Money and finance people, who I will unceremoniously lump as stockbrokers, imagine that the stock market is a magic indicator and a reliable precursor as to what will become of the "underlying real" economy and conventionally wisdom says that the market leads the economy by six to nine months in the olden days.
This notion is interesting for study as pure logic or pure economics or simply pure human behaviour. This is also interesting as a study of human folly.
This is fundamental economics. IF THE ECONOMY IS DOING WELL, which means that firms are hiring because there is demand and they are likely to make good profits, then naturally the stocks of these firms will enjoy higher value as the expected return is higher. There is already a hive of activities on the ground as evidenced by the increasing traffic of people and goods and vehicles, and meetings and negotiations. When this is observed, punters will quickly surmise before the accountants have audited the books that business firms will report good profits, and they buy the stocks ahead of the results. In simple English, when people expect profits to be higher in the foreseeable future, they buy stocks which resulted in an increase in the price of stocks today. Expectations about the future have an impact on events now.
This is human folly. Punters and stockbrokers (and nowadays unfortunately including politicians, central bankers, commercial bankers, merchant or investment bankers) are keen to see a sustainable rise in stock prices, ostensibly to augur well the underlying real economy but more likely to profit themselves monetarily (and momentarily) for the purpose of raising funds for their own private projects collude to induce a "rally" in the stock market by talking and raising expectations. This exercise is now being legitimised as "policy" on the rationale of "building market confidence", thereby provided a path for all lies to be justified on the basis of it being good to the general public as it builds optimism. In recent years, during dull periods in the economy, several such "rallies" have been concocted and they have come and go as quickly as bubbles (a word applied to the market for good reasons), without causing as much a dent on the underlying real economy.
Extended folly. This folly is now extended even to the sacred realm of investment. Of course, this folly was started by Mr. and later Lord Keynes who thought it morally imperative that the government should "invest" even if "digging holes in the ground and filling them up again" just to create jobs when masses of people are unemployed. There is of course between a welfare state of giving free cash and food to hungry people and undertaking a policy where everybody pretend they are working when in fact they are being paid for pointless activities. Such pointless activities in modern times have evolved by cleverly to doing shoddy work by contractors who do bad jobs on overspecified government projects. While some would argue that at least something is built, but that something can be a white elephant or, in budgetary terms, a capital expenditure that can incur an unsustainable stream of heavy operating expenditure when instead a stream of profits should have been flowing. This folly has now gone to private investments. Although the "private" part of the investment may in fact still be government or quasi-government, especially after a period of a dull economy and government overspending has caused a dwindling of the small and medium size businesses and a corresponding rise of government-sponsored monopolies that systematically crowded out the private sector in a series of raids on privately profitable businesses ostensibly for social benefit but resulted in private individual privilege. The problem with private investments, especially when we are talking about the robustness of an economy, is that if you can count the private investments, then the private investments are likely to be lumpy, one-off and probably having more of an enclave character than pervasive effect on the economy. Do not be surprised if the general public does not understand those big private investment numbers in the way that the propaganda masters would like to convince their bosses how well things should be going on the ground.
At the personal level, the folly is common. Individuals, wanting to make it big in life, try to give the impression that they are already doing well by borrowing money to dress well, entertain well, drive well and live well. Many a time, the ruse doesn't work and these individuals often find themselves in debt, and thereby resorting to lying and cheating to "avoid trouble" and end up causing misery to everyone who is unfortunately to encounter such characters.
So, what is to be done properly in real life for the economy?
The government must be unobtrusive, in the sense that it is doing good work in keeping the government machinery humming but everybody just assume that that is the way the world works (when in fact it is just another piece of machinery that needs constant maintaining and upgrading). When the people take the government for granted, then they can begin to dream to kill their boredom by cooking up some activities which will engage them and the general public. Bankers are so bored that they welcome any new ideas to try to see whether they work. This dullness and boredom come when credit expansion is slow and there is no digression into collateral-creating expansion which is self-serving and mindless. Then, bankers and ideas people have the time to sit down and dry run the proposals to make sure that they are sensible at least on paper.
In the present world of smoke and mirrors, everybody is running madly around seeing their own reflections in hazy conditions, filled with fear and uncertainty but plenty of activity. They should realise the room is empty despite the smoke and mirrors and they should sit down quietly and do some real work.
Thursday, January 27, 2011
Wednesday, January 26, 2011
Structure, Structural Breaks & Paradigm Shift
At any one time, every thing we see in life operates in a system around a structure, or more precisely in their own individual systems around their own structures which are all interconnected into a bigger or macro system which may now be stable or in a state of change for the better or for the worse.
This applies not only to the natural world, but also permeates our social world of country, community, family or person, as well as artificial constructs such as the economy, international trade, the monetary and financial system, the electronics that everything else now relies on, the source of power be it political or electrical or mental, and a whole range of systems that may or may not have a seemingly longer life than that of humans.
The issue that is most interesting to me here is how long can a given system lasts, and under what conditions will the system fail. How do we know whether the system is just going through a temporary phase of slowing down or resting or simply just closed for maintenance, or that the system has now finally broken down and that any repairs may be pointless or too costly and it is much better to modify or change it to a completely new system or structure in order that it can accommodate to new demands made on the system or new conditions that have arisen such as the rise of human consumption because half the world does not want to go hungry anymore, longer life, global warming, rising waters, and a host of other things which earnest environmentalists would now want to arrest by asking the world to stop growing.
Part of the reason for wisdom is hard to come by and un-inheritable from parent to child, is that the world does not go through endless rounds of the same through historical time. We are told that the sun is dying at a billion times slower than individual human lives and the sun could still exist when dominant life on earth now of humans may be overtaken by that of worms or some hardened back crustaceans. That wisdom can usually be summarised as foolish things that one should not try to do because it is pointless and won't change a thing in the larger scheme of things, although by natural instinct for survival one is inclined to try to do something however foolish it may in the end proved to be.
So, in the area of economic policy, we may be so inclined to save the existing system or repair the current structure, because this is the world which we are familiar with, or that without maintaining the status quo too many people will become very unhappy as their expectations will be destroyed. It is usually at this point of inflection that public opinions on any issue are most varied and intense, simply because at inflection points signs and evidences can point either way. Everything then boils down to where each stands when he or she looks at the signs, and how he or she interprets them which is unusually according to his or her life history.
It is also usually when we are looking at megatrends and megastructures that different emphasis or insights will give a different reading of the underconditions which are usually unseen, and to make an assessment as what the next step of development will be. In this matter, there is only one proof and that is the proof of reality - we just have to wait and see.
The value of a judgement - this is why people are paid most when they can say what the next stage of development is going to be, in almost any field - is therefore of paramount importance because when things actually happened, it may be, or it is, too late to act to save the day or lives. The value of that forward judgement is the futures market for insights and wisdom.
I therefore very much prefer to state my views as clearly as I can, so that I can be proven wrong clearly by reality, and let other people with their own insights and wisdom share theirs with the rest of humanity if they so choose to follow those views. The fun is in the variety, to see the kaleidoscope of views from the eyes of humans, and I am very much put off by those who, in putting forth their tiny views, insults others who hold dissimilar views.
The challenge in prediction is not to predict a straight line, but to predict the next breaking point. We want to know when the old structure breaks, and how the new structure will be formed. Philosophers call this a paradigm shift. Others call it out of the box of the old paradigm or old structure. When does autumn turns to winter.
This applies not only to the natural world, but also permeates our social world of country, community, family or person, as well as artificial constructs such as the economy, international trade, the monetary and financial system, the electronics that everything else now relies on, the source of power be it political or electrical or mental, and a whole range of systems that may or may not have a seemingly longer life than that of humans.
The issue that is most interesting to me here is how long can a given system lasts, and under what conditions will the system fail. How do we know whether the system is just going through a temporary phase of slowing down or resting or simply just closed for maintenance, or that the system has now finally broken down and that any repairs may be pointless or too costly and it is much better to modify or change it to a completely new system or structure in order that it can accommodate to new demands made on the system or new conditions that have arisen such as the rise of human consumption because half the world does not want to go hungry anymore, longer life, global warming, rising waters, and a host of other things which earnest environmentalists would now want to arrest by asking the world to stop growing.
Part of the reason for wisdom is hard to come by and un-inheritable from parent to child, is that the world does not go through endless rounds of the same through historical time. We are told that the sun is dying at a billion times slower than individual human lives and the sun could still exist when dominant life on earth now of humans may be overtaken by that of worms or some hardened back crustaceans. That wisdom can usually be summarised as foolish things that one should not try to do because it is pointless and won't change a thing in the larger scheme of things, although by natural instinct for survival one is inclined to try to do something however foolish it may in the end proved to be.
So, in the area of economic policy, we may be so inclined to save the existing system or repair the current structure, because this is the world which we are familiar with, or that without maintaining the status quo too many people will become very unhappy as their expectations will be destroyed. It is usually at this point of inflection that public opinions on any issue are most varied and intense, simply because at inflection points signs and evidences can point either way. Everything then boils down to where each stands when he or she looks at the signs, and how he or she interprets them which is unusually according to his or her life history.
It is also usually when we are looking at megatrends and megastructures that different emphasis or insights will give a different reading of the underconditions which are usually unseen, and to make an assessment as what the next step of development will be. In this matter, there is only one proof and that is the proof of reality - we just have to wait and see.
The value of a judgement - this is why people are paid most when they can say what the next stage of development is going to be, in almost any field - is therefore of paramount importance because when things actually happened, it may be, or it is, too late to act to save the day or lives. The value of that forward judgement is the futures market for insights and wisdom.
I therefore very much prefer to state my views as clearly as I can, so that I can be proven wrong clearly by reality, and let other people with their own insights and wisdom share theirs with the rest of humanity if they so choose to follow those views. The fun is in the variety, to see the kaleidoscope of views from the eyes of humans, and I am very much put off by those who, in putting forth their tiny views, insults others who hold dissimilar views.
The challenge in prediction is not to predict a straight line, but to predict the next breaking point. We want to know when the old structure breaks, and how the new structure will be formed. Philosophers call this a paradigm shift. Others call it out of the box of the old paradigm or old structure. When does autumn turns to winter.
Monday, January 24, 2011
Paradigm & Strategy in Economic Policy: China & US
China and the US are operating in two different economic paradigms and are applying different strategies in achieving different economic objectives. Who will succeed? Is there a battle between the two giants?
Bear in mind that the economics is only one element in the whole array of political considerations. Being brought into the picture are issues such as human rights, freedom of speech, freedom of assembly, flow of information as well as the environment and the system of government.
But, by and large, economics remains the lunch pin of all systems - the mandate of heaven, as it were. So long as the people do not suffer and there is no blatant abuse of power by the ruling class, the general popular will leave the power brokers alone. But then what do you do when the mandate of heaven is not derived from the people but from the power elite of another nation which wants to spread its brand of organisation, and hence its idea of how things should be done.
Central to the whole balance must be that between economic prosperity and political power.
The hardest thing to do in real life is how to promote and maintain the prosperity of an economy or a nation. The European colonists had discovered that the best way was to conquer land rich in "wealth" which were metals and later fertility of soil and minerals to feed the factories of the industrial revolution at home. The Japanese attempted at conquering as well but failed and later also resorted to the control of raw materials as well as markets, with innovation in the manufacturing technology.
The US started with conquering the lands of the red indians, being a colony of the British and then a master of their own markets which then set off a string of innovations for domestic markets, before embarking on a global expansion. The Chinese were also insular and kept themselves to themselves, relying instead on ancient green innovations which had served them well for thousands of years until they were overpowered by the industrial revolution. The opening up of the economy helped to kick start their climbing of the industrial technology ladder which they paid for by exporting the sweat of their workers - which upset the prevailing global economic balance based on American sense of fair play and benevolence when the global balance had tilted in the US favour. When they could not withstand the Chinese export onslaught, instead of competing through greater technological superior (which the Americans claim they are), they sabotaged the global economy by the incessant printing of paper money to pay for their imports and to keep the US economy afloat - with inflationary pressures mitigated to some extent by cheap Chinese imports - in order that the US presidents that the chief of US federal reserve could continue to stay in power, albeit for the second term. It is this so-called monetary easing which broke the conventional economic paradigm and which the rest of the world must suffer (including Malaysia) - and which the Chinese has refused to be live with.
So much is at stake. All that the Chinese has worked for for the last twenty odd years in accumulating the foreign reserves chiefly in the US dollar is now being threatened to come to naught - and this has brought a huge realisation to the Chinese about accumulating their wealth in fiat money issued by a foreign power. Not only do they enjoy the sweat of the labour of your people, but after having enjoyed it tells you how wrong you have been in making your people labour and in accepting the useless fiat money which they give you in return. On top of that, they ask you to tighten your pants in order their trousers do not fall off.
So, China and the US are in two different paradigms. China is now on a technological ascent, which means that its output can only increase. But it must undergo a structural shift in its production matrix - away from consumer goods which it has already mastered and towards intermediate and capital goods, including defense. This will shift employment from unskilled but extremely diligent labour from remote farms to the millions of educated and trainable graduates from their universities. Wages and salaries will go up and this has to be matched by their value-add. In this way, production will be geared towards domestic consumption, as in cars, houses, consumer goods, food and entertainment. With the urban more able to spend, farm produce can fetch better prices and this will enrich farmers and keep more people in the rural areas.
The greatness of the Chinese people is their immense ability to adapt to rapidly changing conditions, no doubt helped to some extent by their greater degree of tolerance of hardship strengthened by their determination. Every single person is apparently a versatile putty which can mold itself into any configuration as dictated by the market. The Chinese people appear to be typical rational economic man envisioned by the neoclassical economic models where there is infinite flexibility and adjustment in the system to any perturbation or shock. (In this sense, there is nothing surprising that Keynes thinks his theory more general when price rigidity is coupled monetary policy impotence. Unfortunately for Keynesian policy, fiscal policy is also impotent. Are we then back to the classical model of the real economy driven by technology and productivity growth to keep the growing population happily and fully employed?)
The two paradigms that we now see China and the US economies in are therefore nothing more than the pure economic dichotomy of the real economy (China) and the nominal economy (US). The real economy is ruled by technology whereas the nominal economy is ruled by the central bank. This happened because China has managed in a matter of two decades to cannibalise the technology not only of the US but also of the world which therefore makes China the central of world technology. China may not be as clever as Bill Gates in coming up with new technology but China can be as savvy as Steve Jobs in combining existing technologies to produce everyday applications.
Strategy. Would then a monetary solution by a revaluation of the yuan against the US dollar solve the US budget deficit and unemployment problem? Unlikely. A revaluation of the yuan may in fact be good for China by forcing China to accelerate the process of domesticating its economy, and may reduce the cost of imports particularly in the luxurious food category which is likely to benefit the Europeans than the Americans. The US will continue to suffer from its inability to bootstrap the economy which may force it to exert greater pressure on China - and which it has - and it is likely that up to a point that China is going to resist that bully - and it has.
The US now has come to the limits of its policy option of bullying its major trading partners to adjust in order to solve its domestic economic problem. The problem with the US economy is that the arms industry has refused to die a natural death as a result of the end of the Cold War which has seen economic devastation in Russia, and it is inevitable that the US should also suffer a corresponding economic adjustment, probably not as intensely as Russia, but it must still suffer. Instead, the US tries to patch that vacuum created by the end of the Cold War by inciting more hot spots in the world to engage in warfare - particularly in the Middle East.
The Obama administration seems to fall away from this strategy and hence this renewal of economic dialogue with China. For Obama, this must only the first step towards solving the US economic problem, but it must not be the only step or the only strategic direction. Obama must use the Peace Dividend from the end of the Cold War to take care of the second class citizens in the US society.
In the meantime, China only needs to concentrate on how to redirect its economic growth, maintaining the vibrancy of the coastal cities and spreading the economic prosperity up the riverine towns.
Bear in mind that the economics is only one element in the whole array of political considerations. Being brought into the picture are issues such as human rights, freedom of speech, freedom of assembly, flow of information as well as the environment and the system of government.
But, by and large, economics remains the lunch pin of all systems - the mandate of heaven, as it were. So long as the people do not suffer and there is no blatant abuse of power by the ruling class, the general popular will leave the power brokers alone. But then what do you do when the mandate of heaven is not derived from the people but from the power elite of another nation which wants to spread its brand of organisation, and hence its idea of how things should be done.
Central to the whole balance must be that between economic prosperity and political power.
The hardest thing to do in real life is how to promote and maintain the prosperity of an economy or a nation. The European colonists had discovered that the best way was to conquer land rich in "wealth" which were metals and later fertility of soil and minerals to feed the factories of the industrial revolution at home. The Japanese attempted at conquering as well but failed and later also resorted to the control of raw materials as well as markets, with innovation in the manufacturing technology.
The US started with conquering the lands of the red indians, being a colony of the British and then a master of their own markets which then set off a string of innovations for domestic markets, before embarking on a global expansion. The Chinese were also insular and kept themselves to themselves, relying instead on ancient green innovations which had served them well for thousands of years until they were overpowered by the industrial revolution. The opening up of the economy helped to kick start their climbing of the industrial technology ladder which they paid for by exporting the sweat of their workers - which upset the prevailing global economic balance based on American sense of fair play and benevolence when the global balance had tilted in the US favour. When they could not withstand the Chinese export onslaught, instead of competing through greater technological superior (which the Americans claim they are), they sabotaged the global economy by the incessant printing of paper money to pay for their imports and to keep the US economy afloat - with inflationary pressures mitigated to some extent by cheap Chinese imports - in order that the US presidents that the chief of US federal reserve could continue to stay in power, albeit for the second term. It is this so-called monetary easing which broke the conventional economic paradigm and which the rest of the world must suffer (including Malaysia) - and which the Chinese has refused to be live with.
So much is at stake. All that the Chinese has worked for for the last twenty odd years in accumulating the foreign reserves chiefly in the US dollar is now being threatened to come to naught - and this has brought a huge realisation to the Chinese about accumulating their wealth in fiat money issued by a foreign power. Not only do they enjoy the sweat of the labour of your people, but after having enjoyed it tells you how wrong you have been in making your people labour and in accepting the useless fiat money which they give you in return. On top of that, they ask you to tighten your pants in order their trousers do not fall off.
So, China and the US are in two different paradigms. China is now on a technological ascent, which means that its output can only increase. But it must undergo a structural shift in its production matrix - away from consumer goods which it has already mastered and towards intermediate and capital goods, including defense. This will shift employment from unskilled but extremely diligent labour from remote farms to the millions of educated and trainable graduates from their universities. Wages and salaries will go up and this has to be matched by their value-add. In this way, production will be geared towards domestic consumption, as in cars, houses, consumer goods, food and entertainment. With the urban more able to spend, farm produce can fetch better prices and this will enrich farmers and keep more people in the rural areas.
The greatness of the Chinese people is their immense ability to adapt to rapidly changing conditions, no doubt helped to some extent by their greater degree of tolerance of hardship strengthened by their determination. Every single person is apparently a versatile putty which can mold itself into any configuration as dictated by the market. The Chinese people appear to be typical rational economic man envisioned by the neoclassical economic models where there is infinite flexibility and adjustment in the system to any perturbation or shock. (In this sense, there is nothing surprising that Keynes thinks his theory more general when price rigidity is coupled monetary policy impotence. Unfortunately for Keynesian policy, fiscal policy is also impotent. Are we then back to the classical model of the real economy driven by technology and productivity growth to keep the growing population happily and fully employed?)
The two paradigms that we now see China and the US economies in are therefore nothing more than the pure economic dichotomy of the real economy (China) and the nominal economy (US). The real economy is ruled by technology whereas the nominal economy is ruled by the central bank. This happened because China has managed in a matter of two decades to cannibalise the technology not only of the US but also of the world which therefore makes China the central of world technology. China may not be as clever as Bill Gates in coming up with new technology but China can be as savvy as Steve Jobs in combining existing technologies to produce everyday applications.
Strategy. Would then a monetary solution by a revaluation of the yuan against the US dollar solve the US budget deficit and unemployment problem? Unlikely. A revaluation of the yuan may in fact be good for China by forcing China to accelerate the process of domesticating its economy, and may reduce the cost of imports particularly in the luxurious food category which is likely to benefit the Europeans than the Americans. The US will continue to suffer from its inability to bootstrap the economy which may force it to exert greater pressure on China - and which it has - and it is likely that up to a point that China is going to resist that bully - and it has.
The US now has come to the limits of its policy option of bullying its major trading partners to adjust in order to solve its domestic economic problem. The problem with the US economy is that the arms industry has refused to die a natural death as a result of the end of the Cold War which has seen economic devastation in Russia, and it is inevitable that the US should also suffer a corresponding economic adjustment, probably not as intensely as Russia, but it must still suffer. Instead, the US tries to patch that vacuum created by the end of the Cold War by inciting more hot spots in the world to engage in warfare - particularly in the Middle East.
The Obama administration seems to fall away from this strategy and hence this renewal of economic dialogue with China. For Obama, this must only the first step towards solving the US economic problem, but it must not be the only step or the only strategic direction. Obama must use the Peace Dividend from the end of the Cold War to take care of the second class citizens in the US society.
In the meantime, China only needs to concentrate on how to redirect its economic growth, maintaining the vibrancy of the coastal cities and spreading the economic prosperity up the riverine towns.
Thursday, January 20, 2011
Creativity, Strategy & Ignorance in Economic Policy
How creative can one become in formulating economic policy? I would say, Very!
There are many layers of an economy that the policymaker can focus on. And one can simply choose one particular layer and be deliberately myopic.
Policy can be focused purely on consumption or production, the focus on one will have an impact on the other. One can become increasing adept at consuming or producing or making things. I would say that each one of us spend our entire lives perfecting the art of consumption or production. While we may think that we do all of that - work, eat, sleep - the share each component in our lives defines us, or rather our daily routine. Salary workers spend all their time working, with little time to eat or sleep. Those with cash spend all their time figuring out how to eat, and little time to sleep or do anything productive.
At a higher level, policy can be formulated to define the type of economic system that we prefer to live in or enclose ourselves in. Thanks to Adam Smith who popularise the exchange economy, there is no need for conscious charity and generosity - the world can pretend to do good when it is greedy and selfish - and in the end unfettered capitalism produces the ignoble result of global destruction.
In less enlightened societies, the focus on religious or racial characteristics - attributes which individuals can do very little about, being caught in the torrents of history - as defining policy pivots suffers the problem of being caught with results which are produced by the initial assumption made.
Strategy is therefore nothing but the self-restraint one puts on creativity.
It is the deliberate limiting of the global stage that we, like "creating" a bonsai plant, twist and turn each and every little branch and twig to produce a deformed product which we all then try to admire its twistedness.
In olden times, or rather since times immemorial, the object of dominant people is to invade and steal the fruit of other people labours - for our own benefit and at their expense. This is what we all dream of - the abhorrence of labour - and the only way that this can be done is to create a situation where the unfortunate will have to labour to the delights of others. This is in fact the real heaven that we are all secretly seeking in this dusty earth of ours.
But, alas!, how dismal. Simply for the pleasure of a handful of individuals, whole societies and communities are mobilised to dig up the earth to extract what we need for the moment and to throw away into the naked environment distilled poisons which we do not know how to use for now, and in so doing producing an environment that we all fear to be in.
The mass production of cheap and useless consumer products by the world's most populous nation demonstrated how those who slave do not have the pleasure of enjoying the fruit of their own labour. This is clearly an misguided policy.
The strategy to alter the demographics of a society by importing "young, educated and productive" new citizens in order to cure the ills of an aging society is one that is fraud with danger. The strategy is focused purely on the management of an informal whole will ignoring the condition of the individual constituents. The aging and the infirmed will remain so by the sheer force of nature, while the new, young and energetic will take over and create a sense of vibrant which the underlying layer of the aging and infirmed is unable to defend or retaliate. There is no salvation of the individual.
The degree of self-deception that policymakers can go is amazing. That household debt is now as much as half the national income and deemed to be a non-worrisome "even if it does look like a very big number" is nothing but an attempt for officials to pull wool over the eyes of the public. This is the result of banking ignorance, as they veer deep into consumer lending, unable to revive the budding corporate sector.
There are many layers of an economy that the policymaker can focus on. And one can simply choose one particular layer and be deliberately myopic.
Policy can be focused purely on consumption or production, the focus on one will have an impact on the other. One can become increasing adept at consuming or producing or making things. I would say that each one of us spend our entire lives perfecting the art of consumption or production. While we may think that we do all of that - work, eat, sleep - the share each component in our lives defines us, or rather our daily routine. Salary workers spend all their time working, with little time to eat or sleep. Those with cash spend all their time figuring out how to eat, and little time to sleep or do anything productive.
At a higher level, policy can be formulated to define the type of economic system that we prefer to live in or enclose ourselves in. Thanks to Adam Smith who popularise the exchange economy, there is no need for conscious charity and generosity - the world can pretend to do good when it is greedy and selfish - and in the end unfettered capitalism produces the ignoble result of global destruction.
In less enlightened societies, the focus on religious or racial characteristics - attributes which individuals can do very little about, being caught in the torrents of history - as defining policy pivots suffers the problem of being caught with results which are produced by the initial assumption made.
Strategy is therefore nothing but the self-restraint one puts on creativity.
It is the deliberate limiting of the global stage that we, like "creating" a bonsai plant, twist and turn each and every little branch and twig to produce a deformed product which we all then try to admire its twistedness.
In olden times, or rather since times immemorial, the object of dominant people is to invade and steal the fruit of other people labours - for our own benefit and at their expense. This is what we all dream of - the abhorrence of labour - and the only way that this can be done is to create a situation where the unfortunate will have to labour to the delights of others. This is in fact the real heaven that we are all secretly seeking in this dusty earth of ours.
But, alas!, how dismal. Simply for the pleasure of a handful of individuals, whole societies and communities are mobilised to dig up the earth to extract what we need for the moment and to throw away into the naked environment distilled poisons which we do not know how to use for now, and in so doing producing an environment that we all fear to be in.
The mass production of cheap and useless consumer products by the world's most populous nation demonstrated how those who slave do not have the pleasure of enjoying the fruit of their own labour. This is clearly an misguided policy.
The strategy to alter the demographics of a society by importing "young, educated and productive" new citizens in order to cure the ills of an aging society is one that is fraud with danger. The strategy is focused purely on the management of an informal whole will ignoring the condition of the individual constituents. The aging and the infirmed will remain so by the sheer force of nature, while the new, young and energetic will take over and create a sense of vibrant which the underlying layer of the aging and infirmed is unable to defend or retaliate. There is no salvation of the individual.
The degree of self-deception that policymakers can go is amazing. That household debt is now as much as half the national income and deemed to be a non-worrisome "even if it does look like a very big number" is nothing but an attempt for officials to pull wool over the eyes of the public. This is the result of banking ignorance, as they veer deep into consumer lending, unable to revive the budding corporate sector.
Tuesday, January 11, 2011
Creativity, Strategy & Ignorance
When we try to think creatively, we can try to think in two ways: (i) modifying within an existing paradigm (such as applying different colours to the legs of a chair) or (ii) thinking in a completely new paradigm (such as sitting on the ground or anything else but a chair). There has certainly been plenty of creativity in the ways human beings (and other creatures and plants) live or adapt to the environment in which they live, and probably it is this creativity that is causing the greatest grief among people, especially if they cannot accept the fact that other people can be very happy or at least as happy as they are in living completely different ways of life. The problem is usually the tendency by the majority to impose its preference on the minority (or in some cases, for the minority to impose its preference on the majority). And such tendency is usually championed by the leader of the majority (or minority) in his or her capacity as the leader of the whole multi-varied group.
Strategy is narrower and not as free range as creativity. In strategy, there is a narrower focus of trying to win in a tussle. While creativity is freer in that it tries to explore the advantages that can be got from a situation, through cracks and nooks and corners and other exogenous and endogenous factors hitherto unrealised. Specific advantages have to be brought to bear on a specific situation with the specific objective of winning - this is the purpose of strategy.
In race relations, open minded societies see new ways of living as alternate forms of living and such creativity therefore unleashes a new horizon for life. In race relations, the application of strategy by a particular group to win other groups in the battle for power for the sole purpose of abusing that power is the crudest and the basest use of intelligence. The application of strategy on one side triggers off the use of strategies by everyone else, as each tries to gain dominance over the others. While the protagonists win or lose, all the soldiers forced to fight the sides are usually all doom to die in anonymity. Strategy is necessary in a sad world.
There is a tendency to take ignorant men or women as geniuses as if they really have thought out of the box, when in fact all that they did have been to go where angels fear to tread. A fool comes in and destroys the status quo by the force of arms or law, without realisation the full cost of the destruction. It is very easy to make great change quickly - such as by breaking a neck or chopping off people's legs. It is many times much harder to bring about change in an imperceptible manner. The world simply has too many fools as politicians.
Strategy is narrower and not as free range as creativity. In strategy, there is a narrower focus of trying to win in a tussle. While creativity is freer in that it tries to explore the advantages that can be got from a situation, through cracks and nooks and corners and other exogenous and endogenous factors hitherto unrealised. Specific advantages have to be brought to bear on a specific situation with the specific objective of winning - this is the purpose of strategy.
In race relations, open minded societies see new ways of living as alternate forms of living and such creativity therefore unleashes a new horizon for life. In race relations, the application of strategy by a particular group to win other groups in the battle for power for the sole purpose of abusing that power is the crudest and the basest use of intelligence. The application of strategy on one side triggers off the use of strategies by everyone else, as each tries to gain dominance over the others. While the protagonists win or lose, all the soldiers forced to fight the sides are usually all doom to die in anonymity. Strategy is necessary in a sad world.
There is a tendency to take ignorant men or women as geniuses as if they really have thought out of the box, when in fact all that they did have been to go where angels fear to tread. A fool comes in and destroys the status quo by the force of arms or law, without realisation the full cost of the destruction. It is very easy to make great change quickly - such as by breaking a neck or chopping off people's legs. It is many times much harder to bring about change in an imperceptible manner. The world simply has too many fools as politicians.
Monday, January 10, 2011
Creativity: Monochrome vs Colour
It is well known in photography that so-called artists prefer to shoot in black and white or monochrome for the simple reason that there is no colour to distract the focus of the viewer and that the focus of the subject can be brought out much better and quicker.
While we talk of black and white, there is no such a thing - there is black and white and all the shades of black and white in between. Black and white is also called monochrome to suggest that there is one colour and all the shades of it. Is that colour black or is it white? Of course, from science class we know that black is no colour and white is all colours mixed. Would monochrome then be the result of different intensity of light or whiteness? If there is different shades of whiteness, then white (which is a combination of all colours) is a truly integrated colour where there is no separation out into any of the components (primary) colours even when the whiteness is being diluted out in various shades.
It would then appear that monochrome is a truly integrated colour and that while there are shades of it, it does not discompose into its constituent colours.
In the realm of the human race, while the human race - apparently descended from a man and a woman (Daoists would generalise it into yin and yang) or from a family or from a small group of survivors of the last earthly environmental catastrophe thousands or millions of years ago - have evolved to the many shades that we now see in the faces of humanity on earth today, how then do we begin to see humanity as being the same.
I suppose that in monochrome, we would distinguish humans from non-humans. It is quite easy to say that the mountains and the rivers, the trees and the birds and the animals are non-humans - the conclusion of which unfortunately leads humans to the mindless destruction of non-human nature and the environment in the name of saving the human race.
The difficulty, even at this stage, leads us into the realm where humans are not so clever - that of ghosts and spirits and souls: are they humans or non-humans? Most mere mortals choose not to dwell on this, and it is quite clear that the only difference is the availability of a physical body - and if this is the case, then a human is being defined merely by the features of the physical body - which are most likely to be features that are most like our very own.
Hence, there is this great emotional affinity to people who look most like us or those whom we know. As features become different merely by the different sizes in relation to the rest of the body, even in monochrome, one group begin to distinguish itself from others. Layer by layer, each group finds the reasons to exclude others from their clique - so long as that group is trying to protect its environment for its own economic survival. Of course, if there are common interests to be shared or exploited, there will be an attempt to look for the commonalities from the same features that have been used to try to make distinctions before.
While we bring in colours to the pictures, while the whole picture brightens up, there will also be more distractions and more differences seen. The red begins to make itself different from the yellow and the blue, and the white tries to think it is a superior colour to the black. The common heritage of the human race or even of the living nature is easily all lost as more points of differences can be identified.
Through the eyes of a monochrome expert (Henri Cartier-Bresson or Ansel Adams), the colours are there but the black and white allow emphasis of the subject. Through the eyes of a colour expert (da Vinci, John Constable, Picasso), the colours are used to brighten up the frame but the subject still stays in focus.
In the hands of amateurs, we usually see a mixed up of the subject with the colours or lack of. There is a tendency to over-dramatise or the failure to provide a theme. In the end, we see a confused state, and everybody talking at cross-purposes.
Especially in a multi-racial society, I think is very possible to paint in monochrome and create a great theme, as well as to paint in colour to emphasis the vibrancy along the same theme.
While we talk of black and white, there is no such a thing - there is black and white and all the shades of black and white in between. Black and white is also called monochrome to suggest that there is one colour and all the shades of it. Is that colour black or is it white? Of course, from science class we know that black is no colour and white is all colours mixed. Would monochrome then be the result of different intensity of light or whiteness? If there is different shades of whiteness, then white (which is a combination of all colours) is a truly integrated colour where there is no separation out into any of the components (primary) colours even when the whiteness is being diluted out in various shades.
It would then appear that monochrome is a truly integrated colour and that while there are shades of it, it does not discompose into its constituent colours.
In the realm of the human race, while the human race - apparently descended from a man and a woman (Daoists would generalise it into yin and yang) or from a family or from a small group of survivors of the last earthly environmental catastrophe thousands or millions of years ago - have evolved to the many shades that we now see in the faces of humanity on earth today, how then do we begin to see humanity as being the same.
I suppose that in monochrome, we would distinguish humans from non-humans. It is quite easy to say that the mountains and the rivers, the trees and the birds and the animals are non-humans - the conclusion of which unfortunately leads humans to the mindless destruction of non-human nature and the environment in the name of saving the human race.
The difficulty, even at this stage, leads us into the realm where humans are not so clever - that of ghosts and spirits and souls: are they humans or non-humans? Most mere mortals choose not to dwell on this, and it is quite clear that the only difference is the availability of a physical body - and if this is the case, then a human is being defined merely by the features of the physical body - which are most likely to be features that are most like our very own.
Hence, there is this great emotional affinity to people who look most like us or those whom we know. As features become different merely by the different sizes in relation to the rest of the body, even in monochrome, one group begin to distinguish itself from others. Layer by layer, each group finds the reasons to exclude others from their clique - so long as that group is trying to protect its environment for its own economic survival. Of course, if there are common interests to be shared or exploited, there will be an attempt to look for the commonalities from the same features that have been used to try to make distinctions before.
While we bring in colours to the pictures, while the whole picture brightens up, there will also be more distractions and more differences seen. The red begins to make itself different from the yellow and the blue, and the white tries to think it is a superior colour to the black. The common heritage of the human race or even of the living nature is easily all lost as more points of differences can be identified.
Through the eyes of a monochrome expert (Henri Cartier-Bresson or Ansel Adams), the colours are there but the black and white allow emphasis of the subject. Through the eyes of a colour expert (da Vinci, John Constable, Picasso), the colours are used to brighten up the frame but the subject still stays in focus.
In the hands of amateurs, we usually see a mixed up of the subject with the colours or lack of. There is a tendency to over-dramatise or the failure to provide a theme. In the end, we see a confused state, and everybody talking at cross-purposes.
Especially in a multi-racial society, I think is very possible to paint in monochrome and create a great theme, as well as to paint in colour to emphasis the vibrancy along the same theme.
Wednesday, January 5, 2011
Creativity: How New Can The New Year Be?
I am feeling a bit guilty for having stayed away from the computer for so long during my year-end holidays, so the title to this post does look to be a bit challenging and probably involved.
As you may have noticed, I seldom - well, never - acknowledge any holidays or festivities as they all seem to be so the same as the last one - or, the one yesterday except probably for a bit more devotion to food and drink - or drinks and a bit of food.
My friends had, I suppose, great fun in sending me stuff like 1.1.11 as the last 10.10.10 - and my mind just does not compute - cute, yes, but what is the diff.
Since I am not a farming kind of person, the yearly cycle doesn't really matter. Whether it rains or shines - or neither - my concrete laden urban life where everything I dare to touch or do threatens to destroy the world makes me live my life guilty as hell. I now feel like the ancient ascetics who dared not walk for fear of crushing the poor insects that are invariably caught under their feet. (They probably should have dare not breathe for fear of sucking the invisibles through their nostrils - or they should have allowed their wounds to open and not heal so that some worms may thrive and life a long and healthy life.
Somehow, the new year always opens with thoughts of self-improvement - which often leads one to self denial and apply self restraint so that everything that one consumes is reduced by 5%, 10%, 20%, 50% or even 70% if things are severe enough. As in the retail line, a 70% discount is a recovery of cost of item but not of overheads which can only be covered with at best a 50% discount. Any discount less than that is still profitable.
Would such discounts then apply to the budget deficits of individuals and nations, although I have in my mind all the time thoughts about losing weight, doing exercises, improving diet and quitting the infusion of things considered by the health industry to be poison.
A slim down year across the board, however, is no good for aggregate consumption and countries round the world continue to press harder on the accelerator to send more money quantitatively through the system even though the arteries may all be clogged up with plague and other life threatening stuff such as corruption and ruptures from terrorism.
After decades of rapid growth and near full employment, a really new year should, economically, be one when a bit of magnesium sulphate would have done a marvelous job in purging the intestines but no! the grandma would still like the little helpless but plump and chubby and instead insist on force feeding the hapless balloon. A really new year should be a year of a slimming economy.
By slimming, one is really talking about bringing into more realistic propositions sectors that have already been overfed with liquidity - personal credit, personal consumption, real estate, private transportation, as well as public consumption and public mega infrastructure works.
To really break out of the box, one must push one's head through the wall and come out into a new paradigm and its new frontier.
Where can we find it?
It is right here in our brains, when we have our ideas and think that we can pursue them in order to break new grounds.
I shall now take a few minutes to lampoon the biggest culprits of the current economic mess - incompetent bankers. There is no talent in lending to those who have physical assets as collateral, preferably real estate and false hopes as in stocks and shares. Recent history has shown us there is such a thing as asset bubbles across the asset portfolio, and banks have proven themselves not to be immune to the wholesale destruction of their balance sheets by some incompetent bankers at the top drawing big salaries and huge bonuses based on imputed profits - imputed because the loans that they have disbursed have not been fully repaid. It is the great potential for a bank to become a pyramid schemes that banks have traditionally been managed prudently like Shylock the moneylender. Instead, we have Santa Clauses throwing away the public's savings to politicians, thus undermining the greatest illusion in modern society called the money system.
My view is that the only way out is for small banks to lend to small businesses and hand hold them so that they can grow big in new businesses where big businesses do not know how to go.
I have no fondness for big brands - those in similarly modern shopping malls are probably the most mind deadening design and concepts that one can possibly imagine in this hi-tech world - fueled no doubt by mass marketing so that the only thrill got from wearing something that the average consumer can recognise to be the same fake sameness - like that which also happens in the world's oldest profession.
Our banks are dull, including those who are supposed to look after them.
So what is new for the new year with a new paradigm - let a thousand ideas bloom, and let they be financed - on the basis of their ideas.
I will also spend a few minutes paying attention to cheats. I do not mind clever people and I do not mind not so clever people - they are all part of the distribution curve that nature so wisely choose to endow mankind with. However, I do mind cunning people who sell adulterated stuff in order that they could climb on top of the masses whom they lie to. To say a thing is good when it is bad; to say a thing is bad when it is good. Such adulteration is called the corruption of the nature of things and such people be weeded out from the system. Once the weeds are killed, the beautiful ones will bloom.
As you may have noticed, I seldom - well, never - acknowledge any holidays or festivities as they all seem to be so the same as the last one - or, the one yesterday except probably for a bit more devotion to food and drink - or drinks and a bit of food.
My friends had, I suppose, great fun in sending me stuff like 1.1.11 as the last 10.10.10 - and my mind just does not compute - cute, yes, but what is the diff.
Since I am not a farming kind of person, the yearly cycle doesn't really matter. Whether it rains or shines - or neither - my concrete laden urban life where everything I dare to touch or do threatens to destroy the world makes me live my life guilty as hell. I now feel like the ancient ascetics who dared not walk for fear of crushing the poor insects that are invariably caught under their feet. (They probably should have dare not breathe for fear of sucking the invisibles through their nostrils - or they should have allowed their wounds to open and not heal so that some worms may thrive and life a long and healthy life.
Somehow, the new year always opens with thoughts of self-improvement - which often leads one to self denial and apply self restraint so that everything that one consumes is reduced by 5%, 10%, 20%, 50% or even 70% if things are severe enough. As in the retail line, a 70% discount is a recovery of cost of item but not of overheads which can only be covered with at best a 50% discount. Any discount less than that is still profitable.
Would such discounts then apply to the budget deficits of individuals and nations, although I have in my mind all the time thoughts about losing weight, doing exercises, improving diet and quitting the infusion of things considered by the health industry to be poison.
A slim down year across the board, however, is no good for aggregate consumption and countries round the world continue to press harder on the accelerator to send more money quantitatively through the system even though the arteries may all be clogged up with plague and other life threatening stuff such as corruption and ruptures from terrorism.
After decades of rapid growth and near full employment, a really new year should, economically, be one when a bit of magnesium sulphate would have done a marvelous job in purging the intestines but no! the grandma would still like the little helpless but plump and chubby and instead insist on force feeding the hapless balloon. A really new year should be a year of a slimming economy.
By slimming, one is really talking about bringing into more realistic propositions sectors that have already been overfed with liquidity - personal credit, personal consumption, real estate, private transportation, as well as public consumption and public mega infrastructure works.
To really break out of the box, one must push one's head through the wall and come out into a new paradigm and its new frontier.
Where can we find it?
It is right here in our brains, when we have our ideas and think that we can pursue them in order to break new grounds.
I shall now take a few minutes to lampoon the biggest culprits of the current economic mess - incompetent bankers. There is no talent in lending to those who have physical assets as collateral, preferably real estate and false hopes as in stocks and shares. Recent history has shown us there is such a thing as asset bubbles across the asset portfolio, and banks have proven themselves not to be immune to the wholesale destruction of their balance sheets by some incompetent bankers at the top drawing big salaries and huge bonuses based on imputed profits - imputed because the loans that they have disbursed have not been fully repaid. It is the great potential for a bank to become a pyramid schemes that banks have traditionally been managed prudently like Shylock the moneylender. Instead, we have Santa Clauses throwing away the public's savings to politicians, thus undermining the greatest illusion in modern society called the money system.
My view is that the only way out is for small banks to lend to small businesses and hand hold them so that they can grow big in new businesses where big businesses do not know how to go.
I have no fondness for big brands - those in similarly modern shopping malls are probably the most mind deadening design and concepts that one can possibly imagine in this hi-tech world - fueled no doubt by mass marketing so that the only thrill got from wearing something that the average consumer can recognise to be the same fake sameness - like that which also happens in the world's oldest profession.
Our banks are dull, including those who are supposed to look after them.
So what is new for the new year with a new paradigm - let a thousand ideas bloom, and let they be financed - on the basis of their ideas.
I will also spend a few minutes paying attention to cheats. I do not mind clever people and I do not mind not so clever people - they are all part of the distribution curve that nature so wisely choose to endow mankind with. However, I do mind cunning people who sell adulterated stuff in order that they could climb on top of the masses whom they lie to. To say a thing is good when it is bad; to say a thing is bad when it is good. Such adulteration is called the corruption of the nature of things and such people be weeded out from the system. Once the weeds are killed, the beautiful ones will bloom.
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