It's all about Amelioration

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The More Things Change, The More They Stay The Same

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Pardon the hiatus, in a bit of a trading slump. Sheesh.

We are in really interesting times. Internet bubble burst. Real estate crisis, credit crisis. A bubble decade I call it. I read with utmost interest articles on the fabrication of such bubbles, the implications and causes and one thing I find eerily common, that history repeats itself over and over again. And people generally do not learn from past mistakes. Call it herd mentality, greed, but it’s just God’s way of reminding us that at the end of the day, we are all just humans, susceptible to our very own weaknesses.

Looking around today as an average Singaporean in my late twenties, I am amused by how Singapore has transformed itself. Like many other young aspiring adults, the dream of making it big in this island is becoming a distant future. Not that I am not striving mind you. It’s just that when you see countless condominium showrooms filled with people as if it were a warehouse sale, or ridiculous amounts being splashed for public housing, you kinda feel disenchanted with reality. It begs the question, where is all the wealth coming from? It seems that more and more Singaporeans are feeling poorer in their own land. What do you do in such circumstances? You could either follow the Jones-es, leverage your wealth with real low bank interest rates at that moment and commit to that dream home/car or you could stay at the sidelines and be contended with life.

Wealth in today’s world is a very misused word. In the past, wealth is created by input, which can be in forms of labour or capital. This is what I term “real” wealth. However in this decade especially, a lot of wealth is created by perception and sentiment. This is best explained by the root cause of the recent great recession. The real estate in America was hyped up as an asset with limitless potential. Based on this perception and low interest rate environment, banks were willing to lend to each other as well as the the public. Similarly during the internet bubble burst where people actually believed that start-up tech companies will be an instant hit, bidding their value up to millions of dollars based merely on ideas that these companies had. No actual target market for its service, just ideas. Similarly, how private equity entities can leverage on cheap credit,  basing the debt on the assumption of potential returns of their existing and future assets to takeover companies, (just like what the Glazers did to my beloved football club). If the potential fails, it will lead to a spectacular failure immediately and what was built with blood sweat and tears in decades can be brought down in a blink because the fundamentals of the entity is laden with debt after the takeover.

Again,perception and sentiment rears its ugly head.

If you think that the recent great recession has taught us a few lessons, think again. It might be a sobering experience for that average man on the street, who lost his entire savings on an investment gone bad, or became unemployed. However, greed is here to stay…. for the people at the top at least.

Financial reform? What financial reform? Was there even a crisis in the first place? All the elaborate public hearings for the so-called “crooks” of wall street was just a staged show, because really, the recent American Financial Stability Act that was passed last week was a toothless one, teetering on the lines of reform but in essence little changes that will keep Wall Street happy. No breaking up of big banks that they promised, no curbing of the derivatives market that brought the markets to its knees, and yes taxpayers could still bear the brunt if these banks fail again. The funny thing is that, it was big money that caused the mess, and it was again big money that influenced the outcome of the reform. With 2000 lobbyists sent by Wall Street to Washington, the outcome was really imminent wasn’t it? Notice also in the recent G20 summit, all that’s emerged were rhetoric about reducing budget deficit and stabilizing the banks, but absolutely nothing on reining in excessive risk taking which was the core issue of the crisis just months ago. I wonder if these politicians have selective memory or perhaps on a more cynical note, a hidden interest/agenda?

As I mentioned in the beginning of the post, we do live in interesting times, a time where capitalism is being marketed as the most sound and effective system to preserve the status quo of the rich and excessive risk taking is here to stay. From a private equity firm who qualifies for a bank loan on the presumption of potential wealth that is not really there or European governments that do not meet the Maastricht criteria but pretend to do so, the sad truth is, the more things change, the more they stay the same.

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Written by Nabs

July 2, 2010 at 10:49 am

3 Responses

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  1. Blogger Nab! Good one!

    Horsie

    July 2, 2010 at 11:05 pm

  2. […] The Wind: Singapore incomes to rise more slowly than before? – It’s all about Amelioration: The More Things Change, The More They Stay The Same – Balderdash: The nonsense that passes for Op-Eds in the Temasek […]

  3. […] The Wind: Singapore incomes to rise more slowly than before? – It’s all about Amelioration: The More Things Change, The More They Stay The Same – Balderdash: The nonsense that passes for Op-Eds in the Temasek Review – Under the Willow Tree: […]


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