I was puzzled by the news whether this is the watershed of Eurozone
recovery or just a hyperbole and I had the answers from today's paper. It was
said the big brothers in the Eurozone, Germany and France led the recovery, and
according to the paper, increase in internal consumption and public spending
were the reasons for the tepid growth for Germany and France. And now
Bromberg's article pointing to emerging market demand (Primarily Russia and
China) is also part and parcel. Southern Europe was wrought by the baleful
effects of austerity package throttling the recovery. It is not clear the
strength of this recovery or just an euphoric. Time will prove it.
Dear Henrique, yes, Hope and wish sometimes are surreal. Even the German
Chancellor Dr Merkel admitted the road to recovery is still far-flung. But
there are signs of green shoots no matter how fragile they are which are
supported by domestic consumption, public spending and investment, in the case
of Germany, and also according to the Bloomberg's article you posted external
demand. It can't be just surmise. There is bedrock to support that nascent
recovery. I reiterate, larger economies
lead the recovery has spill-over effects to the southern European countries.
That spill-over effect which I believe will give a boost to the southern economies.
The direction of strategy will be centered on restructuring and growth.
2. When giants slow down (The Economist Article)
It is not their glory days in the past is now over, the exponential growth of BRIC was nested on the booming opulent economies and also their mutual dependency. Some were basically commodity driven. The bashing of the heydays are over is hyperbolic. The biggest vulnerability is BRIC are saddled in the clunky intransigent economic system perpetuate their less dynamism, particularly not precocious enough to respond to exogenous tidal waves which precipitating their downfall. So, their progress either ineptitude to adjust and mire in stagnation; or has mettle to take the gauntlet wade through constant economic reform, readjusting to find fit. Their growth is an undulating path.3.UPDATE 2-Portugal's BES reports loss as bad debts jump 26 July 2013
Europe banks are plagued
with a host of inveterate problems. First and foremost is poor business growth:
current recession, hitherto, resulting fewer lending and higher non-performing
loans is a renowned fact; Second is banks' undercapitalization, the sector is
large, has too little capital, especially after undergoing Basel 3
implementation that exacerbates lending activities to withstand the heavy odds
of improving business environment; Third, it is lack of viable long term business
model to make sustainable profit. Of course, for southern Europe, each has
their own banking problems, like Spain is inflicted by mortgage problems, but
they bear the same engrained root causes.
4.China manufacturing gauge hits 11-month low: HSBC 23 July 2013
As spoken
before, the global economy to achieve sustainable growth, large economies must
expand internal consumption. We pinch the hope on the US and China to lead the
world’s economic growth. If China's growth falters, it will be hard to assuage
the burden for the US alone to make the growth wonder forging ahead. It is
paradoxical that in order to restructure the economy, China allows its growth
to lose momentum that is dangerous move. China must realise the magnitude by looking
into bigger picture, not only their own. A faster growth economy not only epitomises
better chances of ameliorating the world economy, but also as a quid pro quo in
turn benefit the Chinese economy as a whole.
There are
two ways of looking at it . One is inveterate past years efforts to rise as a
pivotal financial centre. Another is fortune. But tide ebbs and flows, it is
hard to maintain if conditions of competition are equal.
5.China Wealth Eluding Foreigners as Equities Earn 1% for 20 Years 15 July 2013
The kernel of
truth of buying Chinese stock at your peril are two folds: One is earning
quality, the Balance Sheet shows company holds billion Yuans of cash in hand,
but you cannot ascertain this cash is in existence as of Balance Sheet date;
Second, is corporate governance, like what is mentioned in the article; there
is no checks and balances, the nefarious CEO is the owner and also majority shareholder
runs roughshod over and at the expense of other investors.
6.Bill Gates once remarked: “I will always choose a lazy person to do a hard job, because he will find an easy way to do it.” Do you agree? 10 July 2013
I am just
doing the opposite. I know my diligence will payoff sometime.
There are
things you can't go by shortcut that is a fait accompli. I can’t see how to
cobber together in between laziness going for shortcut and creativity. A lazy
person reluctant to spend extra efforts emasculate mind boggling activities, it
will eventually being mired into self-imposed circle. It behooves that only
getting out of what boxed you by breaking new path can you spark creativity.
I hardly
write twice in a discussion. I heard shouting and hubbub clamoring which prompt
me to clarify my poorly understood message. In management parlance, we are
urged to simplify process, product design. It was once a fad and now there are
still followers. In real life, simplicity will hardly fulfill the vagaries
change of customer satisfaction. Companies are scrambling to strike a balance
in between standardization and customization.
In real life,
I tried sometimes to approach problem easy way out but to no avail. I need to
go a whole hog to comprehend the nuance. Though I did not achieve efficiency, I
learnt the full gamut of the problem than by way of shortcut. That was what I meant “Thing you can’t go by
shortcut.” My many years’ real life experiences affirm this.
As a boss,
Bill Gates can hire any attributes of employee he likes. A lazy person will
certainly find easy way of doing thing; the assertion does not mention a lazy
person will be more creative than others. I am also can’t find synonym in between
lazy and smart. It is grossly imprecise in use of word, too loose. In my more
than fifteen years research into creativity and reading quite a few books about
this subject. None has ever mentioned that. There is neither empirical evidence
to support a lazy person is smarter. If lazy meant to be loosely use to say: a
relax circumstance is conducive to creativity which is also not true, on the
altar of tense circumstances also spark creativity.
I relate my
experience with Microsoft; brook the least insidiously, but not exactly
bashing. I gave feedback to how time consuming it was to use one of its
Microsoft Word function to type a message. I hinted the same message could be
completed in less than a quarter of my time using my Handphone software, because
Handphone software preempt for next words use. My feedback fell into deaf
ear(no change, no feedback). It was probably too many “lazy employees” being
hired; they found one easy way out, but never forget to dish out new version
with skimpy change of bits and bobs to earn next rent.
7.Is There A Long Term Unemployment Crisis?: TOP LEADERS/ EXECUTIVES - CXO/ CEO/ CIO/ COO/ CFO/ President/ VP/ AVP/ Director/ Head/ Managers TOP LEADERS/ EXECUTIVES - CXO/ CEO/ CIO/ COO/ CFO/ President/... 3 July 2013
Having unemployed
all these years, I found the real problems are how executive search companies
and employers hardwired prejudice toward those unemployed? Will the unemployed
be given the second chance to get back to the work force, or making selection
from those already in employment and leaving those unemployed becomes long term
unemployed and underemployed?
The reality works against us: most employers shun
people who are unemployed for various reasons. One is there is a big pool of
candidate to choose from, they prefer to give opportunity to those are still
working, second, they are not sure whether your skills are up-to-date. Third,
whether you are still vigorous and active and ready to adapt to life change?
And as time passed, it becomes a paradigm to reject unemployed right away.
For executive search firm even worse, they basically
work for client rather than candidate. It is hard if not impossible to table to
their client an unemployed for the position. The exceptions are: when they seek
candidate with unique industry experience, or client lays down very harsh
searching requirements, hard to find candidates or taking advantage of you by
denigrating you to a more junior position to show to their client they got them
cheap and good candidate. Of course, I declined because I deliver value and not
a commodity.
Don't panic, recruiters, if certain skills don't fit,
those unemployed, I think, are keen to pick up the necessary skills to keep the
ball rolling, No one is born to know certain skills, they must have come
through training from class room or on the job, the keys are attitude and
passion to the job. If this problem is not solved, not only unemployment is
rising, but also entrenched. It is a waste of talent and the scarcity of human
resources.
I know the mindset of discrimination is rife and
engrained and changes cannot be any time soon. Enactment and public education
go to the full hog are the most essential remedies. Enactment may not impinge
on stopping recruiters continue doing so, or tackling its root cause, but you
can’t ignore it blithely, it serves as a forceful message to correct some of
the inequity on moral high ground that the job seekers suffer travails have no
fault of their own.
8 .Golden Era Fades for China’s Banks as Crunch Raises Default Risk 2 July 2013
You can view the current banking maelstrom as a
stress test that the Chinese government engineered a switch from idle fund and
non-performing loans in the banking system to invest in quality assets in order
to correct longstanding asset mismatch problems. It is more than a grain of
truth that it seems most banks failed the test badly.
9 .On one hand, economics is a sure thing. But on the other hand... Doubts raised about conclusions to landmark study re debt / growth. http://ht.ly/k8ZMc #sbfiTOP LEADERS/ EXECUTIVES - CXO/ CEO/ CIO/ COO/ CFO/ President/... 19 April 2013
Great article! Charles. It hits the one-sided austerity proponents
on the head of the nail.
There is no specific threshold measure in between debt/growth is
palatable as a single universal guide. Political leaders need to dovetail local
conditions empirically, test the water themselves to find the right balance
that suits them best. This balance is where good enough for policy maker lowers
their debt level but not to strangle the economy till in dire straits. Closely watch investment, consumption and
employment data to determine the optimal size of government‘s output, and
strike the right balance to keep the arduous economic restructuring humming.
On the growth side of the equation, the crux of the current global
economic problem is devoid of demand, and monetary policy is not functioning as
anticipated. It becomes an apocalyptic warning that large economies must strive
to expand internal consumption and investments cater for much needed stimulus
to world economy. By this, Investment, consumption and government spending are
creating that corporeal demand.
Can monetary policy spur growth? Well, there is faintest hope for
monetary policy in a last ditch to be effective if there is no resurgence of
corporeal demands. A surfeit of monies by money printing can be
counterproductive in driving economic growth.
Each element of Investment, consumption and government spending
has to be considered taking in stride. Under high debt environment, foreign
direct investment is a faster way without dramatic increasing mounting debts
and government spending to deleverage, saving own scarce resources, it helps to
decrease unemployment measurably and improve tax collections. To attract foreign direct investment, first,
it is to slash bureaucracy and loosen the regulatory shackles, on the altar of
an all-out battle to woo potential investors.
Government spending is guided by national strategy. A strategy is
a blueprint of economic plans. Where
will the country go from here? What are the country strengths and competencies?
A nation strategy will guide the direction of spending, charting the course,
galvanize resources towards infrastructure or R & D spending, set the
framework for a country future success. The spending will generate value for
years to come. It will not be a white elephant or build bridge to nowhere. The
government spending is the balance of private investment, internal consumption
and foreign direct investments.
Lesson from the austerity-stricken Eurozone tell a sobering story
that without economic sustaining growth, all hell break loose, any
restructuring efforts are futile. Even the one-upmanship Germany seems
predominantly hell-bent on austerity package for the Eurozone, eschewing growth
efforts as derisory, she cannot stay scot-free from wide- spread malady, and
the vile effects are now boomerang, facing dark cloud over her head that rating
agency will downgrade her credit rating. It is a telltale sign that no one can
live alone without the connectivity of global network. Eschewing growth, the
writing is on the wall.
Growth is to counter the downward spiral effect which stultifies Eurozone recovery, guiding the economy into a low gear rehabilitating mode. Over time, the reviving economy gains traction, sustaining world economic growth.
10 Krugman's reality: Austerity
hasn't work & intellectual justification is proven flawed. How to justify
now? http://ht.ly/kdQuu #sbfi
21 April 2013
Thank you for introducing Mr. Paul Krugman’s article, it gives me
a chance to read in details Harvard’s economists “Growth in a Time of Debt”,
Washington post’s “Debt reduction hawks and doves” and also Mr. Krugman’s
canonical view. It also gives me a chance to delve into the depth of the topic
I discussed yesterday. I am not academia, and have little interest in
econometric modeling. That may be my shortcomings to see the full gamut of the
issues in discussion.
The calamitous moment of no specific threshold does not mean it is
not safe at one level; it creates snafus only when behavioral factor comes into
play, and the frothy bubble keeps blowing until it gets out of hand whether the
debt levels are at 70 or 90% of GDP. That is the dangerous part, and it occurs
all the times. It is better to be on the safe side to trim debt level
disarmingly nobody is wary it is not safe.
Another point is the correlation between high debt and economic
performance. A correlation between high debt and mediocre or poor economic
performance is a ring of truth, because the important element for economic
growth-the money being siphoned to reduce debts than go the full hog for
productive use that undercut economic growth. So the theory goes, in my
previous comment I mentioned about guiding the economy into a low gear
rehabilitating mode. But I agree with Krugman’s punch line that the other way
round is true that poor economic performance can lead to high debt.
The final point is whether to slash social program is a right
decision, Mr. Krugman’s view is cryptic. Unless all and sundry, tax residents
in US are willing to support social program by paying higher tax which is
reminiscent of an article I read from local paper published by New York Times.
Why American hate to pay tax, the authors said one reason is that it’s not easy
for people to see how taxes provide benefits. Much to the chagrin, if none is
willing to support the program, then probably some programs need to be
curtailed or circumscribed to the bare essentials. Clamor adjustment to adapt
like this no less will cause pain.
11.Jobless Youth: Europe's Hollow Efforts to Save a Lost Generation -... 21 May 2013
At its worst, I do not
want to brush-off summarily the merits of German education system; that is why,
in a bare minimum, the US is now tinkering with the change of its current
education system the German way. I am wary that such homily approach may be out
of whack, putting the cart before the horse. I want to mention some points sound
raucous, may not resonate well with the German leaders
First, it is the deep
recession in the Eurozone that impedes the job creation, not impending economic
restructuring was the culprit. It helps little to change the education system
while the countries still mire in the stagnant economies. So, first come first,it
is growth that creating job, not the job mismatch.
Second, the southern
economies not all are industrialized as what the German does. So, the southern
countries must no less than intrepid to determine for them a surefire way where
their trains are leading, the education system is only doing supporting the
train direction.
Third, it is probably to
reform the abhorrent hiring practice to give equal opportunities to the younger
generation rather than practically Neanderthal to attribute the problem solely to
education, and you can see the effects quicker.
12.Big four accounting
firms PwC, Deloitte, KPMG, E&Y back in consulting business - The Economic
Times Finance Plus
3 May 2013
It is unfortunate indeed if past misdeed is claw back. The reason
to lop off other business arms in large accounting firm is to brook the least
insidious threats of loss of auditor's independence. And now this fact receives
lukewarm support.
I recently involved in a legal dispute with a brokering firm. The
judiciary organization is not formally part of the country legal system. I lost
the case because that judiciary body primary source of income is derived from
financial institution's funding who has vested interest in the case? How that
judicial body is to maintain independent if its lifeline is depending on the
defense?
May be we have forgotten the lesson how Enron caused the demise of
Arthur Andersen. Consulting is ludicrous business that is the bloodhound
rapacious instinct. But does the governance body have the supervision mechanism
in place to extenuate the vile effects of a convulsive crisis erupted in future
or simply dodge the problem?
13.Why Europe’s
Response to the Cyprus Crisis Has Been Ineffectual buff.ly CFO
network 29 March 2013
The trepidation of inherent crisis was not
short of being reported since the eruption of Eurozone crisis. The financial
world knew that the crumbling Cypriot banks were pumped unconscionably full of
Greek sovereign bonds that needed write-off.
The inaction probably was: Cyprus was a tiny
country, less than half a percent of the euro area GDP, and the banking problem
may not be systemic, and there were more imperative issues at hand for EU
leaders. The crux of ineffectual is more political in nature. On the
liabilities side of banks’ balance sheet are the Russian depositors monies
which the EU thought are money laundering. And the biggest lender, Germany will
be holding election this year, the political leader does not want to be held
hostage to play congenial rescuer’s role to agitate voters.
It is a tragedy for small country like Cyprus
to impose tax on big depositors holding more than 100,000 Euros to fund the
ailing banks which requires approximately €10.8 billion. The move will probably
cripple banking sector for the years to come. The tax haven for attracting
enormous stash from big depositors is tarnished for deposit insurance guarantee
is now a sham. Big depositors would probably seek out safe haven outside
Eurozone. Deposit is the lifeblood for commercial banking, without large
depositors will enfeeble banking sector, there will be limited businesses can
do.
Ordinary Cypriot people will probably not
very much hard-hit by the deposit tax, only the capital control and ensuing
austerity package will have major impact. In the past 30 years, the economy has
shifted from agriculture to light manufacturing and services. The services
sector, including tourism, contributes almost 80% to GDP and employs more than
70% of the labor force. Industry and construction account for approximately
one-fifth of GDP and labor, while agriculture is responsible for 2.1% of GDP
and 8.5% of the labor force. Potatoes and citrus are the principal export
crops. Looking forward, the Cypriots may have to stump up for rising tax
revenues to cover budget deficit and borrowings.
What the profound truths from Cyprus lessons
are:
One, It is a tragedy of the lack of banking
supervision for the feckless bankers in risk reduction of bank portfolios;
Two, there will be loss of confidence by big
depositors in Eurozone that Deposit insurance - a sure guarantee is pulverized.
Breaking trust will come home to roost.
Three, using safe haven to attract
international funds can be backfire, Cyprus is a case in point: can’t get the
best of both world, saddled with lousy option. Cyprus sought EU and Russia for
aids getting disparaging cold shoulders are examples of political reality.
Fourth all that said, the solidarity of
Eurozone is rather fragile, especially the austerity measures make it difficult
to hardwire for the peripheral countries in southern Europe. world, saddled
with lousy option. Cyprus sought EU and Russia for aids getting disparaging cold
shoulders are examples of political reality.
14.Spain’s economy, not yet the new
Germany Finance Plus 14
March 2013
At first blush, on the way a la Germany’s Success is impertinent.
The most renowned Spaniard company in the world is Zara, in textile industry.
Zara’s distinctive advantage is to fast emulate the latest fashion design and
reconfigure their supply chain to facilitate speed delivery to the middle end
market. Odds are that, Spain industry sector contributes only about 27% of GDP
and service sector about 70%. Spain is the biggest producer in the world of
olive oil and biggest producer in Europe of lemons, strawberries and oranges.
If I were Spain's leader, I would strengthen Spain’s comparative
advantage than playing catching up something which the success is seemingly
far-flung. Rome was not built in one day. The competency needs ineluctable
probably a decade or more to take shade, by then, Germany was probably moving
far ahead. Spain will find itself benighted in a chimera, playing the catch-up
game and can’t see where the apogee. Presently, the most promising automotive
player in Spain is SEAT, a subsidiary of the Volkswagen Group. Volkswagen is
still not in the forefront among the global automotive players. Sharpen on what
the country does best will position Spain competitively in the international
arena and I think it is a success.
Dream big and be optimistic about future is good, but be
realistic. Getting the economic engine humming is of paramount importance now,
the low hanging fruits, such as tourism industry which contributes about 11 %
of GDP is a good starting point to saddle with kicking start job growth and
economic growth. Chasten living to fit the budget straitjacket in order to turn
around the economy is an illusion. It is ardently provincial, ignoring the linkage
in between economic growth and job growth, only enfeeble the economy. All that
said, if Spain cannot get this first step in order, wart and all, it will suss
out, a dream is a dream.
15.Tips from Germany on Economic Recovery TOP LEADERS/ EXECUTIVES - CXO/ CEO/ CIO/ COO/
CFO/ President/... 11 March 2013
It is deleterious to copy Germany’s system wholesale, as the two countries
are in two stark business cultures. The Germany’s success is grounded on a tripartite
business system, evince a middle road in between Socialist and Capitalist
systems where workers are not retrenched as liberal as in the US.
Unlike in the US, where feckless employers to prepare for any eventualities
start to lay off workers to protect lucrative profits when they sense business
climate is bad. German prudent layoff practice gives them an edge over
technical knowledge continuity. The German is based on Hartz concept to reform
labor system which allows worker to work part-time in bad times.
There is no absolute good or bad, a profound truth of the two systems. Early retrenchment gives American businesses
the flexibility to survive better at the expense of the public sector and the
employees. The public sector will pick up the tab for taking care of the
unemployed from then on by providing unemployment benefits; and private sector
is also passing the buck of other social problems to the government.
The German system is engineering based to invent state-of-the-art
industrial products. It is true that their educational system provide the basis
for the success of industrial excellence. American system provides individualistic
success, emphasizes personal achievement. In other words, engineering based
German system relies on immense support of their educational system and sagacious
business practices to spur Germany to become today’s manufacturing powerhouse.
And the US must know what to covet to suit her best, not on a whim.
16.The Dilemma of
Older Applicants for Positions Executive suite 8 March 2013
It is hard though not impossible to change the mindset of the
hirers. Ageism is ubiquitous. How to debunk the myths of age discrimination?
There is an interesting findings let share together.
Myths about Older Workers
Myth 1: You can't teach an old dog new tricks
Reality: Studies show only negligible loss of cognitive function
of people under 70. While older workers take longer to absorb completely new
material, their better study attitudes and accumulated experience lower
training costs. The fastest growing group of Internet users is people over 50.
Myth 2: Training older workers is a lost investment because they
will not stay on the job for long.
Reality: The future work life of an employee over 50 usually
exceeds the life of new technology for which the workers are trained.
Myth 3: Older workers are not as productive as younger workers.
Reality: Overall productivity does not decline as a function of
age. Productivity can actually rise due to greater worker accuracy,
dependability, and capacity to make better on the spot judgments. Older
workers' production rates are steadier than other age groups.
Myth 4: Older workers are less flexible and adaptable.
Reality: Older workers are just as adaptable once they understand
the reason for changes. They are more likely to ask why, because they have
often seen past changes in processes and procedures abandoned in midstream when
they didn't bring expected rewards quickly enough.
Myth 5: Older workers are
not as creative or innovative.
Reality: General intelligence levels are the same as younger
workers. Eighty percent of the most workable and worthwhile new production
ideas are produced by employees over 40 years old.
Myth 6: Older workers cost more than hiring younger workers.
Reality: While workers with tenure are entitled to more vacation
time and pension costs related to number of years worked, replacing workers is
not cost free. Aetna Insurance Company did a study of this issue and discovered
these factors added 93 percent to the first year's salary of new employees.
Myth 7: Benefit and accident costs are higher for older workers.
Reality: Total sick days per year of older workers are lower than
other age groups because they have fewer acute illness and sporadic sick days.
While individual older workers' health, disability and life insurance costs do
rise slowly with age, they are offset by lower costs due to fewer dependents.
Overall, fringe benefits costs stay the same as a percent age of salary for
all age groups. Older workers take fewer risks in accident prone situations and
statistically have lower accident rates than other age groups.
Source: American Business and Older Employees, AARP, Washington,
DC, 2000. Bureau of Labor Statistics.
Downloaded from www.seniors4hire.org/ myths_olderworkers.pdf
17.Misplaced concerns about central-bank independence | vox CFO 24 Feb 2013
The role of a central bank is to conduct monetary policy to
influence interest rate, inflation and economic growth. Central bank is a
government’s bank; its primary duty is through deliberate actions to influence
the condition of the economy.
Why central bank needs independence? It was said to prevent
political leader to rig personal gain by controlling the Fed. Imagine a
Congress or president who could order the Fed to print new money to finance a
government budget deficit. A good example is Shinzo Abe announced a 2 %
inflation target requiring central bank print money to the hilt to reflate the
economy. The Japanese central bank palpably lost independence. Despite the
orthodox disparaging opprobrium, crying foul of unconscionable of central bank
losing its independence, is that egregiously bad? I ask. I wish to view from
different perspectives.
Japan has been expanding its monetary supply without much success;
the latest “talk down the yen approach” gives advantage to their export-based
economy. The yen fell measurably, hovering around 95 yen to a dollar now.
Whether it will reflate the economy yet to know but the impact speaks for
itself, evidenced by the buoyant stock market.
A stronger Japanese economy will strengthen global economic
recovery. A prostrate Japan economy will hobble the preponderant structural
reform. Printing money is easy, quantitative easing was originated from Japan
after all; structural reform takes pain, the odyssey of structural reform cuts
across political and interested parties’ hindrance which mires the Japan
economy for decades without any prominent success. The frequent changes of
political landscape, particularly in Japan which is factional, rife with
political tussles make new leader last not more than one year at the helm, the
frequent changes of leadership has the pernicious effects to derail and also
stymie reform efforts.
An immutable central bank kicking the can, guards only price
stability is ineptly dodge the problem. Central Bank should look at larger
picture, as I mentioned earlier, the role of central bank is to take deliberate
actions to conduct monetary policy to influence the condition of the economy.
The orthodox central bank advocates for price stability can only saddle the
Japan economy this far. Does this stagnant economy bereft of hope is what the
Japanese want? And is the independent status sacrosanct? I think the quiescent
Japanese central bank needs new thinking.
The most innovative central banker thus far is Ben Bernanke;
though many cursed him for fanning the inflation around the world without any
proven results for his quantitative easing’s operation. He is a Republican, but
many Republicans brook the least, think he is bought, losing his independence.
Had the Republican candidate Mitt Romney won the last presidential election, he
could be replaced at once. To me, Mr. Bernanke is a proactive central banker;
history will enshrine his innovative ideas of open market operations amidst
some of controversial rescue efforts waiting for vindication.
History is evolving; the incumbent of central bank must take the
gauntlet to confront the utmost unknown. On this ground, Bernanke’s experiments
were phenomenal deserve credit though the results do not cut the mustard, that
only speak of one truth that monetary policy can only do so much. And highlight
an important lesson that monetary policy can only be effective if there is
resurgence of corporeal demands. A surfeit of monies can be counterproductive
in driving economic growth.
And now the Fed
needs contingency plans to project into the future in different scenarios as to
the ambivalence of timing of exit, taking into account the full gamut of
fermenting issues, such as budget sequestration and the possible deep cut of
entitlements, how it will weaken the economy and the conditions of the
incipient economic recovery, the inveterate risk of inflation and high interest
rate rearing its head going forward, in contrast to the central bank’s own
prognosis of the veracity of the economy and the trepidation of too late to
reduce the bloated Fed's balance sheet that takes times to dispose of assets;
to determine the right time of exit.
There is no
absolute central bank’s independence. Even in the US, as the result of
resignations and expired terms, some US presidents have gotten to appoint a
majority of board members, and they are likely to have selected individuals
whose viewpoints would support their own political agenda.
The Fed was
created by the US congress. Fed governors are aware that their powers can be changed
by congress. Congressmen have been quick to point this out to Fed boards whose
actions are inconsistent with the direction of the political leadership. But so
far Congress has relied more on threats than the actual changes. Mindful of
Congress’s power, however, the chairman of the Board of governors makes
frequent appearance on Capitol Hill, to maintain a good working relationship,
and keeps good contacts with the executive branch as well. So the Fed relative
independence is achieved by threading the fine line between too cozy to the
administration resulting serious bouts of inflation brought about by
continuously expansive monetary policy and their prognosis of the veracity of
the economy. It is no easy task.
The independence
of Central Bank can also be strengthened by the right organization culture.
Central bank is a government’s bank. It must work with the executive to exhibit
its independence rather than subservient to the politicians’ personal needs.
The Politician’s belief and philosophy largely influence the relationship
between the executive function and the central bank. The real conundrum in the US
is the party’s philosophy carries the day; the central bank must work with
different cultures of the politicians, which is the challenge. The crux of a
successful central banker is to work with politician on the altar of achieving
economic success and not to hamper it, vehemently adamant about independence.
18. Krugman offers
explanation of hypocrisy re debt ceiling and fight over raising it. Losers get
another round? http://ht.ly/gJ5bo #sbfi CEO/CIO 13 Jan 2013
The question is not whether to raise debt ceiling, GOP's intention is to use it as a weapon to cut entitlements. That is why voted for the budget to raise tax; they resorted to the second round to demand much more to compensate for tax increase which they thought they sacrificed their core but did not get the same in return for spending cut.
I think the most
constructive way is not to entirely brush-off GOP lowering spending, but to
come to terms what should and should not be cut and the rationale behind them.
If there is consensus, I think is a great achievement, a big step leap forward,
just like some GOP forsook their bulwark of tax increase. Democrats can do the
same, what we look for is, at some point, there is convergence of opinion, and
not more divergence in the house.
Charles, you have the point, and I totally
agree with you. However, in a tough negotiation stance, one party may leverage
negotiation tactic they think have an upper hand. From several sources (papers
and magazines) give me an impression that few Republicans will not raise debt
ceiling, but they want more cut in entitlements.
Political brinkmanship will not
go away, Charles. It was a sad experience for Mr. Obama in the last debt
ceiling negotiation.
The last episode is reminiscent
of a comment I posted last year of negotiation tactic-time pressure immediately
after the negotiation; I wrote “The Debt ceiling snafus is a political game
where the Republican was shrewd negotiator. And the Democrat was inapt at
negotiation. The Obama administration had a bigger stake; they couldn't afford
to be irresponsible to let the operation discontinuing. Republican has a skin
in the game; anyone familiar with negotiation skills knows the tactic of time
pressure. When the deadline draws near, the one with the bigger stake feels the
pressure ascending tremendously. This was what the fractious Republican played,
they refused to hunker down. Eventually, at eleven hour, Mr. Obama
administration yielded to the requests of the Republican and Tea party, no tax
increase and bigger cut.” Subsequently, it was said in the newspaper that Mr.
Boehner thought he struck a deal with the Democrat would get the endorsement of
his peer Republicans, when came to voting, The Republican in the congress
backed away. I do not know how true the news was. At that time Mr. Obama was
lame duck after losing majority control in the house to the Republican.
And now the tide has made a
turn, after Mr. Obama gained victory in the second term, according to some
political analysts; The Economists wrote on December 15 2012: “some Republicans
have suggested giving up fight on tax rates, and instead insisting on
entitlement cuts as the price of raising the debt ceiling which the Treasury is
expected to hit in February or March. But the Democrats consider that an empty
threat; if the Republican don’t want to be blamed for a recession-inducing rise
in tax rate, they certainly do not want to be held responsible for over
possible default.”
Charles, you can see the
political dynamics here. There are many Americans, like you, hope the
administration will get the budget deficit in order. They expect the leader
resolutely tackle the looming financial crisis if budget deficit will be
running out of hand one day. The gridlocks are by how much and at what time
span and what to cut? There are ideological differences here. I am wary there
will be quick solutions to iron out differences in such a short negotiation
period.
The primary consideration is
not wasting too much time with fertile outcome, but makes the administration
more effective in delivering. I mentioned trading of cores in the past is just
to make reaching a solution easy in negotiation. Another is to reciprocate, so
that both sides gain trust in each other. I also mentioned in the past playing
time smoothing factor. Some big issue, like healthcare, can take a long-term
view to revamp the system by inviting both parties to find a breakthrough
solution. There is no quick answer to such a big issue. Mr. Obama needs to
coalesce at least the less extreme Republicans to make him more effective.
19.UK House of Commons debate on corporate tax
avoidance - Whats your opinion? PROACTIVE ACCOUNTANTS 25 Jan 2013
It is a complex issue indeed. Tax avoidance is part and parcel of tax planning writing into the tax law, or bilateral agreement under tax treaty.
The crux of the issue is similar terms are
ubiquitous and tax concessions drafted to take accounts of economics issues.
And the big fours are the craft masters of seeking legally tax reduction for
their clients to earn their keeps.
From social perspective, it seems that the
opulent entities enjoy the benefits provided, but do not pay their fair share
in terms of revenues in return.
But a country cannot live in vacuum; other
countries are also offering the same or even more favorable terms to attract
foreign investments. A case in point is now Starbucks is in volition to offer
to pay millions pounds additional tax to appease outburst of anger of the UK
citizens for avoiding tax, but they acted within UK tax law and it is baleful,
a pyrrhic victory to UK to act unilaterally in the eyes of other foreign
investors; Especially UK badly needs foreign direct investment now to boost her
lackluster economy and lower high unemployment.
Unless the tax environment changes, UK is
able to garner the support of other developed countries constricted by revenue
problems, act in concert on the altar to hobble giving any tax concessions in
future, that again is a very complex issue and an undulating path.
The looming great depression is due to deleterious
effect of austerity package and the gamut of European region devoid of growth.
The European leader chastens living to fit the budget straitjacket in order to
turn around the European economy is an illusion. They ignore the linkage in
between economic growth and job growth.
Of course, there is light in the tunnel now.
With the economic powerhouse US and China on the road of recovery, there is a
chance for exogenous growth. It belies the fact that China and US (MNCs) also
depend on Europe for growth, if that growth factor wilts, the impact will blunt
its demand, and in the end all sink together.
The kernel of truth is for low debt countries
and large economies in their endeavors to expand internal consumption and high
debt countries attract foreign direct investments to enliven the economies.
20. Gretchen Morgenson offers wish list of
corporate and regulator accountability. Make them do the right thing or pay? CEO/
CIO/COE/COO/CFO/Head/VP/ Director/President Level 26-12-2012
I think the possible reason why regulators don't take individual
accountable for misdeeds is governed in the company Law. In company law, the
legal personality of corporation is stipulated to treat the corporation as a
separate legal entity. In other words, as the company’s agents act within their
apparent authority, the company, as their principal, will be bound to the third
party. So to speak, the company is bound for any wrongdoing by its agents
within their apparent authority.
The company of course can seek
recourse if there is clear evidence of negligence on the agent part. I do agree
with the author that direct punishment can have direct impact to change agents’
behavior. The company should change its agents if they not work in the interest
of the company and the shareholders.
Charles, I cannot agree more with you that lifting the corporate veil to
expose the agents, preceding cases abound, and the law enforcers save no
efforts to take the transgressors to task under criminal law, even right up to the
corporate captain reining at the helm.
I am writing about direct intervention and more rules. I am not a staunch
supporter of Adam Smith; the cogent reasons are: rule must be succinct, so that
people can follow. Law to facilitate direct intervention is only feasible when
just you said “piercing the corporate veil” is warranted. If I were the lawmaker, I will consider the
followings:
1. What happens now? What is the context of the case in
point? Which part of the system broke down? What are the underpinning factors
resulting the present system cannot cope with the corporate fiasco.
2. What are the apparent alternatives, writing more rules, waving big hammer, Will they help?
To me, the essence of promulgating new law serves as last line of defense
for the common good; it hobbles heinous acts, tells prospective transgressor
culpable where the line is drawn? It fixes the loophole and addresses the
system failure, such as SOX (Company’s internal control system and corporate
governance) and Dodd-Frank Act (Bank industry failure in 2008).
In other words, it is management by exception, more of context specific.
Though opprobrium attributes the high costs of implementing SOX, the fact is
there are fewer financial shenanigans reported now than was previously. Rule is
telling, using punishment ask to toe the line, to restrain behavior that is
baleful to the public at large. It serves for the common good.
To make a real change to corporate scene is to remake ethic as a keystone
of corporate culture comes to the fore, especially for Wall Street Companies.
It should be a prominent cornerstone for corporate governance. It is not mere
good internal control system; it is a positive value system that the corporate
should adhere to.
A positive value system is more than pursuing fabulous wealth; it assumes
social responsibilities, not only takes, but
also gives back to the society. Such as Philanthropists, Bill Gate and Warren
Buffet. It recognizes there are many paths define success in life, not by
pecuniary mean. It respects and recognizes each member’s contribution,
regardless which role you play. It empowers frontline employees to make instant
decision, sharing profit to recognize their contributions.
If more corporates remake their culture to include positive value, embrace
business ethics; I think it manifests not far from an elegant society.
21. FASB proposed rules accelerates reserves for loan losses, requiring earlier
recognition. Banks don't lose enough? http://ht.ly/ghA6q #sbfi CEO/ CIO/COE/COO/CFO/Head/VP/ Director/President Level
It is a contradicting world. It all depends
on which side of the fence you lean on.
The accounting concept requires entities to
adopt prudent concept to recognize foreseeable loss to reflect the true value
of the assets. It is akin to Fair Value Accounting which is touted as to
reflect the market value in an orderly transaction. Bank is quick to capture
the loan value when assets’ value rises and defers recognition impending loss
that requires assets written down. Standard setting process is a political
tussle.
On the other side of the fence is the
standard setter, its duty is to protect public interest, as the public does not
have insider information about the true State of affairs of their investment.
The standard setter’s task is to make the process transparent. Fair Value Accounting
gives a snap shot of instant value which reflects the changes. In the case in
point is the diminution in value of loan loss. Market immediately discounts the
value to reflect the true worth of equity.
The shortcoming of Fair Value Accounting is under
volatile market condition, the reverberation of precipitous fluctuation of
value confuses the investor where the actual value lies. Many critics bellyache
it is a turkey basically on this issue. But, to me, this also conveys
information about the true picture of the current uncertain market. It is
palatable, not real travesty. You can’t have the cake and eat it too! Does it
better than the hidebound view of having the opaque historical information that
stultifies everyone keeping investor in the dark?
Fair Value is impregnable!
22.A Chinese passport
that make its neighbors angry | INS Global Consulting Asia
Job career ,networking 12 Dec 2012
Let analyse the impact of China’s abruptly including disputed territories
in the map of new passport.
First, it helps one iota of the outcome to strengthen China’s claim for disputed
territories as sovereignty. A controversial map on the passport does not attest
as an evidence for legitimate claim as palatable in court; only demonstrates
the party assertion of the claim and creating snafus of gerrymandering, no
legal binding on both sides.
Second, it arouses suspicion of their neighbours that China has the
sincerity to resolve the territories disputes; the act only escalates tension
as brandishing. Especially, China insisted on bilateral talk on sovereignty
issues, both are disparities in size, Beijing certainly can leverage their
economic and military might to tame the dissidents. This passport episode only
confirms their expansionary ambition, and their sermon of “will not be a hegemony
forever” is now broken, no one trust what they say, and only believe in what
they do.
Third, it causes great inconvenience for Chinese citizen travelling to
countries with territories in dispute. It becomes a childish act on both sides
that the disputing countries only stamp visa on the paper they issue. Visa is a
tool to serve Chinese citizen going overseas, now becomes indelicate, so repugnant
and inconvenient due to political wrangles with no clear advantage for either
side.
Fourth, the much more salient feature is the resolve of disputing countries
to coalesce with the US on the crusade to balance the power in the region has become
even more imperative; as Asean’s solidarity is weakened by members’ self-interest
and Chinese divisive tactics. In years to come, AP becomes pivotal to US, we
will see more wrestles of both superpowers in the region.
23.Employers who limit themselves to candidates with "Industry
Experience" should look at Louis Gerstner's move from CEO of RJR to CEO of
IBM. Executive
Suite 6 December 2012
To some, it may be an abhorrent dogma to look for candidate with “industry
experience”, in my job search experience; the recruiter keeps running the same
old groove, I rarely come across “candidate without relevant experience may
also be considered”. Search firms even fastidiously exclude candidate without
the relevant experience, because their rice bowl is at stake. I think the main
reason boils down to quick payback from the new recruit, saving training costs
on the early part of learning curve. Realistically, the recruiter is not short
of candidates with relevant industry experience, why they want to take the risk
to take someone afresh?
On the other hand, no one is inborn with industry experience; they must
have started that relevant industry experience, somewhere, sometime; if the
access to gain relevant experience on the job is blocked, there are two
consequences: One, the searching of talent is limited to only a pool of
available candidates, and it soon can be dried-up, depending on the demand,
Second, the cost of hiring will go up to compensate for the scarcity of
resources.
In the country where I live, only the public sector doesn’t give a hoot, disregard
prior experience, but they fall short in another dogma: scrupulously chasing
for candidate with highest paper qualification, such as candidate with first-class
honor degree will be favorably considered, they tantamount candidate with
higher degree will do a better job.
This kind of freakish hidebound dogma (for candidate with “industry
experience”) will stay for recruiter seeking for quick return on investment; Of
course, there are exceptions, such as candidate is so unique with brilliant
track record, or candidate possesses much sought-after skills that the company
badly needed. There are CEOs at rarefied level without relevant industry
experience were appointed for the jobs. The salient point is, of course, it is
incumbent on the company to have a blend of candidates with and without industry
experience, and invest in them in long-term.
24. Euro zone
economy falls deeper than expected into recession CFO, 15 Feb 2013
The uptick in buoyant sentiment, especially for Germany, and soon to
France, is not a happenstance, largely due to exogenous factors. It is the Neanderthal
policy wonk audaciously pursuing for one-sided austerity package, is inimical,
without concurrently also boosting growth, doomed to fail. That was borne out
by the evidence of what happened in the final quarter of 2012.
Germany is an export-based economy. The revival of Chinese economy will see
more consumption of their products that is where the optimism lies. The Chinese
economy is now turn the corner and gaining traction, especially for export
sector, tapping the strength of US consumption. So long as the two powerhouses fledging
recovery continue to gain traction going forward, there are hopes to pull the
Eurozone out of present doldrums.
As what I suggested in the past, “But the crux of the current global
economic problem is devoid of demand and monetary policy is not functioning as
anticipated. It becomes an apocalyptic warning that large economies must strive
to expand internal consumption and high debt countries attract foreign direct
investments to enliven their economies, cater for much needed stimulus to the world
economy.”
Germany can play such a role a bare minimum in the Eurozone by increasing
their consumption to the hilt, resulting “spilling effects” to other peripheral
Eurozone countries, and the people in Eurozone can see light in the tunnel.
The scope of Head of Finance in Accounting
Department has changed, more than just number crunching. More and more,
companies are looking to their financial expert to act as business partners
with operations managers and to dramatically reduce accounting and finance
costs.
A new
set of core competencies that define how the accounting and finance function
performs, which include:
1. Strong analytic focus on the business's
drivers of success and operational strategies
2. Control achieved through process design
3. Deep knowledge of the business
4. Flexibility and a broad business
perspective
5. Clarity in communication
The Head of Finance position spends only
between 10 to 20 percent of her time on fiduciary reporting and the rest of her
time should be spent partnering with business operations executives in
value-adding decision making for the business.
It is conveniently for employer who call the
shot to recruit Head of Finance, to determine whether the candidate to be
qualified or not. My encounters for most unqualified Head of Finance crossed
path from Corporate Finance sector. Many are holding MBA, or Business
administration, CFA, Degree in Corporate Finance. Many CEOs or bosses, they are
keener to M & A and IPO would like to take candidates with Corporate
Finance background as CFO. Of course, under the CFO, there are qualified
accountants who are familiar with number crunching role take the position as
controller. The CFO's focus is on Balance sheet.
I would prefer an accountant to be qualified,
at least not being looked down by underlings for not knowing her stuff.
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