Sunday, October 26, 2008

Capitalism's Hubris: Gambling & Running on Empty...

Greed and accumulation of immense unimaginable wealth tends to create selfish monsters out of everyone of us.

I must confess that the recent financial turmoil (it is hard to imagine that it has only been about one month!) has created within me a great deal of uncertainty and malaise, as to my take and perspective on the free market system.

I have always been wary and circumspect as to its unbridled schematics to allow anyone with any intelligence, energy or ideas, the absolute freedom to make money at whatever costs or with whichever means.

In my profession alone, I have seen just how the lust and lure of filthy lucre has shaped unethical and unjustifiable management of certain patients. That even the noblest medical profession—one most trusted by the public (in almost all surveys carried out to date)—is not immune to ethical breaches due to moral hazard and venal considerations, has tarnished its much vaunted prestige and honour!

Doctors these days, appear just as likely as everyone else to hanker for the good things in life, even towards aspiring to luxurious extremes and then avariciously pursuing these aims to maintain their upscaled lifestyles... Sadly, when we look askance at other professions, and especially at some politicians, these excesses seem pale in comparison!

Nevertheless, it is seldom decried these days, because being wealthy is no longer considered as despicable or even 'faintly disreputable'. Instead, immense wealth is admired and aspired to by millions if not billions of people worldwide, in a new vista on how we look at this God-receding, secular world...

When I was recently reading Marcia Angell's book on The Truth about the Drug Companies, one paragraph in the early pages (pg6) struck me. Dr Angell, a long-time former editor-in-chief of the prestigious New England Journal of Medicine, wrote that the post-Reagan era saw a relentless rise of wealth worshiping:

"(W)ith the (pro-business) shift, the public attitude toward great wealth changed. Before then, there was something faintly disreputable about really big fortunes. You could choose to do good, but most people who had any choice in the matter thought it difficult to do both.

"That belief was particularly strong among scientists and other intellectuals. They could choose to live a comfortable but not luxurious life in academia, hoping to do exciting cutting-edge research, or they could ‘sell out’ to industry and do less important but more remunerative work…

"It became not only reputable to be wealthy, but something close to virtuous. There were ‘winners’ and there were ‘losers,’ and the winners were rich and deserved to be."
Ironically, we have in embracing the free-market system shifted more than our perspective, we have become morally-laxed as to how wealth and society should interact with one another. Many liberal thinking economists are openly neo-Darwinian in their mantra of tacitly or complicitly espousing the freedom to choose, to compete freely without regulations or governmental control, to acquire wealth as the end-all and the be-all—i.e. survival of the financially fittest!

Lassez faire
style of unfettered free market and mass consumerism trumps other models of socioeconomic exercises—leaving in its wake, the burnt-out carcasses of failed former soviet republics, and the triumphalist American-style model, so gratuitously imitated by aspirant wannabees...

It is not surprising that free-market capitalism has trumped socialism, when even command economies like China switched tactics to encourage free-market practices, under the Dengist exhortation that "it does not matter whether it's a white or black cat, as long as it catches the rat!" (For the Chinese, this means that whichever way of acquiring wealth or making money is acceptable, even to be admired...)

The entire world has placed its immense trust in a system that appears to be inexhaustible and limitless in its proclivity to grow and multiply global wealth exponentially! It is true that most peoples of the world have benefited, that many have had a greater chance for better, less brutish, possibly more fulfilling lives. There have also been some degree of trickle-down effect that has decreased the absolute numbers of abjectly poor people, worldwide.

But it has also created a gaping chasm of the immensely rich versus the very poor. The wealth distribution disparity has widened even more these last few years—the so-called Gini index seemingly greater than ever before in most if not all countries.

Conversely, for the entrepreneurial rich and the bankered privileged handful, there has been greater and greater capacity and complexity in multiplying their chances or access to even more schemes or instruments of wealth creation.

Thomas Friedman, prize-winning author of The World is Flat has this to say of the current economic meltdown:
"You have to go back to the beginning of the problem. After the fall of the Berlin Wall, virtually every economy in the world moved to a capitalist system, which eventually made the world awash with money looking for investments.

"It didn’t take long for financial engineers to figure out how to move home mortgages and commercial loans from a transaction between you and your local bank — or between your company and a syndicate of banks — to something much more diffused and fragmented.

"While your bank may have initiated the mortgage or the corporate loan, it was quickly sold to an aggregator who turned these different loans into bonds and then sold them all over the world in small pieces to banks and money market and pension funds."
~Thomas Friedman, in The Post-Binge World, NY Times, 11 October, 2008
It now transpires that over the past 2 decades or so (some say especially after the 1997 market crash in Asia), in a dizzying spiral of creativity, more and more financial instruments have been fabricated and fashioned to leverage and arbitrage the uncertainty or less-than-exact art of lending and borrowing, or the erratic and herd-like movements of funds ...

Hedging the gargantuan bets (estimated average leverage of >30 times for every dollar!) of complex financial interactions (CDOs, collateralized debt obligations; CDSs, credit default swaps) became high-stakes Casino-style gambles which appear to have now redounded on its perpetrators, and on the global markets!

It has been said that years ago, Mr. Warren Buffett, (billionaire investor-extraordinaire, Wizard/Oracle of Omaha, and arguably the richest man on earth today) had called such leveraging derivatives “weapons of financial mass destruction”.

Then, nobody seriously thought to heed or even to contradict him, as Wall Street and its newest crops of financial wizards kept piling up the momentum to push the frontiers of the free-market system to its ultimate if seemingly illimitable conclusions...

In its mad scramble for unimaginable wealth creation, brilliant savant mathematics/physics, and economics graduate students had been engaged to spur and fabricate the giddy epiphanies of mind-dazzling models of supernova-like possibilities, whetted by the inexhaustible appetites of ultra-liberal free-market espousing Nobel-winning professors.
"Somehow the genius quants — the best and brightest geeks Wall Street firms could buy — fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and — poof! — created $62 trillion in imaginary wealth." ~Richard Dooling, The Rise of the Machines, NY Times 11, October, 2008

Somehow, they argue there must be means of engendering newer and more creative ways to multiplying our global wealth, since every possible schematic scenario thus far, had given rise to exponential growths of nearly everything that mankind had hitherto impacted or even touched!

The last 2 decades of globalisation had lent greater credence and currency towards such explosive possibilities. At least until September 2008...

Not too long ago, Malthusian projections regarding population growth would have placed the fear of God in us puny humans who worry that perhaps we'd soon be facing famines due to outgrowing our ability to feed ourselves!

Malthus' growth charts, while quite inexact by today's standards, had shown skyrocketing patterns of curves way beyond our imagination then and perhaps even now. Today, the humungous global market expansion has made it appear that the Malthusian model is forgettably flawed. Thus, fears as to its realisation had receded from almost everyone's consciousness...

Latterly, even with the urgent (An Inconvenient Truth) rhetoric from Al Gore on our global warming crisis, we seemed to have tired quite quickly as to its relevance in our humdrum lives.

So even when extreme climatic swings (force 4 & 5 hurricanes, tsunamis, cyclones, tornadoes, flooding, forest fires, melting glaciers, etc.) seem to have exceeded their norms, we appear nonchalantly dismissive, stoic and irreverent.

We have become immune to our excesses, pushing such morbid thoughts and awareness to the far reaches of our conscience and consciousness—these are just too hard and too depressing to contemplate. Perhaps the time is not yet ripe for us to seriously address these doomsaying concerns. We're just too caught up with our continuing need to pile up our economic toys and gains...

So, whither the world and its tail-spinning economies? Volatile and uncertain markets, commodities, oil and currencies, appear to be the norm for the foreseeable future. Money markets and governments grapple with whatever means to re-instill some semblance of calm, stability and order, which seemed to have deserted not just the ordinary lay-person but more so, the shell-shocked traders and financiers of the world.

More pain and shocks are in store, but there is hope that when the dust finally settles, mankind would have learnt its greatest lesson of hubris for a long time, and that order and some form of regulatory oversight is a must in taming and reining in man's innate propensity to indulge and over-gratify in every possible excesses and greed!

Nigel Lawson, Britain's Chancellor of the Exchequer during Tharcher's time, reminded us that "the price of a free economy is an ineradicable cycle of boom and bust... of alternating moods of optimism and pessimism," in a Times magazine's Back to Reality article (October 13, 2008, pg23).

In another article, The End of an Era (Times magazine, October 13, 2008, pg30), Michael Elliott quoted British philosopher John Gray as stating that '"the era of American global leadership is over" and that neoliberals had "underestimated the revolutionary nature of global capitalism," with its power to upend the familiar landscape and turn it into a churning place of impermanence.'

To paraphrase many others, it is time to reassess our love affair with the dizzying heights of Greenspan's 'irrational exuberance', and learn to live within our means, and that this is the ultimate moral lesson that will resonate with every world citizen...

Perhaps it's time to revisit our liberal arts tradition, to understand that life is cyclical, with its endlessly recurring themes of human suffering, aspirations, joys, triumphs, arrogance, comeuppance and hubris. We have to believe and learn from history, if not to repeat or forestall its agonising consequences, at least to ameliorate its excruciating pain...

It is worth contemplating on the following words of much published author Harold Bloom, Professor of English and Liberal studies at New York's Columbia University:
"(S)ociety has played out its last stake; it is checkmated. Young men have no hope. Adults stand like day laborers, idle on the streets. None calleth us to labor. The old wear no crown of warm life on their gray hairs. The present generation is bankrupt of principles and hope, as of property.

"I see man is not what man should be. He is the treadle of a wheel. He is a tassel at the apron string of society. He is a money chest. He is the servant of his belly. This is the causal bankruptcy, this is the cruel oppression, that the ideal should serve the actual, that the head should serve the feet.

"Then first, I am forced to inquire if the ideal might not also be tried. Is it to be taken for granted that it is impracticable? Behold the boasted world has come to nothing. Prudence itself is at her wits’ end."
~ Harold Bloom, in NY Times, Out of PanicSelf-Reliance, 12 October, 2008

A shorter version of this article has been published in malaysiakini on Nov 6, 2008 as Capitalism: Gambling and Running on empty

Tuesday, October 7, 2008

New Financial Definitions...

A banking friend sent this to me to reflect the modern day realities of the current contagious financial fiasco! Quite appropriate and definitive!

CEO - chief embezzlement officer.

CFO - corporate fraud officer.

BULL MARKET - A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET - A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sxx.

VALUE INVESTING - The art of buying low and selling lower.

P/E RATIO - The percentage of investors wetting their pants as
the market keeps crashing.

BROKER - What my broker has made me.

STANDARD & POOR - Your life in a nutshell.

STOCK ANALYST - Idiot who just downgraded your stock.

STOCK SPLIT - When your ex-wife and her lawyer split your assets equally between themselves.

MARKET CORRECTION - The day after you buy stocks.

CASH FLOW - The movement your money makes as it disappears down the toilet.

INSTITUTIONAL INVESTOR - Past year investor who's now locked up in a nuthouse.

MOMENTUM INVESTING - The fine art of buying high and selling low.

'BUY, BUY' - A flight attendant making market recommendations as you step off the plane.

FINANCIAL PLANNER - A guy who actually remembers his wallet when he runs to the 7-11 for toilet paper and cigarettes.

CALL OPTION - Something people used to do with a telephone in ancient times before e-mail.

YAHOO - What you yell after selling all you owned to some poor sucker for $240 per share.

WINDOWS - What you jump out of when you're the sucker that bought Yahoo for $240 per share.

PROFIT - Religious person who talks to God.

On another note, another friend (Lokun) send this to our medical school of UM Class 79 chat-site.

HOW MUCH is 700 billion?

The mind registers the number with such imprecision as to make it meaningless.

As a stack of $100 bills, it would reach 54 miles high. But who can imagine that? However, if you had the Zimbabwean 100 billion dollar note (as above), you'd just need 7!!! So who's counting?

On the other hand, someone at the Smithsonian once calculated that counting to one billion, at the rate of one digit per second, would take 30 years.

With my calculator, I computed that this counting of one number at a time per second (assuming it is possible to utter mentally or vocally: say nine hundred ninety-nine million, nine hundred ninety-nine thousand, nine hundred and ninety-nine i.e. 999,999,999, in one second!?!) would take actually slightly more than 31 years and 8 months, taking in leap years and all!

By that scale, counting to 700 billion would take 21,000 years!

Which suddenly dawns on me this thought experiment...

Assuming that our ancestors could count, they would have been counting since the time of our earliest human existence. Then, hunting and gathering rather than farming and domestication, would have been the circumscribed knowledge base and only mode of human activity and endeavour!

Perhaps 'we' would have been running around with Neanderthals, probably decimating, nay exterminating them as well, to emerge as the 'superior' species of homo sapiens sapiens...

Huge numbers boggle the mind and create unimaginable, probably imaginary concepts... Yet, there are individuals such as Bill Gates and Warren Buffet who are worth some 50 billion dollars each! Imagine...

The reality on the ground is that one USD is still almost 3.5 Ringgit, and that it is one huge monster of a mind-boggling number--which could feed our entire Malaysian annual budget several times over!


Sunday, October 5, 2008

Leaving Home, Letting Go...

"This is the hour of lead
Remembered if outlived,
As freezing persons recollect the snow--
First chill, then stupor, then the letting go."

~Emily Dickinson poem, starts "After a Great Pain, A Formal Feeling Comes."

My son Timothy left home for studies in London, in mid September, 2008.

He has always been our 'little' boy, although taller and bigger than I. Somehow, it was easier for him than it has been for us, his parents.

The past 2 years haven't been very easy for both of us. He and I have been having this perennial tussle of minds, his constant tugging to break free, to do his own thing, the way he sees fit. And many of these headstrong decisions appear to conflict with mine...

I supposed my wife and I had been too possessive, too 'controlling' over all his affairs, thus far. We've hitherto looked after all his needs, and he had to live under our shadows, literally... He has muttered that as parents and especially me, we have been too much of control-freaks!

But this time when we left him in London, he didn't quite say it, but he appeared to be ready to be on his own. He's been away from us now for nearly 3 weeks, and he has been fending for himself, attending college, finding new friends and getting along... fine.

I suppose it is difficult to let go, to accept that he has become his own man—individual and independent, well, nearly so.

(Letting Go is incidentally the first novel of one of my favourite authors, Philip Roth, published in 1962.)

He is making many of his own decisions, some very momentous ones, all on his own.

Perhaps, as parents we hope deep down that he will make his life decisions, with the faint lingering memory of some of the little 'right' things that we have imparted to him... He has by all intents and purposes, flown the coop.
"Since I am put to know that your own science
Exceeds, in that, the lists of all advice
My strength can give you: then no more remains,
But that to your sufficiency as your Worth is able,
And let them work."
~William Shakespeare, in
Measure for Measure
... Just spoke to my son through skype, a truly wonderful and free video-chat. Have also today been introduced to fring.googletalk (by good friend Muruga now based in Mumbai, via his iPhone), which would make video calls also free via cellphones through wifi, or 3G—truly great technological wonders for ease of communication worldwide.

It is good to see your loved ones and speak to them, as if they are just a few doors away... Distance is no longer what it used to be, with the instantaneous readiness at our fingertips.

It is easier to let go, knowing that we can reach out quite easily, and each knowing that we can be contactable just as conveniently and freely. It's just the time difference, and finding the same moments to connect.

Tim appears well, has been meeting up with a couple of his friends also from Malaysia, one at Imperial and another at LSE. But he has been literally penny-pinching on his lunch with home-made sandwiches; says his dinners and weekend lunch menus have yet to be recycled, so not too boring yet... He's lost weight about an inch around the waist, says mum's cooking is incomparable, which brings tears to my wife...

But at least we get to see and speak to each other. Hooray for skype, MSN messenger, fring, etc! The world is truly our oyster, definitely and eminently within reach—what with email, sms, video-chats, skype, and now even fring?

The Paradox of our time...

Recently, my sister Julie sent this to me... very thought provoking, and good for a time out...

A Message by George Carlin:

"The paradox of our time in history is that:

We have taller buildings but shorter tempers, wider freeways, but narrower viewpoints.

We spend more, but have less, we buy more, but enjoy less.

We have bigger houses and smaller families, more conveniences, but less time.

We have more degrees but less sense, more knowledge, but less judgment, more experts, yet more problems, more medicine, but less wellness.

We drink too much, smoke too much, spend too recklessly, laugh too little, drive too fast, get too angry, stay up too late, get up too tired, read too little, watch TV too much, and pray too seldom.

We have multiplied our possessions, but reduced our values. We talk too much, love too seldom, and hate too often.

We've learned how to make a living, but not a life. We've added years to life not life to years.

We've been all the way to the moon and back, but have trouble crossing the street to meet a new neighbor.

We conquered outer space but not inner space. We've done larger things, but not better things.

We've cleaned up the air, but polluted the soul.

We've conquered the atom, but not our prejudice.

We write more, but learn less.

We plan more, but accomplish less.

We've learned to rush, but not to wait.

We build more computers to hold more information, to produce more copies than ever, but we communicate less and less.

These are the times of fast foods and slow digestion, big men and small character, steep profits and shallow relationships.

These are the days of two incomes but more divorce, fancier houses, but broken homes.

These are days of quick trips, disposable diapers, throwaway morality, one night stands, overweight bodies, and pills that do everything from cheer, to quiet, to kill.

It is a time when there is much in the showroom window and nothing in the stockroom.

A time when technology can bring this letter to you, and a time when you can choose either to share this insight, or to just hit delete...

Remember; spend some time with your loved ones, because they are not going to be around forever.

Remember, say a kind word to someone who looks up to you in awe, because that little person soon will grow up and leave your side.

Remember, to give a warm hug to the one next to you, because that is the only treasure you can give with your heart and it doesn't cost a cent.

Remember, to say, 'I love you' to your partner and your loved ones, but most of all mean it. A kiss and an embrace will mend hurt when it comes from deep inside of you.

Remember to hold hands and cherish the moment for someday that person will not be there again.

Give time to love, give time to speak! And give time to share the precious thoughts in your mind.


Life is not measured by the number of breaths we take, but by the moments that take our breath away."