials and inside knowledge in this sector. This will definite provide Temasek the edge and the confidence to move into this sector.
So much for my speculation.
LAYOFF OF THE CENTURY
Last week, China announced 26 million has gone out of job directly attributed to the economic recession in the develop world. From countries to countries, employment figures keep propping higher. Soon many countries will be looking at double digits unemployment. To better understand the magnitude of the unemployment. We can equate 26 millions as the entire population of Australia not working or about 6 times Singapore population not working. If we add all the unemployment in the rest of the world, the numbers may be just mind blogging.
Last night, US reported another set of brutal January job report. Almost 2 million jobs lost in US in the last 3 months bringing unemployment to 7.6%. There is just no end in sight to further job lost. The US economy is basically driven by domestic’s consumption. It is obvious that with job lost, consumption will decrease thus creating more jobs lost, bringing about a very vicious cycle of job losses. As consumption decreases, the world manufacturing countries will see more factories shutdown or downsize. Retrenchment is inevitable. The same vicious cycle will repeats in these countries leading to more jobs lost. If the US government fails to stimulate consumption, the unemployment rate will exacerbate further. As the recession becomes deeper and longer, there can be no escape from the dreaded depression every country trying to avoid.
With extremely bleak job scenario, the social and political costs become more uncertain but definitely leads to social unrest, chaos and increased crime rates. Young will suffer from malnutrition and illiteracy. The aged will suffer from lack of health care. Many will suffer from depression and there are already sign of increasing suicides. Corruption too will increase especially in the third world when one has to find means to feed their families. The will be increase in illegal economic migrants when people are faced with hardships. Conflicts between neighbouring countries will be inevitable. Major industrialised nations may seek trade protectionism to pacify it local constituents. Such action can snowball into trade wars. The world is definitely heading into very turbulent times.
So these are the ills of massive unemployment. But the cause of this massive unemployment is free trade and capitalism. Capitalism solely works on the market forces of supply and demand and is supposed to provide the best efficiency for the usage of capital and resources. Capitalism and free trade are supposed to bring wealth and improve the livelihood of the people. Ironically now, it has brought despair and pains to so many people. So we see the ugly side of free market and capitalism, it has failed to address the social cost to human being. Market is incapable of self regulation. Market forces may not be efficient as previously believed by the pioneering economists. Perhaps Karl Marx may be laughing in his grave this time.
If unemployment is cyclical synonymous with an economic recession, then there is hope that those jobs will be returned to workers when the economy recovers. What fearsome is when cyclical unemployment becomes a structural unemployment, as a result of a paradigm shift to a 'new economy' after this economic crisis. Many of the jobs may become redundant and job losses become permanent. High unemployment may become a new global crisis leading to trade war and conflict. Affected country really needs to be nimble to adjust to the changes and formulate strategies to solve this problem.
-----------------Living to see the world---------------------------
Last night, US reported another set of brutal January job report. Almost 2 million jobs lost in US in the last 3 months bringing unemployment to 7.6%. There is just no end in sight to further job lost. The US economy is basically driven by domestic’s consumption. It is obvious that with job lost, consumption will decrease thus creating more jobs lost, bringing about a very vicious cycle of job losses. As consumption decreases, the world manufacturing countries will see more factories shutdown or downsize. Retrenchment is inevitable. The same vicious cycle will repeats in these countries leading to more jobs lost. If the US government fails to stimulate consumption, the unemployment rate will exacerbate further. As the recession becomes deeper and longer, there can be no escape from the dreaded depression every country trying to avoid.
With extremely bleak job scenario, the social and political costs become more uncertain but definitely leads to social unrest, chaos and increased crime rates. Young will suffer from malnutrition and illiteracy. The aged will suffer from lack of health care. Many will suffer from depression and there are already sign of increasing suicides. Corruption too will increase especially in the third world when one has to find means to feed their families. The will be increase in illegal economic migrants when people are faced with hardships. Conflicts between neighbouring countries will be inevitable. Major industrialised nations may seek trade protectionism to pacify it local constituents. Such action can snowball into trade wars. The world is definitely heading into very turbulent times.
So these are the ills of massive unemployment. But the cause of this massive unemployment is free trade and capitalism. Capitalism solely works on the market forces of supply and demand and is supposed to provide the best efficiency for the usage of capital and resources. Capitalism and free trade are supposed to bring wealth and improve the livelihood of the people. Ironically now, it has brought despair and pains to so many people. So we see the ugly side of free market and capitalism, it has failed to address the social cost to human being. Market is incapable of self regulation. Market forces may not be efficient as previously believed by the pioneering economists. Perhaps Karl Marx may be laughing in his grave this time.
If unemployment is cyclical synonymous with an economic recession, then there is hope that those jobs will be returned to workers when the economy recovers. What fearsome is when cyclical unemployment becomes a structural unemployment, as a result of a paradigm shift to a 'new economy' after this economic crisis. Many of the jobs may become redundant and job losses become permanent. High unemployment may become a new global crisis leading to trade war and conflict. Affected country really needs to be nimble to adjust to the changes and formulate strategies to solve this problem.
-----------------Living to see the world---------------------------
Thursday, February 5, 2009
INDECENT PAY
Indecent Pay
The days of fat bonus for CEOs and top executives may be over. In good times, some CEO gets up to $1 million dollars a day. Nobody questions such hefty pay when the stock market is booming and corporations produced exceptional profits. With the banking systems losing over US$1 trillion and stock market loses over US$25trillion, a lot of questions need to be ask about executive’s remuneration and compensation packages. But first just see what $1 trillion in numeric is.
1,000,000,000,000
When the above amount is lost just in the financial institutions, many of the top executives continues to receive bonus. Wall Street paid out some $18 billion of bonus to some of these financial troubled institutions. That is total indecency of the first degree. American taxpayers had to spend billions to bailout some of the failed financial institutions like BOA, Citi, FreddieMac, WaMu, AIG, Merril Lynch, just to name the familiar few. That, I agree with Obama, ‘its shameful’ and ‘it’s the height of irresponsibility’.
Talking of corporate governance and accountability, where is it? Yes CEOs are paid to produce good profit for the benefit of shareholders. In the obsession to deliver profit, CEO has taken risks that have done irreparable damages and even caused demise to so many good companies. Perhaps, remuneration should also have a punitive clause to protect shareholders and bonus should be based on company 3 to 5 year’s performance rather than just 1 year.
The boards of directors too should be accountable. They too, should forfeit the director’s fee if the company were to lose money due to reckless and irresponsible decisions of the companies’ executives.
We must take cognisant that the banking and financing business is unique from others like manufacturing or services. Here an individual banker can single handed produced millions dollars of profit. Can any company CEO turn away profit. The answer is an unqualified no and CEO is willing to pay accordingly for any skilful person who can produce the profit. For this reason alone, many successful bankers will be continued to be paid millions. The simple fact of life is, if you can bring in millions, you will be paid millions like sportsmen, singers, actors etc
--------------------Living to see the world-------------------------
The days of fat bonus for CEOs and top executives may be over. In good times, some CEO gets up to $1 million dollars a day. Nobody questions such hefty pay when the stock market is booming and corporations produced exceptional profits. With the banking systems losing over US$1 trillion and stock market loses over US$25trillion, a lot of questions need to be ask about executive’s remuneration and compensation packages. But first just see what $1 trillion in numeric is.
1,000,000,000,000
When the above amount is lost just in the financial institutions, many of the top executives continues to receive bonus. Wall Street paid out some $18 billion of bonus to some of these financial troubled institutions. That is total indecency of the first degree. American taxpayers had to spend billions to bailout some of the failed financial institutions like BOA, Citi, FreddieMac, WaMu, AIG, Merril Lynch, just to name the familiar few. That, I agree with Obama, ‘its shameful’ and ‘it’s the height of irresponsibility’.
Talking of corporate governance and accountability, where is it? Yes CEOs are paid to produce good profit for the benefit of shareholders. In the obsession to deliver profit, CEO has taken risks that have done irreparable damages and even caused demise to so many good companies. Perhaps, remuneration should also have a punitive clause to protect shareholders and bonus should be based on company 3 to 5 year’s performance rather than just 1 year.
The boards of directors too should be accountable. They too, should forfeit the director’s fee if the company were to lose money due to reckless and irresponsible decisions of the companies’ executives.
We must take cognisant that the banking and financing business is unique from others like manufacturing or services. Here an individual banker can single handed produced millions dollars of profit. Can any company CEO turn away profit. The answer is an unqualified no and CEO is willing to pay accordingly for any skilful person who can produce the profit. For this reason alone, many successful bankers will be continued to be paid millions. The simple fact of life is, if you can bring in millions, you will be paid millions like sportsmen, singers, actors etc
--------------------Living to see the world-------------------------
Tuesday, February 3, 2009
NO BLUEPRINT FOR RECOVERY
NO BLUEPRINT FOR ECONOMIC RECOVERY
The world economy has had exponential growth since WW2. This was a period of relative calm. With the demise of communism in Russian, Europe and China in Asia, the focus has shifted from political philosophy to economic growth especially after the fall of the Berlin Wall. With the European espousing free market economy and the US embraced unfettered capitalism, wealth creation has been phenomenal. The ill of capitalism, ‘greed’ has reared its ugly head. This had led to excessive production and unsustainable development especially in real estates. There is just too much inventories from houses to consumer goods. The relentless effort to pursue profit had driven the financial world to be over leveraged. Now is a period of financial deleveraging and digestion of excessive inventories of commodities, industrial products, to household goods. All these will take some time.
This week world leaders, think tanks, academics, entrepreneurs, economists are gathered at Davos for the World Economic Forum to understand and attempt to formulate strategies to avert this economic calamity. On hindsight, it is now easier to pinpoint the root cause of this economic mess. And there will of course be no shortage of ideas and solutions. But the problem is always in implementation and whether the politicians and its citizen are willing to take the strong dose of medication to cure this economic illness. Some need stronger medicine than others. Does politician has the courage to face the truth and convey the message to its people, without to worry about their political costs.
The democratic world of one man one vote may find itself disadvantage against the Chinese where the central government can unilaterally make the tough and necessary decisions. The free world might find itself bogged down my domestic politics to take the most appropriate but painful resolution to address this financial mess.
The world also needs a new financial architecture and a new social contract with its people. But each country has its own unique idiocy and circumstances. So it is impossible to have a global or universal standard to get the entire world out of this economic mayhem. Inadvertently, a universal policy or action may hurt one country more than the others and politician may not have the political will to implement it. At the end of the day, each country had to move on its own pace it is comfortable with. No government will want to solve this problem by having to default on its power to govern.
So the world will never be able to come up with universal economic blueprint to weather this storm.
--------------------------Living to see the world------------------
The world economy has had exponential growth since WW2. This was a period of relative calm. With the demise of communism in Russian, Europe and China in Asia, the focus has shifted from political philosophy to economic growth especially after the fall of the Berlin Wall. With the European espousing free market economy and the US embraced unfettered capitalism, wealth creation has been phenomenal. The ill of capitalism, ‘greed’ has reared its ugly head. This had led to excessive production and unsustainable development especially in real estates. There is just too much inventories from houses to consumer goods. The relentless effort to pursue profit had driven the financial world to be over leveraged. Now is a period of financial deleveraging and digestion of excessive inventories of commodities, industrial products, to household goods. All these will take some time.
This week world leaders, think tanks, academics, entrepreneurs, economists are gathered at Davos for the World Economic Forum to understand and attempt to formulate strategies to avert this economic calamity. On hindsight, it is now easier to pinpoint the root cause of this economic mess. And there will of course be no shortage of ideas and solutions. But the problem is always in implementation and whether the politicians and its citizen are willing to take the strong dose of medication to cure this economic illness. Some need stronger medicine than others. Does politician has the courage to face the truth and convey the message to its people, without to worry about their political costs.
The democratic world of one man one vote may find itself disadvantage against the Chinese where the central government can unilaterally make the tough and necessary decisions. The free world might find itself bogged down my domestic politics to take the most appropriate but painful resolution to address this financial mess.
The world also needs a new financial architecture and a new social contract with its people. But each country has its own unique idiocy and circumstances. So it is impossible to have a global or universal standard to get the entire world out of this economic mayhem. Inadvertently, a universal policy or action may hurt one country more than the others and politician may not have the political will to implement it. At the end of the day, each country had to move on its own pace it is comfortable with. No government will want to solve this problem by having to default on its power to govern.
So the world will never be able to come up with universal economic blueprint to weather this storm.
--------------------------Living to see the world------------------
Sunday, February 1, 2009
SICK BULL IS DEAD
SINKING BULL IS DEAD
The bull, stuck in the deep mud since last year, kept alive with rope around its horns, is now grasping for its last few breaths. Even with all the ropes (bailouts and emergency loans), the bull is destined for the history book like Bear Stern and Lehman Brothers. And the rest of the once mighty corporations like Citibank, UBS, RBS, AIG, GM etc are all hanging precariously on the cliff. Any burst of strong wind will see some of them falling off the cliff into oblivion.
Locally, despite the enormous budget, there was no post market rally. The massive stimulus budget announce by Barack Obama does not tickle the market. Around the world, from Australia, China and Japan, similar massive stimulus budgets were also announced. And stock markets continue to ignore and even react negatively. Such indifference points to the market resignation and scepticism. There seem to be an air of hopelessness and helplessness.
Around the world, the dreaded R word has become reality as countries after countries announce 3Q GDP contractions and officially confirm recession in these countries. Next quarter, most countries expect even worst contraction. Countries only hope to see improvement at 3Q or 4Q. It won’t be long when the dreaded D word will become the fashionable and most commonly used word from analysts and politicians.
With all these stimulus packages and some restructuring processes in place, there are concerns that all these measures may not work. So what is next? There has been talk about the G20 entering into a new Brettonwoods. There is a dire need for the world to look deeply in how to better regulate the banking system, SWF, hedge funds and all the financial instruments that have been emancipated from free and unfettered capitalism. There is a real need for a new set of universal regulations for the globalised world.
But do the world’s leaders, especially the US and the European have the political will to stomach the painful changes need to address the financial ills of this world. The world may be able to absorb the colossal financial loss, but the social cost will definitely take a political toll on many governments. And that, I hope will not become the ‘Waterloo’ for politicians who have to make the tough decisions. On a more optimistic and positive note, this crisis may become a catalyst for politicians to act decisively. It is often believed crisis create great leaders.
Of course there will always the dangers of trade protectionism for domestic politics. We need responsible leaders with vision to lead the world out of this economic mess. Any further deterioration will lead this world into depression, bringing unimaginable hardship to the entire world.
-----------------------------------Living to see the world------------------------------
The bull, stuck in the deep mud since last year, kept alive with rope around its horns, is now grasping for its last few breaths. Even with all the ropes (bailouts and emergency loans), the bull is destined for the history book like Bear Stern and Lehman Brothers. And the rest of the once mighty corporations like Citibank, UBS, RBS, AIG, GM etc are all hanging precariously on the cliff. Any burst of strong wind will see some of them falling off the cliff into oblivion.
Locally, despite the enormous budget, there was no post market rally. The massive stimulus budget announce by Barack Obama does not tickle the market. Around the world, from Australia, China and Japan, similar massive stimulus budgets were also announced. And stock markets continue to ignore and even react negatively. Such indifference points to the market resignation and scepticism. There seem to be an air of hopelessness and helplessness.
Around the world, the dreaded R word has become reality as countries after countries announce 3Q GDP contractions and officially confirm recession in these countries. Next quarter, most countries expect even worst contraction. Countries only hope to see improvement at 3Q or 4Q. It won’t be long when the dreaded D word will become the fashionable and most commonly used word from analysts and politicians.
With all these stimulus packages and some restructuring processes in place, there are concerns that all these measures may not work. So what is next? There has been talk about the G20 entering into a new Brettonwoods. There is a dire need for the world to look deeply in how to better regulate the banking system, SWF, hedge funds and all the financial instruments that have been emancipated from free and unfettered capitalism. There is a real need for a new set of universal regulations for the globalised world.
But do the world’s leaders, especially the US and the European have the political will to stomach the painful changes need to address the financial ills of this world. The world may be able to absorb the colossal financial loss, but the social cost will definitely take a political toll on many governments. And that, I hope will not become the ‘Waterloo’ for politicians who have to make the tough decisions. On a more optimistic and positive note, this crisis may become a catalyst for politicians to act decisively. It is often believed crisis create great leaders.
Of course there will always the dangers of trade protectionism for domestic politics. We need responsible leaders with vision to lead the world out of this economic mess. Any further deterioration will lead this world into depression, bringing unimaginable hardship to the entire world.
-----------------------------------Living to see the world------------------------------
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