Is Our Money Safe? - Part I

Written by Sam Vaknin


Continued from page 1

Considerrepparttar thorny issue of exchange rates. Financial statements are calculated (sometimes stated in USD in addition torepparttar 106725 local currency) usingrepparttar 106726 exchange rate prevailing onrepparttar 106727 31st of December ofrepparttar 106728 fiscal year (to whichrepparttar 106729 statements refer). In a country with a volatile domestic currency this would tend to completely distortrepparttar 106730 true picture. This is especially true if a big chunk ofrepparttar 106731 activity preceded this arbitrary date. The same applies to financial statements, which were not inflation-adjusted in high inflation countries. The statements will look inflated and even reflect profits where heavy losses were incurred. "Average amounts" accounting (which makes use of average exchange rates throughoutrepparttar 106732 year) is even more misleading. The only way to truly reflect reality is ifrepparttar 106733 bank were to keep two sets of accounts: one inrepparttar 106734 local currency and one in USD (or in some other currency of reference). Otherwise, fictitious growth inrepparttar 106735 asset base (due to inflation or currency fluctuations) could result.

Another example: in many countries, changes in regulations can greatly effectrepparttar 106736 financial statements of a bank. In 1996, in Russia, for example,repparttar 106737 Bank of Russia changedrepparttar 106738 algorithm for calculating an important banking ratio (the capital to risk weighted assets ratio).

Unless a Russian bank restated its previous financial statements accordingly, a sharp change in profitability appeared from nowhere.

The net assets themselves are always misstated:repparttar 106739 figure refers torepparttar 106740 situation on 31/12. A 48-hour loan given to a collaborating client can inflaterepparttar 106741 asset base onrepparttar 106742 crucial date. This misrepresentation is only mildly ameliorated byrepparttar 106743 introduction of an "average assets" calculus. Moreover, some ofrepparttar 106744 assets can be interest earning and performing – others, non-performing. The maturity distribution ofrepparttar 106745 assets is also of prime importance. If most ofrepparttar 106746 bank's assets can be withdrawn by its clients on a very short notice (on demand) – it can swiftly find itself in trouble with a run on its assets leading to insolvency.

Another oft-used figure isrepparttar 106747 net income ofrepparttar 106748 bank. It is important to distinguish interest income from non-interest income. In an open, sophisticated credit market,repparttar 106749 income from interest differentials should be minimal and reflectrepparttar 106750 risk plus a reasonable component of income torepparttar 106751 bank. But in many countries (Japan, Russia)repparttar 106752 government subsidizes banks by lending to them money cheaply (throughrepparttar 106753 Central Bank or through bonds). The banks then proceed to lendrepparttar 106754 cheap funds at exorbitant rates to their customers, thus reaping enormous interest income. In many countriesrepparttar 106755 income from government securities is tax free, which represents another form of subsidy. A high income from interest is a sign of weakness, not of health, here today, gone tomorrow. The preferred indicator should be income from operations (fees, commissions and other charges).

There are a few key ratios to observe. A relevant question is whetherrepparttar 106756 bank is accredited with international banking agencies. These issue regulatory capital requirements and other mandatory ratios. Compliance with these demands is a minimum inrepparttar 106757 absence of which,repparttar 106758 bank should be regarded as positively dangerous.

(continued)

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Web site:

http://samvak.tripod.com/


The Revolt of the Poor - The Demise of Intellectual Property

Written by Sam Vaknin


Continued from page 1

Two developments threatenrepparttar future of intellectual property rights. One isrepparttar 106724 Internet. Academics, fed up withrepparttar 106725 monopolistic practices of professional publications - already publish onrepparttar 106726 web in big numbers. I published a few book onrepparttar 106727 Internet and they can be freely downloaded by anyone who has a computer or a modem. The full text of electronic magazines, trade journals, billboards, professional publications, and thousands of books is available online. Hackers even made sites available from which it is possible to download whole software and multimedia products. It is very easy and cheap to publish onrepparttar 106728 Internet,repparttar 106729 barriers to entry are virtually nil. Web pages are hosted free of charge, and authoring and publishing software tools are incorporated in most word processors and browser applications. Asrepparttar 106730 Internet acquires more impressive sound and video capabilities it will proceed to threatenrepparttar 106731 monopoly ofrepparttar 106732 record companies,repparttar 106733 movie studios and so on.

The second development is also technological. The oft-vindicated Moore's law predictsrepparttar 106734 doubling of computer memory capacity every 18 months. But memory is only one aspect of computing power. Another isrepparttar 106735 rapid simultaneous advance on all technological fronts. Miniaturization and concurrent empowerment by software tools have made it possible for individuals to emulate much larger scale organizations successfully. A single person, sitting at home with 5000 USD worth of equipment can fully compete withrepparttar 106736 best products ofrepparttar 106737 best printing houses anywhere. CD-ROMs can be written on, stamped and copied in house. A complete music studio withrepparttar 106738 latest in digital technology has been condensed torepparttar 106739 dimensions of a single chip. This will lead to personal publishing, personal music recording, andrepparttar 106740 torepparttar 106741 digitization of plastic art. But this is only one side ofrepparttar 106742 story.

The relative advantage ofrepparttar 106743 intellectual property corporation does not consist exclusively in its technological prowess. Rather it lies in its vast pool of capital, its marketing clout, market positioning, sales organization, and distribution network.

Nowadays, anyone can print a visually impressive book, usingrepparttar 106744 above-mentioned cheap equipment. But in an age of information glut, it isrepparttar 106745 marketing,repparttar 106746 media campaign,repparttar 106747 distribution, andrepparttar 106748 sales that determinerepparttar 106749 economic outcome.

This advantage, however, is also being eroded.

First, there is a psychological shift, a reaction torepparttar 106750 commercialization of intellect and spirit. Creative people are repelled by what they regard as an oligarchic establishment of institutionalized, lowest common denominator art and they are fighting back.

Secondly,repparttar 106751 Internet is a huge (200 million people), truly cosmopolitan market, with its own marketing channels freely available to all. Even by default, with a minimum investment,repparttar 106752 likelihood of being seen by surprisingly large numbers of consumers is high.

I published one bookrepparttar 106753 traditional way - and another onrepparttar 106754 Internet. In 50 months, I have received 6500 written responses regarding my electronic book. Well over 500,000 people read it (my Link Exchange meter registered c. 2,000,000 impressions since November 1998). It is a textbook (in psychopathology) - and 500,000 readers is a lot for this kind of publication. I am so satisfied that I am not sure that I will ever consider a traditional publisher again. Indeed, my last book was published inrepparttar 106755 very same way.

The demise of intellectual property has lately become abundantly clear. The old intellectual property industries are fighting tooth and nail to preserve their monopolies (patents, trademarks, copyright) and their cost advantages in manufacturing and marketing.

But they are faced with three inexorable processes which are likely to render their efforts vain:

The Newspaper Packaging

Print newspapers offer package deals of cheap content subsidized by advertising. In other words,repparttar 106756 advertisers pay for content formation and generation andrepparttar 106757 reader has no choice but be exposed to commercial messages as he or she studiesrepparttar 106758 content.

This model - adopted earlier by radio and television - rulesrepparttar 106759 internet now and will rulerepparttar 106760 wireless internet inrepparttar 106761 future. Content will be made available free of all pecuniary charges. The consumer will pay by providing his personal data (demographic data, consumption patterns and preferences and so on) and by being exposed to advertising. Subscription based models are bound to fail.

Thus, content creators will benefit only by sharing inrepparttar 106762 advertising cake. They will find it increasingly difficult to implementrepparttar 106763 old models of royalties paid for access or of ownership of intellectual property.

Disintermediation

A lot of ink has been spilt regarding this important trend. The removal of layers of brokering and intermediation - mainly onrepparttar 106764 manufacturing and marketing levels - is a historic development (thoughrepparttar 106765 continuation of a long term trend).

Consider music for instance. Streaming audio onrepparttar 106766 internet or downloadable MP3 files will renderrepparttar 106767 CD obsolete. The internet also provides a venue forrepparttar 106768 marketing of niche products and reducesrepparttar 106769 barriers to entry previously imposed byrepparttar 106770 need to engage in costly marketing ("branding") campaigns and manufacturing activities.

This trend is also likely to restorerepparttar 106771 balance between artist andrepparttar 106772 commercial exploiters of his product. The very definition of "artist" will expand to include all creative people. One will seek to distinguish oneself, to "brand" oneself and to auction off one's services, ideas, products, designs, experience, etc. This is a return to pre-industrial times when artisans ruledrepparttar 106773 economic scene. Work stability will vanish and work mobility will increase in a landscape of shifting allegiances, head hunting, remote collaboration and similar labour market trends.

Market Fragmentation

In a fragmented market with a myriad of mutually exclusive market niches, consumer preferences and marketing and sales channels - economies of scale in manufacturing and distribution are meaningless. Narrowcasting replaces broadcasting, mass customization replaces mass production, a network of shifting affiliations replacesrepparttar 106774 rigid owned-branch system. The decentralized, intrapreneurship-based corporation is a late response to these trends. The mega-corporation ofrepparttar 106775 future is more likely to act as a collective of start-ups than as a homogeneous, uniform (and, to conspiracy theorists, sinister) juggernaut it once was.



Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He is a columnist for Central Europe Review, United Press International (UPI) and eBookWeb and the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Web site:

http://samvak.tripod.com/


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