It was a rainy morning of October 2008, Her Majesty waked
up. She asked for her dresses, as in the morning she will see Mr. Brown.
Honestly she liked much more Tony.
Never mind, during this hard times may be
Gordon can explain her something. She was a bit nervous. The financial markets
are shaken and she does not like such news. She remembered all the recessions
since the Great Depression. She definitely hates this.
Gordon came and she was listening him. And in her mind again
Tony. Why Tony let this man to talk so much and so complicated? She understands
not a single word.
Gordon left. She called Edward. Is there any chance to get
some explanation to these financial events? Edward looked a bit worried, but
promised to help.
She was wondering while finishing her tea. Today it got more
bitter taste than usual…
Few months later Edward came to her office;
Mam, I need you for a
presentation. So what is
this all about?
Your Majesty asked me if I could get some explanation for
the crisis. Please let me take you there.
Good Edward, just make sure they will speak English.
Certainly Mam…
Who will I meat this time?
Professor Luis Garciano.
She listened the man, all the analysis of the previous
situation as well as the possible ways to get out from it.
The Queen have asked one simple question:
‘How come nobody could foresee it?’
The
professor answered:
“I
think the main answer is that people were doing what they were paid to do, and
behaved according to their incentives, but in
many cases they were being paid to do the wrong things from society’s
perspective.”
(Guardian, 26 July, 2009 ) - See more
at:
The Queen went home and called Edward.
Edward, where did you hide this bright man till now?
1535 July 6th was a shiny day… Thomas was sitting in his
cell and felt a sort of relief. The last hours of his life. He accepted his
destiny.
Being and advisor to the King is not always a lucky job.
Anna is a clever woman,
very clever. Managed to pull in her whole family…
The King – I tried to save him, but cannot. The God will
judge him anyway…
Someone knocking on the door – Sir Thomas, we came for you…
The history changes right?
At 1535 if His Majesty did not like his advisor, they just
beheaded him. That is what happened to Thomas More and to many in his seat. Why
the King did not liked Thomas? Hmm… because he did stand for his values. And he
was ready to die for that. Thomas gave pretty good advices, but he also had
some principles.
What about today?
Today the economic science getting closer and closer to
Astrology or Fortune telling. However there is a big difference. The
astrologist or any fortuneteller are paid to predict our future. We pay and
they say what they think about.
Our modern day economists, sorry the majority of them are in
many ways sitting on the both ends of the economic processes.
They are the one
supposed to predict and guide their nations and businesses in their future
strategies, but on the other end they are by many ways the beneficiaries of
multiple private businesses. By the income the majority gets far higher
benefits from their “private” functions.
On the “lower levels” it is very clear, that the financial
advisors usually guide us for those financial products, which give higher
benefit for them, I mean for the advisors and not you as a customer…
Sounds funny right? In fact more complicated a scheme, more
chances you have to lose money. They all play on one single factor – your
secret desire – the human greed. They all promise you higher than the market
returns. But in fact this in general terms impossible. So at the end of the day
you will be happy to get out from such schemes and feel lucky if you did not
lose money. On the other end your financial advisor will make sure, that he
gets his payment the first day you entered into the deal…
Before the crisis majority of those so-called financial
advisers failed to present the truth to the customer. That was one of the major
problems leading to the catastrophe.
What happens to a doctor, if he gives the wrong medication,
or makes you harm due to incompetence or negligence. The doctor will be fined,
or prohibited from further practice or in worst case even jailed.
What happened to those advisors, who made you lose your
money?
Absolutely nothing. They got paid, they might said sorry and
now they are sitting in the same chairs or in some others and giving exactly
the same advises. And they make sure, that you do not read those small letters
at the bottom of the contract you just about to sign.
Think about this…
Do you think on the “higher levels” the situation is better?
Don’t be so naïve:
“Academic financial
economists hold many roles in the private financial sector, from serving on
boards to ownership of financial services firms. Often academic economists
serve as consultants for financial firms. The desire to obtain and hold a
consultancy, which serves as an additional source of income, may bias these
economists’ views of the appropriate contours of financial regulation. A
similar but stronger argument can be made for those economists that serve on
boards of important and large private financial companies or who work as
ongoing employees of the firm. Still other economists have founded or
co-founded their own financial services firms and retain either an ownership
role, a role as a chief economist or as a co-founder. It is clear that these
economists might have a vested interest in the nature of financial regulation.”
Just let me
give you one more sentence from the above study examining how much the “high
scholars” are involved in the private sector..
“More
specifically, of the nineteen economists that we included in our study, we
found that thirteen, or almost 70%, worked in some capacity with private
financial institutions. In our sample, two of the financial academic economists
are co-founders of private financial services firms where they work in key
positions, one as managing partner and the other as chief economist. In the
case of the former, the firm is owned by all the managing partners, making the
former an owner of the firm. In the case of the latter, we were unable to
determine ownership.
A third economist works for two banks, in one case as
president and in the other as director. Eight of the financial academic
economists serve on the board of directors of private financial firms and two
economists were identified as consultants or affiliated experts for private
financial firms. Since it is difficult to identify consultancies unless either
the company or the economist mentions it, it is likely that more than two
economists served as consultants.”
In the meantime study does not trace those cases, when the scholar’s
research is funded by a private entity. In case they would check this aspect as
well, it would definitely show even worst situation from the one they describe.
In general there must be a focus on those, who advise any
government and their relationship with the private and public sectors.
Otherwise we shall walk into the next disaster…
In general it makes no sense to let the wolf to look after
our lambs. And I let you think about one question.
How long shall we let this situation?
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