Tuesday, March 23, 2010

The Gold Standard: Solid as the Paper It's Written On

One often hears proponents of gold-based currency systems remarking that fiat currencies are nothing but "pretty pieces of paper" or "colored confetti" that are products of a system of legalized "counterfeiting" and "institutionalized fraud." Presumably, these sorts of references are made to highlight the supposedly solid, unassailable, and durable qualities of gold-based monetary arrangements as compared to the fragile, manipulable, and ephemeral qualities of fiat paper monetary institutions.

A few years ago it might have been possible to write off such commentary as the rants of an ideological fringe. In today's world this would be a mistake as it's clear that the ideas animating such rhetoric have penetrated deep into the mainstream consciousness, being propagated by prominent media personalities and touted by respectable analysts. In particular, these ideas have proved to be powerfully persuasive to a disaffected public that's besieged by a grave economic crisis and is looking for answers.

Therefore as people reflect upon the merits of gold-based monetary systems relative to those of fiat currency institutions, it's important to keep in mind a basic fundamental fact: The gold standard is a piece of paper.

The Gold Standard Is a Piece of Paper

That's right. The institution of the gold standard is nothing but a piece of paper on which it's written that a unit of a particular currency (e.g. USD) can be redeemed for a specific quantity of gold.

These pieces of paper on which gold-based monetary charters are written can be -- as they historically have been -- used and discarded in much the fashion of toilet paper.

This is how the gold standard life-cycle works: The government and/or citizens of a country spend beyond their means and acquire large debts. These debts are accounted for in units of the country's currency -- a currency which presently contains, or is convertible into gold at a legally fixed currency-to-gold ratio (exchange rate). The government, often encouraged by private debtors, decides to create new debased money containing, or convertible into reduced quantities of gold. Debtors, including the government, can now use the devalued currency to cancel their old obligations (acquired at the old currency-to-gold exchange rate).

See, "Is ObamaCare Good for Gold?"

Therefore, the first step in this scheme is to take the paper that the previous gold-standard law was written on and toss it into the trash bin. Second, with the stroke of a pen, a novel gold-to-currency exchange rate is etched onto a brand new piece of paper, and voila! A brand new spick-and-span gold-standard currency has been legally established to replace the old one! Finally, the new legally established exchange rate is then affixed on newly minted debased metallic coins and/or paper bills that the government and private debtors are then able to use to pay their debts. Rinse and repeat a few years/months later when the magnitude of public/private debt is once again deemed to be too onerous to be paid with money convertible at the current currency-to-gold exchange rate.

This, in a nutshell, is the sordid history of gold-based money, from pre-classical times to the Classical Age, from the Middle Ages through the Renaissance, and right up through the Modern Era.

The Golden Illusion

By providing a facade of value and solidity, gold standards have provided an illusion that's enabled governments and various private interest groups throughout human history to perpetuate mass fraud on their populations. The fraud I'm referring to, of course, is the surreptitious confiscation of the fruits of citizens' labor and savings through the process currency debasement.

Gold standards are a sort of "Jedi mind trick" in which people are fooled into thinking that the purchasing power of the money they hold -- whether paper or metallic -- is safe and secure because of the gold that supposedly backs it. However, the truth of the matter is that the value of any and all forms of money, whether paper or metallic, isn't worth much more than the paper that the monetary charter is written on. Governments can and do change the rules of the currency game at will, and at any moment. When one studies history -- as opposed to the historical fictions parroted by gold pamphleteers -- one comes to understand that the history of the gold standard is the story of the constant failure of this institution to provide societies with monetary stability. All gold-based currency systems inexorably collapse. As do all fiat money systems.

It's important to understand why all gold-based monetary systems eventually collapse. Throughout history, regardless of the type of government (monarchy, democracy, dictatorship, etc.) or the monetary laws that are formally written on the books, there's a perennial tendency for governments and citizens to spend beyond their means and become indebted. There's a concomitant tendency for citizens and their governments to want to extricate themselves of the consequences of their profligacy through the creation of new money through debasement of the metallic currency, and/or reduction the quantity of gold that's redeemable for paper bills, and/or other alterations to the terms of currency-to-gold convertibility. By changing the rules of the game arbitrarily and often, confidence in the purchasing power of a currency deteriorates progressively until eventually, the currency ceases to be used/accepted as a medium of exchange.

As it so happens, this is the exact same decadent process that leads to the collapse of fiat currency systems. There's no essential difference, theoretically or historically.

Ironically, when gold standards collapse, the subsequent inflation is often erroneously attributed to the failure of the fiat monetary systems that succeed it. Take the popular narrative of the inflation of the 1970s in the US, for example. This narrative clearly confuses correlation with causation.

See, "Secular Stock Bear vs. Secular Gold Bull."

In this case, as with all historical cases, the inflation that occurs after gold standards collapse is the direct consequence of the pattern of fiscal profligacy established during the gold-standard period. (Was it not the excessive debt accumulation that caused the collapse of the gold standard in the first place?) Certainly, the fiscal profligacy may continue when the nation switches to a fiat currency system, for indeed, once deficit spending has become a habit, it's difficult to revert. But the fact remains that the downward spiral of deficit spending financed by means of currency debasement was set in motion while the nation was on the supposedly solid and unassailable gold standard.

Gold standards have never addressed, and can never address, the root causes of monetary instability.

(Readers will note that ironically, after the final collapse of the gold standard system in the US in 1971, fiscal and monetary stability was reestablished in the 1980s under a fiat money regime.)


Gold-standard pamphleteers endlessly parrot the line that all fiat currencies in the history of mankind have eventually collapsed. Then they wax lyrical about how "for thousands of years" gold has served mankind as a bastion of economic stability and even economic liberty.

The truth is quite different: For thousands of years, gold-based monetary systems have been used by private counterfeiters and especially governments to defraud unsuspecting citizens of the fruits of their labor and their savings. Furthermore gold-based money has provided no guarantee against economic instability or political tyranny. Indeed, the failure of gold-based monetary systems knows no exception; in the history of mankind all such systems have eventually collapsed, usually after relatively short periods of time.

The fact of the matter is that gold standards are pieces of paper that are just as ineffective in preventing currency instability as the pieces of paper that fiat currency charters are written on. Human nature is such that the words printed on those pieces of paper are destined to be violated, and history has shown that in the long run, they always are.

The lesson of history is that the most effective restraints against the universal human impulses that are at the root of monetary instability have nothing to do with the materials that currencies are made of. The root causes of the problem of monetary instability, as well as the solutions, run much deeper.

Saturday, April 25, 2009

Deflationary Shocks: Helping Or Hurting The Economy?

Good Stuff


Deflationary Shocks: Helping Or Hurting The Economy?
  • On Tuesday April 21, 2009, 6:39 pm EDT

When an economy undergoes a deflationary shock, the implications can be both positive and negative for consumers and businesses. There is a big difference between the terms disinflation and deflation, which we will first go over before getting into the causes and effects of deflationary shocks, and how these shocks can affect the economy, consumers and businesses.

Disinflation usually occurs during a period of recession and manifests itself by slowing down the rate at which prices increase; this occurs as a result of a decrease in consumer sales. If the inflation rate drops to a lower level than before, technically that difference is disinflation.

Deflation, on the other hand, can be thought of as the opposite of inflation, or as negative inflation, and it occurs when the supply of goods and/or services rises faster than the supply of money.

Deflation and Its Causes
Deflation manifests itself as a simultaneous sustained contraction or decline in:

  • the general level of prices for goods and services that comprise the consumer basket (consumer price index)
  • business and consumer credit availability (credit/lending practices)
  • consumer demand triggered by a decline in the money supply
  • government spending
  • business investment spending
  • investment assets
The precursor or precondition of deflation can be a recessionary period (which can deteriorate to an economic depression), during which there is either an excessive extension of credit or a huge assumption of debt.

Deflation can be triggered by any combination of the following factors:

  • a decline in the money supply
  • an increase in the supply of goods or services, which exacerbate the situation and further lower prices
  • a decrease in the demand for goods
  • an increase in the demand for money
Either an increase in the demand for or a decrease in the supply of money will result in people wanting more money, which will result in a higher interest rate (price of money). The increased interest rates will result in decreased demand, as consumers and businesses will reduce borrowing money to make purchases.

If deflation is exacerbated, it can throw an economy into a deflationary spiral. This happens when price decreases lead to lower production levels, which, in turn, lead to lower wages, which lead to lower demand by businesses and consumers, which leads to further decreases in prices. Two sectors of the economy that have traditionally remained well-insulated from economic downturns are education and healthcare as their costs and prices may actually increase while the general level of prices for most goods and services declines.

Money Supply and Deflation
Let's examine the factors and components of deflation, the workings of each and how they impact the economy. We'll start with money supply and lending and credit availability.

The money supply is defined as the total amount of money that is available in an economy at a given time; it includes currency and the various types of deposits offered by banks and other depository institutions. Although money no longer has an intrinsic value, it does have four very valuable functions that facilitate the functioning of an economy and a society: it serves as a medium of exchange, unit of account, store of value and standard of deferred payment.

Types of Credit

Credit, and the extension of credit, is the ability of a debtor to access cash to accomplish goals of a financial or non-financial nature. Credit comes in two different forms and each form works and impacts the debtor differently.

The two types of credit are self-liquidating and the non-self-liquidating credit. Self-liquidating credit is usually a loan needed for the production of (capital) goods or provision of services, and it is for a fairly short to intermediate time period. Due to its nature, the use of such credit generates the financial returns and cash flow that enables the loan repayment and adds value to an economy. The non-self-liquidating type of credit is a loan that is used for the purchase of consumer goods (consumption); it is not tied to the production if goods or services, it relies on other sources of income or cash to be repaid and it tends to stay in the system for a long period of time as it does not generate any income or cash to liquidate itself. This type of lending and credit extension tends to be counterproductive and adds a substantial cost (including opportunity cost) instead of value to an economy, as it tends to burden production.

Lending is based on a dual principle: the willingness of the lender to extend credit and provide funds to consumers and businesses, and the ability of the borrower to repay the loan with interest at a given interest rate based on credit scores and ratings (price of money). Both principles rely on the lenders' and the consumers' confidence in each other, and a positive and upward production trend which enables the debtors to pay back their loan obligations. When that upward growth production trend slows down or stops so does confidence, which impacts the desire to lend and the ability to pay back loans.

Such conditions shift the focus of all participants in an economy from growth to conservation and survival. This translates to creditors becoming more conservative and careful on their lending practices and applications, which leads to a decline in consumer and business spending; this subsequently affects production because the demand for goods and services has declined. The decline in business and consumer spending exerts downward pressure on the prices of goods and services and leads to deflation.

Deflation's Impact on an Economy
What really happens during deflationary shocks? People increase their savings and spend less, especially if they are in fear of losing their jobs or other sources of income. The stock market experiences turbulent fluctuations and indicates a declining trend while at the same time there is a decrease in company buy-outs, mergers and hostile takeovers. Governments revise or effect increasingly strict regulation legislation and implement governmental structural changes. As a result of this behavior, investment strategies will switch to less risky and more conservative investment vehicles. In addition, investment strategies will favor tangible investments (real estate, gold/precious metals, collectibles) or short-term investments that tend to maintain their values and provide the consumer with more stable purchasing power.

Macroeconomic Perspective
From a macroeconomic perspective, deflation is caused by a shift in the demand (investment and saving equilibrium) and supply (liquidity preference and money supply equilibrium) curves for final goods and services and a decline in the aggregate demand (GDP), which monetary policy can impact and alter.

When the volume of money and credit transactions decline relative to the volume of goods and services available, then the relative value of each unit of money rises, making prices of goods fall. In actuality it is the value of money itself that fluctuates and not the value of the goods that is reflected in their prices. The price effects of deflation tend to occur and cut across the board in both goods and investment assets.

Microeconomic Perspective
From a microeconomic perspective, deflation affects two important groups: consumers and businesses.

Impact on the Consumer
These are some of the ways that consumers can prepare for deflation:

  • Pay down or pay off any non-self liquidating debt such as personal loans, credit card loans etc.
  • Increase the amount of savings out of each paycheck
  • Maintain retirement contributions despite stock market fluctuations
  • Seek out bargains and negotiate down for any durable goods that need to be acquired or replaced
  • If there is a feeling of insecurity concerning job continuation and stability or income generating assets, start seeking out alternative sources of income
  • Go back to school or update skills to enhance personal marketability
Impact on Business
The following are some of the ways that a business can prepare for deflation:

  • Develop an action plan that will provide alternatives to any of the business aspects, sectors or costs that will be impacted by deflation
  • Do careful planning on the production of goods and services and inventory reduction
  • Investment planning should focus on higher value goods or services and avoid higher cost/lower value ones
  • Increase investments that will boost productivity and reduce costs
  • Re-evaluate all costs and contractual agreements with clients and suppliers and take appropriate action as necessary
Deflation can be beneficial if producers/suppliers can produce more goods at a lower cost, leading to lower prices for consumers. This can be due to either cost-cutting techniques or more efficient production due to improved technology. Deflation can also be perceived as beneficial because it can increase the purchasing power of the currency, which buys more goods and services. However, deflation can also be harmful to an economy as it forces businesses to cut prices to attract consumers and stimulate the quantity demanded, which has further harmful effects. Deflation also has a harmful effect on borrowers because must they pay back loans in dollars that will buy more goods and services (higher purchasing power) than the dollars they borrowed. Consumers and/or businesses that procure new loans will raise the real or inflation-adjusted cost of credit, which is the exact opposite effect of what the monetary policy tries to accomplish to combat falling demand. Deflation forces a country's central bank to revalue its monetary unit and readjust its economic and regulatory policies to deal with deflationary shocks.

Monday, February 11, 2008

Coal In The Hole

Here I go again, aggrandizing the commodity, and the media hasn't got a way of losing it either. For the past few weeks, coal has been on the headlines of financial and energy stories. Prices have already surged past US$ 125 per metric tonne in Newcastle Port, Australia (a benchmark for Asian coal prices) in the week ending Feb 8th. The media hasn't been too comforting about it either, all the news reports ranting about how bad the supply constraints are, that miners literally are on their knees when it comes to answering customers' demands. Coking coal, used primarily for making steel, is predicted to jump beyond US$ 200 per tonne. There have also been rumors that an Asian steel company had paid a miner US$ 275 per tonne for coking coal, more than double last year's price.

Looks like, at this point in time, the whole world is scrambling for the same stuff the British were after almost a century ago. With countries ramping up domestic power capacity (coal-fueled) by some tens of Gigawatts, hundreds in China's case, to the already existing capacity, supply will get even more squeezed. And thanks to the recent extreme upscale of crude oil prices, we are all now fighting for the ultimate alternative: coal.

South Africa, one of the world's largest exporter of thermal coal, was hit by a devastating power crisis for the past few weeks, as coal-fired plants were running way beyond maximum capacity and literally couldn't handle the pressure anymore. The government is declaring an emergency which leads to closures of coal-delivery ports, halting exports to a crawl.

Indonesia, the largest single exporter of coal, can't off-take enough to satisfy the hunger as mines are already maxed out in production capacity. Bumi Resources, the largest Asian coal miner by asset size, corporate secretary, Dileep Srivastava, said in late January coal prices may well soar beyond the US$ 150 per tonne mark in the short-medium term time-frame.

The lack of infrastructural investments in railways and ports (so are heavy equipments such as barges and conveyers) around the world adds another heavy straw to the camel's back. Ships waiting to load, are backed up for months in Newcastle, Australia's biggest coal-loading port, which worsens matters and shows problems are not likely to dissipate in the near future due to the prolonged bottlenecks. Floods in the country (Australia plays a pivotal role in the coal supply chain as it currently holds the number two position in total export volume) have also squeezed the already tight market and increased the demand for coals from regions like Western Canada. Grande Cache Coal, a miner based in Calgary, has doubled its share price in the past week alone, closing at US$ 3.30 on Friday, Feb 8th.

Adding insult to injury, China is experiencing the worst winter in 50 years. Snow-blanketed roads and highways make it impossible to transport coal from the northwestern states of the country (that's where most of the coal deposits are) in time to supply China's 80% of power plants that run entirely on coal. Power coal supplies fall eerily to an all-time low of 4 days, where the suggested threshold level by the government is 3 weeks. China has also cancelled, and broke contracts, coal shipments to Japan and South Korea, who were obviously enraged by Wen Jiabao, the Chinese Premier's public statement to cut its exports entirely to those countries (in effect, China is halting all coal exports to every other country) starting early February. On receiving the news, the heads of state of the two countries scurried to get their hands on future binding contracts from Indonesia or India, and my guess is, with limited results.

In a related story, the world's largest miner, BHP Billiton, has upped the ante in an attempt to takeover long-time arch-rival Rio Tinto, part of the reason was to increase its stake in coal deposits. The acquisition, if successful, would bring about the largest coal deposit owned by a single company. The almost hostile bid came amidst surging coal prices, with Rio Tinto asking a far above premium to the current stock price.

Monday, January 14, 2008

Coal: The Other Black Gold

With oil prices surging well around the US$ 100/barrel mark, it's obvious oil-dependent industries such as those of power plants are looking into alternative sources of energy. They desperately need to be able to generate power using alternatives such as natural gas, and coal. Of the three main energy commodities, coal is the least expensive (behind natural gas and oil). As you might have expected, coal is the most abundant and it's worth noting that coal prices have surged threefold in 2007 alone.

China, for example, is hastening towards the launching of hundreds of new coal-fired power plants (roughly two in every week), and the US is doing the exact same thing, only on a different time frame. Why the move? Coal-fired plants generate 26% of the world's total energy output and coal is still reasonably cheap at around US$91.50/metric tonne (contract prices; and well above US$100/metric tonne for non-contract prices) compared to crude oil which is currently running at US$92/barrel (although the power generated per volume falls behind that of oil). But the commotion is that companies in emerging economies are scurrying forward to grab significant cuts of the pie in overseas mining companies (securing future contracts, thus supply, for years ahead). Consequently, China had stopped exporting coal in 2006, becoming a net importer of the commodity. This is the beginning of a major phenomenon, as China, being the fastest growing economy in the world (over 10% annual GDP growth, unofficial figures), with a population of well over 1.3 billion people, is desperately seeking to satisfy its hunger for commodities that are crucial in laying the foundation for its breakneck growth as an emerging world power. Essentially, It is on the blazing trail to energy addiction just like the US was decades ago. Today, the US is the world's biggest energy hog, consuming an alarming 30% of the world's total energy output. India's largest corporate group by asset size, Tata Group has been scrounging countries like Indonesia, Thailand and Vietnam for coal contracts and in early 2007, it even bought out a 30% stake of Kaltim Prima Coal and Arutmin mines wholly owned by Bumi Resources, Asia's largest coal miner based in Indonesia, for a reported value in excess of US$ 1.6 billion. The indication is clear, those with the liquidity to go forward and secure contracts would have done so hastily. Adding to the pandemonium, analysts are predicting it is becoming "the energy of the future", just as it were almost a century ago, when England turned its back on wood in favor of coal for the generation of thermal heat energy. How would these affect world coal supply? As supply can't be increased substantially overnight, prices would therefore automatically shoot skyward to cope with the torrential demand. Meanwhile, China is aggressively fighting for the lion's share of the commodity, sparking off worldwide explorations (and acquisitions) by dozens of Chinese companies, stretching from Africa to South America (China has been operating around 500 mines the past decade in the African continent alone). This ambitious search and exploration for more and more coal, has received the unsolicited attention of others, attracting inflammatory rantings from UN members saying China is staged to become the world's biggest polluter and emitter of greenhouse gases. I'm not going to go into the details of such issues: global warming and climate change. I'm emphasizing on coal as the other black gold as a commodity. Notwithstanding, China maintains its increasingly high consumption of coal, with miners digging almost 24-7 around the country (high death toll might also be the major contributing factor for criticism from the West blaming China for not doing enough to step up safety measures). And thanks to severe bottlenecks in coal delivery from Australian mines to its ports, due to the unusually heavy volume of rain, and shortage of railways and train carriages, prices have surged steadily for the past two years. Both China and India have been neck-and-neck in finding and discovering new mines across the globe especially in equatorial regions which are fertile grounds for coal explorations and excavations. Coal deposits in countries closer to the equator are said to be of prime quality in comparison to those found in the temperate regions of Russia and China.

As for an investment advice, look out for companies in the likes of Peabody Energy Corp in the US, and Xstrata Plc in the UK. These companies posted record annual gains (again, thanks to the skyrocketing coal prices and severely tight supply of the commodity in the world market right now). Do your own research, and invest in these companies. If you're smart and clear-headed enough to take on investments in coal-related companies (miners, contractors etc), then you'll reap the benefits of doing so well beyond your imagination.

Monday, October 8, 2007

Business As Usual, Not !

So here it comes again, the Lebaran or Idul Fitri holiday season in Indonesia. I'm thinking things might get really boring over the holidays, it's like I should've been better off working during the holidays. The idea of going on a trip during the holidays is unbearable, just for the very fact that places get so overly crammed (at least here in Indonesia), you can't possibly go anywhere without hearing children's cries, loud music, and annoying laughter. It's ridiculously difficult trying to get plane tickets and lodgings and worse if you're the last minute type. I always try to avoid those times. Even so, if the holidays were meant to be fun, I still can't see the real reasons for it. Shouldn't just people take leave and go on vacations? It makes it so much easier for people wishing to stay on working during dramatic periods. I might come up with something different for a change, like trying to work on partnerships or business deals overseas. That way, when the holidays comes, I could go take a plane and fly away, and come back in a few days without missing a single thing. That sounds great ! Just how busy is "busy", well, as promiscuous as it seems, the implication of "being busy" differs distinctly across the globe. One might say working from 9 to 5 gets them real busy, while some work over till the wee hours of first light yet they consider themselves far from being busy. Who's to say what? What's the relative point of "being busy"?

Imagine the hours wasted during the holidays with which otherwise could be used in productive ways. Eight hours a day, multiply that by a week, you have 56 wasted hours, times the population of this country, 250 million, that's 14 billion hours flying away. Such a pity, countless things could've been accomplished during that period. It makes me feel obnoxious & guilty at the same time. I can't stop but think, people are wasting so much precious time. Why would you or I for that matter, waste precious time when, really, you can't turn back the clock, ever! I'm not trying to arouse sarcasm all over my blog, but let's face it, we've had times where we'd rather be spending time at the office, doing some sort of work and getting the money for it too, of course! (or else, why would you?) So then the inevitable question slips in; how do you balance life and work? I take days off during my regular work days, go on little trips here and there. That should do it for me, life's balanced, while work is something more of an array of deranged amalgamation of money-making, self-neglecting, mind-provoking, (sweat-generating, sometimes) cycle of activities that is both a gift and a curse to mankind. A curse because people neglect their families, engaged on having affairs in the office, a little extreme isn't it, but it's true. Don't get me wrong, I'm far from being fond of stereotyping people but for the most part, work is good, keeps people busy, puts money on the table.

Am I already being a workaholic? I don't think so.. I don't even remember why the word "workaholic" was ever invented. It's almost like the word is universally being used to console those who hate work, and to taunt the hardworking society of this world. It just makes it sound so incredibly senseless when you're in your prime trying to do everything, everywhere, every time, out of every opportunity. Enough said, I'm preparing to kill time by piling up books to read up during the holidays. It's gonna be a long, dull and counter-productive holiday season, but then again, the world spins.

Monday, September 24, 2007

SOA Market Demand North Bound: IBM

This is pretty interesting. The demand for SOA is growing exponentially and so is its market share. A whopping US$ 160 Billion industry? Wow.. Never guessed it.

Friday, 7 September 2007

SOA Market Demand North Bound: IBM

The market for Service Oriented Architecture (SOA) is seeing a huge increase and there is a fundamental commitment to SOA as the future of process and application design, according to a new survey by IBM...

The market for Service Oriented Architecture (SOA) is seeing a huge increase and there is a fundamental commitment to SOA as the future of process and application design, according to a new survey by IBM.

The survey report, done by the Link Group for IBM, which drew more than 4,200 technical and business leaders from around the world, said more than 4,500 IBM customers globally have modeled their businesses around SOA, a business strategy that helps a company reuse existing technology to more closely align IT with business goals, helping to result in greater efficiencies, cost savings and productivity. Globally SOA is a USD 160 billion industry and rising fast.

The survey found both significant increases in budgets and the number of SOA projects aimed at new business challenges with 40 per cent of respondents indicating that between 10-30 per cent of overall IT budgets are being spent on SOA projects. Additionally, 53 per cent of respondents indicated that their budgets for SOA projects for 2007 increased between 10-20 per cent compared to 2006.

The survey also revealed that 67 per cent of the respondents said the key decision makers responsible for moving to an SOA strategy are business leaders including C-level executives and business managers. Additionally, 65 per cent of clients said that business leaders are also primarily responsible for selecting an IT partner to help achieve business goals in an SOA.

"Business leaders in ASEAN not engaged in the SOA decision making process will soon find themselves at a competitive disadvantage," said Dan Powers, Vice President, Worldwide SOA, IBM. "With its focus on optimizing and automating specific business processes and eliminating redundant ones, it is business leaders that will drive the adoption of SOA from early stages to enterprise wide adoption."

In their survey of 680 Asia Pacific (including Japan) companies, Dr. Patrick Chan, Research Director of Asia-Pacific Emerging Technologies Research at IDC, explained that most IT project managers have positive attitudes and strong understanding of SOA with mid-sized and larger corporates with more budget power. These are likely to adopt SOA in their organisation within the next 1 - 2 years.

As SOA is seeing an upward trend, S&S Media is organising a event from 21-23 November on SOA at Bangalore. SOA India 2007 is the first of its kind business and technical conference on SOA to the Indian Enterprise IT community of CIOs, CTOs, Management, IT directors, IT managers, IT architects, Network and Infrastructure specialists, Project Managers, Project Leaders, and Software Architects. SOA India 2007 will feature two separate, but parallel, tracks for a business and technical audience. Other fringe topics that will be part of the larger discussion include: Business Process Modeling (BPM), Agile best practices, BPEL, SaaS, MDM, BI, and Enterprise 2.0.

For more details visit http://www.sda-india.com/conferences/soaindia/# or www.soaindia2007.com

Shortage of SOA skills
Another interesting finding from the IBM SOA survey was that there is an increasing need for training staff so they possess the unique combination of both business and IT skills required for a business to realise the potential of SOA. Currently, half the respondents said they have less than 25 per cent of the necessary SOA skills to help their company meet long-term goals. However, 80 per cent of respondents are increasing SOA skills in their company this year, with more than 60 per cent focused on retraining existing staff on SOA. A combination of business and IT skills was cited by 68 per cent of the respondents as prerequisite to applying SOA to meet business goals.

To help address the SOA skills shortage, IBM has introduced a new, interactive SOA game as well as announcing certification programs to help organisations develop teams of individuals with so-called "T-shaped" skills, which encompass both deep business skills, represented by the horizontal line of the "T", and technical understanding, represented by the vertical line.

The new SOA game, called Innov8, is an interactive, 3-D educational BPM simulator designed to bridge the gap in understanding between IT teams and business leaders in an organization. This type of serious gaming – simulations which have the look and feel of a game but correspond to non-game events or processes such as business operations – has emerged as a successful method to retrain or develop new skills. This simulator is a result of the annual IBM SOA case study competition among graduate students at Duke University and the University of North Carolina. The game, which is played with a joystick, is based on advanced, commercial gaming technologies and allows players to visualize how an SOA affects different parts of the organisation. Together, users can literally see business processes, identify bottlenecks, and explore 'what if' scenarios before the SOA is deployed.

IBM has enhanced its SOA certification and education programs with new, self-paced and instructor-led courses conducted online and in classrooms. With more than 218 SOA-based courses for every level in an organisation, IBM's SOA curricula provide the roadmap to master the most highly sought-after SOA industry skills.

Here in the ASEAN region, IBM continues to foster relationships with higher education institutions through their Academic Initiative program and have already conducted Technology Briefing sessions in over 12 universities across ASEAN with well- respected institutions such as the National University of Singapore and the Institute of Technology, Bandung Indonesia (ITB). These Technology Briefings have impacted over 1500 students on SOA reuse and connectivity, Architecture, design, building of solutions and life-cycle management using the SOA platform, with the more recent ones being here in Singapore at the Nanyang Polytechnic with 112 students and at King Mongkut's University of Technology Thonburi (KMUTT) in Thailand with 172 students . These Technology Briefings are focused on creating greater awareness amongst the students to create SOA based solutions and provided them access to resources, leading to skills certification through the IBM Academic Initiative program.

An addtional finding was that 75 per cent of respondents said the primary reason for implementing SOA was to meet new business goals versus 25 percent that cited fixing existing business problems.

IBM recently made a series of announcements that directly address many of the survey's findings including:

- To help business leaders better understand the various stages of SOA evaluation and deployment, IBM announced plans for eight new industry-specific SOA Roadmaps spanning six industries. Each of the SOA roadmaps contains a business blueprint, which helps customers map the business side of an SOA strategy, and an industry-specific framework, which includes core technology used to execute the business blueprint. The new SOA Roadmaps focus on critical business process areas within a given industry. - Additionally IBM announced six new SOA professional services focused on SOA Diagnostic, SOA Strategy, SOA Implementation Planning, and Business Process Management Enabled by SOA, SOA Design Development and Integration, and SOA Management. New capabilities include infrastructure and strategy workshops for SOA Strategy professional services, web application and portal infrastructure services for SOA Design, Development and Integration and a new testing center of excellence for SOA management.

Tuesday, July 10, 2007

Poverty and Its Discontents

Poverty doesn't make the world go round. It creates the dreadful chasm that separates the haves and the utterly-deprived. I recently came across a TIME article which talks about world leaders finding solutions to "fix" terroristic mindsets around the world. The issue touches upon sensitive subjects including US foreign policy issues, and it makes much more sense, in that the world's most powerful nations should gather together and find a solution to alliviate the sufferings of third world nations, such as providing better education systems, deploying food aids, educating the public on health, closing in the gap between the rich and the poor, public facilities etc. Absolute poverty brings about desperation, mental breakdown of moral character, dysfunctional mindset, lack of willingness to understand right from wrong. While Abraham Maslow might have suggested the theoretical approach to the solutions to such problems, the practice is yet to be tested on. Countless efforts had been made to create a higher number of middle-class population in third world countries, attempts have been partly unsuccessful, due to the extreme difficulties facing aid workers, non-profit organizations in assisting those countries to fix the basic dilemnas of their own misjudgments.

The rich and poor cannot possibly have the same mindsets. What the rich considers a need, is beyond the wildest imagination of the poor. Take for example, the Internet. Why would the poor need internet access for? It is not in their best interest whether they are able to have it or not. It's the rich who needs it to trade shares on the stock markets, book plane tickets and go on luscious vacations in remote tropical islands, do research on the newest 6.0L SUVs available on the market. Another is; financial stability. How the heck are they supposed to grasp the concept of what an investment is when their level of education is somewhat meager, or minimal at best. What matters most to the poor is food, water and basic shelter. If even those basic needs are not within their reach, the list of other things coveted by the rich would be rendered useless. They are compelled to have such narrow mindsets, and it is literally inevitable. Their impulsive reluctance to differentiate the wrong from right deepens that chasm, which automatically sets the stage for barbaric, primitive and inhuman acts inflicted upon others in their society. Poor countries don't provide social welfare to the population, let alone education. For the most part, they need to rely on themselves to survive. Pollution-laden and heavily-congested streets elevate the stress level of the poor, as they commute to work each day not by cars, or buses but by bicycles and motorcycles thus exposing themselves to direct contact with the toxic and hazardous air (for the record, vehicles in third world countries don't require exhaust filters or catalytic converters to be installed in order to be street-legal). Time devaluation is another drawback in poor countries, they are just not as well educated to grasp the fundamental ideas of time management. Put it this way: You wouldn't be thinking of a dream house, or a dream vacation when you're constantly in survival mode, somewhere in the Amazon jungle for life ! That's almost how I figured it.

The sheer phychological pressure (and deprivation) exerted on individuals in these countries, somewhat catalyses, if not amplifies, the tendency to go to the extremes. These include joining Madrasahs, Jihad-oriented groups, religious sects teaching all sorts of terror tactics imaginable. Terror groups thrive in poor countries, largely because of state breakdowns, governments unable to even supply the basic needs of the people; clean potable water, decent transportation systems (roads, railways), financial stability, justifiable political system, fair trial of criminals, justice, equality and the list goes on. These undoubtfully contributes to how a person reacts to the allurement of getting involved in a Jihad, or terrorism war.