Monday, April 26, 2010

Entrepreneurs, Bankers & Policies

If pandering to foreign investors is not the best path to high income in an economy, then it is necessary to woo local investors. Who are they?

Local savers and investors are the true patriots of the nation, for they are the people who sink their toes into the soil, dig deep and are willing to do and die on this soil. They are the true sons and daughters of the soil, for they make this land a place where they will live and die.

The true patriots are those who work very hard, despite even extremely conditions, following the basic rule of economic survival of not consuming at one go all that one has at the moment. With the little that they have saved, they hope to graduate from the drudgery of earning wages based on their subservience to become masters of their own little capital, from which they hope to earn a multiple from.

How fast that little capital spin and grow depends on their astuteness in knowing what the market needs, what the market is likely to need in the immediate future and in understanding the dynamics of the market supply and demand situation.

Those who read the market properly succeed; and those who don't, fail.

Successes and failures are both part of the dynamics of a growing economy that yearns to earn high income.

Protecting failures breeds insolence, while protecting successes breeds arrogance.

How the nation can break out of its little coconut shell depends on the courage of those with money to support those with foresights and ideas backed by technical skills.

In traditional societies without a modern banking system, the funding is undertaken by snake heads, gangsters and Ah Longs who go sideways into funding enterprises that cater to the base needs of unenlightened human beings like themselves.

In a modern society with a modern banking system, funding is controlled by bankers. In the not too distance past, bankers cultivated good relationships with their clients on a professional basis, qua bankers. Today, people who work in financial institutions are not real bankers for they merely handle money in the abstract sense, paying close to their gods of the stockmarket, and moving money in terms of the balance sheets and their income statements. They do not undertand the underlying dynamics of money and the economy, except in lending (a) where there is supposed to be no risk (ie real estate) or (b) where the rate of return is the high (ie financial products). The real business of producing goods and services to the neighbourhood has become too boring a lending proposition.

The tendency for bankers to mass process their loan applications is caused by the change in central banking thinking from keeping the creation of fiat money on an even keel to one where new money is used to cover up the failures of old money. That big money funds big multinationals should not be a surprising phenomenon, for the strategy is global economic domination. There is no wonder that bankers surrender their lending policies to the corporate strategies of the multinationals, and there is no wonder that the global economy today is dictation by foreign direct investments - as the rich of every emerging economy in Asia and Eastern Europe invest abroad in search of higher and higher returns.

This broad sweep of the global economic and financial landscapes shows the difficulty in formulating good local investment policies where emphasis is place on local personal knowledge and global market intelligence. Good policies must encourage the dissemination of accurate information and impartial news for local investors to make good decisions in an increasingly challenging world. All efforts must go out to lay an even ground for all economic players so that they can concentrate on winning the economic game at the global level. We have to begin to work together as a national team with the government laying down simple clear policies, the bankers keeping track of the economics with their customers, and the entrepreneurs sweating it out to pay the banks and feed their families.

Do the key players of the economy know what they are doing? Or are they merely repeating what's in the news?

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