http://www.latimes.com/news/nationworld/world/la-fg-abughraib26jun26,0,4979912.story?track=tottext
(LA Times report on Americans needing to build more prisons and expand the famed Abu Ghraib jail because of ‘ballooning prison population’)
One would imagine Saddam’s famously ‘despotic’ regime would need more prisons than the Americans now that the latter have brought freedom to the land of one of the oldest civilizations on earth. If that’s the case, why would the Americans need to build more jails?
Or may be, the Americans bombed away all of Saddam’s prisons as a way to free the Iraqis held by that despot.
Or may be, ‘mad’ Saddam didn’t need that many prisons because he had been killing off his prisoners wholesale instead of jailing them (unlike the nice Americans). But in that case, it should then be obvious to every Iraqi that those Americans are their ‘saviours’ on earth. Then why are they whacking those Americans daily?
Or may be, those Iraqis are real fools that know no better, or are influenced by ‘external forces’ that just hate those nice Americans to death. Who on earth would harbor such a stupid idea? Who could not see that Americans are great people out to do the whole world a favour? Like, who else (not even certain bacteria) would be so great as to gobble up 30 million barrels of oil (or 25% of the world’s oil production), and ‘free’ mother earth of the great burden of housing those dirty black hydrocarbons that everyone else like the Arabs on camels, Chinamen on opium and other infatuations etc. have no use for?
Or may be, freedom was the excuse used to steal control of someone else’s assets (oil in this case). Jailing those not willing to accept their predatory overlord is just the tool used to give the illusion that freedom had indeed arrived. If they are locked up, they cannot demonstrate nor do other stunts like blowing people esp. Americans up. This is nothing new - they do it in their own home with the likes of the ‘free blacks’ and the poor/disadvantaged whom they lock up wholesale to create the illusion of a great democracy.
What a great system they have! Which also explain why they can only ‘export’ the concept but not share it.
For if their system is so great, we all can be in heaven on earth just by migrating to ‘great America’ and let Uncle Sam bring us all great freedom. Their Adam Smith’s invisible hand and Milton Friedman’s price mechanism would solve all earthly problems that all deities since time immemorial could not.
They don’t want you and me? They like the fun of having green card lotteries?
Deng Xiao Ping put it about the same way when 'challenged' by my previous pet American idiot Ronald Reagan when he visited China decades ago.
The latter asked Deng why Chinamen could not be ‘more free’ like his Americans.
Deng said, sure, China can open its doors and let Chinamen be free to do anything including the freedom to go to the US and live the great American dream. The question: is the US willing to open the door for these Chinamen.
Apparently, the other idiot never raised that topic ever again and went home to focus on his ‘star wars’ programs that his followers claim finally ‘saved Eastern Europe’ from the ‘evil Russians’.
Tuesday, June 28, 2005
Monday, June 20, 2005
Where Lies the Oil
Before petroleum oil took its current central seat in man’s ‘pursuit of freedom’ (esp. via the automobile), other forms of oil were used mainly for lighting and heating. This was before the advent of the ‘oil engine’ towards the later part of the Industrial Revolution (which finally led to the likes of the Shah and the Iranian Revolution which, of course, according to some conspiracy-theory-proof fellas have absolutely nothing to do with the topic here).
One of the most convenient sources of oil for lighting in those times more than a century ago, when factories needed men to work through the dark hours of the nights for the sake of ‘economic growth’, are whales which humans in certain countries hunted in huge numbers. It is therefore not surprising that the countries that spoke most loudly of the pursuit of freedom would be the ones that consumed the most oil and therefore whales. That counted Chinamen out - for those idiots were busy smoking opiums courtesy of the other fellas in a form of blissful heaven on earth. Today, there are other forms of intoxication equally blissful to oil such people.
The reason for mass whaling for oil was because oil from whales was relatively cheap to obtain. You only have to sail your ship to certain parts of the oceans and just wait for them to pass. One then merely need to pump a few harpoons into them, wait for the oceans to go red and the whales to go no more. And then you collect the huge carcasses of meat containing balloons of oil that these natural reservoirs provide by the tonnes.
Upon the advent of the ‘oil engine’ and the automobile, ‘free’ men’s demand and pursuit of oil became much more extreme. In fact, the more ‘free’ they are, the more oil they consume which explains why the ‘greatest’ democracy of the world consumes the ‘greatest’ amount (more than 3 times its fair share) of oil and feels so ‘free’ to whack others for it in the name of the other’s freedom, and spoil whatever men with sufficient omega-3 oil in their heads try to do to save the environment.
Thus defines the one defining resource of the modern and free world of today and for which huge ‘world wars’ and ‘war to end all wars’ were fought. In reality, they were wars to determine who get to control oil and end the effort from the others or losers to get to them. Therefore, losers like the Germans, Japanese, Indians and Chinese are left with no claim nor control of any oil resources outside of their own territories (the latter 2 considered losers even though they were on the ‘winning’ side, for other losing reasons - thousands of Indians dying for the 'empire where the sun never sets' notwithstanding).
But while the bigger fellas found it much more convenient (free?) going after the reservoirs of cheap petroleum oil, the smaller fellas found themselves playing with the smaller ones. Thus we have the Americans and British whacking the Arabs for the last century when ever they liked in the name of freedom or free trade, the Australians ‘saving’ Timor Leste from the Indonesians only to steal their oil now that they are smaller to bully, or, in the case of the Japanese, whacking the whales for their oil in the name of science.
We all know which one or ones are the more obvious lies but things don’t have to be that way if we have more of certain other things to oil those cells above our necks. Perhaps those omega-3 oils from the whales would help? No wonder the Japanese are so smart….
Observer report on ‘extraordinary effort by US to scupper British attempts to tackle global warming’: http://observer.guardian.co.uk/international/story/0,6903,1509839,00.html
BBC report on voting in the ‘International Whaling Commission’ (no votes for the unhuman whales!):
http://news.bbc.co.uk/2/hi/science/nature/4109632.stm
One of the most convenient sources of oil for lighting in those times more than a century ago, when factories needed men to work through the dark hours of the nights for the sake of ‘economic growth’, are whales which humans in certain countries hunted in huge numbers. It is therefore not surprising that the countries that spoke most loudly of the pursuit of freedom would be the ones that consumed the most oil and therefore whales. That counted Chinamen out - for those idiots were busy smoking opiums courtesy of the other fellas in a form of blissful heaven on earth. Today, there are other forms of intoxication equally blissful to oil such people.
The reason for mass whaling for oil was because oil from whales was relatively cheap to obtain. You only have to sail your ship to certain parts of the oceans and just wait for them to pass. One then merely need to pump a few harpoons into them, wait for the oceans to go red and the whales to go no more. And then you collect the huge carcasses of meat containing balloons of oil that these natural reservoirs provide by the tonnes.
Upon the advent of the ‘oil engine’ and the automobile, ‘free’ men’s demand and pursuit of oil became much more extreme. In fact, the more ‘free’ they are, the more oil they consume which explains why the ‘greatest’ democracy of the world consumes the ‘greatest’ amount (more than 3 times its fair share) of oil and feels so ‘free’ to whack others for it in the name of the other’s freedom, and spoil whatever men with sufficient omega-3 oil in their heads try to do to save the environment.
Thus defines the one defining resource of the modern and free world of today and for which huge ‘world wars’ and ‘war to end all wars’ were fought. In reality, they were wars to determine who get to control oil and end the effort from the others or losers to get to them. Therefore, losers like the Germans, Japanese, Indians and Chinese are left with no claim nor control of any oil resources outside of their own territories (the latter 2 considered losers even though they were on the ‘winning’ side, for other losing reasons - thousands of Indians dying for the 'empire where the sun never sets' notwithstanding).
But while the bigger fellas found it much more convenient (free?) going after the reservoirs of cheap petroleum oil, the smaller fellas found themselves playing with the smaller ones. Thus we have the Americans and British whacking the Arabs for the last century when ever they liked in the name of freedom or free trade, the Australians ‘saving’ Timor Leste from the Indonesians only to steal their oil now that they are smaller to bully, or, in the case of the Japanese, whacking the whales for their oil in the name of science.
We all know which one or ones are the more obvious lies but things don’t have to be that way if we have more of certain other things to oil those cells above our necks. Perhaps those omega-3 oils from the whales would help? No wonder the Japanese are so smart….
Observer report on ‘extraordinary effort by US to scupper British attempts to tackle global warming’: http://observer.guardian.co.uk/international/story/0,6903,1509839,00.html
BBC report on voting in the ‘International Whaling Commission’ (no votes for the unhuman whales!):
http://news.bbc.co.uk/2/hi/science/nature/4109632.stm
Friday, June 17, 2005
Patriot Act of My Pet Idiot
According to the report attached, the American Patriot Act drafted under the auspices of no other than my pet idiot George Bush Jr., will allow them to try and spot terrorists by checking out the reading habits of patrons of libraries and book stores.
http://www.latimes.com/news/nationworld/nation/la-na-patriot16jun16,0,1882486.story?track=tottext
Now, let’s see how my pet idiot and his American patriots will do that:
1. Spot people that read only the Korans.
Reason: all the ‘terrorists’ that whacked them and whom they whacked since time immemorial were mostly muslims. What do you mean they already have the book, and non-muslims also read them? Then look at only those that read them 5 times a day (phew, that counts Chinamen like me out!)
2. Spot those with turbans and beards.
Reason: Osama and the Talibans had those things on. What do you mean so do the Sikhs? Who are these Sikhs anyway? What do you mean you cannot detect such things? Can't we detect those with ‘habit’ of tweaking their turbans or beards while reading? If not, can’t surely our system smell them out...
3. Look out for those reading about Middle East and Arabia.
Reason: didn’t Osama and his gang come from that part of town? What do you mean you get a ton of white, black and yellow people too? Just color them ‘red’ for suspects.
4. Pick out those that read books on bomb-making.
Reason: they got bombed in Iraq and elsewhere where they went to whack others. What do you mean they already know how to make them?
5. Finger readers that read books on nuclear reactors.
Reason: all countries in idiot Bush’s Axis of Evil are or were trying to build nuclear reactors and thus nuclear bombs which Bush claim they want to use on his people. What do you mean the French, Russian, Ukrainian, South African, Brazilian, Chinese, Pakistanis, and Koreans were already selling them? Tell these fellas to stop doing that! Why cannot? What is this ‘free world’ crap? Ain’t we the sole super-power? What do you mean the Russians said ‘my foot’? Well then, tell Khodorovsky and those Russian Jews to help – they owe us one for helping whack those bloody Arabs don’t they? What do you mean the Russians already fingered them using their own version of Patriot Act? And they did that without having to watch their libraries and bookshops? Bloody brilliant fellas those Russians!
6. Get those fellas reading about sales and purchase agreements.
Reason: see previous point. What do you mean you will find a billion Chinamen and another billion Indian fellas? If they do that, then they are ‘potentials’ – who cares if they count for one third of the world.
7. Suss out those that read about airplanes and how to fly.
Reason: those bastards rained planes on us! What do you mean our flying schools taught them? Well then, suss out people with the same reading habits as those in those flying schools then.
8. Find readers that read about people whose names starts with C, H, O, M.
Reason: many people with name starting with those letters like Che Guevara, Chin Peng, Ho Chi Minh, Osama, Mandela, Mao were all terrorists (shit, this Chinama may get tagged). What do you mean Nehru was also a terrorist? OK, OK include N too. If need be include the whole damn alphabet. (ha, this Chinaman get to have more company)
9. Include people that read about all those terrorists.
Reason: birds of the same feather flock together. I don't care if they are chickens or not. Finger them too.
10. Identify readers that read about architecture esp. American architecture.
Reason: they seemed to like to bomb buildings esp. American ones. How do I know why they seem to have a liking for American architectures?
11. Short list those that read all the above in American libraries and bookshops.
Reason: they bombed us in America didn’t they? OK, there are also libraries elsewhere? No problem, see next idea.
12. Wire all the libraries and bookshops in the world to Bush’s office.
Reason: see previous point. What do you mean cannot? Just get the whole world to monitor their libraries and bookshops for us. Globalise the whole damn thing. What do you mean the Germans, French, Brazilians, Africans, Chinese, and Indians don't want anything to do with this? Isn’t this global terrorism anyway? Ask them if they are with us or not. If not, call them ‘old world’ and threaten to whack the hell out of them. What do you mean they are already old? Anyway, if we get enough fools out there doing this we may even make tons of money selling them our spot-the-terrorist-thru-their-reading-habits system!
13. Pay attention to German, French and Malaysian libraries and bookshops. (darn, this Chinaman is in real trouble)
Reason: Osama’s gang made stopovers in those places on their way to Bush-land before Sept 11. What do you mean these fellas kept quiet the last time, and there is no reason to believe they won’t do the same even if they spot them in their libraries and book shops?
14. Setup the tracking system in madrasahs all round the world
Reason: same as 1. What do you mean it costs money to do that? Go rob some rich Arab like Saddam! Tell them to set it up – tell them big brother wants it (aren’t we the big brother?) If they don’t know how, teach them! What do you mean that would make them smarter and more dangerous? Zap them then! Too far away in Indonesia? Get our deputy sheriffs to do the dirty job - call those bloody Australians. And, what do you mean if we, the British and Australians can get to all the madrasahs in the world, you would not need this bloody system? You trying to be funny or what? What about those that does not read anything? Surely they do? If not how can they get to hate us so much? No problem, see next trick.
15. Tweak the system to detect muslim Arabs with turbans and beards who don’t read anything except the Koran 5 times a day.
Reason: see all above. What do you mean they are in every corner of the world? In that case, put this system into every cochroach on the earth and get them to sniff these fellas out! We know how to GM these insects don’t we? How the hell do I know how? I Bush Jr only understood one book in my entire life and that didn't need much brain. What do you mean the cochcroaches cannot tell them from us because the books look so similar? Can't we get the insects to sort out their 'messenger' from ours? What do you mean even if you guys can do all those things the list would still be half a billion long? If you guys really have no faith in this thing, see my ultimate trick.
16. Spot them by faith.
Reason: I, George Bush Jr do things that way. Trust me, my “America’s Pastor” Billy Graham told me god elected me as US president to do great things for the world. What do you mean by if that’s the case why don’t I and Billy just get the Big Boss to give me the damn list or better still zap all those terrorists from up on high? No problem, in fact whatever list you patriots generate is going to be vetted by none other than Big Billy himself. You see, Big Billy had gone through ‘hundreds of crusades’ and with his inspired help all our presidents had never failed to identify who to whack – the muslims. Except that since there are so many of those fellas, we now want to be more targeted which is why me Big Bully need this Patriot Act and the system above. You know what I mean?
http://www.latimes.com/news/nationworld/nation/la-na-patriot16jun16,0,1882486.story?track=tottext
Now, let’s see how my pet idiot and his American patriots will do that:
1. Spot people that read only the Korans.
Reason: all the ‘terrorists’ that whacked them and whom they whacked since time immemorial were mostly muslims. What do you mean they already have the book, and non-muslims also read them? Then look at only those that read them 5 times a day (phew, that counts Chinamen like me out!)
2. Spot those with turbans and beards.
Reason: Osama and the Talibans had those things on. What do you mean so do the Sikhs? Who are these Sikhs anyway? What do you mean you cannot detect such things? Can't we detect those with ‘habit’ of tweaking their turbans or beards while reading? If not, can’t surely our system smell them out...
3. Look out for those reading about Middle East and Arabia.
Reason: didn’t Osama and his gang come from that part of town? What do you mean you get a ton of white, black and yellow people too? Just color them ‘red’ for suspects.
4. Pick out those that read books on bomb-making.
Reason: they got bombed in Iraq and elsewhere where they went to whack others. What do you mean they already know how to make them?
5. Finger readers that read books on nuclear reactors.
Reason: all countries in idiot Bush’s Axis of Evil are or were trying to build nuclear reactors and thus nuclear bombs which Bush claim they want to use on his people. What do you mean the French, Russian, Ukrainian, South African, Brazilian, Chinese, Pakistanis, and Koreans were already selling them? Tell these fellas to stop doing that! Why cannot? What is this ‘free world’ crap? Ain’t we the sole super-power? What do you mean the Russians said ‘my foot’? Well then, tell Khodorovsky and those Russian Jews to help – they owe us one for helping whack those bloody Arabs don’t they? What do you mean the Russians already fingered them using their own version of Patriot Act? And they did that without having to watch their libraries and bookshops? Bloody brilliant fellas those Russians!
6. Get those fellas reading about sales and purchase agreements.
Reason: see previous point. What do you mean you will find a billion Chinamen and another billion Indian fellas? If they do that, then they are ‘potentials’ – who cares if they count for one third of the world.
7. Suss out those that read about airplanes and how to fly.
Reason: those bastards rained planes on us! What do you mean our flying schools taught them? Well then, suss out people with the same reading habits as those in those flying schools then.
8. Find readers that read about people whose names starts with C, H, O, M.
Reason: many people with name starting with those letters like Che Guevara, Chin Peng, Ho Chi Minh, Osama, Mandela, Mao were all terrorists (shit, this Chinama may get tagged). What do you mean Nehru was also a terrorist? OK, OK include N too. If need be include the whole damn alphabet. (ha, this Chinaman get to have more company)
9. Include people that read about all those terrorists.
Reason: birds of the same feather flock together. I don't care if they are chickens or not. Finger them too.
10. Identify readers that read about architecture esp. American architecture.
Reason: they seemed to like to bomb buildings esp. American ones. How do I know why they seem to have a liking for American architectures?
11. Short list those that read all the above in American libraries and bookshops.
Reason: they bombed us in America didn’t they? OK, there are also libraries elsewhere? No problem, see next idea.
12. Wire all the libraries and bookshops in the world to Bush’s office.
Reason: see previous point. What do you mean cannot? Just get the whole world to monitor their libraries and bookshops for us. Globalise the whole damn thing. What do you mean the Germans, French, Brazilians, Africans, Chinese, and Indians don't want anything to do with this? Isn’t this global terrorism anyway? Ask them if they are with us or not. If not, call them ‘old world’ and threaten to whack the hell out of them. What do you mean they are already old? Anyway, if we get enough fools out there doing this we may even make tons of money selling them our spot-the-terrorist-thru-their-reading-habits system!
13. Pay attention to German, French and Malaysian libraries and bookshops. (darn, this Chinaman is in real trouble)
Reason: Osama’s gang made stopovers in those places on their way to Bush-land before Sept 11. What do you mean these fellas kept quiet the last time, and there is no reason to believe they won’t do the same even if they spot them in their libraries and book shops?
14. Setup the tracking system in madrasahs all round the world
Reason: same as 1. What do you mean it costs money to do that? Go rob some rich Arab like Saddam! Tell them to set it up – tell them big brother wants it (aren’t we the big brother?) If they don’t know how, teach them! What do you mean that would make them smarter and more dangerous? Zap them then! Too far away in Indonesia? Get our deputy sheriffs to do the dirty job - call those bloody Australians. And, what do you mean if we, the British and Australians can get to all the madrasahs in the world, you would not need this bloody system? You trying to be funny or what? What about those that does not read anything? Surely they do? If not how can they get to hate us so much? No problem, see next trick.
15. Tweak the system to detect muslim Arabs with turbans and beards who don’t read anything except the Koran 5 times a day.
Reason: see all above. What do you mean they are in every corner of the world? In that case, put this system into every cochroach on the earth and get them to sniff these fellas out! We know how to GM these insects don’t we? How the hell do I know how? I Bush Jr only understood one book in my entire life and that didn't need much brain. What do you mean the cochcroaches cannot tell them from us because the books look so similar? Can't we get the insects to sort out their 'messenger' from ours? What do you mean even if you guys can do all those things the list would still be half a billion long? If you guys really have no faith in this thing, see my ultimate trick.
16. Spot them by faith.
Reason: I, George Bush Jr do things that way. Trust me, my “America’s Pastor” Billy Graham told me god elected me as US president to do great things for the world. What do you mean by if that’s the case why don’t I and Billy just get the Big Boss to give me the damn list or better still zap all those terrorists from up on high? No problem, in fact whatever list you patriots generate is going to be vetted by none other than Big Billy himself. You see, Big Billy had gone through ‘hundreds of crusades’ and with his inspired help all our presidents had never failed to identify who to whack – the muslims. Except that since there are so many of those fellas, we now want to be more targeted which is why me Big Bully need this Patriot Act and the system above. You know what I mean?
Wednesday, June 15, 2005
The Story of Ay's Promise
In the old days, all round the world people had great fear for their kings, or rather the power their kings represented. Therefore it was common for people to consider their kings and the kings to consider themselves as semi-gods or, even in some cases, as gods (depending on how powerful or arrogant the king got to be). If you don't believe, you can ask the Japanese on who Hirohito of World War II fame was.
Once upon a time in a land faraway (at least from where my Chinaman ancestors used to live), there was a huge and powerful empire. Because of its hugeness, it therefore had access to equally huge resources which its rulers used to satisfy their fancies. For example, they built huge structures and monuments that lasted through the eons that had passed which we still admire in awe today.
At one point in time, one of its kings became the patron of a certain cult that believed in the supremacy of the Sun God over the numerous others peddled by the various cults in the kingdom.
This king was so obsessed with his new cult that he spent huge amounts of his country resources on it. Among others, the king built a new capital for himself and his supporters at great cost. The city was beautiful and plentiful in food and other supplies.
And he gave special treatment to the people who supported his views. They for example, got to enjoy all the things their new beautiful garden homes had to offer.
These supporters in turn included people who were 'spin doctors' who were adept at making up claims and stories in support of the king and his views. It was a symbiotic relationship familiar to history.
At the same time, the king neglected the other affairs of his country resulting in great turmoil and suffering throughout the empire.
Many of his people blamed the sorry state of their great country on the king’s obsession with his one deity and his new garden city. According to them, the country’s misfortune was due to the king’s neglect of the other deities and therefore had drawn the deities’ wraths.
So, upon the king’s death the people revolted.
The new ruler was one of the dead king’s ministers by the name of Ay. For that reason, it was likely that Ay had special feelings for the ex-king’s supporters as they was his co-supporters.
But given the people’s utter hatred for what this bunch of supporters and the former king represented, the politically astute Ay had no choice but to satisfy the people’s wishes and banish the ex-king’s supporters to some far away corner of that country.
As a fellow supporter, Ay was also aware of the supporters’ threat to his new-found powers if they were not to cooperate with his compromise. In any case, it would not be a surprise if among the supporters were Ay’s relatives and perhaps even his own off-springs (throughout history, men of power are known to sow their seeds all over the place).
As their future home is at a far corner of the empire known to be under perennial attacks from external invaders, combined with the former king’s supporters fear of retribution from their other fellow countrymen, Ay had to convince the supporters to accept the idea of banishment by promising them that they will get their land (Ay's promised land?) when they get there and they will have his ‘special’ protection.
On top of that, Ay 'promised' them that when things had quieten down he would send someone (a messenger) over to get them out of the horrid barren plot of land that they were to be banished to, and these people could then return to their former spanking new city with its beautiful gardens where they used to live like in heaven (compared to the new place they were about to go to).
In that way, the ex-home that these outcasts used to enjoy life in might also be interpreted as Ay's other 'promised land'.
As proof of Ay's commitment, he perhaps had his promises recorded on clay tablets (no paper in those days) for them to bring along for the local governors of their place of exile.
Thus to these ex-supporters, Ay was not only their guarantor of survival, but Ay's 'promise' of a return to their former 'heavenly' homes became these people's perennial wish.
And Ay’s messenger would be their saviour from the barren land that they were banished to.
To get to their new home, these followers had to some rivers and perhaps some small lakes - not an impossibility for people of that time but it was nevertheless a challenge for privileged ex-city dwellers more accustomed to the comforts of their garden homes managed by someone else than to the demands of river and lake crossings. So when they made it, it was indeed a big achievement to feel proud over.
On top of that, they witnessed for the first time in their sheltered lives, the results of the rise and ebb of the tides. Though not a surprise to local fishermen, these ex-supporters once found that the waters of the river they were about to cross ‘moved out’ and they could literally walk across to the bank on the other side. It was low tide but knowing no better, they pronounced that the water had 'parted'.
At a later time, perhaps in an attempt to over-inflate this event and their own ego they were to claim that the ‘sea parted’ for them (remember, among them were likely to be 'spin doctors' of the great empire).
Their new neighbours in the promised land were obviously less cultured and less developed compared to this bunch of ex-privileged people from the 'centre of the empire'. This difference made the supporters of the ex-king arrogant – it was an easy thing to do if you lived among the less developed and had the patronage of the most powerful man in the empire.
In the meantime, Ay had consolidated his powers as the new king. So according to tradition, Ay was treated around his kingdom as semi-god or god.
But now that the other ex-supporters were out of sight, and himself comfortably established as new king, Ay never bothered to keep his promise of a messenger and a return to the heavenly ex-homes for this bunch of outcasts.
In any case, these supporters still managed to live comfortably in their new land by invoking the name of Ay to get their way. That way, they got special treatment and rightfully considered themselves special.
So, even if among them were no off-springs of Ay, it would still not be a surprise for the loud mouth ones among them to have maximized the effect of Ay's patronage by claiming themselves to be special children of Ay.
In addition, they found that Ay's clay tablet was also quite useful for 'throwing weight' around.
So when one of them found that some of his people were going astray (perhaps not listening to him), he came up with the idea of going up to the mountains to bake a new tablet containing supposedly Ay's instructions on how to live ethically (or listening to him).
Thus from generation to generation, this bunch of people did the same trick on their fellow supporters and neighbours who, fearful of their mighty kings, continued to give great 'respect' to those tablets of Ay and to the ‘special status’ of these people thereby further inflating their egos.
The 'spin doctors' among them also found that the stories of their origin, journey of banishment, and Ay's promises when well-spun were convenient in shock and awe-ing the clearly less endowed and less privileged others.
So, in their stories they started referring to the beautiful garden their forefathers used to enjoy like in heaven, the 'parting of the sea' for their forefathers to cross, they being special children of Ay, Ay's 'promised land' and his saviour messenger.
Over time, the stories were also interspersed with instructions on household traditions/practices, short stories and little ditties which undoubtedly made them rather entertaining, and some times ludicrous and instructive.
As the tablets got broken from time to time, new ones were made along with the favourable new spins. And when papyrus paper got to them from the centre of the empire, the contents of the latest tablets along with the other stories and their spins were transferred onto 'paper'.
In paper form, the stories became more accessible, and made longer spins possible.
Well, there were really not many other books around the place anyway and only a privileged people could have afforded them then.
Given that it does contain some instructive ideas like the concept of compound interest, it was not difficult to imagine the descendents of the ex-king’s supporters staying ahead of their other neighbours at the fringe of Ay's empire - books are still powerful tools for transmitting knowledge and thus competitive advantage – thereby perpetuating their arrogant believe in their own supremacy.
In their words, they had more reasons to think they were indeed the ‘chosen ones’.
It was also not difficult to imagine how envious the other people living around this bunch of arrogant but undeniably better ‘endowed’ (by way of riches accumulated) folks would have been. Thus, the others started to want to be part of this story.
But alas, such privileges could not be shared without reducing the limited riches or comparative advantages of the few, not to mention the loss of the crowing rights to the privileges accorded by the stories.
Over some more generations, the name of Ay in their story got to be less relevant or rather less effective (who cares about what some king from so many generations ago promised?). So, to keep it relevant and more importantly to perpetuate the mystical effect of the story, Ay had to be replaced with something perhaps more lasting and powerful.
So some smart alec decided to change the word ‘Ay’ to ‘god’. The justification was really quite easy – weren’t all kings supposed to be semi-gods or gods anyway? So, that change was just a minor tweak. Who among the book’s owners would have argued anyway? Thus, Ay’s promises became god’s promises, and Ay’s messenger became god’s messenger.
In due course whenever they fell on hard times, some fella from among the group would re-invoke the long held dream of getting away from the rotten place they were in and returning to the great place their privileged ancestors used to live, as Ay or god promised.
But if you have to follow strictly by the script, before that can happen Ay’s or god's messenger must firstly ‘appear’. So, these fellas or their followers would have to declare someone as Ay’s or god's messenger.
That indeed was what happened time and time again.
Well, as long as the earth continues to exist you can theoretically do that an infinite number of times. Of course, this is made possible only because of the fact that despite all such claims of being Ay's or god's messenger over the eons nothing near what the 'script' said would happen actually happened i.e. Ay or god never bothered to take them back to their ex-'heaven'.
But this is really quite a serious matter since the word Ay was replaced by the word god– we are no more talking about Ay’s promises or messenger but that of a much more powerful or respectable figure.
Furthermore, it was becoming fashionable for if not anything at least the bragging rights, and the fear and respect accrued. So, different fellas were soon fighting over who were the real characters in the story.
One smarter of these fellas, upon losing the battle to be accepted as ‘the messenger’, decided to expand his support base.
To do so, he was mindful not to offend his own internal supporters who thought of themselves as ‘special children of god’. So, with a stroke of creative genius, he created the lesser term ‘children of god’ and used that as enticement for the outsiders whose backing and power this fella needed to call upon.
The simple logic is this: since the other suckers could not be ‘special children of god’, they just might be happy being mere ‘children of god’. Surprisingly, it worked. And this fella, with his hugely expanded support base, managed to overwhelm the other fellow claimants.
To accomodate their new powerful patrons, this renegade bunch had to 'add on' to the old story the new concepts they used to capture their patron's imagination and support - there is always a cost for everything. So a new book was introduced to not just augment the first one, but be the final update on and therefore overrides the former.
And removing Ay from the texts was also both timely and convenient since Ay was from a bygone era and a different super-power from the current patron. Anyhow, this Ay never kept his promise anyway.
Actually, the story was much more than that…
Not to be outdone, the orignal group smartly decided that it was perhaps okay to let this expanded bunch be. Probably they figured that whatever happens, the latter, if they were stupid enough to follow strictly by the old script, would have to accept that as mere ‘children of Ay’ they were really a tad lower than the ‘special children of Ay’.
Indeed, it was infinitely better for things to be that way rather than not! Better that my book remains 'book one' and yours 'book two' than for it not figuring in your scheme of things at all.
So, this episode really made everyone happy (as long as the foolish ones don’t realize it) – which explains why the ‘arrangement’ remained so for so long.
As time moved further on, an egoistical fella among the subsequent followers of the newly expanded group decided to upgrade his own status to that of an 'apostle'.
Of course, not everyone would be happy with such selfish changes – who are you to start changing the story and elevating yourself, the others would say.
But this fella smartly figured that he could 'slip' his more godly status in along with another more significant one with the help of overwhelming ‘fire-power’, and over time no blind follower would ever argue with the changes anyway.
Thus he suggested that his leader’s messenger status be changed to that of the son of god, and himself one of his disciples or apostles. This gave rise to a momentous dispute.
Actually it was very simple: according to the script, the world was supposed to end and every one was supposed to 'go back to heaven' soon after the appearance of 'the messenger'. But 'the messenger' had come and gone for a few hundred years and yet that 'let's all go to heaven' never happened. In that sense, our fella's opponent might have a case.
But luckily for the progenitor, his changes had the support of the king of the then super-power of the land (who cares what happen to heaven when you have a super-power to help you dictate what happens on earth?).
So when this king got all the differing fellas at a place called Nicene and told them to agree on one version of the story once and for all, this fella's version won. In their words, their version is 'the truth' while the other's is a 'heresy' (never mind if it was won by sheer fire power. Anyway which gullible future idiot will bother with that?).
Actually it wasn't as congenial as it seemed. The losers in this particular dispute were actually banished – much like those of the time of Ay. But, things did not end there.
The followers of the losers in this particular dispute soon decided that they too could make some small changes here and there, and come up with their own story more accommodating to their wishes!
In their version of the story, they appointed one of their own rank outsiders as god’s ‘latest messenger’ - the previous 'the messenger' turned 'son of god' was merely 'one of god's messengers'.
To add to its appeal, special privileges for the original selected few from Ay's time were revoked (ha, now every one is at least more equal).
In fact, they had a whole new book that had 'new updates' and 'selected' extracts from the 2 previous ones.
Given that it was a 'selection', it was therefore not difficult to then assume that it was therefore better than the rest too.
Anyway, those 2 other books were written by 'arch enemies' and contained too many inconsistencies to be credible. Not to mention, 3 books was probably too much to lug around on those poor camels.
It is not difficult then to see how this would be bad news to the winner of the previous dispute, and the special ones they out-muscled earlier.
So, those two got together and tried to go at the latest story-tellers ('you mean our 2 books are not as good as your 1?' was probably how the logic went).
But by then, things were really more equal - the super-power of the land is no more that of the guy that underwrote the previous story change. Now, it was really free for all.
So since then, the people in Ay’s promised land had lived happily ever after – happily fighting and killing each other for the right to call their own version of the Ay story the ‘final one’.
And while Ay had been forgotten to all these fools' convenience, more fools from further afar are today also stupidly joining in thinking that 'believing in the story' will somehow bring them to the 'heavenly home' that Ay promised long time ago to a bunch of outcasts.
Once upon a time in a land faraway (at least from where my Chinaman ancestors used to live), there was a huge and powerful empire. Because of its hugeness, it therefore had access to equally huge resources which its rulers used to satisfy their fancies. For example, they built huge structures and monuments that lasted through the eons that had passed which we still admire in awe today.
At one point in time, one of its kings became the patron of a certain cult that believed in the supremacy of the Sun God over the numerous others peddled by the various cults in the kingdom.
This king was so obsessed with his new cult that he spent huge amounts of his country resources on it. Among others, the king built a new capital for himself and his supporters at great cost. The city was beautiful and plentiful in food and other supplies.
And he gave special treatment to the people who supported his views. They for example, got to enjoy all the things their new beautiful garden homes had to offer.
These supporters in turn included people who were 'spin doctors' who were adept at making up claims and stories in support of the king and his views. It was a symbiotic relationship familiar to history.
At the same time, the king neglected the other affairs of his country resulting in great turmoil and suffering throughout the empire.
Many of his people blamed the sorry state of their great country on the king’s obsession with his one deity and his new garden city. According to them, the country’s misfortune was due to the king’s neglect of the other deities and therefore had drawn the deities’ wraths.
So, upon the king’s death the people revolted.
The new ruler was one of the dead king’s ministers by the name of Ay. For that reason, it was likely that Ay had special feelings for the ex-king’s supporters as they was his co-supporters.
But given the people’s utter hatred for what this bunch of supporters and the former king represented, the politically astute Ay had no choice but to satisfy the people’s wishes and banish the ex-king’s supporters to some far away corner of that country.
As a fellow supporter, Ay was also aware of the supporters’ threat to his new-found powers if they were not to cooperate with his compromise. In any case, it would not be a surprise if among the supporters were Ay’s relatives and perhaps even his own off-springs (throughout history, men of power are known to sow their seeds all over the place).
As their future home is at a far corner of the empire known to be under perennial attacks from external invaders, combined with the former king’s supporters fear of retribution from their other fellow countrymen, Ay had to convince the supporters to accept the idea of banishment by promising them that they will get their land (Ay's promised land?) when they get there and they will have his ‘special’ protection.
On top of that, Ay 'promised' them that when things had quieten down he would send someone (a messenger) over to get them out of the horrid barren plot of land that they were to be banished to, and these people could then return to their former spanking new city with its beautiful gardens where they used to live like in heaven (compared to the new place they were about to go to).
In that way, the ex-home that these outcasts used to enjoy life in might also be interpreted as Ay's other 'promised land'.
As proof of Ay's commitment, he perhaps had his promises recorded on clay tablets (no paper in those days) for them to bring along for the local governors of their place of exile.
Thus to these ex-supporters, Ay was not only their guarantor of survival, but Ay's 'promise' of a return to their former 'heavenly' homes became these people's perennial wish.
And Ay’s messenger would be their saviour from the barren land that they were banished to.
To get to their new home, these followers had to some rivers and perhaps some small lakes - not an impossibility for people of that time but it was nevertheless a challenge for privileged ex-city dwellers more accustomed to the comforts of their garden homes managed by someone else than to the demands of river and lake crossings. So when they made it, it was indeed a big achievement to feel proud over.
On top of that, they witnessed for the first time in their sheltered lives, the results of the rise and ebb of the tides. Though not a surprise to local fishermen, these ex-supporters once found that the waters of the river they were about to cross ‘moved out’ and they could literally walk across to the bank on the other side. It was low tide but knowing no better, they pronounced that the water had 'parted'.
At a later time, perhaps in an attempt to over-inflate this event and their own ego they were to claim that the ‘sea parted’ for them (remember, among them were likely to be 'spin doctors' of the great empire).
Their new neighbours in the promised land were obviously less cultured and less developed compared to this bunch of ex-privileged people from the 'centre of the empire'. This difference made the supporters of the ex-king arrogant – it was an easy thing to do if you lived among the less developed and had the patronage of the most powerful man in the empire.
In the meantime, Ay had consolidated his powers as the new king. So according to tradition, Ay was treated around his kingdom as semi-god or god.
But now that the other ex-supporters were out of sight, and himself comfortably established as new king, Ay never bothered to keep his promise of a messenger and a return to the heavenly ex-homes for this bunch of outcasts.
In any case, these supporters still managed to live comfortably in their new land by invoking the name of Ay to get their way. That way, they got special treatment and rightfully considered themselves special.
So, even if among them were no off-springs of Ay, it would still not be a surprise for the loud mouth ones among them to have maximized the effect of Ay's patronage by claiming themselves to be special children of Ay.
In addition, they found that Ay's clay tablet was also quite useful for 'throwing weight' around.
So when one of them found that some of his people were going astray (perhaps not listening to him), he came up with the idea of going up to the mountains to bake a new tablet containing supposedly Ay's instructions on how to live ethically (or listening to him).
Thus from generation to generation, this bunch of people did the same trick on their fellow supporters and neighbours who, fearful of their mighty kings, continued to give great 'respect' to those tablets of Ay and to the ‘special status’ of these people thereby further inflating their egos.
The 'spin doctors' among them also found that the stories of their origin, journey of banishment, and Ay's promises when well-spun were convenient in shock and awe-ing the clearly less endowed and less privileged others.
So, in their stories they started referring to the beautiful garden their forefathers used to enjoy like in heaven, the 'parting of the sea' for their forefathers to cross, they being special children of Ay, Ay's 'promised land' and his saviour messenger.
Over time, the stories were also interspersed with instructions on household traditions/practices, short stories and little ditties which undoubtedly made them rather entertaining, and some times ludicrous and instructive.
As the tablets got broken from time to time, new ones were made along with the favourable new spins. And when papyrus paper got to them from the centre of the empire, the contents of the latest tablets along with the other stories and their spins were transferred onto 'paper'.
In paper form, the stories became more accessible, and made longer spins possible.
Well, there were really not many other books around the place anyway and only a privileged people could have afforded them then.
Given that it does contain some instructive ideas like the concept of compound interest, it was not difficult to imagine the descendents of the ex-king’s supporters staying ahead of their other neighbours at the fringe of Ay's empire - books are still powerful tools for transmitting knowledge and thus competitive advantage – thereby perpetuating their arrogant believe in their own supremacy.
In their words, they had more reasons to think they were indeed the ‘chosen ones’.
It was also not difficult to imagine how envious the other people living around this bunch of arrogant but undeniably better ‘endowed’ (by way of riches accumulated) folks would have been. Thus, the others started to want to be part of this story.
But alas, such privileges could not be shared without reducing the limited riches or comparative advantages of the few, not to mention the loss of the crowing rights to the privileges accorded by the stories.
Over some more generations, the name of Ay in their story got to be less relevant or rather less effective (who cares about what some king from so many generations ago promised?). So, to keep it relevant and more importantly to perpetuate the mystical effect of the story, Ay had to be replaced with something perhaps more lasting and powerful.
So some smart alec decided to change the word ‘Ay’ to ‘god’. The justification was really quite easy – weren’t all kings supposed to be semi-gods or gods anyway? So, that change was just a minor tweak. Who among the book’s owners would have argued anyway? Thus, Ay’s promises became god’s promises, and Ay’s messenger became god’s messenger.
In due course whenever they fell on hard times, some fella from among the group would re-invoke the long held dream of getting away from the rotten place they were in and returning to the great place their privileged ancestors used to live, as Ay or god promised.
But if you have to follow strictly by the script, before that can happen Ay’s or god's messenger must firstly ‘appear’. So, these fellas or their followers would have to declare someone as Ay’s or god's messenger.
That indeed was what happened time and time again.
Well, as long as the earth continues to exist you can theoretically do that an infinite number of times. Of course, this is made possible only because of the fact that despite all such claims of being Ay's or god's messenger over the eons nothing near what the 'script' said would happen actually happened i.e. Ay or god never bothered to take them back to their ex-'heaven'.
But this is really quite a serious matter since the word Ay was replaced by the word god– we are no more talking about Ay’s promises or messenger but that of a much more powerful or respectable figure.
Furthermore, it was becoming fashionable for if not anything at least the bragging rights, and the fear and respect accrued. So, different fellas were soon fighting over who were the real characters in the story.
One smarter of these fellas, upon losing the battle to be accepted as ‘the messenger’, decided to expand his support base.
To do so, he was mindful not to offend his own internal supporters who thought of themselves as ‘special children of god’. So, with a stroke of creative genius, he created the lesser term ‘children of god’ and used that as enticement for the outsiders whose backing and power this fella needed to call upon.
The simple logic is this: since the other suckers could not be ‘special children of god’, they just might be happy being mere ‘children of god’. Surprisingly, it worked. And this fella, with his hugely expanded support base, managed to overwhelm the other fellow claimants.
To accomodate their new powerful patrons, this renegade bunch had to 'add on' to the old story the new concepts they used to capture their patron's imagination and support - there is always a cost for everything. So a new book was introduced to not just augment the first one, but be the final update on and therefore overrides the former.
And removing Ay from the texts was also both timely and convenient since Ay was from a bygone era and a different super-power from the current patron. Anyhow, this Ay never kept his promise anyway.
Actually, the story was much more than that…
Not to be outdone, the orignal group smartly decided that it was perhaps okay to let this expanded bunch be. Probably they figured that whatever happens, the latter, if they were stupid enough to follow strictly by the old script, would have to accept that as mere ‘children of Ay’ they were really a tad lower than the ‘special children of Ay’.
Indeed, it was infinitely better for things to be that way rather than not! Better that my book remains 'book one' and yours 'book two' than for it not figuring in your scheme of things at all.
So, this episode really made everyone happy (as long as the foolish ones don’t realize it) – which explains why the ‘arrangement’ remained so for so long.
As time moved further on, an egoistical fella among the subsequent followers of the newly expanded group decided to upgrade his own status to that of an 'apostle'.
Of course, not everyone would be happy with such selfish changes – who are you to start changing the story and elevating yourself, the others would say.
But this fella smartly figured that he could 'slip' his more godly status in along with another more significant one with the help of overwhelming ‘fire-power’, and over time no blind follower would ever argue with the changes anyway.
Thus he suggested that his leader’s messenger status be changed to that of the son of god, and himself one of his disciples or apostles. This gave rise to a momentous dispute.
Actually it was very simple: according to the script, the world was supposed to end and every one was supposed to 'go back to heaven' soon after the appearance of 'the messenger'. But 'the messenger' had come and gone for a few hundred years and yet that 'let's all go to heaven' never happened. In that sense, our fella's opponent might have a case.
But luckily for the progenitor, his changes had the support of the king of the then super-power of the land (who cares what happen to heaven when you have a super-power to help you dictate what happens on earth?).
So when this king got all the differing fellas at a place called Nicene and told them to agree on one version of the story once and for all, this fella's version won. In their words, their version is 'the truth' while the other's is a 'heresy' (never mind if it was won by sheer fire power. Anyway which gullible future idiot will bother with that?).
Actually it wasn't as congenial as it seemed. The losers in this particular dispute were actually banished – much like those of the time of Ay. But, things did not end there.
The followers of the losers in this particular dispute soon decided that they too could make some small changes here and there, and come up with their own story more accommodating to their wishes!
In their version of the story, they appointed one of their own rank outsiders as god’s ‘latest messenger’ - the previous 'the messenger' turned 'son of god' was merely 'one of god's messengers'.
To add to its appeal, special privileges for the original selected few from Ay's time were revoked (ha, now every one is at least more equal).
In fact, they had a whole new book that had 'new updates' and 'selected' extracts from the 2 previous ones.
Given that it was a 'selection', it was therefore not difficult to then assume that it was therefore better than the rest too.
Anyway, those 2 other books were written by 'arch enemies' and contained too many inconsistencies to be credible. Not to mention, 3 books was probably too much to lug around on those poor camels.
It is not difficult then to see how this would be bad news to the winner of the previous dispute, and the special ones they out-muscled earlier.
So, those two got together and tried to go at the latest story-tellers ('you mean our 2 books are not as good as your 1?' was probably how the logic went).
But by then, things were really more equal - the super-power of the land is no more that of the guy that underwrote the previous story change. Now, it was really free for all.
So since then, the people in Ay’s promised land had lived happily ever after – happily fighting and killing each other for the right to call their own version of the Ay story the ‘final one’.
And while Ay had been forgotten to all these fools' convenience, more fools from further afar are today also stupidly joining in thinking that 'believing in the story' will somehow bring them to the 'heavenly home' that Ay promised long time ago to a bunch of outcasts.
Monday, June 13, 2005
Are Arabs the Greatest Fools?
For those of us that noticed, the few years around the turn of the 20th century were notable for the following events:
- 1997 was the start of the ‘Asian financial crisis’ that also hit other 3rd world places around the globe like Brazil and Russia,
- at the same time, the internet boom was fuelling Greenspan’s famous ‘irrational exuberance’ in the US that peaked in 2000,
- 2001 saw the start of widespread discovery of US corporate scandals behind Greenspan’s ‘infectious greed’ whose aftermath we are still witnessing today
(see this report http://www.latimes.com/business/la-fi-enron11jun11.story)
In early 2001, some ‘analyst predictions’ had it that the Dow would rise to 20,000 where P/E ratios would be 40.
While ‘econom-ignoramuses’ like me were scratching my head trying to understand how that would make sense, there were also Asians I know of that were very sure that the American ‘boom’ had sound basis.
According to them, it was really quite simple : the simpleminded fella in me may think that all things are equal and smart money should enter markets whose PEs are lower (go to Asia in this case) and the PEs would converge.
But since that was not happening, things were therefore not really equal – according to my friends, American management were in essence ‘better’ than Asian management (http://cckplanetblog.blogspot.com/2001_07_01_cckplanetblog_archive.html).
Although my then suspicion on what was behind the American ‘boom’ was not quite on the mark, at least I was suspecting something was not right.
Sometime in second half of 2001, a short report in the Straits Times quoted a Saudi prince saying ‘cheap does not mean good buy’. According to the report, the prince was approached by the ‘new’ JP Morgan Chase to buy bonds issued by Enron, and the reason given by this American bank was that the prices of Enron bonds were low and therefore good buys.
Actually, any Asian idiot could have said that but these are good American managed companies so it's different. At that point in time I wondered why the Saudi prince went public with such comments.
Before year's end Enron had filed for bankruptcy protection, and its 2 biggest creditors were Citigroup and, none other than, JP Morgan.
So what had actually been attempted earlier was a classic ‘con’ job.
Those American banks knew what state Enron was in and were trying to ‘screw’ the Saudi prince by getting him to buy the soon to be worthless bonds!
Today, of course, we know that a lot of American investors (which should have ‘better management’ according to some hypothesis) were burnt by Enron, and are seeking re-dress from these banks who are the epitome of American finance.
In his maiden visit to Asia as CEO, the ‘last CEO’ of JP Morgan (before it became JP Morgan Chase) declared that the market is always more creative and therefore always ahead of governments and regulators. Because of that, the private sector ‘understands their business much better than regulators’, and governments and regulators should therefore let the ‘market regulate itself’.
I was among the JP Morgan staff present then. That was in 1995 or 1996, way before Greenspan observed the ‘irrational exuberance’ around him.
This CEO fella was so great that he ended his career by selling JP Morgan off to Chase in late 2000, a year before the Enron debacle surfaced.
A coincidence? Whatever the case, I know of people that still harp after this CEO fella I know.
Today, we also know that Enron was not just a once off incident attributable to a couple of rogue American businessmen, but the same had happened with the likes of Worldcom, Global Crossing, Tyco etc. (yes, those banks tried to screw more than just Arabs more than once).
And we all know that the optimistic ‘analyst predictions’ of the 20,000-level Dow were really backed up by ‘future-potential hot-air’ peddled by the likes of Martha Stewart, and the mass cooking of books by companies and their financiers who according to Joseph Stiglitz employed ‘accounting trickery’ attributable to the lack of sound regulation i.e. this is a systemic problem (http://www.salon.com/tech/feature/2002/07/03/stiglitz/?x)
Today, I still have people telling me how great ‘free market’ is and how through its own magic (like the ‘price mechainsm’) the market will somehow solve all problems as long as people like governments do not ‘interfere with the market’ (the famous laissez faire).
On this, they cite some minor economists like Milton Friedman (just another goyok seller to me) and his theories.
Of course, you get a completely different view from other economists like Joseph Stiglitz.
To simpletons like me, the principle is quite simple: if you want to ‘drop names’ and quote blindly, at least pick someone with more credentials like Mr Stiglitz lah. At least this fella has a Nobel prize to back his views up.
So who do you think are greater fools: the Arabs like our Saudi prince above, the American investors screwed by the great American management of the likes of Enron and its bankers, or the Asians that think that American managers are ‘better’ than Asian ones and harp blindly about the magical greatness of ‘free market’ and ‘laissez faire’?
You decide.
Bank Settles Enron Lawsuit
· Citigroup, accused of defrauding investors by disguising loans to the fallen energy trader, agrees to pay $2 billion. It denies any illegality.
By Josh Friedman, LA Times Staff Writer
Wall Street giant Citigroup Inc. agreed Friday to pay $2 billion to settle a class-action lawsuit that accused the bank of defrauding the University of California and other investors through its work for fallen energy trader Enron Corp.
The deal, the biggest yet stemming from the 2001 bankruptcy that came to symbolize corporate corruption, could set the stage for other hefty recoveries in the Enron fiasco.
"This is a big, big step in the right direction," said William S. Lerach, a San Diego lawyer who represented UC. The settlement is "a very favorable portent for the future" as negotiations proceed with other defendants, Lerach said.
Separate claims are pending against JPMorgan Chase & Co., Credit Suisse First Boston and other financial institutions that allegedly helped Enron hide mounting debt through elaborate accounting tricks.
Other settlements could reach or exceed hundreds of millions of dollars, analysts said, although the Citigroup deal is expected to be among the largest because it was one of the Houston company's biggest lenders.
In a statement, Citigroup denied violating any law and said it agreed to settle "solely to eliminate the uncertainties, burden and expense of further protracted litigation."
Citigroup, the nation's largest financial institution, said it had ample legal reserves to cover the payout.
The Citigroup settlement dwarfed earlier deals made by Enron investors with Lehman Bros. Holdings Inc., Bank of America Corp. and others that totaled $492 million. Separately, Citigroup, Merrill Lynch & Co. and other banks have paid about $460 million to government regulators to settle Enron-related allegations.
The class-action settlements could eventually mean a multimillion-dollar recovery for UC, which lost $145 million on its Enron stock investments. But no distributions will be made until all outstanding claims are resolved, and university officials said it was too soon to determine how much they might get back.
UC, whose investment portfolio now totals $63 billion, said the losses had no effect on retiree benefits or on programs funded by its endowment.
Enron's downfall cost investors an estimated $40 billion to $45 billion as its financial house of cards collapsed, crushing its once-highflying stock and prompting rating agencies to cut its debt to "junk" status. Lawyers said it was unclear how much of the loss was attributable to fraud and recoverable under the law.
Under the settlement, investors who bought Enron stock or bonds from Sept. 9, 1997, to Dec. 2, 2001, when the company sought bankruptcy protection, can seek recovery of damages. UC lawyer Lerach estimated that 50,000 investors might file claims.
"Every Enron investor who lost money should … keep their records up to date," he said.
Under their fee agreement, lawyers for the plaintiffs stand to get 8% to 10% of the amount recovered.
The UC-led suit accused financial institutions of helping Enron raise money even as it was secretly imploding. UC, which in February 2002 was named lead plaintiff in the consolidated class actions, claimed that the banks participated in a host of schemes that violated securities law.
Citigroup, for example, allegedly disguised loans to enable Enron to present a misleading picture of its balance sheet.
The suit said Citigroup lent Enron $2.4 billion in a series of deals identified as "swaps" and nicknamed Delta transactions because they were conducted through Citigroup's Cayman Island unit, called Delta. Citigroup paid Enron hundreds of millions of dollars each time, obligating the company to repay the cash over five years.
Although the transactions were in fact loans, they were never disclosed as such on Enron's books. The plaintiffs alleged that Enron was seeking to conceal the full amount of its debt so that regulators and investors would be unaware of its precarious financial position.
Based on its investment grade rating at the time, Enron could have gotten credit at much lower rates, but it paid Citigroup and JPMorgan 6.5% to 7% for the "disguised loans," making the deals hugely profitable for the banks, the plaintiffs said.
In late 2001, after revelations about Enron's accounting made headlines, Citigroup and JPMorgan unsuccessfully sought to arrange the company's sale to rival Dynegy Inc. so they could split a $90-million investment banking fee and stave off its likely bankruptcy. The suit said calls to credit rating firm Moody's Investors Service by Robert E. Rubin, a former Treasury secretary who was then Citigroup's vice chairman, and by JPMorgan Chairman William Harrison were attempts to "strong-arm" the firm to prevent it from downgrading Enron before a sale could be completed.
The latest deal could help Citigroup shake the scandals that have tarnished its image and slowed its growth in recent years. The bank, which last year saw its profit drop for the first time since 1998, has been barred by the Federal Reserve from making major acquisitions as it scrambles to clear a spate of regulatory problems in the U.S. and abroad.
Last year, Citigroup agreed to pay $2.6 billion as part of a record $6.1-billion settlement by banks, auditors and former board members to resolve class-action claims resulting from the 2002 downfall of telecom giant WorldCom Inc. In March, Citigroup agreed to pay $75 million to investors in the defunct fiber optic network Global Crossing Ltd.
Citigroup Chief Executive Charles Prince called the latest accord a positive step for his firm.
"It is a key priority for Citigroup to resolve major cases like this one and to put a difficult chapter in our history behind us," Prince, who succeeded Sanford Weill in October 2003, said in a statement.
Henry Hu, a corporate and securities law professor at the University of Texas at Austin, said the Fed sanctions had given Prince an incentive to get Citigroup past its scandals.
"This happened on an earlier watch. Prince wants to get rid of the baggage of the past," Hu said.
Trey Davis, UC's director of special projects, noted that the university's Enron losses represented less than 0.3% of its funds under management at the time, and a smaller percentage of current assets.
"UC's investment funds remain strong and there was no significant impact on either our portfolio or the benefits provided to retirees," Davis said.
"While it is not possible to recoup all of the investors' losses in such cases — especially when the fraudulent company is bankrupt — the university has pursued a meaningful recovery … for the shareholders."*
(BEGIN TEXT OF INFOBOX)
Enron settlements
Citigroup's $2-billion payment to settle claims by Enron shareholders is the largest yet in a series of deals with investors and regulators in connection with the energy trader's 2001 collapse.
August 2002: Andersen Worldwide, parent of auditor Arthur Andersen, says it will pay $32 million to settle lawsuits from Enron investors and employees.
February 2003: Merrill Lynch agrees to pay $80 million to settle a Securities and Exchange Commission investigation of its Enron dealings.
July 2003: Citigroup and JPMorgan Chase agree to pay more than $300 million to settle government charges that they helped Enron and Dynegy defraud investors.
December 2003: Canadian Imperial Bank of Commerce says it will pay $80 million to settle SEC allegations that it helped Enron inflate profit and hide debt.
July 2004: Bank of America says it will pay $69 million to settle a lawsuit by Enron investors over its role as underwriter for some debt offerings.
October 2004: Lehman Bros. says it will pay $222.5 million to settle a suit by the University of California and other investors over its role as an Enron underwriter.
January: Enron's insurance firm says it will pay $155 million to UC and other investors to settle a shareholder lawsuit. Ten former Enron directors say they also will pay $13 million out of their own pockets.
Friday: Citigroup agrees to pay investors $2 billion to settle a lawsuit that accused the bank of fraud in its work for Enron.
Sources: Times research, Associated Press, Bloomberg News
Los Angeles Times
Salon.com July 3, 2002
Joseph Stiglitz began explaining why markets fail long before Enron and WorldCom rose, exploded and crashed. But not many people wanted to listen during the boom-boom '90s; Stiglitz was even fired from his position as chief economist at the World Bank after he repeatedly criticized the organization's free-market obsessions. [cck note: this is not entirely correct. Stiglitz was fired from the World Bank partly because he strongly & publicly criticised the way the IMF handled the Asian and other financial crises around the world. In essence, he said that the IMF use the same 4 steps in all crises which are designed to help creditor countries screw the countries in trouble. The US government, the 'boss' of the World Bank, then had this man fired from his job].
Today, Stiglitz's lifetime of work is suddenly all too relevant. Consider, for example, his theory of "asymmetric information." Stiglitz spent years demonstrating that one party in a transaction -- say, the owner of a factory -- often possesses more information than the other about that transaction, and thus has an advantage that allows for market inefficiencies, and potentially, human suffering. His work won Stiglitz the 2001 Nobel Prize in economics, but more to the point, it handily explains why Enron and other companies successfully hid their accounting tricks for so long. Because executives have the power to determine how to arrange their profit-and-loss numbers, the theory holds, they'll always have a leg up on detectives and accountants who are trying to uncover misdoings.
From 1993 to 1997, Stiglitz served as a member and then as the chairman of President Clinton's Council of Economic Advisers. He then went on to become chief economist at the World Bank, where he stayed until 2000. At each step of his career, Stiglitz advocated for a critical look at what he calls "the Washington Consensus" -- the conventional wisdom that holds that everything bad in the economy can be laid at the government's door while everything good stems from the market.
Filled with accessible, on-the-ground examples from Ethiopia, Indonesia, Russia and elsewhere, Stiglitz's new book, "Globalization and Its Discontents," witheringly dismantles that consensus. The villains, Stiglitz argues, are obvious: The International Monetary Fund, Clinton Treasury Secretary Lawrence Summers and Wall Street all come off badly, more concerned with ideology and their own bottom lines than with the facts.
Salon sat down with Stiglitz in New York and discussed accounting trickery, why government is necessary and the present state of the world economy.
The American economy is engulfed in a wave of corporate scandal. WorldCom, Enron, Adelphia, ImClone -- the failures and frauds keep piling up. What's going on?
I think the most important, significant thing that [the scandals] bring home is the importance of regulation. You can't have markets work without good information, and it is not necessarily the case that people have an incentive to provide accurate information; [but] they do have an incentive if there are penalties for providing fraudulent information. So the government plays an absolutely essential role in enabling the markets to work.
Now there were some big mistakes made in the mid-'90s. When I was at the Council of Economic Advisers, FASB -- the Financial Accounting Standards Board -- proposed a change in the way stock options for executives would be treated. The Council of Economic Advisers supported the change, on the grounds that it would improve the quality of [corporate] information. Wall Street and Silicon Valley united to put political pressure to oppose this change. The U.S. Treasury gave in to this political pressure and put pressure on FASB, and FASB backed off.
The reasons it was so important were severalfold. First, the principle that accounting standards ought to be kept out of politics -- that principle was compromised. Secondly, it compromised the quality of information.
Thirdly, it provided further incentives for the use of stock options. And that has contributed to the whole problem we're seeing.
Why? Because with stock options, executives have an incentive to get the value of their company up as fast as possible. They found that they'll make more money if you give inaccurate or distorted information rather than honest information. One of the things I've always argued as an economist is that incentives matter, and one of the things we did there was provide incentives to provide stock options, which provided incentives to provide dishonest information.
Is that the root cause of all these accounting irregularities and alleged frauds?
That's right. There are many factors; the go-go atmosphere, the attitude that anything goes. But if there is a single thing that you can say is the root cause, it is that -- the stock option decision and the mania to which it gave rise.
How does the present situation compare to other crises in American capitalism? Are we witnessing excesses on a par with the '20s, the '80s ...?
It's a pattern that we've had frequently, and it's often associated with what I would call deregulation episodes. The savings and loan debacle, for example, where the U.S. government had to bail out [banks] to the tune of several hundred billion dollars, was basically the same thing: misreporting, trying to claim as income things that weren't income. So in fact there is a pattern here, and that pattern continually reminds us of the need to have some kind of oversight, if we're going to make the market economy work.
But the pains of the '80s seemed to disappear relatively quickly. There was a minor recession in the early 90s, but the economy recovered. Will that happen again, or is this problem on a much larger scale?
Eventually, it's going to bounce back. I have absolute confidence in that. The American economy is very, very strong for the long run. But this may, and quite likely will, extend the recovery and slow it down.
The timing couldn't be worse. The fiscal mismanagement of the current administration -- leading to a change in the fiscal position of the United States over the past year -- is absolutely phenomenal; going from huge surpluses to huge deficits and the deficits are probably going to be larger than people anticipated. That means that foreigners are already losing confidence in the United States because the United States had earned a reputation for sound fiscal management -- and now that reputation is being destroyed. The United States had a reputation for the best accounting standards in the world; now people are saying, we don't know.
The last time excessive doubt in the U.S. economy occurred -- during the Depression -- new regulation followed. How will this episode affect the structure of capitalism, here in the U.S. and abroad?
It is an important warning. The view of capitalism in the late '90s was of a particular form; American capitalism was triumphant. The view was that you don't need regulations -- just let it rip. Now people are becoming much, much more cautious. They're looking at what America said at that time with a lot more circumspection. There's a recognition that there's a downside. And just like the lesson of the Reagan era -- the excessive deregulation of banks -- led most countries to recognize the importance of sound financial regulation, I think that this episode is going to lead people to say there ought to be sound accounting regulations, sound regulation on corporate governance, things that were insufficiently talked about before.
It's also going to mean that the premise that American accounting standards are better, say, than European standards, is no longer going to be convincing. People are going to say let's look at alternatives. There isn't one way, there are alternatives. Sometimes the American way is best but sometimes Americans ought to learn from others, and the accounting standards in Europe may in fact be a better system for dealing with the complexities of the current world.
Is that a sign of progress -- moving away from an American-centric economic worldview?
Yes, I think it is.
You mentioned that the Bush deficit isn't helping matters, but in terms of future policy, what needs to be done and do you think that Bush will do it?
What is interesting is how slow they've been to recognize the problems. We're now beginning to recognize the broader set of issues, what you might call conflicts of interest. Merrill Lynch brought those issues out into the open; that if a firm is trying to sell a stock through its brokerage houses, trying to get business through its IPOs, those conflicts of interest can lead to bad decisions.
But if you could name a list of things -- 1, 2, 3 -- that Bush and Congress could do to reinstill confidence in the markets and economy, what would they be?
We need to begin to think much more carefully about these issues of conflicts of interest, which are pervasive. We saw it in the accounting area, where the accountant firms have conflicts of interest between their role as consultants and their role as accountants. In the 1930s, the Glass-Steagall Act was passed, which talked about why we needed to separate out investment banks from commercial banks because of the potential conflicts of interest. I think another mistake that was made in the '90s was the repeal of that. The point was made that people were getting around it, and that was used as an argument against it. Well, there were two strategies: Do you try to limit the ability to get around it, or do you abandon it. I think they made the wrong choice.
Part of the reason they made that choice was because of Wall Street lobbying. Even now, post-Enron, most attempts at reform have been stalled due to opposition from Wall Street. How can anyone who wants to reform the system overcome such a powerful force?
It will be overcome when there is enough popular support, and when the problems begin to rebound seriously enough against the industry. Let me go back to another example. At the end of the 19th century, it was the food industry -- the meat industry -- that asked for government regulation. Why? Because as a result of Upton Sinclair's book "The Jungle," people said we don't trust meat. And they said, we'll trust the government if it starts inspecting the meat. So the industry demanded regulation to restore confidence.
Do you really think that will happen?
Henry Paulson [chairman of Goldman Sachs] has begun talking about the problem and you have to think that it's partly because of a recognition that if investors lose faith in American firms, they're going to put their money elsewhere. And that is going to be very bad for Wall Street. There are going to be two sources of concern: one, voters; secondly, investors
Do you think that the current corporate implosions will undermine the force of the free-market fundamentalists -- who you identify as the Washington Consensus? Will fears of a lack of U.S. regulation extend to the world of international development?
Well, what we're beginning to understand is that Wall Street is not the font of all wisdom that a lot of people in the '90s tried to sell it as -- especially the people on Wall Street. For instance, in the 1990s Wall Street pushed for capital market liberalization -- opening up companies to speculative money that could come in and out overnight. We now realize that capital market liberalization has contributed a great deal to the instability in the world: to the East Asia crisis, the global financial crisis. At the beginning of that crisis, Wall Street, U.S. Treasury, IMF said, Oh that's not the source of the problem. In fact, they said, speculative money is too small to be possibly a problem. A year later, when Long Term Capital Management was in trouble, the same kinds of people were saying that we need to bail out Long Term Capital Management because if we don't, this one firm -- one firm! -- could bring the whole global financial system down. Now, that kind of inconsistency, that kind of hypocrisy, caused a lot of people concern. Now what we're seeing is that there's a systemic problem; it's not just one company, it's many companies. And I think that breaking of the confidence in Wall Street is leading people to reexamine not only Wall Street but the influence it has had on the IMF, and in turn, the IMF policies and their consequences for the developing world.
Let's talk about those policies. You focus on Russia as an example of a failed IMF country, citing decreased gross domestic product, increased poverty and a widening gap between rich and poor -- most of it caused by a rapid, corrupt privatization process. But when I was reading about the new class of Russian oligarchs, I couldn't help but think that they -- not the IMF -- were the real source of the problem. Why not focus on holding the thieves accountable rather than blaming the IMF?
But incentives matter, and if we don't create the right incentives, we get bad behavior. As we talked about with the case of Enron, we had incentives to overstate profits, to get the stock prices up, and they responded to those incentives. In the case of Russia, the IMF helped create incentives that led to people taking their money out of the country. Let me explain: The IMF pushed these countries to have very rapid privatization, before they had corporate governance, while the economy was still in recession, and they pushed the privatization so rapidly that it was almost inevitably a corrupt privatization. At the same time, they pushed them to open up their capital markets. Think of yourself as one of the oligarchs that have managed to persuade Yeltsin to give you -- for a pittance -- these natural resources worth billions of dollars. Then you're told effectively by the IMF that you can either invest that money in Russia, which was in recession or depression, or take that money to the United States or a secret bank account. If you're smart enough to get Yeltsin to give you a billion dollars, you're smart enough to take your money out. Moreover, you would recognize that if you left your money in Russia, there was a good chance that in a couple years' time, the successor of Yeltsin might say, You got that money illegitimately. We want it back. And if you have your money in the United States or Cyprus bank accounts, they can't get it back. If you have your money in Russia, they can get it back. So it was their own self-preservation that led them to take their money out. But of course, as they all did that, the economy of Russia went further and further down. The culpability lies with setting up incentives that led people to behave that way.
Critics have argued that you underestimate the gains that have come from IMF policy, which you identify as the high-speed "hare" approach, compared to your gradualist "tortoise" approach. Poland, for example, underwent "shock therapy" and came out better than other countries in the region, like Ukraine, which followed a more gradualist approach.
Let me put it in the following way. What is fast and what is slow depends on what you're doing. Poland quickly brought down hyperinflation; that needed to be done fast. It brought down hyperinflation to moderate levels, 18-20 percent. It didn't push it further than that in the first instance. It then began a process of very gradual reform. So it, Hungary, Slovenia -- these were the tortoises. These tortoises have won the race. They are the economies with a GDP that's higher than it was 10 years ago. The hares are further behind. Their GDP is much lower than it was 10 years ago. Now of course there are some that are neither tortoises nor hares -- that aren't doing anything: Belarus, Ukraine. No one said that those are models you ought to follow. The model was, yes, have reforms but have it in a paced, balanced way. And Poland, Slovenia, Hungary show that there were alternatives to the "shock therapy." In fact, the deputy prime minister of Poland in 1993-95, when they were going through these changes, was very explicit that their success was a result of their not following shock therapy policies. It was that they did it with a systematic, gradual policy of structural reform. There are some things that you can do quickly, but changing societies, you can't do overnight. But if you do it in the right way, you actually do it in a reasonable length of time.
What is a reasonable length of time -- particularly when it comes to identifying what's succeeded and failed?
We are never really sure, but what we do know historically is that if Russia's economy is down 30 percent from what it was [in 1989], and let's say they start growing 4 or 5 percent a year, it's going to take them another decade or two just to get back to where they were. In that sense, yes, there will be ups and downs; the race is never over. But the shock therapy has cost the Russian people enormously, not only in terms of GDP. Their life expectancy is down while the rest of the world has life expectancy increasing. These are the kind of consequences that have resulted. Poverty went from 2 percent of the population to over 40 percent in 1998. These are just enormous changes.
You've argued that part of the problem is that the IMF doesn't pay attention to these social costs. Why is that? Why don't they look beyond things like GDP?
There are two or three answers to that question. One of them is that their major responsibility has been macroeconomics. At one point, the head of the IMF even said "we aren't concerned about poverty." They wanted to just look at macroeconomics -- and in fact, they didn't do a very good job of that. Secondly, they believed, a lot of them, in trickle-down economics: If you can succeed in getting [an economy] to grow, everyone would benefit.
In the United States, we've rejected trickle-down economics; you have to have pro-poor growth policies if you're going to succeed. It isn't necessarily true that a rising tide lifts all boats. Some are left behind.
Thirdly, they had a fixation on financial markets. Historically, people with that kind of focus worry more about inflation than they do about unemployment [because inflation does more immediate damage to their investments]. They worry less about poverty than they do about what will happen to the capital markets. In my view, a lot of that has been shortsighted. It is a mistake to ignore the social and political consequences of policies. Even if you don't worry yourself about poverty, it is bad economics. When the IMF cut out the subsidies for the food and fuel to the poorest people in Indonesia, it led to riots. Those riots led capital to flee and that exacerbated the economic downturn, the depression, in the country. So ignoring the social consequences is bad economics.
What do you make of the crisis in Argentina? Two people were killed June 26 in protests, while their economic minister was in Washington asking for the IMF to reinstate an $18 billion credit line. Should the IMF give in?
The issue in Argentina shows that the IMF still hasn't learned a lesson about the risks of contractionary fiscal policy. For 60 years economists have said that when you're in a recession you need expansionary fiscal policy. In the United States, during the much milder recession of 2000-01, both Democrats and Republicans said we need a stimulus. But what was the IMF doing in Argentina? The same thing it did in East Asia, which was insisting on a contraction, making the downturn even worse.
But you argued in your book that less IMF intervention should occur overall because lenders have come to expect and depend on international bailouts; they've been encouraged to loan money to high-risk borrowers because the IMF has acted like an insurance policy. So perhaps the IMF refusal to help is a necessary evil, a way to correct expectations.
The general principle that bailouts have not worked is becoming increasingly recognized. The bailouts did not work in Indonesia, Thailand, Korea, Russia, Brazil and now in Argentina. I don't think that the critical issue facing Argentina today is outside money. Most of the money that Argentina is likely to get will do nothing more than repay already existing loans. What Argentina needs to do is restart their economy. The human resources, the physical resources are still there. What they need is money, not to repay the IMF, not to repay the other loans that are outstanding, but money that can go to corporations that will allow them to buy the inputs, that will allow them to start producing goods that they can then sell and export.
So not a bailout but rather a stimulus ...
They need a stimulus, and that will require some money. But that's very different from a bailout. And what worries me is that if the price of getting a bailout is more contraction, it's going to exacerbate the problems.
Even if the IMF is still screwing up in Argentina, there are signs of reform.
They've accepted responsibility for the Asian crisis and have enacted many reforms in the past few years. Are you encouraged by the institution's progress?
There have been some very encouraging signs. Now, they are recognizing the importance of poverty and the consequences of their policies for poverty.
What's your take on the anti-globalization protest movement? By trying to abolish the IMF, a stance also favored by Milton Friedman, are they making matters worse? Or are they an important catalyst for change?
I think that globalization -- which is nothing more than the closer integration of the countries of the world, as a result of lowering transportation costs, communication costs, the elimination of artificial barriers -- is something that's going to be with us. As this integration occurs, as we become more interdependent, we need to have rules and regulations. So if anything, today we need international institutions more than ever. The problem is that confidence in these institutions is lower than ever.
So my view is that if we abolished the IMF, we'd end up re-creating it. And the real danger is that we'd re-create it with some of the same blemishes that it has today. So it makes much more sense to me to work on reforming the institution; to return it to its original objective, which was to help countries facing an economic downturn have the resources to stimulate; so that a downturn in one country doesn't stimulate a downturn in its neighbors. Getting it to go back to some of its original mission is the right direction for it to go.
- 1997 was the start of the ‘Asian financial crisis’ that also hit other 3rd world places around the globe like Brazil and Russia,
- at the same time, the internet boom was fuelling Greenspan’s famous ‘irrational exuberance’ in the US that peaked in 2000,
- 2001 saw the start of widespread discovery of US corporate scandals behind Greenspan’s ‘infectious greed’ whose aftermath we are still witnessing today
(see this report http://www.latimes.com/business/la-fi-enron11jun11.story)
In early 2001, some ‘analyst predictions’ had it that the Dow would rise to 20,000 where P/E ratios would be 40.
While ‘econom-ignoramuses’ like me were scratching my head trying to understand how that would make sense, there were also Asians I know of that were very sure that the American ‘boom’ had sound basis.
According to them, it was really quite simple : the simpleminded fella in me may think that all things are equal and smart money should enter markets whose PEs are lower (go to Asia in this case) and the PEs would converge.
But since that was not happening, things were therefore not really equal – according to my friends, American management were in essence ‘better’ than Asian management (http://cckplanetblog.blogspot.com/2001_07_01_cckplanetblog_archive.html).
Although my then suspicion on what was behind the American ‘boom’ was not quite on the mark, at least I was suspecting something was not right.
Sometime in second half of 2001, a short report in the Straits Times quoted a Saudi prince saying ‘cheap does not mean good buy’. According to the report, the prince was approached by the ‘new’ JP Morgan Chase to buy bonds issued by Enron, and the reason given by this American bank was that the prices of Enron bonds were low and therefore good buys.
Actually, any Asian idiot could have said that but these are good American managed companies so it's different. At that point in time I wondered why the Saudi prince went public with such comments.
Before year's end Enron had filed for bankruptcy protection, and its 2 biggest creditors were Citigroup and, none other than, JP Morgan.
So what had actually been attempted earlier was a classic ‘con’ job.
Those American banks knew what state Enron was in and were trying to ‘screw’ the Saudi prince by getting him to buy the soon to be worthless bonds!
Today, of course, we know that a lot of American investors (which should have ‘better management’ according to some hypothesis) were burnt by Enron, and are seeking re-dress from these banks who are the epitome of American finance.
In his maiden visit to Asia as CEO, the ‘last CEO’ of JP Morgan (before it became JP Morgan Chase) declared that the market is always more creative and therefore always ahead of governments and regulators. Because of that, the private sector ‘understands their business much better than regulators’, and governments and regulators should therefore let the ‘market regulate itself’.
I was among the JP Morgan staff present then. That was in 1995 or 1996, way before Greenspan observed the ‘irrational exuberance’ around him.
This CEO fella was so great that he ended his career by selling JP Morgan off to Chase in late 2000, a year before the Enron debacle surfaced.
A coincidence? Whatever the case, I know of people that still harp after this CEO fella I know.
Today, we also know that Enron was not just a once off incident attributable to a couple of rogue American businessmen, but the same had happened with the likes of Worldcom, Global Crossing, Tyco etc. (yes, those banks tried to screw more than just Arabs more than once).
And we all know that the optimistic ‘analyst predictions’ of the 20,000-level Dow were really backed up by ‘future-potential hot-air’ peddled by the likes of Martha Stewart, and the mass cooking of books by companies and their financiers who according to Joseph Stiglitz employed ‘accounting trickery’ attributable to the lack of sound regulation i.e. this is a systemic problem (http://www.salon.com/tech/feature/2002/07/03/stiglitz/?x)
Today, I still have people telling me how great ‘free market’ is and how through its own magic (like the ‘price mechainsm’) the market will somehow solve all problems as long as people like governments do not ‘interfere with the market’ (the famous laissez faire).
On this, they cite some minor economists like Milton Friedman (just another goyok seller to me) and his theories.
Of course, you get a completely different view from other economists like Joseph Stiglitz.
To simpletons like me, the principle is quite simple: if you want to ‘drop names’ and quote blindly, at least pick someone with more credentials like Mr Stiglitz lah. At least this fella has a Nobel prize to back his views up.
So who do you think are greater fools: the Arabs like our Saudi prince above, the American investors screwed by the great American management of the likes of Enron and its bankers, or the Asians that think that American managers are ‘better’ than Asian ones and harp blindly about the magical greatness of ‘free market’ and ‘laissez faire’?
You decide.
Bank Settles Enron Lawsuit
· Citigroup, accused of defrauding investors by disguising loans to the fallen energy trader, agrees to pay $2 billion. It denies any illegality.
By Josh Friedman, LA Times Staff Writer
Wall Street giant Citigroup Inc. agreed Friday to pay $2 billion to settle a class-action lawsuit that accused the bank of defrauding the University of California and other investors through its work for fallen energy trader Enron Corp.
The deal, the biggest yet stemming from the 2001 bankruptcy that came to symbolize corporate corruption, could set the stage for other hefty recoveries in the Enron fiasco.
"This is a big, big step in the right direction," said William S. Lerach, a San Diego lawyer who represented UC. The settlement is "a very favorable portent for the future" as negotiations proceed with other defendants, Lerach said.
Separate claims are pending against JPMorgan Chase & Co., Credit Suisse First Boston and other financial institutions that allegedly helped Enron hide mounting debt through elaborate accounting tricks.
Other settlements could reach or exceed hundreds of millions of dollars, analysts said, although the Citigroup deal is expected to be among the largest because it was one of the Houston company's biggest lenders.
In a statement, Citigroup denied violating any law and said it agreed to settle "solely to eliminate the uncertainties, burden and expense of further protracted litigation."
Citigroup, the nation's largest financial institution, said it had ample legal reserves to cover the payout.
The Citigroup settlement dwarfed earlier deals made by Enron investors with Lehman Bros. Holdings Inc., Bank of America Corp. and others that totaled $492 million. Separately, Citigroup, Merrill Lynch & Co. and other banks have paid about $460 million to government regulators to settle Enron-related allegations.
The class-action settlements could eventually mean a multimillion-dollar recovery for UC, which lost $145 million on its Enron stock investments. But no distributions will be made until all outstanding claims are resolved, and university officials said it was too soon to determine how much they might get back.
UC, whose investment portfolio now totals $63 billion, said the losses had no effect on retiree benefits or on programs funded by its endowment.
Enron's downfall cost investors an estimated $40 billion to $45 billion as its financial house of cards collapsed, crushing its once-highflying stock and prompting rating agencies to cut its debt to "junk" status. Lawyers said it was unclear how much of the loss was attributable to fraud and recoverable under the law.
Under the settlement, investors who bought Enron stock or bonds from Sept. 9, 1997, to Dec. 2, 2001, when the company sought bankruptcy protection, can seek recovery of damages. UC lawyer Lerach estimated that 50,000 investors might file claims.
"Every Enron investor who lost money should … keep their records up to date," he said.
Under their fee agreement, lawyers for the plaintiffs stand to get 8% to 10% of the amount recovered.
The UC-led suit accused financial institutions of helping Enron raise money even as it was secretly imploding. UC, which in February 2002 was named lead plaintiff in the consolidated class actions, claimed that the banks participated in a host of schemes that violated securities law.
Citigroup, for example, allegedly disguised loans to enable Enron to present a misleading picture of its balance sheet.
The suit said Citigroup lent Enron $2.4 billion in a series of deals identified as "swaps" and nicknamed Delta transactions because they were conducted through Citigroup's Cayman Island unit, called Delta. Citigroup paid Enron hundreds of millions of dollars each time, obligating the company to repay the cash over five years.
Although the transactions were in fact loans, they were never disclosed as such on Enron's books. The plaintiffs alleged that Enron was seeking to conceal the full amount of its debt so that regulators and investors would be unaware of its precarious financial position.
Based on its investment grade rating at the time, Enron could have gotten credit at much lower rates, but it paid Citigroup and JPMorgan 6.5% to 7% for the "disguised loans," making the deals hugely profitable for the banks, the plaintiffs said.
In late 2001, after revelations about Enron's accounting made headlines, Citigroup and JPMorgan unsuccessfully sought to arrange the company's sale to rival Dynegy Inc. so they could split a $90-million investment banking fee and stave off its likely bankruptcy. The suit said calls to credit rating firm Moody's Investors Service by Robert E. Rubin, a former Treasury secretary who was then Citigroup's vice chairman, and by JPMorgan Chairman William Harrison were attempts to "strong-arm" the firm to prevent it from downgrading Enron before a sale could be completed.
The latest deal could help Citigroup shake the scandals that have tarnished its image and slowed its growth in recent years. The bank, which last year saw its profit drop for the first time since 1998, has been barred by the Federal Reserve from making major acquisitions as it scrambles to clear a spate of regulatory problems in the U.S. and abroad.
Last year, Citigroup agreed to pay $2.6 billion as part of a record $6.1-billion settlement by banks, auditors and former board members to resolve class-action claims resulting from the 2002 downfall of telecom giant WorldCom Inc. In March, Citigroup agreed to pay $75 million to investors in the defunct fiber optic network Global Crossing Ltd.
Citigroup Chief Executive Charles Prince called the latest accord a positive step for his firm.
"It is a key priority for Citigroup to resolve major cases like this one and to put a difficult chapter in our history behind us," Prince, who succeeded Sanford Weill in October 2003, said in a statement.
Henry Hu, a corporate and securities law professor at the University of Texas at Austin, said the Fed sanctions had given Prince an incentive to get Citigroup past its scandals.
"This happened on an earlier watch. Prince wants to get rid of the baggage of the past," Hu said.
Trey Davis, UC's director of special projects, noted that the university's Enron losses represented less than 0.3% of its funds under management at the time, and a smaller percentage of current assets.
"UC's investment funds remain strong and there was no significant impact on either our portfolio or the benefits provided to retirees," Davis said.
"While it is not possible to recoup all of the investors' losses in such cases — especially when the fraudulent company is bankrupt — the university has pursued a meaningful recovery … for the shareholders."*
(BEGIN TEXT OF INFOBOX)
Enron settlements
Citigroup's $2-billion payment to settle claims by Enron shareholders is the largest yet in a series of deals with investors and regulators in connection with the energy trader's 2001 collapse.
August 2002: Andersen Worldwide, parent of auditor Arthur Andersen, says it will pay $32 million to settle lawsuits from Enron investors and employees.
February 2003: Merrill Lynch agrees to pay $80 million to settle a Securities and Exchange Commission investigation of its Enron dealings.
July 2003: Citigroup and JPMorgan Chase agree to pay more than $300 million to settle government charges that they helped Enron and Dynegy defraud investors.
December 2003: Canadian Imperial Bank of Commerce says it will pay $80 million to settle SEC allegations that it helped Enron inflate profit and hide debt.
July 2004: Bank of America says it will pay $69 million to settle a lawsuit by Enron investors over its role as underwriter for some debt offerings.
October 2004: Lehman Bros. says it will pay $222.5 million to settle a suit by the University of California and other investors over its role as an Enron underwriter.
January: Enron's insurance firm says it will pay $155 million to UC and other investors to settle a shareholder lawsuit. Ten former Enron directors say they also will pay $13 million out of their own pockets.
Friday: Citigroup agrees to pay investors $2 billion to settle a lawsuit that accused the bank of fraud in its work for Enron.
Sources: Times research, Associated Press, Bloomberg News
Los Angeles Times
Salon.com July 3, 2002
Joseph Stiglitz began explaining why markets fail long before Enron and WorldCom rose, exploded and crashed. But not many people wanted to listen during the boom-boom '90s; Stiglitz was even fired from his position as chief economist at the World Bank after he repeatedly criticized the organization's free-market obsessions. [cck note: this is not entirely correct. Stiglitz was fired from the World Bank partly because he strongly & publicly criticised the way the IMF handled the Asian and other financial crises around the world. In essence, he said that the IMF use the same 4 steps in all crises which are designed to help creditor countries screw the countries in trouble. The US government, the 'boss' of the World Bank, then had this man fired from his job].
Today, Stiglitz's lifetime of work is suddenly all too relevant. Consider, for example, his theory of "asymmetric information." Stiglitz spent years demonstrating that one party in a transaction -- say, the owner of a factory -- often possesses more information than the other about that transaction, and thus has an advantage that allows for market inefficiencies, and potentially, human suffering. His work won Stiglitz the 2001 Nobel Prize in economics, but more to the point, it handily explains why Enron and other companies successfully hid their accounting tricks for so long. Because executives have the power to determine how to arrange their profit-and-loss numbers, the theory holds, they'll always have a leg up on detectives and accountants who are trying to uncover misdoings.
From 1993 to 1997, Stiglitz served as a member and then as the chairman of President Clinton's Council of Economic Advisers. He then went on to become chief economist at the World Bank, where he stayed until 2000. At each step of his career, Stiglitz advocated for a critical look at what he calls "the Washington Consensus" -- the conventional wisdom that holds that everything bad in the economy can be laid at the government's door while everything good stems from the market.
Filled with accessible, on-the-ground examples from Ethiopia, Indonesia, Russia and elsewhere, Stiglitz's new book, "Globalization and Its Discontents," witheringly dismantles that consensus. The villains, Stiglitz argues, are obvious: The International Monetary Fund, Clinton Treasury Secretary Lawrence Summers and Wall Street all come off badly, more concerned with ideology and their own bottom lines than with the facts.
Salon sat down with Stiglitz in New York and discussed accounting trickery, why government is necessary and the present state of the world economy.
The American economy is engulfed in a wave of corporate scandal. WorldCom, Enron, Adelphia, ImClone -- the failures and frauds keep piling up. What's going on?
I think the most important, significant thing that [the scandals] bring home is the importance of regulation. You can't have markets work without good information, and it is not necessarily the case that people have an incentive to provide accurate information; [but] they do have an incentive if there are penalties for providing fraudulent information. So the government plays an absolutely essential role in enabling the markets to work.
Now there were some big mistakes made in the mid-'90s. When I was at the Council of Economic Advisers, FASB -- the Financial Accounting Standards Board -- proposed a change in the way stock options for executives would be treated. The Council of Economic Advisers supported the change, on the grounds that it would improve the quality of [corporate] information. Wall Street and Silicon Valley united to put political pressure to oppose this change. The U.S. Treasury gave in to this political pressure and put pressure on FASB, and FASB backed off.
The reasons it was so important were severalfold. First, the principle that accounting standards ought to be kept out of politics -- that principle was compromised. Secondly, it compromised the quality of information.
Thirdly, it provided further incentives for the use of stock options. And that has contributed to the whole problem we're seeing.
Why? Because with stock options, executives have an incentive to get the value of their company up as fast as possible. They found that they'll make more money if you give inaccurate or distorted information rather than honest information. One of the things I've always argued as an economist is that incentives matter, and one of the things we did there was provide incentives to provide stock options, which provided incentives to provide dishonest information.
Is that the root cause of all these accounting irregularities and alleged frauds?
That's right. There are many factors; the go-go atmosphere, the attitude that anything goes. But if there is a single thing that you can say is the root cause, it is that -- the stock option decision and the mania to which it gave rise.
How does the present situation compare to other crises in American capitalism? Are we witnessing excesses on a par with the '20s, the '80s ...?
It's a pattern that we've had frequently, and it's often associated with what I would call deregulation episodes. The savings and loan debacle, for example, where the U.S. government had to bail out [banks] to the tune of several hundred billion dollars, was basically the same thing: misreporting, trying to claim as income things that weren't income. So in fact there is a pattern here, and that pattern continually reminds us of the need to have some kind of oversight, if we're going to make the market economy work.
But the pains of the '80s seemed to disappear relatively quickly. There was a minor recession in the early 90s, but the economy recovered. Will that happen again, or is this problem on a much larger scale?
Eventually, it's going to bounce back. I have absolute confidence in that. The American economy is very, very strong for the long run. But this may, and quite likely will, extend the recovery and slow it down.
The timing couldn't be worse. The fiscal mismanagement of the current administration -- leading to a change in the fiscal position of the United States over the past year -- is absolutely phenomenal; going from huge surpluses to huge deficits and the deficits are probably going to be larger than people anticipated. That means that foreigners are already losing confidence in the United States because the United States had earned a reputation for sound fiscal management -- and now that reputation is being destroyed. The United States had a reputation for the best accounting standards in the world; now people are saying, we don't know.
The last time excessive doubt in the U.S. economy occurred -- during the Depression -- new regulation followed. How will this episode affect the structure of capitalism, here in the U.S. and abroad?
It is an important warning. The view of capitalism in the late '90s was of a particular form; American capitalism was triumphant. The view was that you don't need regulations -- just let it rip. Now people are becoming much, much more cautious. They're looking at what America said at that time with a lot more circumspection. There's a recognition that there's a downside. And just like the lesson of the Reagan era -- the excessive deregulation of banks -- led most countries to recognize the importance of sound financial regulation, I think that this episode is going to lead people to say there ought to be sound accounting regulations, sound regulation on corporate governance, things that were insufficiently talked about before.
It's also going to mean that the premise that American accounting standards are better, say, than European standards, is no longer going to be convincing. People are going to say let's look at alternatives. There isn't one way, there are alternatives. Sometimes the American way is best but sometimes Americans ought to learn from others, and the accounting standards in Europe may in fact be a better system for dealing with the complexities of the current world.
Is that a sign of progress -- moving away from an American-centric economic worldview?
Yes, I think it is.
You mentioned that the Bush deficit isn't helping matters, but in terms of future policy, what needs to be done and do you think that Bush will do it?
What is interesting is how slow they've been to recognize the problems. We're now beginning to recognize the broader set of issues, what you might call conflicts of interest. Merrill Lynch brought those issues out into the open; that if a firm is trying to sell a stock through its brokerage houses, trying to get business through its IPOs, those conflicts of interest can lead to bad decisions.
But if you could name a list of things -- 1, 2, 3 -- that Bush and Congress could do to reinstill confidence in the markets and economy, what would they be?
We need to begin to think much more carefully about these issues of conflicts of interest, which are pervasive. We saw it in the accounting area, where the accountant firms have conflicts of interest between their role as consultants and their role as accountants. In the 1930s, the Glass-Steagall Act was passed, which talked about why we needed to separate out investment banks from commercial banks because of the potential conflicts of interest. I think another mistake that was made in the '90s was the repeal of that. The point was made that people were getting around it, and that was used as an argument against it. Well, there were two strategies: Do you try to limit the ability to get around it, or do you abandon it. I think they made the wrong choice.
Part of the reason they made that choice was because of Wall Street lobbying. Even now, post-Enron, most attempts at reform have been stalled due to opposition from Wall Street. How can anyone who wants to reform the system overcome such a powerful force?
It will be overcome when there is enough popular support, and when the problems begin to rebound seriously enough against the industry. Let me go back to another example. At the end of the 19th century, it was the food industry -- the meat industry -- that asked for government regulation. Why? Because as a result of Upton Sinclair's book "The Jungle," people said we don't trust meat. And they said, we'll trust the government if it starts inspecting the meat. So the industry demanded regulation to restore confidence.
Do you really think that will happen?
Henry Paulson [chairman of Goldman Sachs] has begun talking about the problem and you have to think that it's partly because of a recognition that if investors lose faith in American firms, they're going to put their money elsewhere. And that is going to be very bad for Wall Street. There are going to be two sources of concern: one, voters; secondly, investors
Do you think that the current corporate implosions will undermine the force of the free-market fundamentalists -- who you identify as the Washington Consensus? Will fears of a lack of U.S. regulation extend to the world of international development?
Well, what we're beginning to understand is that Wall Street is not the font of all wisdom that a lot of people in the '90s tried to sell it as -- especially the people on Wall Street. For instance, in the 1990s Wall Street pushed for capital market liberalization -- opening up companies to speculative money that could come in and out overnight. We now realize that capital market liberalization has contributed a great deal to the instability in the world: to the East Asia crisis, the global financial crisis. At the beginning of that crisis, Wall Street, U.S. Treasury, IMF said, Oh that's not the source of the problem. In fact, they said, speculative money is too small to be possibly a problem. A year later, when Long Term Capital Management was in trouble, the same kinds of people were saying that we need to bail out Long Term Capital Management because if we don't, this one firm -- one firm! -- could bring the whole global financial system down. Now, that kind of inconsistency, that kind of hypocrisy, caused a lot of people concern. Now what we're seeing is that there's a systemic problem; it's not just one company, it's many companies. And I think that breaking of the confidence in Wall Street is leading people to reexamine not only Wall Street but the influence it has had on the IMF, and in turn, the IMF policies and their consequences for the developing world.
Let's talk about those policies. You focus on Russia as an example of a failed IMF country, citing decreased gross domestic product, increased poverty and a widening gap between rich and poor -- most of it caused by a rapid, corrupt privatization process. But when I was reading about the new class of Russian oligarchs, I couldn't help but think that they -- not the IMF -- were the real source of the problem. Why not focus on holding the thieves accountable rather than blaming the IMF?
But incentives matter, and if we don't create the right incentives, we get bad behavior. As we talked about with the case of Enron, we had incentives to overstate profits, to get the stock prices up, and they responded to those incentives. In the case of Russia, the IMF helped create incentives that led to people taking their money out of the country. Let me explain: The IMF pushed these countries to have very rapid privatization, before they had corporate governance, while the economy was still in recession, and they pushed the privatization so rapidly that it was almost inevitably a corrupt privatization. At the same time, they pushed them to open up their capital markets. Think of yourself as one of the oligarchs that have managed to persuade Yeltsin to give you -- for a pittance -- these natural resources worth billions of dollars. Then you're told effectively by the IMF that you can either invest that money in Russia, which was in recession or depression, or take that money to the United States or a secret bank account. If you're smart enough to get Yeltsin to give you a billion dollars, you're smart enough to take your money out. Moreover, you would recognize that if you left your money in Russia, there was a good chance that in a couple years' time, the successor of Yeltsin might say, You got that money illegitimately. We want it back. And if you have your money in the United States or Cyprus bank accounts, they can't get it back. If you have your money in Russia, they can get it back. So it was their own self-preservation that led them to take their money out. But of course, as they all did that, the economy of Russia went further and further down. The culpability lies with setting up incentives that led people to behave that way.
Critics have argued that you underestimate the gains that have come from IMF policy, which you identify as the high-speed "hare" approach, compared to your gradualist "tortoise" approach. Poland, for example, underwent "shock therapy" and came out better than other countries in the region, like Ukraine, which followed a more gradualist approach.
Let me put it in the following way. What is fast and what is slow depends on what you're doing. Poland quickly brought down hyperinflation; that needed to be done fast. It brought down hyperinflation to moderate levels, 18-20 percent. It didn't push it further than that in the first instance. It then began a process of very gradual reform. So it, Hungary, Slovenia -- these were the tortoises. These tortoises have won the race. They are the economies with a GDP that's higher than it was 10 years ago. The hares are further behind. Their GDP is much lower than it was 10 years ago. Now of course there are some that are neither tortoises nor hares -- that aren't doing anything: Belarus, Ukraine. No one said that those are models you ought to follow. The model was, yes, have reforms but have it in a paced, balanced way. And Poland, Slovenia, Hungary show that there were alternatives to the "shock therapy." In fact, the deputy prime minister of Poland in 1993-95, when they were going through these changes, was very explicit that their success was a result of their not following shock therapy policies. It was that they did it with a systematic, gradual policy of structural reform. There are some things that you can do quickly, but changing societies, you can't do overnight. But if you do it in the right way, you actually do it in a reasonable length of time.
What is a reasonable length of time -- particularly when it comes to identifying what's succeeded and failed?
We are never really sure, but what we do know historically is that if Russia's economy is down 30 percent from what it was [in 1989], and let's say they start growing 4 or 5 percent a year, it's going to take them another decade or two just to get back to where they were. In that sense, yes, there will be ups and downs; the race is never over. But the shock therapy has cost the Russian people enormously, not only in terms of GDP. Their life expectancy is down while the rest of the world has life expectancy increasing. These are the kind of consequences that have resulted. Poverty went from 2 percent of the population to over 40 percent in 1998. These are just enormous changes.
You've argued that part of the problem is that the IMF doesn't pay attention to these social costs. Why is that? Why don't they look beyond things like GDP?
There are two or three answers to that question. One of them is that their major responsibility has been macroeconomics. At one point, the head of the IMF even said "we aren't concerned about poverty." They wanted to just look at macroeconomics -- and in fact, they didn't do a very good job of that. Secondly, they believed, a lot of them, in trickle-down economics: If you can succeed in getting [an economy] to grow, everyone would benefit.
In the United States, we've rejected trickle-down economics; you have to have pro-poor growth policies if you're going to succeed. It isn't necessarily true that a rising tide lifts all boats. Some are left behind.
Thirdly, they had a fixation on financial markets. Historically, people with that kind of focus worry more about inflation than they do about unemployment [because inflation does more immediate damage to their investments]. They worry less about poverty than they do about what will happen to the capital markets. In my view, a lot of that has been shortsighted. It is a mistake to ignore the social and political consequences of policies. Even if you don't worry yourself about poverty, it is bad economics. When the IMF cut out the subsidies for the food and fuel to the poorest people in Indonesia, it led to riots. Those riots led capital to flee and that exacerbated the economic downturn, the depression, in the country. So ignoring the social consequences is bad economics.
What do you make of the crisis in Argentina? Two people were killed June 26 in protests, while their economic minister was in Washington asking for the IMF to reinstate an $18 billion credit line. Should the IMF give in?
The issue in Argentina shows that the IMF still hasn't learned a lesson about the risks of contractionary fiscal policy. For 60 years economists have said that when you're in a recession you need expansionary fiscal policy. In the United States, during the much milder recession of 2000-01, both Democrats and Republicans said we need a stimulus. But what was the IMF doing in Argentina? The same thing it did in East Asia, which was insisting on a contraction, making the downturn even worse.
But you argued in your book that less IMF intervention should occur overall because lenders have come to expect and depend on international bailouts; they've been encouraged to loan money to high-risk borrowers because the IMF has acted like an insurance policy. So perhaps the IMF refusal to help is a necessary evil, a way to correct expectations.
The general principle that bailouts have not worked is becoming increasingly recognized. The bailouts did not work in Indonesia, Thailand, Korea, Russia, Brazil and now in Argentina. I don't think that the critical issue facing Argentina today is outside money. Most of the money that Argentina is likely to get will do nothing more than repay already existing loans. What Argentina needs to do is restart their economy. The human resources, the physical resources are still there. What they need is money, not to repay the IMF, not to repay the other loans that are outstanding, but money that can go to corporations that will allow them to buy the inputs, that will allow them to start producing goods that they can then sell and export.
So not a bailout but rather a stimulus ...
They need a stimulus, and that will require some money. But that's very different from a bailout. And what worries me is that if the price of getting a bailout is more contraction, it's going to exacerbate the problems.
Even if the IMF is still screwing up in Argentina, there are signs of reform.
They've accepted responsibility for the Asian crisis and have enacted many reforms in the past few years. Are you encouraged by the institution's progress?
There have been some very encouraging signs. Now, they are recognizing the importance of poverty and the consequences of their policies for poverty.
What's your take on the anti-globalization protest movement? By trying to abolish the IMF, a stance also favored by Milton Friedman, are they making matters worse? Or are they an important catalyst for change?
I think that globalization -- which is nothing more than the closer integration of the countries of the world, as a result of lowering transportation costs, communication costs, the elimination of artificial barriers -- is something that's going to be with us. As this integration occurs, as we become more interdependent, we need to have rules and regulations. So if anything, today we need international institutions more than ever. The problem is that confidence in these institutions is lower than ever.
So my view is that if we abolished the IMF, we'd end up re-creating it. And the real danger is that we'd re-create it with some of the same blemishes that it has today. So it makes much more sense to me to work on reforming the institution; to return it to its original objective, which was to help countries facing an economic downturn have the resources to stimulate; so that a downturn in one country doesn't stimulate a downturn in its neighbors. Getting it to go back to some of its original mission is the right direction for it to go.
Wednesday, June 08, 2005
Why Not A Closer Russian Mirror?
Comment submitted to Moscow Times. For all the poorer Russians almost robbed of their country's natural resources, and the stupidity of some Russians that think that people like Khodorovsky are 'great' enterpreneurs (what's so difficult in making money out of oil wells? Ask the Arab oil sheikhs.)
http://www.themoscowtimes.com/stories/2005/06/08/007.html
I refer to the article above and the writer’s interesting 'bring back' to the 1930s. Then I wondered why he/she did not care to bring readers back to Russia's history in the 1980s & 1990s, and the lessons from the collapse of the old Soviet Union. It would perhaps be more educational to the whole world if he/she had done that.
People like me may live afar but do wonder how a few Russians like Khodorovsky and Abramovich could have had so much money to buy up those highly lucrative‘assets’ of theirs that created so much wealth for them in such a short time.
To me, their ‘successes’ were ‘fairy tales’ too good to be true. If it was so easy, past Russian communist leaders would not have been that dumb not to realize that and therefore let a few of these ‘Khodorovskies’ develop within the communist system, and then parade them in front of the world as prove of communist or Russian supremacy!
On the other hand, if democracy is really so ‘magical’, I wondered then where are the‘Khodorovskies’ of the Russian manufacturing or IT sectors?
I also wondered how the likes of Khodorovsky could have gotten the money to buy those ‘easy money assets’ they ended up having. You see, people like me still remember the widely held 'reports' before the 1990s that all Russians are poor people because of their ‘ineffective’ communist system. So unless people like Khodorovsky had got a sudden ‘windfall from the skies’ as the empire collapsed, or they got their ‘assets’ on the cheap.
Whatever the case, there are probably valuable lessons the whole world can learn from the history of your country during the 1980s and 1990s. Sadly, this was not to be the case for the writer of this article who chose to look into a distant mirror instead of the one much closer. I wonder why?
http://www.themoscowtimes.com/stories/2005/06/08/007.html
I refer to the article above and the writer’s interesting 'bring back' to the 1930s. Then I wondered why he/she did not care to bring readers back to Russia's history in the 1980s & 1990s, and the lessons from the collapse of the old Soviet Union. It would perhaps be more educational to the whole world if he/she had done that.
People like me may live afar but do wonder how a few Russians like Khodorovsky and Abramovich could have had so much money to buy up those highly lucrative‘assets’ of theirs that created so much wealth for them in such a short time.
To me, their ‘successes’ were ‘fairy tales’ too good to be true. If it was so easy, past Russian communist leaders would not have been that dumb not to realize that and therefore let a few of these ‘Khodorovskies’ develop within the communist system, and then parade them in front of the world as prove of communist or Russian supremacy!
On the other hand, if democracy is really so ‘magical’, I wondered then where are the‘Khodorovskies’ of the Russian manufacturing or IT sectors?
I also wondered how the likes of Khodorovsky could have gotten the money to buy those ‘easy money assets’ they ended up having. You see, people like me still remember the widely held 'reports' before the 1990s that all Russians are poor people because of their ‘ineffective’ communist system. So unless people like Khodorovsky had got a sudden ‘windfall from the skies’ as the empire collapsed, or they got their ‘assets’ on the cheap.
Whatever the case, there are probably valuable lessons the whole world can learn from the history of your country during the 1980s and 1990s. Sadly, this was not to be the case for the writer of this article who chose to look into a distant mirror instead of the one much closer. I wonder why?
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