Saturday, December 20, 2014

Poem: My sister’s grave today is elegant and bare

My sister’s grave today is elegant and bare

Bereft ev’n of that stone which pressed her coffin down

And had a little space to hold such poor tribute

As I could bring on my rare visits to the site.

Then I could only lay it down upon the ground

below which rest her bones and hair, for little else

defies this mortal world till He come round who will

Renew the world and us, we’re told. My years fade too,

And I confront the thought that I may never pass

this way again, at least in flesh; the more regret

that this last time perhaps, though I speak here with God

As I am wont to do, I could not bring with me

that least of tokens on her day of birth: a rose.


I used to find travel both exciting and attractive – I suppose because it is associated with childhood visits to the mountains each summer holiday as long as my father was alive. After that, the family could barely survive till I and my siblings started working, and even then could only rarely afford the time and money for holidays. I still find it difficult to initiate holidays. Moreover, after one has been whirled around the world several times on that purposeful but rushed and joyless routine called business travel, I guess expeditions lose their charms. Perhaps age has something to do with it. At least, it is so for me.

In any case, after my sister was killed, I have visited DC only on the rare occasions when business paid for the travel that brought me to town. However, whenever I come to DC, I always visit her grave, bringing with me a single rose.

On my sister’s grave, near the headstone, the gravestone had a little depression, less than half the depth and size of the digit of a little finger. I used to cut the stem of a rose to that tiny dimension, and leave it resting there, on each visit - as long as the gravestone was there.

For reasons best known to the authorities at the Arlington National Cemetery, they remove, some time after the burial, each gravestone, leaving only the headstone to mark each place of burial.

As all the headstones are of a precise height and shape, the effect is to render the entire Cemetery geometric and coldly symmetrical. It is difficult to find a particular grave even after you have been to it several times. You need to know the row and serial number which make it possible to locate any particular grave.

When the gravestone was no longer there, I used to leave my rose on the ground just near the spot where the headstone emerged from the ground.

In 2014, when I was 65 years of age and starting both to confront the relative nearness of my own mortality as well as the fact that that business would perhaps no longer pay to bring me to DC, I found myself in the city again at relatively short notice and, for the very first time since her death, the visit was not only in December but also on the second of the month.

As it turned out, my schedule was too full, so I could neither visit her grave on her birthday (which is on the third) nor even bring with me what I had till then always brought on each visit: a rose.

It is all those regrets and sadnesses and uniformities that stain the hope that marks this poem.

ENDS Sphere: Related Content

Tuesday, June 17, 2014

Investor Governance: Challenge vs. Opportunity. By Colin V. Habberton

Here is an article by Colin V. Habberton, posted by his permission:

Executive Summary

Investment decisions made by asset managers are driven by the mandates they receive from their clients that are, by and large, institutional asset owners. These decisions are underpinned by the principle of maximising the financial returns of each investment, with performance measures for asset managers directly linked to those returns. This article asks the question whether this conventional view adequately takes into account the interests and opinions of the individual investor who is ultimately the source of the ongoing flow of capital into investment markets. It presents the argument through the lens of governance of how stakeholder engagement might offer fresh insight to investor engagement and an opportunity for the investment industry to communicate with the broader base of the investment market.


In a recent Business Day article , the Government Employees Pension Fund’s exposure (GEPF) was put at R437bn, some R100bn higher than the contingent liabilities quoted by the government in the last budget review that interestingly did not account for any liability for the GEPF itself. With R500bn out of pocket of its defined benefit scheme of an increasingly well-paid community of beneficiaries, the taxpayer ultimately becomes the GEPF’s funder of last resort, a worrying proposition. The rational response to this, echoed by the article’s author, is for the Public Investment Corporation (PIC), the GEPF’s principal asset manager, should focus on maximising returns alone for its client. But is it as simple as that?

The ‘Rational’ View

This rational view certainly stands up to the conventional logic that the purpose of investing is the maximisation of returns – you put your money in, you want the maximum amount of money you can possibly get out. The maximisation of returns becomes the key performance metric and analysts decide on the buy/sell/hold positions according to that baseline assumption.

There are alternative views to the conventional approach. The rise of ‘Responsible Investing’ (RI) provides an umbrella category of investment approaches and practices that do not hold the maximisation of financial return as the only metric for investment analysis and decision-making. There is a litany of sub-categories that arguably fall under ‘RI’. ‘Ethical’ investing involves the screening relating to certain ethical filters incl. faith based packaging i.e. Shariah compliant funds. ‘Sustainable’ Investing takes into account the social and/or environmental sustainability (‘E’ and ‘S’) factors as metrics for making the investment decision but are not the core purpose of the business or investment. ‘Socially Responsible’ Investing is similar to Sustainable Investing but specifically includes governance criteria (commonly grouped together to as ‘ESG’ factors) as components of business’ responsibilities and reporting but profit remains its core purpose. ‘Green’ Investing is predictably focused on assets that have a specific alignment or impact towards environmental outcomes. Target Investing purpose is usually specific for the upliftment of a community, area or interest group. With ’Impact’ investing, social and environmental impact indicators are held core to the business and/or the investment decision.

Although there is much noise around these alternative views in the media and from niche product providers in the industry, on aggregate they still amount to a small fraction of the total volume of capital invested on global markets, and particularly so in South Africa. As to be expected, their attractiveness to investors is still by and large judged by the risk-adjusted financial returns they deliver for their investors. Even the alternative views are measured in the terms set by the rational view. One specific critique that could be leveled on the rational view is whether it adequately takes into account the non-financial interests of asset owners, the trustees of underlying pension funds, right down to the individual pension or provident fund contributor. In illustration, consider the case of an asset owner who through their appointed asset manager invests pension fund contributors money into a particular listed entity whose downsizing programme lifts earnings, dividend income and its stock price – an attractive financial proposition - but results in the redundancy of a number of employees that could in fact be, the indirect investors in the loss of their own employment.

The common assumption is that all investors believe in the mantra of return maximisation, and from that foundation, intermediaries author mandates to pursue that mantra, without necessarily providing their clients and beneficiaries with the opportunity to participate in the decisions that are being made and the motivations behind them. Raising the awareness of how and why investment decisions are made to the broader base of an asset owners’ contributors and improving the education of those stakeholders is currently largely ignored. Decisions are made by the very few with the funds provided by the many.

The Governance Perspective

One lens that provides a different perspective on this challenge is the consideration of good governance and how this impacts the investment decision-making processes for asset owners and asset managers. South Africa currently has one of the most recognised and robust corporate governance frameworks in the world, underpinned by King I, II and III, that has shaped business decision-making for more than a decade. One notable paradigm shift with King III was the recognition and revision of the governance principles to go beyond an assessment of the interests of shareholders, to now include and consider the interest of stakeholders affected by the operations and decisions by a business. More recently, the new Companies Act, turned a number of the key tenets of King III into law, notably that all legal entities – public as well as for profit and not for profit structures are urged to implement and maintain a standard model of good governance.

It is widely accepted that good governance within a business is a key requirement in any due diligence process. It is a clear indicator of a well-managed organisation confirming that decision-making processes are transparent and the separate levels of authority within the business are evident and accountable to each other. Good governance is a tangible indicator of a good investment opportunity. But is good governance applied and practiced in the same way by the institutions and their appointees taking responsibility for investment decisions on behalf of significant stakeholder communities, such as the contributors to pension funds?

Pension fund contributors do not have the skills and experience for the complexity of analysing investment opportunities and assessing what the right investment decision would be, or so the argument goes. And so trustees are usually appointed, not necessarily through transparent or widely publicised process but, usually based on their willingness, political influence, financial skill set or combination of all three, to represent the interests of the members of the pension or providence scheme. Governance, tick. However, are trustees the best representatives for the interests of the members, especially when those interests may go beyond the pale of pure financial return? It could be argued that, in the terms of King III, asset owners and asset managers, as entities falling under the requirements of the Companies Act bear a wider responsibility of remaining accountable towards all their respective stakeholders, not just their shareholders. A possible response to this challenge is for asset owners, asset managers and trustees to ensure they critically assess their disclosure, education and awareness policies and practice.

Towards Institutional Investor Accountability

Teaching on governance is slowly but surely bleeding into financial textbooks, it is promoted as a key requirement in the assessment and management of investment assets, but the true experience is largely practiced in the boardroom and the benefit of governance understood by those privileged few who have access to those books and boardroom discussions. In 2011, the publisher of the King III report, the IODSA, in association with ASISA penned the Code for Responsible Investing in South Africa (CRISA) in response and alignment to the UNPFI’s Principles for Responsible Investment, which applies to asset owners, asset managers, and consultants. CRISA calls for the integration of ESG factors into the investment decision-making and management process.

In 2013, ASISA partnered with the Principal Officers Association (POA) and the International Finance Corporation (IFC) to spearhead the Sustainable Returns for Pension and Society Project. This initiative provides industry players with a framework and tools to assist with the implementation of CRISA and compliance to Regulation 28 of Pension Funds Act. A relevant requirement of Regulation 28 is that all trustees of asset owner funds understand what responsible investing is and ensure that their fund’s assets are managed in line with ESG principles. ASISA has taken a lead on this by providing training to trustees through their Academy from 2014 onwards.

Industry bodies, regulators and government are recognising the importance of taking the wider view regarding investment decision-making. Despite these clear, unified steps, only a selection of asset owners and asset managers have committed themselves as signatories to the PRI and CRISA. To date, there are few, if any examples of asset owners and asset managers proactively communicating the reasons and outcomes of their investment decisions to their broad base of stakeholders.

Maximising Value

The opportunity exists for asset owners and asset managers to take the lead in this area and investing time and resources in educating their respective clients on the variety of investment choices that exist and why certain decisions are ultimately taken. This should include awareness of the practice of alternative investment approaches like responsible investing. By actively communicating the reasons for a commitment to ESG (or not) to their stakeholders, asset owners could take a proactive role in making their decision-making more transparent, offering their members the opportunity to engage with trustees proactively, allowing for collaborative decision-making processes. Informing individual investors would equip them to take a personal interest in their investment decisions holding asset owners responsible for the fiduciary role they play in advising third parties such as asset managers and the details of the specific mandate they carry from their members. On the converse, individual investors could become increasingly informed of the state of their investments and connected to performance of their funds. This knowledge could be a powerful tool for collective understanding for the broad base of stakeholders to maximise value when markets or investments face distress and resultant impact that there might be on returns in the short term.

In South Africa, deep socio-economic challenges continue to exist. The collective interests of all investors present a powerful force to shape the flows of capital that not only challenge the assumptions of conventional investor decision-making but also offer exciting potential for new approaches to how and particularly where their money is invested.

Sphere: Related Content

Monday, May 19, 2014

Some global implications of India under the New Prime Minister, Modi

Even if you do not normally follow India, it is the largest democracy in the world, and the 2nd largest country in the world.

So you may want to invest a few seconds in understanding the latest on the situation there.

That is because India has a newly-elected Prime Miniter, Modi.

There are therefore new threats and opportunities for global politics as well as for the global economy.

You can deduce these from:

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Sunday, April 06, 2014

On the rigging of High Frequency Trading (HFT) and the likely impact of Michael Lewis's book Flash Boys

Michael Lewis has exposed to the public what was always known to people of any intelligence or experience in the financial industries: in spite of all the efforts at promoting transparency and level playing fields, financial markets are still, with the connivance of politicians and government agencies, rigged by the largest players.

For an illuminating though short discussion of all this, see:

The particular field that Lewis has now exposed to public scrutiny, High Frequency Trading or HFT, may seem esoteric but its impact is huge.

In fact, HFT is so huge in volume that, you may recollect, some 4 years ago, it caused the famous "Flash Crash" in the entire global economy (that is of course the event to which the title of Lewis's book refers).

If HFT was banned, global trading volumes would be cut in half. In other words, HFT is HALF of ALL global trading in listed shares...

However, the issue MUCH bigger than the rigging of the HFT market, is the IMPACT of the very existence HFT - in terms of shortening the time-horizon of investment decisions and stakeholder-considerations on the part of EVERY company that is listed in the stock market.

Therefore I am in fact for banning HFT entirely. What we should have, instead, is a new structure for companies, globally (see the book recently published titled "Transforming Capitalism from Within").

Meanwhile, we must focus on eliminating the evils within HFT (i.e. the rigging of the market by the large players to the disadvantage of average players)

That can only be done if the US Department of Justice probes the current structure of HFT as "restraint on trade". To be effective, that must be coordinated with the SEC and the FBI. My fear is that these US agencies will either say the market isn't rigged after all (unlikely) or is so advantageous overall that we should leave it as it is (which is what all the big institutions and their paid hacks will now argue in the press and on TV).

Overall, the most likely effect of Michael Lewis's book is that the US agencies will do the usual "face saver" and agree to restrict some irrelevant parts of HFT, or target marginal things - e.g. limits on some types of activity, opening up some minor channels to level the playing field, and other such superficial stuff.

In terms of disadvantaging the average player, we also must not forget that the process (so-called "club deals") of how Wall Street allocates the shares and even the secondary offerings of "hot IPOs" actually creates, for average investors, very much more disadvantage.

So it is Club Deals that need to be fought at least as much as High Frequency Trading.

Sphere: Related Content

Friday, March 28, 2014

A beautiful philosophy of life

As some of my readers know, I was recently asked to Chair the Relational Thinking Network (see and related sites) and, in pursuance of one of my duties (to spread the word about the Network), I invited a small group of friends and acquaintances who don't know the Network, to have an initial discussion of its philosophy and policies.

Today, I received the following message from one of the participants:

"I see this life as a wonderful present to each of us. I like this world as it is and I feel no need to change it."

Does that not seem like a beautiful philosophy of life?

But there are some kinds of beauty which are dry.

And his response seems to me remarkably like the response of the rich young aristocrat to the invitation of Jesus the Lord, as described by Matthew in his biography of Jesus, chapter 19.

Here is what I actually wrote to my acquaintance who participated in the discussion:

Dear XXX

My father died when I was 8, so we went from an upper middle-class lifestyle to being literally on the streets.

I was able to go through school and college only because a few people wanted to change my situation and made scholarships available for me.

I studied for my first university exam by candlelight because we had no electricity at home.

If a kind stranger from Edinburgh (I found out many years later) had not created a special scholarship for me, I might never have passed my university exams. If I would be alive at all, I would certainly be living in a slum in Delhi.

Life is indeed a gift, but only those people can really enjoy it who have money and health.

Oh yes, health - were it not for people who gave their life to discovering medicines because they wanted to change things, we would be living much shorter and more physically painful lives.

If everyone took your point of view, there would be no reduction in ignorance or misery in the world.

As it is, we who have the gifts of health and money have responsibilities; and if we decline our responsibilities, we reduce our humanity.

The invitation of the Network is an invitation to discovering the living beauty and joy that comes from seeing change and indeed transformation not only in the world as a whole but also in the lives of individuals and in our own relationships.

Kind regards

Prabhu Sphere: Related Content

Thursday, February 20, 2014

Germany’s Constitutional Court: Extraordinarily Unconstitutional Tactics

On 7 February, Germany's highest court, its Constitutional Court, decided that it wanted to consult another court, and this one not in Germany! The court to be consulted is the European Court of Justice (ECJ) in Luxembourg.

The question on which the German Constitutional Court feels itself unqualified to rule is the constitutionality of Mario Draghi’s Outright Monetary Transactions (OMT) scheme.

Is the Constitutional Court so stupid that it does not know the OMT violates the German Constitution? Basically, the OMT allows the European Central Bank (ECB) to monetise fiscal deficits - and that is not allowed by the generally highly-sensible and conservative German Constitution.

The truth is that Germany's Constitutional Court is hardly stupid, even if it is composed of politicians rather than judges or lawyers.

So if the Members of the Court know that something is against the Constitution of their country, why don't they want to say so?

Of course, because they are politicians! They do not want to say that the move is unconstitutional because they are afraid that such an announcement will undermine the delicate progress that is taking place in the European economy.

So, instead of doing what they are sworn to do (uphold the Constitution), they have taken the strange decision to undermine their own Constitution in the interests of the short-term health of the economy. That is how the dangerous slide into lawlessness starts in any country. We have seen this sort of thing in countries such as Pakistan and Bangladesh and Zimbabwe....

The ECJ normally takes up to 24 months to handle a case, and the German Constitutional Court will then have to consider whatever the ECJ says in order to reach its own decision (which could take it another two years).

I suppose the hope is that, by then, Europe’s economy will be swimming along well, so that this will have become a non-issue by then.

Or, if the Eurozone economy does not recover by then, no doubt the Constitutional Court can ask for the advice of the top court, in turn, of many other countries :)

Why not go next to Afghanistan?

Sphere: Related Content

Tuesday, February 11, 2014

How Governance Became Unethical – and what to do about it (speaking notes for the Lecture delivered at the New Hampshire Institute of Politics, 10 February 2014)

Distinguished guests – and, Dr Kuehne, many thanks, for that kind introduction. Neil Levesque and Ann Camann, my thanks to you for the kind invitation and all that you have done to help with the practical arrangements!

I want to thank you all, first, because I am from India, and not many Americans are happy to hear non-Americans speaking about America (I should say, not many Americans are prepared to tolerate non-Americans speaking about America!).

However, this talk is really in a global context, because the US is still the world’s largest economy (roughly a third, actually of the world economy as a whole!) and whatever happens here impacts the world.

Second, my thanks because I am at this Institute, which is hosted by St Anselm’s, while I am a Hindu follower of Jesus, and Hindu followers of Jesus tend to be very anti-christian. So I am especially appreciative of St Anselm’s which is prepared to tolerate someone like me who is quite critical of its allegiance! However, though I may not be an ally, I am certainly a co-belligerent against many common opponents, as I think you will discover as we go along.

The Relational Thinking Network, on whose behalf I am partly speaking today, certainly has Roman Catholics among its members, supporters and sympathisers, along with Protestants, Eastern Orthodox Christians, Jews, Hindus, Muslims, Buddhists, people of other religions, as well as atheists and agnostics, not to mention people who are from the Right as well as the Left of the political spectrum.

Allow me to start with a quote from Alexis de Tocqueville

*SLIDE 2* the well known 19th century French observer of American society, whose book

*SLIDE 3* Democracy in America, published in 1835, is still widely read – indeed, if you haven’t read it, I recommend it to you as something that is essential reading for anyone who wishes to take an intelligent interest in the world.

Tocqueville travelled through what was then the New World observing, from the perspective of a detached social scientist, America’s burgeoning democratic order, the market revolution, and Western expansion.

The quote from Tocqueville to which I want to draw your attention is the following:

*SLIDE4* “There are many men of principle in both parties in America, but there is no party of principle”

Perhaps some of you may feel that part of Tocqueville’s statement

*SLIDE5* “there is no party of principle” in the US is still valid!

And, I don’t know, but perhaps some of you may feel that Tocqueville’s statement

*SLIDE6* “there are many men of principle in both parties” is less true than it used to be!

If so, may I suggest that your gut feeling that the number of people of principle has declined, may be partly due to your disappointment with some people who you thought followed good old American principles but turned out to have had those on as a mask to hide their real motivations, and your gut feeling may have partly to do with your disappointment with some other people who may have really believed in those principles but who made the wrong choice at one point or another.

However, it is also possible that your gut feeling about the increasing lack of principle in today’s politicians may be partly a mere perception – it may be that, not THAT many politicians LACK principles, it may be that they follow DIFFERENT principles than yours!

In other words, there has been a colossal values-shift among American politicians and indeed in American society over the generation or two even since the 1960s – which I guess dates most of us in this room.

That shift in US values was multi-dimensional.

Allow me to attempt to describe some elements of it, even in the very brief time that we have together.

*SLIDE7* Early US values could be considered to be an outcome of at least a 3-way conflict: there were the values of Native Americans, there were the values of those whom I may, without intending to indicate cattle ranching, and I hope not entirely inappropriately, colloquially call “Cowboys”, and there were the values that ruled in the Puritan and other Settlements, which were indubitably Protestant, Reformed, Biblical…

*SLIDE8* By the 19th century, when Tocqueville was travelling through America, it is clear that the influence of Biblical values was widespread, though there was an impending clash with two new forces.

The first and obvious clash was with the values of the slave-owning South (much of which justified its slave-owning with stray texts from the Old Testament).

However, even though it required huge sacrifice to counter this threat, the threat of the slave-owning South, the far more insidious threat was from the canker, the rot, forming at the heart of Puritan and Protestant values in the Settlements – the rising orientation, particularly among the rich - due to the inevitable temptation of the rich to pride, arrogance, and a degenerate lifestyle – as initially few and then larger numbers therefore oriented themselves towards towards Rationalism and Deism (EXPLAIN, IF NECESSARY).

At this stage, however, if one does not examine the philosophy but examines the morality or ethics, you will find that most Deists and Rationalists had an understandable emotional attachment, however nominal or superficial, to basically New Testament values, even if they had no intellectual basis for such values in their own philosophy.

However, as always happens, prosperity produces, in the second and third generations of the wealthy, an even greater tendency towards pride, arrogance, and a dissolute lifestyle. By the 1880s, Deists and Rationalists found New Testament morality too constraining, and started patronising, in more or less organised fashion, the old idea of Evolutionism (in its new avatar of Darwinism) to use as a battering ram against organisations, institutions and individuals that promoted trust in the Bible and faith in God.

That attack was only marginally successful till the 1960s, when the GI Bill (EXPLAIN, IF NECESSARY) and the incredibly massive expansion in the number of universities and, within existing universities, in the number and size of educational programs, provided to Rationalists and Evolutionists an opportunity to ensure that the academics in all these universities were, as far as possible, also Rationalists and Evolutionists.

The 1960s and 1970s therefore saw the culture-defining battle between faith and Evolutionism, even though the wider body of Christians seem to have been entirely unaware of that, principally because they had been too preoccupied, since the turn of the twentieth century, with trying to defend their own churches, denominations, and other institutions from the depredations of Rationalism and Evolutionism.

*SLIDE9* THIS slide suggests the nature of today’s situation in terms of values.

The whole story is told much more fully in books such as *SLIDE10* Vishal Mangalwadi’s The Book That Made Your World, *SLIDE11* George Marsden’s The Soul of the American University: From Protestant Establishment to Established Non-Belief, and other works by *SLIDE12* Nathan O. Hatch (such as The Bible in America, The Democratisation of American Christianity, and Methodism and the Shaping of American Culture) and, probably most important of all, books by *SLIDE13* David W. Bebbington, such as Baptists Through the Centuries, and The Dominance of Evangelicalism.

In any case, allow me to sum up the transition in American values down to our day in the following way:

*SLIDE14* There have been incredible transformations of the dominant consensus in the US, which took us from no State establishment of any religious denomination (and therefore competition between the various varieties of Puritanism and Protestantism), to a new situation by the inclusion of the large numbers of Eastern Orthodox and Roman Catholic immigrants to the US from the 1880s so that the new amalgam was referred to as “Christian”. From that, there was a transition to the term “Judeo-Christian” by the immigration of Jewish people from around the 1900s. From the 1960s, there was a complete revolution, to the beginnings of what was called “secularism” (the banning of prayer in public schools, the removal of the Ten Commandments from public places, and so on). In the last few years we have seen the prominence given by the media to anti-theists.

The result has been the rise, among today's young people, of what I call a “Whatever-culture”, which has three characteristics:

- first, the idea that there is nothing which is in its essence sense right or wrong, typified by the widespread propagandising of the slogan “everything is relative” (when it should be quite clear to anyone with the slightest bit of sense that everything is not relative – for instance neither a mile, nor an acre, nor a pint, nor a gallon is “relative”).

So the first mark of today’s “Whatever culture” is the foolish idea that “everything is relative”.

The second is that the future does not matter – with all the consequences of such an attitude not only for individual and family wellbeing in the long term, but also for national and global survival - given the environmental challenges that we all now face.

The third is the sort of Buddhist attitude that the present is what it is and can be, to you, whatever you want it to be.

People of my generation sometimes refer to this “Whatever culture” as “apathy”, but it is rather a plague that has spread throughout the USA - a disease that would be called, in classical terms, the sin of “spiritual sloth”, or neglecting what God has said, and being physically, emotionally and volitionally inactive. The sin of sloth refers to the waste that is consequent upon lack of use, in relation to a person, place, thing, skill, or ideal that requires maintenance, refinement, or other effort to continue to exist. Classical definitions of the sin of sloth focused on it as either refusal or carelessness in the performance of one's obligations, especially obligations which are spiritual, ethical and legal (such as political participation in a democracy).

Whether you consider it an America-wide plague of sloth, or mere apathy, the practical *SLIDE 15* result, at the level of governance, was the injection of high-growth hormones into the economy. By the 1970s, the US government could dare, and the public and the media was willing to be complicit, in the immoral act of breaking an international treaty by unilaterally DELINKING THE DOLLAR FROM GOLD (enabling, first, American debt due to the Vietnam War to be repaid in debased dollars, but also so as to manipulate the value of the dollar more freely in the interests of American growth but at the cost of increasing volatility and vulnerability not only in the US but around the world). By the 1980s, as natural demand started drying up, our monetarist friends could stimulate demand by artificial means, including putting in place particular mechanisms that were more or less effective (such as FREDDIE MAC, FANNIE MAE) but these sorts of mechanisms created the long term challenges for the economy from which we have suffered in the last few years. From the 1990s, demand picked up worldwide as the result of the COLLAPSE OF THE BERLIN WALL AND THE OPENING OF RUSSIA, CHINA AND INDIA, making the whole world capitalist, with two and a half billion consumers and producers being added to the global economy, so we would have had historically unprecedented growth anyway, but various ways were invented of boosting that growth even further. Many of these ways were unsound and dangerous (which we will look at with the next slide). Any economy designed as ours is at present goes through booms and busts, and the greater the growth, the greater the booms and busts – so with these new mechanisms, the bust when it came was going to be one of the biggest yet – and that is what happened starting in 2007.

• *SLIDE 16* Here are the other high-growth hormones which, as a result of the new orientation of governance, were either added or greatly expanded in scope since the 1990s.

Allow me to discuss them in reverse order to that shown in the slide.

About *High Frequency Trading*, I will say only that it should be obvious that High-Frequency Trading strengthens the trend towards short-termism, and militates against long-term thinking, by all stock-exchange quoted companies.

• Another high-growth hormone was the *encouragement of speculation*. Politicians, regulators and market players together conspired (and the media and the public, whose role in any democracy, is to guard their freedoms, did nothing to oppose), the subversion and systematic violation of the Glass-Steagall Act, till the Gramm-Leach-Bliley Act was able to be practically smuggled in, in a midnight-session in 1999. The Gramm-Leach-Bliley Act added “safe money” (your savings, your pension money, the money of municipalities, and so on) to the “hot money” (of rich individuals and large institutions) with which speculation (or large-scale gambling) had earlier been allowed.

• Another high-growth hormone added to the economy was so-called *Securitisation* – one of these wonderful names which indicates the opposite of what it is; and, partly because of the name, but also for other equally insubstantial reasons, the attitude induced by securitisation was “where’s the risk?” when it was absolutely clear to any normal-headed person that risk does not go away when it is widely distributed, it just makes system instability more likely when anything goes wrong.

• The last of the high-growth hormones that I want to mention (there were and are others!) is *leverage* - with idiocies such as mortgages available to most people at 120% of the value of the object being hypothecated but, if you were rich, you could speculate in the millions of dollars while, if you were a major global bank, you could gamble in the billions of dollars through companies such as LTCM which (as some of you may be too young to recollect but which the older ones among us may recollect), nearly brought the global economy to a grinding halt in 1998, when we were only half an hour away from total collapse, and it required quite illegal means to rescue the global economy.

Such high-growth hormones together led, then, to the current economic crisis which started in 2007, as well as the current political deadlock in the US.

*SLIDE 17* The political gridlock is, of course, not one of policies, even though that is the appearance that is given to the deadlock, because that suits both the Democrats and the Republicans. Rather, the political gridlock is really a gridlock of interests. We don’t have time to explore that any further right now, but if you are interested in looking into that, there are plenty of books which will provide the facts to you, such as Jeff Faux’s THE GLOBAL CLASS WAR, which documents how America’s bipartisan elite has betrayed the people of the USA.

In any case, in view of our topic today, the point to which I would like to draw your attention is that *SLIDE18* Politics always trumps economics: something that I did not understand at all when I first came across that statement as a student at university, but as I started working, and compared what was happening in my own country, India, with what was happening in other developing countries, as well as in other developed countries, I began to understand the crucial importance of the right policies.

However, political renewal requires cultural renewal (cultural renewal must either precede or accompany political renewal – (GIVE EXAMPLES OF 19TH CENTURY ENGLAND AND THE WORK OF WILLIAM WILBERFORCE, AND LEE KUAN YEW AND CONTEMPORARY SINGAPORE).

For cultural renewal, Relational Thinking has much to offer everyone – whether ordinary Democrats, Republicans, or Uncommitted Citizens.

*SLIDE 19* The first thing that Relational Thinking offers us is a comprehensive analysis of the challenges facing us, which form an interconnected web EXPLAIN TWO OR THREE

*SLIDE20* The 2nd thing that RT offers us is a comprehensive vision for the future (if you don’t like the word “Biblical”, that simply indicates where it comes from and, if you don’t want to know that, please change it to “Relational” or “Human” or whatever else you like)

*SLIDE21* The 3rd thing that RT offers us is a clear view of how the world should look, and will look, if we move towards this kind of cultural and social, and therefore economic and political renewal.

Applying the Relational Proximity Model to your family life and personal relationships, and to NPOs or other organisations with which you may be involved, enables you to begin to see not only the particular strengths of your relationships, and the areas for improvement, but also specifically how you might improve them.

*SLIDE22* Relational Thinking is buttressed by academically solid research through the non-profit organisation, Relational Research, which is able to undertake research on behalf of Think Tanks, NonProfits, Foundations, Political Parties, Governments, and companies and other business-oriented organisations.

In addition *SLIDE 23* there is the for-profit company, Relational Analytics. Though a part its profits go to the investors in the company, they are aware that a part of the profits also go back into the work of Relational Research. Relational Analytics offers a set of audit tools for companies not only to measure Relational Risk but also, as a consequence of the audit, to prescribe ways of addressing *relational risk*.

Then there is the Relationships Foundation which is involved with policy work.

Between the work of such specialist parts of the Relational Thinking Network, and the national movements, such as the USA’s own rWorld (SIMON, WHERE ARE YOU? If you have questions about the national movement which has just started in the USA, please contact Simon Fowler). Anyway, between the work of the national movements, which are not only in the USA but also in the UK, South Africa, Hong Kong, Singapore and Australia, and the specialist parts of the Relational Thinking Network such as Relational Research and Relational Analytics, the Relational Thinking Network offers you one important means of cultural renewal, which I am happy to commend to you.

Naturally, there are other organisations also working for societal resurgence, and you may be perhaps already working with one of them.

I hope so.

Meanwhile, let me summarise my message: Governance has become more and more unethical since the 1980s because of increasing abandonment by Americans of Truth and spirituality that lead to morality and responsibility. The route to cultural, social, economic and political recovery undoubtedly lie in re-commitment to Truth, morality, and responsibility by each of us in this Auditorium and by the many millions of Americans around this nation. If you do not turn to Truth, morality and responsibility, then America as a nation will continue to decline. Nations not only rise, nations have also fallen into decline and oblivion; think of the Roman Empire, the Greek, the Assyrian, the Persian, that of Chengiz Khan, and so on.

But I am hopeful that a better prospect is ahead – if we and others in the USA will turn to Truth, goodness, modesty, mercy, and indeed to genuine and sacrificial love for each other, for your nation, and for the still-globalising world in which we all now live.

Thank you.

ENDS Sphere: Related Content

Sunday, February 02, 2014

New English words needed to indicate grand-parents' relationships with each other

I think we need to invent at least two new words in English.

That's because children have (normally) two paternal grandparents as well as two maternal grandparents.

So what is the paternal grandfather to the maternal grandfather, or vice versa?

No single word for the relationship exists in the English language (so far as I am aware).

So what about saying that they are "grand-fellows" to each other?

If that suggestion is acceptable, that leaves the question of the grandmothers: what is the paternal grandmother to the maternal grandmother, and vice versa?

Unfortunately, no exact equivalent to "fellow" exists for women.

Suggestions welcome!

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Saturday, February 01, 2014

Indian traditions - and a surprising British occurence

I am infamous in the family for going on and on about how life used to be in India when I was a child, specifically the open houses where friends and family walked in and out - and anyone could stay as long as they wanted.

My favourite incident is about an uncle of mine, who walked in without warning for tea one afternoon, and stayed for over six months.

Not surprisingly, for British friends or those who know England well, I draw a parallel with the Clapham Circle, whose communal lifestyle was very similar to my childhood one in India.

But today I have learnt something that tops it all:

The "father of English hymnology", Isaac Watts, was once invited for a week to stay with friends in Hertfordshire.

He actually stayed till he died - 36 years later!

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Saturday, January 25, 2014

Reflections on the current state of the Chinese economy

The moderation in Chinese economic growth in September was not a blip. That is confirmed by the December macro-economic data now available.

As retail sales and manufacturing investments remained stable, the main reason for the continuing slowdown appears to be less infrastructure investment and (more worryingly) slower export growth.

Further, since November, liquidity has been tight, and credit growth is expected to slow further in 2014.

So the PBoC was forced to inject funds into the market ahead of Chinese New Year.

Money market rates may therefore calm down next month, though financial reforms and the PBOC's bias towards tightening will probably mean volatile interbank rates - volatility may be great for day traders but is also not good for the economy as a whole.

And more regulations on shadow banking are expected in 2014; there may or may not be a major crackdown, but there could be an improvement in regulatory supervision - at least I hope so.

Meanwhile, the risk of defaults in shadow banking has risen, and I fear that there may be systemic risk.

What all that means is that the slowdown (possibly catastrophic) that I had expected to hit the Chinese economy last year, only started hitting it last year, and its full impact is going to start being felt this year.

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Friday, January 24, 2014

The current tide of anti-corruption efforts around the world

A friend who is at present in a developing country, writes to me today as follows:

I am not sure whether or not you remember, but we met the first time when you gave a presentation about bribery and corruption. Very often, I think back to that time and your presentation. Being now in (country xxx) with the new leadership and their anti-graft campaign, I see a lot of change. Also, in (company YYY), we all have been subject to very, very strict integrity and compliance rules as well as the related monitoring. What was possible and even acceptable a few years ago is now strictly banned. It is amazing to see how fast the world is changing in this regard – and I think in a very positive way!

Another friend writes from another developing country:

As you certainly know, we had the probably most prominent case of corruption and abuse of power in modern history in our municipality.... The raise and the fall of (person ZZZ) have been an impressive lesson about (how the country is changing). Having met ZZZ a couple of times personally, this case had my full attention.

India has seen the astonishing spectacle, in the capital, of a political party which did not even exist a year earlier, having formed the government, principally because of its high-profile commitment to fighting corruption.

China has seen the same kind of rising sentiment, partly of course because of the economic situation, which seems to be slowly deteriorating, as I forecast (though I had thought it would already start happening by the middle of last year).

In the West, the sort of rise in corruption which has taken place over the last generation, seems also to be in abeyance at present.

Historically, such trends have lasted a few years and then abated (with the exception of the Protestant Reformation, whose impact over a couple of centuries was so deep that Protestant countries still remain the least corrupt overall). As an example of the short-lived nature of most anti-corruption drives, consider Japan after WWII, China after Mao's rise to power, India under Gandhiji's leadership, Russia after the October Revolution, East Africa and uhuru, and so on.

So the question is whether the current global mood will deliver results, and whether it will last.

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