As the latest buzzword in the world of business and finance that’s a few steps away from economic recession, is corporate social responsibility just a ploy used by companies to make them appear way less greedy?
By: Vanessa Uy
Sometimes I ask myself weather the current coverage by the mainstream media regarding corporate social responsibility is actually confusing the general public’s already distorted perception on why companies embraces corporate social responsibility in the first place. From the lighthearted “there just buying into the latest must have fashion accessory” perception of corporate social responsibility. To the press’s overly simplistic painting a picture that start-up companies that embraced corporate social responsibility for “idealistic” reasons are actually holding back a tidal wave of greed and corruption doesn’t help matters either. Even though I see the overall good in corporate social responsibility especially when it comes to the environmental side of things. The truth of the mater - like the one used to be tackled by agents Mulder and Scully in the TV series The X-Files – is not what it seams to be.
More than just a “look how caring we are” public relations ploy of big corporations, corporate social responsibility can serve also as a company’s unique selling point especially in today’s slowing down markets. Anything that helps your company will be tried in these somewhat desperate times I’m told, but what’s the point? Why adopt a policy that would wind up your company to lose money just to avoid the general public’s “resentment” of the financially successful i.e. rich from being directed at your company? Before we get overly philosophical, let’s first explore this concept of corporate social responsibility.
Corporate social responsibility is now currently made up of three broad layers. The most basic is the traditional corporate philanthropy which many view only big companies with relatively long history can afford. Like Google’s 25 million-dollar philanthropy, which the company announced in January 2008 to be awarded to social projects that tackle poverty and climate change. The second layer of corporate social responsibility can be thought of as a branch of risk management. This is when companies talk to Non Government Organizations and to governments regarding the current pressing problems like the cost of living, the environment, and also create codes of conduct that allow them to be more transparent in their day to day operations. Companies also talk with their competitors regarding these things as to form a collective risk management scheme and in keeping their workers “happy”. In other words “enlightened self-policing”. The third of which is how corporate social responsibility makes a company appear “caring” to the rest of the world which creates value to the company in which can also be used as a unique selling point.
For whatever its worth, companies that had adopted corporate social responsibility since the 1990’s have been aiming to improve our two most pressing problems namely environmental protection and poverty alleviation. It seems like programs that address pre-existing environmental problems can also serve to improve local economic conditions. Concepts like organic farming, which crops and animals are produced without the use of harmful chemicals and animals are kept in free range as opposed to being kept in inhumane conditions. Fair trade, which farmers / producers are paid a fair price for their products as opposed to the lowest price allowed by law. Also sustainable utilization of natural resources like the Marine Stewardship Council or MSC which help keep fish stocks at a sustainable level while providing job security for the fishing industry.
Critics of corporate social responsibility say that it is just a cover used by companies who are performing badly and want rich treehuggers to purchase their initial public offerings with a perception that their clients are making a difference. But the results speak for themselves. Even though the mainstream press seems to over hype the political correctness of corporate social responsibility, embracing the idea for environmental reasons have not only improved the immediate environment of the companies that chose to, but the social conditions also improved. Companies that refurbish pre-loved / pre-owned computers to be either donated or to be sold at a bargain to impoverished communities are not only helping the environment by reducing the amount of e-wastes going into our overloaded landfills. They’re also creating new jobs and even future employment due to the computer literacy that results from donated computers.
Thursday, April 17, 2008
Friday, March 14, 2008
Did Keynesian Economics Kill the Business Cycle?
Not so long ago, economists resigned themselves to the fact that recession is just a part of the economic cycle. Then came John Maynard Keynes who shattered that dogma and revolutionized the science of economics. Will “Keynesian Economics” save us from the harmful effects of the business cycle?
By: Ringo Bones and Vanessa Uy
Despite the problems affecting our global economy like sub prime mortgage exposure and the worrying trend of economic recession, we often tend to forget the fact that business conditions have always been fluid and dynamic. One year, the markets are booming and bullish with jobs aplenty. Another year, the stock market goes into a free fall, and bankruptcy courts become more crowded than the Tokyo Subway at rush hour. As chronicled in our economic history books: recession, expansion, then recession follows a sequential saga. And in the memory of the bad old days of ruthless capitalism that brought us Black Tuesday – October 29, 1929 – the day the stock market crashed. Tales chronicling the “Great Depression” even mentioned about banks failing by the thousands and a very drastic slowdown of the US economy that weeds started to grow on the materialistic self-complacent provincialism of Main Street.
America’s post-World War II economy which is largely – if not totally – governed by the principles laid out by John Maynard Keynes in the hopes of making the 1929 “Black Tuesday” incident just an ugly footnote of the American economic history. Thus in the United States, pure capitalism has gradually given way to a mixed economy, in which the government shapes the tax and fiscal policies to stabilize the ups and downs of business. “Keynesian Economics” which is viewed by “conservative” Americans with disdain because it tends to undermine the Protestant / Calvinist work ethic that helped built the American nation, which in turn downgrades productivity. Government “over regulation” of industries like the savings and loans has resulted only in disaster. Despite of it’s detractors, the economic policies laid out by John Maynard Keynes gain widespread praise by economists for keeping a full-blown economic depression from ever happening again. But as the Federal Reserve Board acts to control the money supply and counteract the business cycle, can we really conclude that recessions are a thing of the past?
But economists tend to forget that economics – in general – is primarily greed driven. The promise of rich rewards / gains despite atrocious levels of risks is what makes traders take foolhardy decisions at the expense of their representative investors’ funds. And yet we can take real comfort in the fact that economic recessions are milder in the “Keynesian Mixed Economy” environment than they where under the pre - New Deal capitalism. And if they occur, post – World War II economic recessions are also shorter in duration and much rarer in occurrence. Let’s just hope that our current post – sub prime mortgage / credit crunch 2008 will follow this trend. Maybe the “worries” that made our grandparents and great grandparents gray and wrinkled is something that the under 25s will scarcely know.
By: Ringo Bones and Vanessa Uy
Despite the problems affecting our global economy like sub prime mortgage exposure and the worrying trend of economic recession, we often tend to forget the fact that business conditions have always been fluid and dynamic. One year, the markets are booming and bullish with jobs aplenty. Another year, the stock market goes into a free fall, and bankruptcy courts become more crowded than the Tokyo Subway at rush hour. As chronicled in our economic history books: recession, expansion, then recession follows a sequential saga. And in the memory of the bad old days of ruthless capitalism that brought us Black Tuesday – October 29, 1929 – the day the stock market crashed. Tales chronicling the “Great Depression” even mentioned about banks failing by the thousands and a very drastic slowdown of the US economy that weeds started to grow on the materialistic self-complacent provincialism of Main Street.
America’s post-World War II economy which is largely – if not totally – governed by the principles laid out by John Maynard Keynes in the hopes of making the 1929 “Black Tuesday” incident just an ugly footnote of the American economic history. Thus in the United States, pure capitalism has gradually given way to a mixed economy, in which the government shapes the tax and fiscal policies to stabilize the ups and downs of business. “Keynesian Economics” which is viewed by “conservative” Americans with disdain because it tends to undermine the Protestant / Calvinist work ethic that helped built the American nation, which in turn downgrades productivity. Government “over regulation” of industries like the savings and loans has resulted only in disaster. Despite of it’s detractors, the economic policies laid out by John Maynard Keynes gain widespread praise by economists for keeping a full-blown economic depression from ever happening again. But as the Federal Reserve Board acts to control the money supply and counteract the business cycle, can we really conclude that recessions are a thing of the past?
But economists tend to forget that economics – in general – is primarily greed driven. The promise of rich rewards / gains despite atrocious levels of risks is what makes traders take foolhardy decisions at the expense of their representative investors’ funds. And yet we can take real comfort in the fact that economic recessions are milder in the “Keynesian Mixed Economy” environment than they where under the pre - New Deal capitalism. And if they occur, post – World War II economic recessions are also shorter in duration and much rarer in occurrence. Let’s just hope that our current post – sub prime mortgage / credit crunch 2008 will follow this trend. Maybe the “worries” that made our grandparents and great grandparents gray and wrinkled is something that the under 25s will scarcely know.
Monday, March 10, 2008
The Flavors of Recession
As we ring in 2008 with apprehension over the sub prime mortgage crisis and credit crunch that plagued the US economy during the latter half of 2007, the question remains: Is the US economy already in recession?
By: Ringo Bones and Vanessa Uy
One time honored wisdom states that if America sneezes, the rest of the world catches a cold. A colorful phrase used to describe economic recession and the primary reason why the rest of the world lives in fear – especially countries who exports most of their products to the US - every time the US economy heads into a downturn. But come 2008, the question on everyone’s minds still remains: Is the US economy already in recession?
But what is an economic recession? Who decides? For years, the press and the Las Vegas odds-makers had adopted this simple pragmatic definition: When the real Gross National Product (total value of all goods and services, corrected for inflationary price rises) declines for two quarters (6 months) in a row – that is an economic recession. This rough definition is adequate for most purposes, and surely more “refined” than its "blue collar" counterpart which states: When your neighbor looses his job, its only economic slowdown, when you loose your job, it’s a full blown economic recession.
Another definition of economic recession that is formulated by The National Bureau of Economic Research, a prestigious nonprofit organization that has kept the official score on the US economy’s business cycles. The “bureau’s” definition is based on more refined tests and measurements. Yet, for the most part, The National Bureau of Economic Research arrives at the same conclusions as the press and Las Vegas odds-makers did when it applies it’s own definition. Which states: “An economic recession is a recurring period of decline in total output, income, employment, and trade usually lasting six months to a year and marked by widespread fluctuations in the economy.”
As time went on, economist these days had discovered and defined a new species of economic recession called a “mini” or “growth-recession” which the current Bush Administration says best describes on what is happening to the US economy right now. Even though most Americans – especially those under the age of 30 – think that the credit crunch is a new and recent phenomena that only came to life near the end of July 2007. But the credit crunch did happen way before, back in 1966 to 1967, when the American people had to live with a “growth-recession” when a credit crunch curtailed housing starts and shaved 20% off stock prices. A mini or growth-recession is defined as follows: When output and employment grow for half a year or more at significantly less than their average trend rate of growth, an economy is in a “growth-recession”, even if actual growth rates never turn negative.
Even though American billionaire and now the world’s richest man Warren Buffett and the financial firm Merrill Lynch both said that the US economy is already experiencing recession at the start of 2008. The Bush Administration still insists that the US economy is only undergoing a slow down and can be easily cured with an Economic Stimulus Package. Does the Bush Administration dread the use of the “R” word (recession) because they think it will cause widespread panic? But the US economy is indeed now experiencing full blown recession because 2008 jobless rates are at a five year high, home repossessions are on the rise, Wall Street shaky as world markets watch. Plus the price of crude oil and basic foods now at a record high is not helping matters either.
As the US Federal Reserve Chairman Ben Bernanke slash interest rates further and the Economic Stimulus Package planned to be increased to 200 billion US dollars - the latest ones in the form of "auctions" that could well undermine a financial firm's credit rating, will all of these measures be able to turn around the ailing US economy from sliding further into a deep recession? It’s a bit iffy, because as the US Federal Reserve makes cheaper still the cost of borrowing money, the “financially inept” – sorry to say – will be driven further into debt. This is so because its primarily due to greed driven foolhardy decisions that drove these people to concoct get rich quick schemes that started all this mess in the first place. Unless an epidemic of “financial enlightenment” sweeps across the United States, bankruptcy courts will be standing room only beginning 2008.
By: Ringo Bones and Vanessa Uy
One time honored wisdom states that if America sneezes, the rest of the world catches a cold. A colorful phrase used to describe economic recession and the primary reason why the rest of the world lives in fear – especially countries who exports most of their products to the US - every time the US economy heads into a downturn. But come 2008, the question on everyone’s minds still remains: Is the US economy already in recession?
But what is an economic recession? Who decides? For years, the press and the Las Vegas odds-makers had adopted this simple pragmatic definition: When the real Gross National Product (total value of all goods and services, corrected for inflationary price rises) declines for two quarters (6 months) in a row – that is an economic recession. This rough definition is adequate for most purposes, and surely more “refined” than its "blue collar" counterpart which states: When your neighbor looses his job, its only economic slowdown, when you loose your job, it’s a full blown economic recession.
Another definition of economic recession that is formulated by The National Bureau of Economic Research, a prestigious nonprofit organization that has kept the official score on the US economy’s business cycles. The “bureau’s” definition is based on more refined tests and measurements. Yet, for the most part, The National Bureau of Economic Research arrives at the same conclusions as the press and Las Vegas odds-makers did when it applies it’s own definition. Which states: “An economic recession is a recurring period of decline in total output, income, employment, and trade usually lasting six months to a year and marked by widespread fluctuations in the economy.”
As time went on, economist these days had discovered and defined a new species of economic recession called a “mini” or “growth-recession” which the current Bush Administration says best describes on what is happening to the US economy right now. Even though most Americans – especially those under the age of 30 – think that the credit crunch is a new and recent phenomena that only came to life near the end of July 2007. But the credit crunch did happen way before, back in 1966 to 1967, when the American people had to live with a “growth-recession” when a credit crunch curtailed housing starts and shaved 20% off stock prices. A mini or growth-recession is defined as follows: When output and employment grow for half a year or more at significantly less than their average trend rate of growth, an economy is in a “growth-recession”, even if actual growth rates never turn negative.
Even though American billionaire and now the world’s richest man Warren Buffett and the financial firm Merrill Lynch both said that the US economy is already experiencing recession at the start of 2008. The Bush Administration still insists that the US economy is only undergoing a slow down and can be easily cured with an Economic Stimulus Package. Does the Bush Administration dread the use of the “R” word (recession) because they think it will cause widespread panic? But the US economy is indeed now experiencing full blown recession because 2008 jobless rates are at a five year high, home repossessions are on the rise, Wall Street shaky as world markets watch. Plus the price of crude oil and basic foods now at a record high is not helping matters either.
As the US Federal Reserve Chairman Ben Bernanke slash interest rates further and the Economic Stimulus Package planned to be increased to 200 billion US dollars - the latest ones in the form of "auctions" that could well undermine a financial firm's credit rating, will all of these measures be able to turn around the ailing US economy from sliding further into a deep recession? It’s a bit iffy, because as the US Federal Reserve makes cheaper still the cost of borrowing money, the “financially inept” – sorry to say – will be driven further into debt. This is so because its primarily due to greed driven foolhardy decisions that drove these people to concoct get rich quick schemes that started all this mess in the first place. Unless an epidemic of “financial enlightenment” sweeps across the United States, bankruptcy courts will be standing room only beginning 2008.
Friday, March 7, 2008
Who’s Afraid of Stagflation?
Fast becoming an economic doomsayer’s buzzword in our post sub prime mortgage financial environment, will stagflation rear’s it’s ugly head again this 2008?
By: Ringo Bones and Vanessa Uy
Despite American economist, especially those in the pay of the Bush Administration, saying that the US economy is not yet in recession when we ring in 2008. But in our post - New Deal economic system that’s supposedly designed to keep economic recession a thing of the past, a form of economic malaise is now poised to threaten the on-going recovery process to lessen the impact of the sub prime mortgage crisis – namely stagflation.
Most of us living today – especially those under the age of 25 – has probably many questions to ask about stagflation, like: What is stagflation? Did stagflation happen before? Before we proceed, lets briefly discuss on what is stagflation and it’s primary causes.
When the post – World War II Keynesian Mixed Economy has alleviated the curse of old-fashioned economic depression and recession, it created the economic conditions that engendered the newfangled specter of stagflation. Stagflation is caused by a combination of stagnation in the production and employment sector with the inflation in the cost of living.
In 2008, stagflation now threatens China, Australia, and especially New Zealand whose individual Central Banks choose to raise the cost of borrowing money – i.e. raised interest rates – at a time when crude oil prices and food prices are at an all time high. The Las Vegas odds-makers say it’s a definite certainty that stagflation will definitely return in 2008, but let’s examine the economic conditions that made stagflation happen.
Back in 1979 during the Carter Administration, the economic slowdown of that year was primarily blamed on the artificially induced scarcity of the crude oil supply due to OPEC unable to respond the on-going geopolitical instability of the Middle East. This caused soaring food prices that contributed to the two-digit inflation that plagued America’s economy at the end of the 1970’s.
Then US President Jimmy Carter with the help of then Treasury Secretary G. William Miller, and then Federal Reserve Board Chairman Paul Volcker choose to cure the “inflation” part of stagflation back in 1979 by increasing the cost of borrowing money – i.e. raising interest rates. High interest rates on loans – 15% for large companies, 20% for less credit - worthy borrowers – were intended to combat inflation. The bad news is high interest rates adds to the cost in running a company and thereby leads to inflated prices. Some companies kept costs down by downsizing – i.e. laying off more “expendable” employees to keep their bottom line healthy. The poor and the unskilled members of the American society bore the brunt of the corporate downsizing during the latter days of the Carter Administration.
The fiscal oversight in tackling the 1979 stagflation documented on how President Carter and his financial advisers choose to reign in on the inflation part of stagflation because of their trust on “off the shelf” methods (or was it their trust of prevailing “off the shelf wisdom”) of tackling inflation are already tried and true. But at the expense of economic stagnation that prevailed well into the 1980’s. Let’s just hope that the Bush Administration’s “Economic Stimulus Package” has provisos for preventing the repeat of the 1979 stagflation because of the damage it could inflict on the already ailing global economy. A lot is now riding on the current US Federal Reserve Chairman Ben Bernanke’s decisions because it’s not just the American Economy that is on the line. The export - oriented economies of the Asian Far East will surely be affected.
By: Ringo Bones and Vanessa Uy
Despite American economist, especially those in the pay of the Bush Administration, saying that the US economy is not yet in recession when we ring in 2008. But in our post - New Deal economic system that’s supposedly designed to keep economic recession a thing of the past, a form of economic malaise is now poised to threaten the on-going recovery process to lessen the impact of the sub prime mortgage crisis – namely stagflation.
Most of us living today – especially those under the age of 25 – has probably many questions to ask about stagflation, like: What is stagflation? Did stagflation happen before? Before we proceed, lets briefly discuss on what is stagflation and it’s primary causes.
When the post – World War II Keynesian Mixed Economy has alleviated the curse of old-fashioned economic depression and recession, it created the economic conditions that engendered the newfangled specter of stagflation. Stagflation is caused by a combination of stagnation in the production and employment sector with the inflation in the cost of living.
In 2008, stagflation now threatens China, Australia, and especially New Zealand whose individual Central Banks choose to raise the cost of borrowing money – i.e. raised interest rates – at a time when crude oil prices and food prices are at an all time high. The Las Vegas odds-makers say it’s a definite certainty that stagflation will definitely return in 2008, but let’s examine the economic conditions that made stagflation happen.
Back in 1979 during the Carter Administration, the economic slowdown of that year was primarily blamed on the artificially induced scarcity of the crude oil supply due to OPEC unable to respond the on-going geopolitical instability of the Middle East. This caused soaring food prices that contributed to the two-digit inflation that plagued America’s economy at the end of the 1970’s.
Then US President Jimmy Carter with the help of then Treasury Secretary G. William Miller, and then Federal Reserve Board Chairman Paul Volcker choose to cure the “inflation” part of stagflation back in 1979 by increasing the cost of borrowing money – i.e. raising interest rates. High interest rates on loans – 15% for large companies, 20% for less credit - worthy borrowers – were intended to combat inflation. The bad news is high interest rates adds to the cost in running a company and thereby leads to inflated prices. Some companies kept costs down by downsizing – i.e. laying off more “expendable” employees to keep their bottom line healthy. The poor and the unskilled members of the American society bore the brunt of the corporate downsizing during the latter days of the Carter Administration.
The fiscal oversight in tackling the 1979 stagflation documented on how President Carter and his financial advisers choose to reign in on the inflation part of stagflation because of their trust on “off the shelf” methods (or was it their trust of prevailing “off the shelf wisdom”) of tackling inflation are already tried and true. But at the expense of economic stagnation that prevailed well into the 1980’s. Let’s just hope that the Bush Administration’s “Economic Stimulus Package” has provisos for preventing the repeat of the 1979 stagflation because of the damage it could inflict on the already ailing global economy. A lot is now riding on the current US Federal Reserve Chairman Ben Bernanke’s decisions because it’s not just the American Economy that is on the line. The export - oriented economies of the Asian Far East will surely be affected.
Friday, February 22, 2008
Sovereign Wealth Funds: Altruism’s Road to Hell?
Touted as the primary means of revitalizing an ailing “economic system”. Do Sovereign Wealth Funds really help more than they inevitably hurt?
By: Vanessa Uy
Billionaire investor George Soros is one of those people who really have a high praise for Sovereign Wealth Funds. But how many of us have the investment savvy of George Soros? And most of all; will Sovereign Wealth Funds – if properly (and ethically?) used – help alleviate our current (2008) global economic slowdown? But first, a brief primer on what is a Sovereign Wealth Fund.
A Sovereign Wealth Fund is a fund that is owned by a sovereign state. These are usually composed of financial assets such as stocks, bonds, property or other financial instruments. Sovereign Wealth Funds are broadly defined entities that can manage the national savings for the purposes of investment. These pooled funds may have their origins in, or may represent foreign currency deposits, gold, Special Drawing Rights and International Monetary Fund (IMF) reserve position held by central holdings. In other words, Sovereign Wealth Funds are assets of sovereign nations, which are typically (but not necessarily) held in domestic and different reserve currencies such as the dollar, euro, and yen. The names attributed to the respective management entities may include central banks, official investment companies, state pension funds, sovereign oil funds and so on.
Even though it’s really beyond reproach that Sovereign Wealth Funds can save an ailing company or an “economic system”. But the problem of evil rearing it’s ugly head comes along when investors who are controlling a typical Sovereign Wealth Fund can now dictate the company’s policy – which they now own by the way and they can fire / replace the company CEO if he or she doesn't fall in line. Never mind the ensuing massive layoffs that typically occur if the “new management” thinks that this move will “streamline” the company.
This is why some countries are staunchly “Protectionists” when faced with the prospects and / or threats of Sovereign Wealth Funds. Imagine if The People’s Republic of China’s Sovereign Wealth Funds allowing the Beijing Government access to Lockheed Martin’s “Proprietary Trade Secrets”. And what about the Sovereign Wealth Funds of “Despotic Arab States”, are we ready to face another “New World Order”?
And then there’s the issue of corporate ethics and the latest corporate buzzword “Corporate Social Responsibility”. I’ll bet a number of us are wondering if their pension funds are used by the US Central Intelligence Agency to underwrite their “Extraordinary Renditions” program which sadly existing Sharia Banking Laws didn’t mention (preach?) about the sins of investing one’s money in the “Military – Industrial Complex”. Those of us who are weary of the evils of Capitalism should take a stand now.
By: Vanessa Uy
Billionaire investor George Soros is one of those people who really have a high praise for Sovereign Wealth Funds. But how many of us have the investment savvy of George Soros? And most of all; will Sovereign Wealth Funds – if properly (and ethically?) used – help alleviate our current (2008) global economic slowdown? But first, a brief primer on what is a Sovereign Wealth Fund.
A Sovereign Wealth Fund is a fund that is owned by a sovereign state. These are usually composed of financial assets such as stocks, bonds, property or other financial instruments. Sovereign Wealth Funds are broadly defined entities that can manage the national savings for the purposes of investment. These pooled funds may have their origins in, or may represent foreign currency deposits, gold, Special Drawing Rights and International Monetary Fund (IMF) reserve position held by central holdings. In other words, Sovereign Wealth Funds are assets of sovereign nations, which are typically (but not necessarily) held in domestic and different reserve currencies such as the dollar, euro, and yen. The names attributed to the respective management entities may include central banks, official investment companies, state pension funds, sovereign oil funds and so on.
Even though it’s really beyond reproach that Sovereign Wealth Funds can save an ailing company or an “economic system”. But the problem of evil rearing it’s ugly head comes along when investors who are controlling a typical Sovereign Wealth Fund can now dictate the company’s policy – which they now own by the way and they can fire / replace the company CEO if he or she doesn't fall in line. Never mind the ensuing massive layoffs that typically occur if the “new management” thinks that this move will “streamline” the company.
This is why some countries are staunchly “Protectionists” when faced with the prospects and / or threats of Sovereign Wealth Funds. Imagine if The People’s Republic of China’s Sovereign Wealth Funds allowing the Beijing Government access to Lockheed Martin’s “Proprietary Trade Secrets”. And what about the Sovereign Wealth Funds of “Despotic Arab States”, are we ready to face another “New World Order”?
And then there’s the issue of corporate ethics and the latest corporate buzzword “Corporate Social Responsibility”. I’ll bet a number of us are wondering if their pension funds are used by the US Central Intelligence Agency to underwrite their “Extraordinary Renditions” program which sadly existing Sharia Banking Laws didn’t mention (preach?) about the sins of investing one’s money in the “Military – Industrial Complex”. Those of us who are weary of the evils of Capitalism should take a stand now.
Monday, January 28, 2008
In Banks We Trust
Ever since the news of the Société Générale bank fraud spread around the world, bank depositors and the general public are now wondering whether banks are part of the solution – or cause of the problem – of our current global financial crisis?
By: Vanessa Uy
As the French bank Société Générale prepares to close its offices for the weekend last January 25, 2008. A 31 – year – old Junior Executive Trader named Jerome Kerviel now dubbed as the “rogue trader” managed to loose a little over 7 billion US dollars worth of Société Générale’s funds by trading on the European Equities Market. An amount equivalent to 15% of the bank’s total assets or the amount the bank earns in an average fiscal year. The Junior Executive’s questionable action was defined as a fraud under established trading laws. Now under custody, investigators have doubts whether Jerome Kerviel acted alone. If found guilty, Jerome Kerviel may face a 5 - year prison sentence and hefty fines. Since the incident happened, ordinary bank depositors around the world – i.e. you and me – now doubt whether commercial banks and related financial institutions can do their part in solving the current “financial turbulence”.
For as long as I can remember, banks are seen as “agents of economic progress.” This is so because in school our teachers had instilled in us that if we save our money in banks - as opposed to stashing it in our “secret cookie jar” - we will be contributing to the economic progress and welfare of our nation. But recent events, like the Société Générale bank “fraud” case introduced a worm of doubt on everyone’s perceived trust between their money and their bank.
As of late, top economists had been pointing their fingers on the culture of “savings disparity” as the primary cause of the US credit crisis that is now threatening the global economy. These economists point out that on average, typical Americans save an equivalent of about 10% of their annual income, while in China its 50%. The prevailing wisdom about the role of banks on a nation’s / state’s economy lead the economists to conclude that the phenomenon of “savings disparity” is the overwhelming reason why – at present – the US Economy is weakening. While China’s remained strong despite the “bad decisions” made by US banks and related financial institutions that lead to the credit crunch and sub prime mortgage crisis. But since – taken as a whole – the global economy is a relatively complex dynamic system that’s continuously in flux, only time will tell if the Federal Reserve chairman Ben Bernanke and the Bush Administration’s resort to John Maynard Keynes – style economics. Like the 145 - billion dollar “Economic Stimulus” package that will supposedly prevent the US Economy from sliding into a recession. Or should everyone of us prepare for a repeat of the “Banking Panic of 1857”, or the draconian credit control measures of the Roosevelt Administration that lead to the “Bank Holiday” of March 4, 1933. Just remember what John Maynard Keynes wrote early in his career: “In the long run we are all dead.”
By: Vanessa Uy
As the French bank Société Générale prepares to close its offices for the weekend last January 25, 2008. A 31 – year – old Junior Executive Trader named Jerome Kerviel now dubbed as the “rogue trader” managed to loose a little over 7 billion US dollars worth of Société Générale’s funds by trading on the European Equities Market. An amount equivalent to 15% of the bank’s total assets or the amount the bank earns in an average fiscal year. The Junior Executive’s questionable action was defined as a fraud under established trading laws. Now under custody, investigators have doubts whether Jerome Kerviel acted alone. If found guilty, Jerome Kerviel may face a 5 - year prison sentence and hefty fines. Since the incident happened, ordinary bank depositors around the world – i.e. you and me – now doubt whether commercial banks and related financial institutions can do their part in solving the current “financial turbulence”.
For as long as I can remember, banks are seen as “agents of economic progress.” This is so because in school our teachers had instilled in us that if we save our money in banks - as opposed to stashing it in our “secret cookie jar” - we will be contributing to the economic progress and welfare of our nation. But recent events, like the Société Générale bank “fraud” case introduced a worm of doubt on everyone’s perceived trust between their money and their bank.
As of late, top economists had been pointing their fingers on the culture of “savings disparity” as the primary cause of the US credit crisis that is now threatening the global economy. These economists point out that on average, typical Americans save an equivalent of about 10% of their annual income, while in China its 50%. The prevailing wisdom about the role of banks on a nation’s / state’s economy lead the economists to conclude that the phenomenon of “savings disparity” is the overwhelming reason why – at present – the US Economy is weakening. While China’s remained strong despite the “bad decisions” made by US banks and related financial institutions that lead to the credit crunch and sub prime mortgage crisis. But since – taken as a whole – the global economy is a relatively complex dynamic system that’s continuously in flux, only time will tell if the Federal Reserve chairman Ben Bernanke and the Bush Administration’s resort to John Maynard Keynes – style economics. Like the 145 - billion dollar “Economic Stimulus” package that will supposedly prevent the US Economy from sliding into a recession. Or should everyone of us prepare for a repeat of the “Banking Panic of 1857”, or the draconian credit control measures of the Roosevelt Administration that lead to the “Bank Holiday” of March 4, 1933. Just remember what John Maynard Keynes wrote early in his career: “In the long run we are all dead.”
Wednesday, January 16, 2008
Structured Settlements: A Barrier to Social Justice?
Now more than ever, governments worldwide are forced to choose between the welfare of their citizens or in maintaining the “bottom line” of corporate entities.
By: Ringo Bones and Vanessa Uy
American social justice crusader Michael Moore had criticized structured settlements in his documentary “Bowling for Columbine” citing that -in practice- it is pro-corporation and anti-corporate victim. In the recent Heiligendamm G8, ATTAC-the anti G8 pressure group-are very clear on where they stand on the issue of structured settlements with their motto that states: “The world is not for sale.” But what is a “structured settlement”? A structured settlement is a financial or insurance arrangement- including periodic payments- that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in the US and Canada during the 1970’s as an alternative to lump sum settlements. Structured settlement payments are sometimes called “periodic payments.” A structured settlement that is incorporated into a trial judgment is called “periodic payment judgment.” Almost instantly after being instituted by the major economic powers in their judicial system, structured settlements were later adopted by London, Australia and the rest of the “Industrialized West.” If this form of settlement is being widely adopted by the Western World, then conventional wisdom dictates that this is a good thing – right?
In practice, the equitability of structured settlements break down when the claimant has became terminally ill and doesn’t have much time to live. This works in favor of the corporation responsible for the said injury/damage to the health and well being of the plaintiff. Back in June 2007, the BBC reported on a court appeal in the US to pay compensation to Vietnamese citizens affected by the defoliant “Agent Orange” then in use during the Vietnam War. The claimants lost on the first round of court hearings, but they vow to persevere.
Basing on what we currently know about the “Agent Orange” issue, the Vietnamese victims of the said defoliant face an uphill battle. Since the manufacturers of the “Agent Orange” used during the Vietnam War – DOW Chemical Corporation and Monsanto Corporation – have close ties to the powers-that-be on the Pentagon and Capitol Hill. Even though -at present- DOW and Monsanto are currently involved with structured settlements with American Troops who became chronically ill and developed cancer while being exposed to “Agent Orange” during their “Tour of Duty” in Vietnam during the 1960’s.
DOW and Monsanto’s “delay tactics” will only do the company favors since their yet-to-be-recognized claimants are slowly dying out. This might not pass as justice to most of us civilized folks, but it’s the law!
By: Ringo Bones and Vanessa Uy
American social justice crusader Michael Moore had criticized structured settlements in his documentary “Bowling for Columbine” citing that -in practice- it is pro-corporation and anti-corporate victim. In the recent Heiligendamm G8, ATTAC-the anti G8 pressure group-are very clear on where they stand on the issue of structured settlements with their motto that states: “The world is not for sale.” But what is a “structured settlement”? A structured settlement is a financial or insurance arrangement- including periodic payments- that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in the US and Canada during the 1970’s as an alternative to lump sum settlements. Structured settlement payments are sometimes called “periodic payments.” A structured settlement that is incorporated into a trial judgment is called “periodic payment judgment.” Almost instantly after being instituted by the major economic powers in their judicial system, structured settlements were later adopted by London, Australia and the rest of the “Industrialized West.” If this form of settlement is being widely adopted by the Western World, then conventional wisdom dictates that this is a good thing – right?
In practice, the equitability of structured settlements break down when the claimant has became terminally ill and doesn’t have much time to live. This works in favor of the corporation responsible for the said injury/damage to the health and well being of the plaintiff. Back in June 2007, the BBC reported on a court appeal in the US to pay compensation to Vietnamese citizens affected by the defoliant “Agent Orange” then in use during the Vietnam War. The claimants lost on the first round of court hearings, but they vow to persevere.
Basing on what we currently know about the “Agent Orange” issue, the Vietnamese victims of the said defoliant face an uphill battle. Since the manufacturers of the “Agent Orange” used during the Vietnam War – DOW Chemical Corporation and Monsanto Corporation – have close ties to the powers-that-be on the Pentagon and Capitol Hill. Even though -at present- DOW and Monsanto are currently involved with structured settlements with American Troops who became chronically ill and developed cancer while being exposed to “Agent Orange” during their “Tour of Duty” in Vietnam during the 1960’s.
DOW and Monsanto’s “delay tactics” will only do the company favors since their yet-to-be-recognized claimants are slowly dying out. This might not pass as justice to most of us civilized folks, but it’s the law!
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