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.)

Conclusion

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

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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
Conclusion
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.

Open Source As a Mainstream Alternative

Why does Open Source matter? Is Open Source really free? Would proprietary software be entirely wiped out from the face of the earth in, say, fifty year's time? These are the questions that come tumbling upon the people of the IT Industry.

For me personally, Open Source has contributed a great deal to our organization's systematic approach to software usage, whether they be user-based applications or back-end server sides. I feel the organization has benefited immensely from such an undertaking. Open source software successfully delivered what it promised, from easy-to-use interfaces, to full-fledged functionality packed in those binary packages that's never before imaginable (considering it's developed by a community of enthusiasts, part-timers, and downright hobbyists).

While I'm not promoting Open Source in any way, it does speak the truth, for itself. Plain free software, most fully-functional and even comparably more useful to its payware counterparts (not to mention some perform better than their proprietary counterparts). No gimmicks, no frills, just plain good, working software. You'd never had to worry about violating copyrights, incriminating licenses, or the imposition of additional fees when using them (this being limited to usage, while some fees are imposed if you're a developer and want to sell for a profit. The licenses themself are usually under various Open Source licenses, GNU GPL (General Public License), BSD and Apache being the norm of some examples).

Open Source communities are getting larger and larger and they seem to appear by the thousands, if not tens of thousands. Creativity, innovation, and radical improvements are added to the already feature-packed softwares, benefiting millions across the globe. Patches are more frequently updated, as developers from different parts of the world, working from different time zones contributing to the software tree (as opposed to a few developers working to fix that decade-old bug)

The passion to develop helps create this phenomenon, some wanting recognition from the developer community as a whole would turn to open source as a staging monumental step to elevate status. Many such developers eventually work for well-known, high-profile dot com companies such as Google and eBay.

Software giants such as Microsoft, had begun undertakings to promote and sponsor Open Source conventions, seminars and conferences where permissible. This is a no surprise, if the world's moving in that direction, wouldn't it be also right to say you need to move in that direction too? Strangely enough, news had gone around, Microsoft asking some Linux distributions to join in a pact to co-develop a branch of Open Source operating system. While many of the Linux distributions rejected Microsoft's idea, some are still pondering if the joint-venture would be worth the effort.

While the idea has been around for decades, only in recent years does open source gain popularity as it's developer base increases exponentially. After all, would Steve Jobs be right when he said (quoting from Alan Kay) "People who are really serious about software should make their own hardware." ?

The propensity to say "I believe so" lingers in my mind.

Sunday, April 29, 2007

SOA & ECM Day Conferences - Singapore, 23rd & 24th of April 2007

Just got back from Singapore, 2 days ago, after attending the SOA & ECM (Service-Oriented Architecture & Enterprise Content Management) Day conferences there. The events were held by SDA Asia Magazine (a periodical focusing largely on Enterprise-Level IT). Sponsors of the events include big names in IT; Software AG, EMC, Serena Software, Sun Microsystems, HP (IT Governance & SOA Divisions), IBM (WebSphere Portal & WorkPlace Divisions), Interwoven Inc.

I get a better idea of what SOA (you can find a pretty good definition of SOA at xml.com) literally means, in terms of IT Governance; The management of ERP Systems, The integration of legacy systems with cutting edge technologies, How these processes can be tuned in accordance with a company's needs, and to loose-couple processes so as to be dynamically linked (instead of obsolete methods of statically linking processes). Basically, in a way, that is saying SOA implies a wide range of methods on how you can fine-tune your company's IT infrastructure to boost efficiency (so the CFO would stop bugging you about infrastructural and operational costs, ROI and overexpansion (in some cases) ). And efficiency literally means, costs are cut down, profits jump, ROI is faster than projected, and company gaining higher ground against competitors (so to say). Such includes, integration of systems where possible. Instead of running 2 or 3 parallel systems, you consolidate them to run on a single system, which automatically brings about cost savings in many areas (companies have a wide-range of pre-defined areas specific to each industry/sector).

While SOA is a rapidly growing new technology on the Enterprise-level systems, there's yet a need to gather up proof, on how effective SOA can accomodate current needs of upgrading old systems and in what time frame are we talking about here? How can SOA balance the needs of the CIO and the CFO, as we know the two different individuals has very different vantage points in terms of company expenditures and investments (who would always, undoubtfully, be in a tug-of-war with each other) ? Would ROI play a major role as a deciding factor, as whether SOA could or could not be implemented as a result of cost concerns? Time frame of which such tasks are being carried out? (too slow and the system fails, too fast and there would be problems later on).

Thus, challenges remain: How do we implement such a monolithic task of separating existing systems without causing glitches on the operational backend of it? or the infrastructural for that matter? How do we diagnose the problems of the current system, as we need to do that first, before any SOA implementation can be done. Would the big IT guys provide good enough solutions to accomodate the changing needs of the company? If they do, at what price tag? And for the wide range of different system integration needs, how much bang for the buck can they possibly ante up, as compared to what the Open Source community can?

ECM covered a less broad topic, as it discussed the delivery of content across a company, and how well content is managed. One of the presenters gave an example on a case he'd worked with; How an Indonesian company stacks its records of customer shipments & invoices in a warehouse that approximately held about 20 years of all transactional records (on paper), and all of a sudden, there was a need to find a customer's invoice among the large stacks of papers, and figuratively, it's like finding a needle in a haystack. It took the company 4 men, and 5 working days before finding the document needed. Moreover, after they found the document, it was processed manually from one division to another, so there can only be one person accessing that document simultaneously. All in all, the process took 10 days. Now, he compared that to a content management system, where a document is stored on a mainframe/blade system, and all one need to do is search for that document online, and have it ready in minutes, for the multiple personnels on multiple divisions. And there can be some 40-50 people from different divisions accessing the document simultaneously, saving time, effort and money!

SOA may be a defining factor for large enterprises, as IBM, HP and the like, had taken measurable steps in preparing for the IT Governance age in the coming days of IT-entrenched companies wanting to stay ahead of the pack. I reckon we need to look forward, that new methods of integration developed today, may kindle global skepticism, but unnecessarily do so in the near future. They may well be crucial tools to survive in the IT-oriented business environments.

If you wish to read up more on SOA, here are some links that I find useful:

http://en.wikipedia.org/wiki/Service-oriented_architecture


http://www.xml.com/pub/a/ws/2003/09/30/soa.html

Sunday, April 15, 2007

Indonesian Stocks Flying Sky High

For the past few months (notably this past month), stock prices had soared to record highs, (so did the JSX Composite Index). This is an interesting time to invest, as predictions are being conceived that stocks are climbing higher up still. I speculate the phenomenon is caused by firstly; liquid cash being poured into the country by foreign investors seeking a high profit margin in emerging markets. Secondly, mining sectors are growing exponentially in production thus setting record high operating incomes during the past year. Thirdly, metal prices continue to escalate. For instance, tin, which has gone up about 30% in price since last year, had caused so much hype, that goverment-run businesses are earning 3-figure profit margins in 2006 (PT Timah Tbk: TINS.JK , gaining an increase of 206% in net profit last year alone, compared to 2005). This will inevitably lead to better confidence on the market this year. Notwithstanding, other sectors such as finance & banking, agro-industry, infrastructure have all their share of good riddance on the bull market too. The indications are clear, the stocks are flying, the JCI is the third best performer in all Asian markets (with Shanghai being first, and Hong Kong second). So why not invest now !?

RSS Everything !

RSS this, RSS that..

I believe we've come to an age of getting used to having to obtain information at our fingertips, at the instant we want them, no more dilly-dallying when doing so. It gets to the point where I'm overly frustrated each time I can't access a piece of information I need to quickly enough.. So then I discovered RSS, a while back and walla..! No more looking up and foraging the whole pile of old, rusty, left-out-in-the-dark bookmarks! RSS has a fine way of publishing the right information for me, personal links that need to be visited every once in a while, and getting devotional readings has never been easier too! RSS keeps all the information at hand, and just by having an RSS reader, it's almost like you don't need a web browser (for browsing at least..). For a while, I've been using infoRSS (a plugin reader for the Firefox browser), but yesterday I had to uninstall it, because it's giving me a hard time. I can't get the configuration thingy figured out, it's way too complicated.. Nevertheless, I discovered Google Reader, a pretty neat web-based reader (you need to have a Google account to use it though) that's popular with everyone (almost) using RSS. It has cool functions to go with that, like "starring" your favorite RSS topics, just like how you star your favorite messages on Gmail, its interface is very similar to Gmail, so you won't have a hard time figuring out the options, menus, etc. It's worth the try if you're looking for a good, decent, straight-forward RSS reader, or if you haven't used one before. Since then, I've RSSed this, and RSSed that. I practically RSS everything I can get my hands on, to save myself time from opening too many browser tabs, getting lost somewhere and getting nowhere in the end.

So, if you've not used RSS before, why not give it a try. Look for the XML or RSS feed symbol on web pages, as they contain web feeds which can be viewed / read using any RSS reader (hundreds around, the most popular ones are: My Yahoo! and Google Reader, and a bunch of others I can't possibly remember). All you've gotta do is copy that link, and paste it on your RSS reader, or if your browser supports it as an add-on, just right-click on the link, and "Add link to RSS reader" (or other similar commands). There you have it, reading articles on the web has never been easier !

Monday, April 9, 2007

Professor Carol Dweck and Mindsets

My comment on Guy Kawasaki's post : "More on Professor Carol Dweck and Mindsets". I think I should buy and read the book, it looks interesting..

A Follow-up of My Previous Post: "Indonesia's Economic Outlook 2007"

As the title suggests... (see below)

The good fortune for domestic and International investors

Frank van Lerven

These were the returns on stocks for the year 2006 as recorded by Dow Jones and MSCI on Dec. 12, 2006:
World (in US$): +17.4 percent
Europe (in Euros): 14.4 percent
Asia Pacific : + 8.4 percent
U.S. (broad market): +12.3 percent
Asia Pacific excl. Japan: + 21.9 percent
Indonesia: +48.9 percent

These fine returns were preceded by similar, positive returns for every single year, going back to 2003. So, global and domestic investors are now looking at four years of positive returns, most of them in double digits! The JSX (the Jakarta Stock Exchange) has been going from one high to another (now 1,755), but the Dow Jones (now at 12,310) has also reached an all time high. To put this in perspective, the S&P 500 at 1,412 is still off its high, reached in 2000 (1,553), and the Nasdaq 2000 (currently trading at 2,437) is still far off its 2000 peak (5,049)

"Will investors be able to find investments providing similar returns in 2007, and if so, where?" is certainly a question on many investors' minds. By the same token, a prudent investor would be justified in asking another question: "After four years of sun, is there any chance of rain in 2007?" And when the possibility of "rain" is a realistic perspective, investors in the JSX need to be aware that: when it rains here, it pours!

In speaking with Indonesian friends in these last weeks, I definitely pick up that the "chase for high returns" is alive and well. Bankers advise Indonesian investors to consider investing in the JSX, China, Emerging markets and any other markets that have recorded 30 percent plus annual returns in recent years. Also, most analysts in the U.S. have become increasingly positive and confident about the markets, projecting returns in the 8-12 percent range. One of them is Abbey Cohen of Goldman Sachs, who earned some reputation as a bullish analyst in the late '90s.

The economy moves in cycles, and over time, will show phases of: Expansion, contraction (recession) and recovery. Generally speaking, stock prices go up in the phase of expansion, as the world has been experiencing for a couple of years now, but fall in the phase of contraction (recession).

Many studies have been done on the actual returns that private investors make, compared to the funds they invest in. And study after study shows that there is a big difference: Where funds make money, private investors often do not. The reason is: The majority of private investors join the bull market at the end of its run, and then sell when the bear market is about to end.

There are reasons for caution and one of them is the length of the current bull run. According to some commentators, the current bull run in the U.S. equity markets is almost unprecedented, as it is the second lengthiest since World War II and has lasted 89 percent longer than average (according to Ned Davis Research Inc.)!

This "fact" may carry a bias, depending on how one defines bull market, but it is indicative of a notion all investors should be aware of: We had a good run, lasting four years, and these runs do end! The indices presented here, the Dow Jones, FT World Index (both in U.S. dollar and Euros) and the JSX, all clearly show the good run investors have had. The Dow Jones index, going back to 1920, provides a truly long-term perspective.

Indonesian investors have had the best of all worlds for the last couple of years: Excellent returns in the JSX, excellent returns when investing overseas, and excellent returns in investing in property at home!

So, could we be at the end or in the latter phase of a bull run? Or, put in more economic terms: Are we getting close to the Peak of the phase of expansion? And is there a chance that the U.S. economy is heading for recession after a couple of years of strong growth rather than the "soft landing" that most analysts are expecting?

If a true recession scenario in the U.S. materializes, it will be bad for equity investors, wherever in the world you invest! Less than expected earnings will be the news of the day, and the U.S. market will head south. Recession in the U.S. will mean that the U.S. consumers have no money to spend, and this will immediately affect the global economy.

Economists are notoriously bad at predicting markets and psychologists-financial planners, such as myself, do not do better. So, trying to read the newspaper of 2007 does not make sense. However, what does make sense is to identify trends and topics that constitute the key factors influencing where the markets are heading in 2007, and developments in the U.S. will lead the way!

Right now, (time of writing, mid-December) the indicators do seem to point to the "soft landing" scenario and a continuation of the bull market for stocks. Some of the bullish indicators are:

o An unprecedented amount of take-over activity in both Europe and the U.S.

o Lots of cash ("liquidity") around.

Note: One of the trends of 2006 was "Private Equity funds" and "Hedge funds" flexing their muscles

o reasonable P/E ratios, e.g. for the U.S. at 15, Europe at 14 and Asian markets (excl. Japan) at 16.

o Continuing high growth in China, which may positively affect the Japanese economy

The indicators, which point to, at least, slower growth are:

o Lower economic growth figures for 2007 for most developing countries

o Slowing housing market in the U.S.

o Longer term U.S. bonds return less interest than short term bonds (the so called "inverted" yield curve), indicating that investors expect that interest rates will come down, and this would happen when growth slows.

Another factor is the U.S dollar! In the latter part of 2006, the U.S dollar started to drop further against the Euro and the Yen. Few analysts truly understand the specific timing of this downfall, as the U.S dollar has for a long time been seen as "overvalued". However, a further sharp decline would render the financial markets unstable.

So, investors who want to keep some kind of control over their investments should pay attention to:

o how the "slower growth" scenario in the U.S. unfolds. Interest rates staying at current levels in the U.S. (5.25 percent), or coming down slightly, inflation declining from 2.4 percent now to under 2 percent, probably mean that "the soft landing" is in place. A sharp decline in interest rates and inflation can cause turbulence in the stock markets.

o how the U.S dollar fares; if e.g. the Euro-U.S dollar conversion rate stays close to where it now stands (1.33), there would not be any negative effect, but if the rate moves beyond 1.4, this benign picture would alter.

If the "soft landing" in the U.S. materializes, there is, indeed, little to stop the Indonesian stock market from going further, and making new highs in uncharted territory. Interest rates in Indonesia will most likely continue to come down, and this will continue to make stocks attractive

The writer is CFP and FPC qualified financial planning professional.

INVESTMENT STRATEGIES FOR 2007:

Step 1: Assess your base currency

Is it the U.S. dollar, the Euro, the GBP or perhaps the IDR? As currency fluctuations are highly unpredictable, it is a sound advice to:

o Invest at least 50 percent of the stock section in your base currency (example: U.S. dollar holders investing in the U.S. stock market)

o Invest 90-100 percent of the fixed interest section in your base currency (example: Euro holders investing in Euro denominated bonds)

Step 2: Asses your tolerance for risk and diversify between asset classes

Stock markets are volatile and can experience downturns of 40-50 percent. Can you tolerate this kind of volatility and how much time do you have to recover from losses?

A guideline for allocating between the asset classes, considering your risk profile is:

Low risk : 80 percent fixed interest-20 percent stocks

Medium risk : 40 percent fixed interest-60 percent stocks

High risk : 20 percent fixed interest-80 percent stocks

Step 3 for U.S dollar, Euro, GBP investors:

o Invest 70-80 percent of your stock section in the U.S. and Europe (and most of it in the market of your base currency) and 20-30 percent in Asian markets and/or Emerging Markets;

o "Spread" the maturities in your fixed interest section by investing in bonds with short-, medium and long-term maturities. Alternatively, invest in well managed bond funds and/or inflation indexed bonds consider low risk "fund-of-fund" hedge funds", to replace part of the fixed interest section.

Step 3 for rupiah investors:

o Invest 50 percent of your stock section in the Indonesian market and 50 percent "overseas", predominantly in the U.S., Europe, and then Asian markets

o Invest at least 80 percent in Indonesian bonds with medium and long maturities and up to 20 percent in US$/Euro fixed interest funds (to diversify)

Step 4: Assess your appetite for truly high-risk investments (speculation)

If you have a desire to speculate, to get truly high returns, give this part of your financial assets a name: "the gambling envelope". Then consider:

* High growth markets such as India, China, entering these markets using mutual funds

* Playing stock index and currency futures

* Trading in options

* Investing in one stock

Be realistic with your expectations about returns in the Chinese stock market; this market may be overbought at current levels. Consider the Japanese stock market, as this has been the one market that did not perform in 2006, and so may be well positioned to catch up with the other global markets in 2007!

Indonesia's Economic Outlook 2007

Here's an article, predicting Indonesia's economic outlook in 2007. The impressive part is the performance of the stock market (JSX), so far it's moving up on record territories. It's interesting to note some sectors are performing extremely well, namely (as mentioned below) : mining, property, basic industries and manufacturing. These main sectors contribute largely, thus raising the JCSI level by some 50%. There's a whole lot of truth in what the columnist had to say, as I'm watching my personal investments in stocks and equity-based mutual funds skyrocket. So go do some research, and when you feel the time is right, invest in Indonesia's stock market !


Positive market perception in Indonesian stock market

Manoj Nanwani

The JCSI (Jakarta composite stock index) this year is Asia's third best performer in terms of volume, after Thailand's and Korea's. However, with recent happenings in both Thailand and the Korean peninsula, Indonesia's stock market is poised to lead the show in Asia.

The revised capital control measure that was put up initially by the Bank of Thailand left a bad taste in investors' mouth for months to come. On the other hand, the North Korea's nuclear standoff remains an unrealized yet real threat that pose as disincentive for investors to pour more money into South Korean stocks.

Hopefully, gone is the mental siege that for years had stemmed Indonesia's stock market from growing and developing optimally. The Jakarta Stock Exchange (JSX), the country's main exchange, has grown by almost 50 percent since the end of the first half, from around 1,200 to roughly 1,780 at present. That is the good news.

The better news is such growth has been purely driven by real improvement in the macro and micro economic environment, improved confidence of business and consumers towards the government's economic team, and the public's greater hope for a better future.

The even better news is: The market -- consisting of analysts, observers, players and investors -- finally acknowledges and confide to these real improvements.

Unfortunately, Indonesian stocks are not yet a regular in global investors' radar screen when it comes to emerging markets stocks. At least it is not yet one of the so called BRIC members -- investors' jargon for Brazil, Russia, India and China -- the darling of global capital inflows nowadays.

Whereas considering the similar demographic and dynamics of Indonesian market to the BRIC countries, this needs a further assessment and quick response from the Indonesian authorities in order to attract more global funds.

For a start, all macro economic indicators remain positive, and still improving. Closing this year, GDP is expected to reach 5.6 percent while, year-to-date inflation is 5.32 percent. The inflation figure that is much lower than any economist or analyst ever expected proves that Boediono has lived up to his earned reputation as an inflation tamer. Such achievement has maintained real interest rate highly consistent and competitive, thus safeguarding the rupiah from any sign of instability let alone weakening.

This allows Bank Indonesia to lower interest rate to 9.75 percent, which we expect to get further down to 9 percent at the end of first quarter next year.

This is good news for the banking industry, the manufacturing sector and the consumer goods sector.

In order to win a few more of the tougher-line and hard-won analysts and regional economists, Indonesia must present the right case with the right perspectives. In other words, Indonesia is currently experiencing the right process, has the right offers in terms of potential sectors and soon to have the right incentives.

For a start, Indonesia's moderate GDP growth deserves more than a glance. Although the figure is not too significant compared to the 7-8 percent growth across Asian countries this year, it remains a great achievement since Indonesia faced a much more challenging economic environment from last year to the middle of this year. This was mainly due to the government's decision to raise fuel price by an average of 126 percent in October 2005, thus instantly catapulted inflation to 17 percent and forced Bank Indonesia to double interest rate. Other Asian economies, in the mean time, relatively enjoyed a stable ride over the weakening U.S. and European economies.

On top of that, as global oil price has normalized to around US$56/barrel from over $70 previously, tensions have eased a lot throughout the globe, especially for consumers in the developed markets such as Europe and the U.S. This in turn allows exporters in the emerging markets, who previously feared a major decline for their exports to more than start hoping again. Indonesia is one of the world's major exporters for commodity, mineral and basic staple goods.

Indeed, exporters in Indonesia have taken advantage of the less-than-challenging economic condition at present to generate more sales, increase production, increase capacity and even replace their supply chain in order to make as much of the current momentum.

A recent survey by ABN AMRO Asia of Indonesian businesses, especially the manufacturing sector, showed a very positive consensus: Indonesian companies are planning to expand their businesses not because they want to, but because they need to.

True enough, a closer look into the Indonesian real sector reveals one highly promising yet underestimate fact: Indonesia's capacity utilization rate is at an all time high. Even higher than pre-crisis level.

Moreover, our findings show that while some Indonesian companies have started to expand their operation, increase their production capacity or raise inventory level, domestic private consumption remains strong and still rising. The Central Statistics Agency (BPS) shows that private consumption has increased by 1.66 percent on average per quarter and 2.99 percent on annual basis.

With the higher cash flow in the corporate books, such corporate expansion activities will be either self-funded or bank-rolled. However, with the currently declining interest rate, there should be mutual incentive for both lenders and borrowers to work together.

These corporate roll outs will present a long-awaited moment for the banking industry to start channeling credits profitably with much lower risk. We expect bank lending rate to grow by 20 percent next year from 9-11 percent this year, while GDP will grow to 6.3 percent next year with private consumption, export and investment as the backbone.

For many who have lost interest in relying on macroeconomic indicators, the question remains whether stock market rally will actually bring higher employment and prosperity for majority of Indonesians.

At the moment, the signs are positively say that it will. The current hype in the stock market may actually bridge the long-time divide between better macroeconomic indicators through the recapitalization of the so-called real sector.

In terms of the most prospective sectors mining, property, basic industries and manufacturing have been the main sectors driving the 50 percent growth of the JCSI in the last six months. While at the same time infrastructure, consumer goods and the service sectors have just begun to post an increasingly positive trend. Not to mention the government's real commitment to speed up infrastructure development. As this comes into realization, Indonesia will benefit from higher employment and rising income, which eventually will sustain private consumption even further.

Lastly, the agriculture sector especially those companies that grow palm oil will never get it wrong. More and more technology being developed by both government and private initiative to convert palm oil and other agriculture produce into becoming bio-fuel. As oil price will remain higher than normal, bio-fuel is really the next big thing. Indonesia is currently the world's second largest producer for palm oil after Malaysia.

In terms of landing the right picks, the small and medium businesses (SMB) sector have taken a lot of interest from banks, the government and private investors alike. This is happening for the right reason and will sustain overall growth for a longer term horizon. In the last one week alone, the second layer stocks have grown by 6.1 percent, higher than the 1.77 percent booked by the blue chips.

Minister of Finance Sri Mulyani Indrawati noted recently that the government wants not only higher growth but also high-quality growth.

Investors have welcome yet holding her closely on that statement. Investors are closely monitoring the capacity building and restructuring efforts across state bureaucracies and state-owned enterprises currently taking place. This tops the government's agenda in order to improve the state's ability and capacity to increase public spending.

So far, the result has been slow but really promising. Although at the end of the first half this year the government only spent 12 percent of the total investment spending allocated for 2006, another 12 percent was spent in the third quarter alone. With intense training and restructuring across government bureaucracy, the government expects to what is otherwise allocated for this year combined with next year's budget.

If spending is indeed picking up as planned and needed, private consumption and employment are both expected to rise. In line with increased government spending, banks will have more incentive to also bankroll the key sectors.

Now the government can worry less about the market than they should do about the economy. As mentioned, the areas of tax, investment and labor laws are crucial to be addressed immediately. Security, while has been stable so far, is not to be overlooked.

At the end, the market will close this year looking in hindsight that the Indonesian government has an economic team that is indeed competent, credible and committed to overturn one of the most challenging time in the history of the country's economy. At the moment, perception is gradually won as shown by fundamental bullish in the stock market.

This winning battle can be done faster and better. But time is of the essence here.

Thursday, April 5, 2007

Linksys Wireless Broadband Routers

I just came to realize Linksys has different versions of the Wireless Broadband Router WRT54G series. In particular, one that I bought about 2 weeks ago in Singapore, the basic WRT54G. There are different versions of the model, you should check yours before buying one of these devices. If possible, ask for the latest one (presumably, it's v8.0).

[Left: Linksys WRT54G version 3.1 . Notice the indicator lights are horizontally placed on the front panel]







[Left: Linksys WRT54G version 1.0 . Front panel looks more crammed, and indicator lights are vertically placed.









Here's more information on the
Linksys WRT54G Series, (including other sub-series such as the S, X and P). I think I'm gonna get the SRX200 wireless broadband router, WRT54GX2 on my next trip to Singapore, or should I ?

George Orwell vs G.K. Chesterton

I believe George Orwell was referring to G.K. Chesterton as well [implicitly], when he wrote the essay (see below). Let me quote from his book "Orthodoxy"..

"Let us begin, then, with the mad-house; from this evil and fantastic inn let us set forth on our intellectual journey. Now, if we are to glance at the philosophy of sanity, the first thing to do in the matter is to blot out one big and common mistake. There is a notion adrift everywhere that imagination, especially mystical imagination, is dangerous to man’s mental balance. Poets are commonly spoken of as psychologically unreliable; and generally there is a vague association between wreathing laurels in your hair and sticking straws in it. Facts and history utterly contradict this view. Most of the very great poets have been not only sane, but extremely business-like; and if Shakespeare ever really held horses, it was because he was much the safest man to hold them. Imagination does not breed insanity. Exactly what does breed insanity is reason. Poets do not go mad; but chess-players do. Mathematicians go mad, and cashiers; but creative artists very seldom. I am not, as will be seen, in any sense attacking logic: I only say that this danger does lie in logic, not in imagination. Artistic paternity is as wholesome as physical paternity. Moreover, it is worthy of remark that when a poet really was morbid it was commonly because he had some weak spot of rationality on his brain. Poe, for instance, really was morbid; not because he was poetical, but because he was specially analytical. Even chess was too poetical for him; he disliked chess because it was full of knights and castles, like a poem. He avowedly preferred the black discs of draughts, because they were more like the mere black dots on a diagram. Perhaps the strongest case of all is this: that only one great English poet went mad, Cowper. And he was definitely driven mad by logic, by the ugly and alien logic of predestination. Poetry was not the disease, but the medicine; poetry partly kept him in health. He could sometimes forget the red and thirsty hell to which his hideous necessitarianism dragged him among the wide waters and the white flat lilies of the Ouse. He was damned by John Calvin; he was almost saved by John Gilpin. Everywhere we see that men do not go mad by dreaming. Critics are much madder than poets. Homer is complete and calm enough; it is his critics who tear him into extravagant tatters. Shakespeare is quite himself; it is only some of his critics who have discovered that he was somebody else. And though St. John the Evangelist saw many strange monsters in his vision, he saw no creature so wild as one of his own commentators. The general fact is simple. Poetry is sane because it floats easily in an infinite sea; reason seeks to cross the infinite sea, and so make it finite. The result is mental exhaustion, like the physical exhaustion of Mr. Holbein. To accept everything is an exercise, to understand everything a strain. The poet only desires exaltation and expansion, a world to stretch himself in. The poet only asks to get his head into the heavens. It is the logician who seeks to get the heavens into his head. And it is his head that splits."


So what's "imagination"? and was he differentiating "mystical" with "psychological" ? It seems unlikely.. How do we justify that what he wrote was justifiable ? By trying to comprehend the metaphors used in this passage, it's as if he's referring to some other piece of the puzzle yet to be discovered [by the reader]. Anyhow, this passage had me thinking, as arguably as it seems, the author attempted to defend imagination against logic. I agree with what he had to say, in a figurative way, that logic drives people mad, but imagination, on the contrary, doesn't.

Politics and the English Language - An essay by George Orwell


This is kind of interesting, an old essay by George Orwell. It's practically about writing in general; as he described the inclination of authors, politicians, and journalists to replace the basic and simple words of the English language with intricate ones, thus altering their meanings altogether. This methodology, he explained, was used to indoctrinate the mass public of crafty ideologies such as communism, fascism, and socialism .. I came across this while reading one of Guy Kawasaki's post. You can find the original essay here.

---

George Orwell

Politics and the English Language

Most people who bother with the matter at all would admit that the English language is in a bad way, but it is generally assumed that we cannot by conscious action do anything about it. Our civilization is decadent and our language — so the argument runs — must inevitably share in the general collapse. It follows that any struggle against the abuse of language is a sentimental archaism, like preferring candles to electric light or hansom cabs to aeroplanes. Underneath this lies the half-conscious belief that language is a natural growth and not an instrument which we shape for our own purposes.

Now, it is clear that the decline of a language must ultimately have political and economic causes: it is not due simply to the bad influence of this or that individual writer. But an effect can become a cause, reinforcing the original cause and producing the same effect in an intensified form, and so on indefinitely. A man may take to drink because he feels himself to be a failure, and then fail all the more completely because he drinks. It is rather the same thing that is happening to the English language. It becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts. The point is that the process is reversible. Modern English, especially written English, is full of bad habits which spread by imitation and which can be avoided if one is willing to take the necessary trouble. If one gets rid of these habits one can think more clearly, and to think clearly is a necessary first step toward political regeneration: so that the fight against bad English is not frivolous and is not the exclusive concern of professional writers. I will come back to this presently, and I hope that by that time the meaning of what I have said here will have become clearer. Meanwhile, here are five specimens of the English language as it is now habitually written.

These five passages have not been picked out because they are especially bad — I could have quoted far worse if I had chosen — but because they illustrate various of the mental vices from which we now suffer. They are a little below the average, but are fairly representative examples. I number them so that I can refer back to them when necessary:

1. I am not, indeed, sure whether it is not true to say that the Milton who once seemed not unlike a seventeenth-century Shelley had not become, out of an experience ever more bitter in each year, more alien [sic] to the founder of that Jesuit sect which nothing could induce him to tolerate.

Professor Harold Laski (Essay in Freedom of Expression)

2. Above all, we cannot play ducks and drakes with a native battery of idioms which prescribes egregious collocations of vocables as the Basic put up with for tolerate, or put at a loss for bewilder.

Professor Lancelot Hogben (Interglossia)

3. On the one side we have the free personality: by definition it is not neurotic, for it has neither conflict nor dream. Its desires, such as they are, are transparent, for they are just what institutional approval keeps in the forefront of consciousness; another institutional pattern would alter their number and intensity; there is little in them that is natural, irreducible, or culturally dangerous. But on the other side, the social bond itself is nothing but the mutual reflection of these self-secure integrities. Recall the definition of love. Is not this the very picture of a small academic? Where is there a place in this hall of mirrors for either personality or fraternity?

Essay on psychology in Politics (New York)

4. All the ‘best people’ from the gentlemen's clubs, and all the frantic fascist captains, united in common hatred of Socialism and bestial horror at the rising tide of the mass revolutionary movement, have turned to acts of provocation, to foul incendiarism, to medieval legends of poisoned wells, to legalize their own destruction of proletarian organizations, and rouse the agitated petty-bourgeoise to chauvinistic fervor on behalf of the fight against the revolutionary way out of the crisis.

Communist pamphlet

5. If a new spirit is to be infused into this old country, there is one thorny and contentious reform which must be tackled, and that is the humanization and galvanization of the B.B.C. Timidity here will bespeak canker and atrophy of the soul. The heart of Britain may be sound and of strong beat, for instance, but the British lion's roar at present is like that of Bottom in Shakespeare's A Midsummer Night's Dream — as gentle as any sucking dove. A virile new Britain cannot continue indefinitely to be traduced in the eyes or rather ears, of the world by the effete languors of Langham Place, brazenly masquerading as ‘standard English’. When the Voice of Britain is heard at nine o'clock, better far and infinitely less ludicrous to hear aitches honestly dropped than the present priggish, inflated, inhibited, school-ma'amish arch braying of blameless bashful mewing maidens!

Letter in Tribune

Each of these passages has faults of its own, but, quite apart from avoidable ugliness, two qualities are common to all of them. The first is staleness of imagery; the other is lack of precision. The writer either has a meaning and cannot express it, or he inadvertently says something else, or he is almost indifferent as to whether his words mean anything or not. This mixture of vagueness and sheer incompetence is the most marked characteristic of modern English prose, and especially of any kind of political writing. As soon as certain topics are raised, the concrete melts into the abstract and no one seems able to think of turns of speech that are not hackneyed: prose consists less and less of words chosen for the sake of their meaning, and more and more of phrases tacked together like the sections of a prefabricated hen-house. I list below, with notes and examples, various of the tricks by means of which the work of prose-construction is habitually dodged.

DYING METAPHORS. A newly invented metaphor assists thought by evoking a visual image, while on the other hand a metaphor which is technically ‘dead’ (e. g. iron resolution) has in effect reverted to being an ordinary word and can generally be used without loss of vividness. But in between these two classes there is a huge dump of worn-out metaphors which have lost all evocative power and are merely used because they save people the trouble of inventing phrases for themselves. Examples are: Ring the changes on, take up the cudgel for, toe the line, ride roughshod over, stand shoulder to shoulder with, play into the hands of, no axe to grind, grist to the mill, fishing in troubled waters, on the order of the day, Achilles’ heel, swan song, hotbed. Many of these are used without knowledge of their meaning (what is a ‘rift’, for instance?), and incompatible metaphors are frequently mixed, a sure sign that the writer is not interested in what he is saying. Some metaphors now current have been twisted out of their original meaning without those who use them even being aware of the fact. For example, toe the line is sometimes written as tow the line. Another example is the hammer and the anvil, now always used with the implication that the anvil gets the worst of it. In real life it is always the anvil that breaks the hammer, never the other way about: a writer who stopped to think what he was saying would avoid perverting the original phrase.

OPERATORS OR VERBAL FALSE LIMBS. These save the trouble of picking out appropriate verbs and nouns, and at the same time pad each sentence with extra syllables which give it an appearance of symmetry. Characteristic phrases are render inoperative, militate against, make contact with, be subjected to, give rise to, give grounds for, have the effect of, play a leading part (role) in, make itself felt, take effect, exhibit a tendency to, serve the purpose of, etc., etc. The keynote is the elimination of simple verbs. Instead of being a single word, such as break, stop, spoil, mend, kill, a verb becomes a phrase, made up of a noun or adjective tacked on to some general-purpose verb such as prove, serve, form, play, render. In addition, the passive voice is wherever possible used in preference to the active, and noun constructions are used instead of gerunds (by examination of instead of by examining). The range of verbs is further cut down by means of the -ize and de- formations, and the banal statements are given an appearance of profundity by means of the not un- formation. Simple conjunctions and prepositions are replaced by such phrases as with respect to, having regard to, the fact that, by dint of, in view of, in the interests of, on the hypothesis that; and the ends of sentences are saved by anticlimax by such resounding commonplaces as greatly to be desired, cannot be left out of account, a development to be expected in the near future, deserving of serious consideration, brought to a satisfactory conclusion, and so on and so forth.

PRETENTIOUS DICTION. Words like phenomenon, element, individual (as noun), objective, categorical, effective, virtual, basic, primary, promote, constitute, exhibit, exploit, utilize, eliminate, liquidate, are used to dress up a simple statement and give an air of scientific impartiality to biased judgements. Adjectives like epoch-making, epic, historic, unforgettable, triumphant, age-old, inevitable, inexorable, veritable, are used to dignify the sordid process of international politics, while writing that aims at glorifying war usually takes on an archaic colour, its characteristic words being: realm, throne, chariot, mailed fist, trident, sword, shield, buckler, banner, jackboot, clarion. Foreign words and expressions such as cul de sac, ancien regime, deus ex machina, mutatis mutandis, status quo, gleichschaltung, weltanschauung, are used to give an air of culture and elegance. Except for the useful abbreviations i. e., e. g. and etc., there is no real need for any of the hundreds of foreign phrases now current in the English language. Bad writers, and especially scientific, political, and sociological writers, are nearly always haunted by the notion that Latin or Greek words are grander than Saxon ones, and unnecessary words like expedite, ameliorate, predict, extraneous, deracinated, clandestine, subaqueous, and hundreds of others constantly gain ground from their Anglo-Saxon numbers(1). The jargon peculiar to Marxist writing (hyena, hangman, cannibal, petty bourgeois, these gentry, lackey, flunkey, mad dog, White Guard, etc.) consists largely of words translated from Russian, German, or French; but the normal way of coining a new word is to use Latin or Greek root with the appropriate affix and, where necessary, the size formation. It is often easier to make up words of this kind (deregionalize, impermissible, extramarital, non-fragmentary and so forth) than to think up the English words that will cover one's meaning. The result, in general, is an increase in slovenliness and vagueness.

MEANINGLESS WORDS. In certain kinds of writing, particularly in art criticism and literary criticism, it is normal to come across long passages which are almost completely lacking in meaning(2). Words like romantic, plastic, values, human, dead, sentimental, natural, vitality, as used in art criticism, are strictly meaningless, in the sense that they not only do not point to any discoverable object, but are hardly ever expected to do so by the reader. When one critic writes, ‘The outstanding feature of Mr. X's work is its living quality’, while another writes, ‘The immediately striking thing about Mr. X's work is its peculiar deadness’, the reader accepts this as a simple difference opinion. If words like black and white were involved, instead of the jargon words dead and living, he would see at once that language was being used in an improper way. Many political words are similarly abused. The word Fascism has now no meaning except in so far as it signifies ‘something not desirable’. The words democracy, socialism, freedom, patriotic, realistic, justice have each of them several different meanings which cannot be reconciled with one another. In the case of a word like democracy, not only is there no agreed definition, but the attempt to make one is resisted from all sides. It is almost universally felt that when we call a country democratic we are praising it: consequently the defenders of every kind of regime claim that it is a democracy, and fear that they might have to stop using that word if it were tied down to any one meaning. Words of this kind are often used in a consciously dishonest way. That is, the person who uses them has his own private definition, but allows his hearer to think he means something quite different. Statements like Marshal Petain was a true patriot, The Soviet press is the freest in the world, The Catholic Church is opposed to persecution, are almost always made with intent to deceive. Other words used in variable meanings, in most cases more or less dishonestly, are: class, totalitarian, science, progressive, reactionary, bourgeois, equality.

Now that I have made this catalogue of swindles and perversions, let me give another example of the kind of writing that they lead to. This time it must of its nature be an imaginary one. I am going to translate a passage of good English into modern English of the worst sort. Here is a well-known verse from Ecclesiastes:

I returned and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

Here it is in modern English:

Objective considerations of contemporary phenomena compel the conclusion that success or failure in competitive activities exhibits no tendency to be commensurate with innate capacity, but that a considerable element of the unpredictable must invariably be taken into account.

This is a parody, but not a very gross one. Exhibit (3) above, for instance, contains several patches of the same kind of English. It will be seen that I have not made a full translation. The beginning and ending of the sentence follow the original meaning fairly closely, but in the middle the concrete illustrations — race, battle, bread — dissolve into the vague phrases ‘success or failure in competitive activities’. This had to be so, because no modern writer of the kind I am discussing — no one capable of using phrases like ‘objective considerations of contemporary phenomena’ — would ever tabulate his thoughts in that precise and detailed way. The whole tendency of modern prose is away from concreteness. Now analyze these two sentences a little more closely. The first contains forty-nine words but only sixty syllables, and all its words are those of everyday life. The second contains thirty-eight words of ninety syllables: eighteen of those words are from Latin roots, and one from Greek. The first sentence contains six vivid images, and only one phrase (‘time and chance’) that could be called vague. The second contains not a single fresh, arresting phrase, and in spite of its ninety syllables it gives only a shortened version of the meaning contained in the first. Yet without a doubt it is the second kind of sentence that is gaining ground in modern English. I do not want to exaggerate. This kind of writing is not yet universal, and outcrops of simplicity will occur here and there in the worst-written page. Still, if you or I were told to write a few lines on the uncertainty of human fortunes, we should probably come much nearer to my imaginary sentence than to the one from Ecclesiastes.

As I have tried to show, modern writing at its worst does not consist in picking out words for the sake of their meaning and inventing images in order to make the meaning clearer. It consists in gumming together long strips of words which have already been set in order by someone else, and making the results presentable by sheer humbug. The attraction of this way of writing is that it is easy. It is easier — even quicker, once you have the habit — to say In my opinion it is not an unjustifiable assumption that than to say I think. If you use ready-made phrases, you not only don't have to hunt about for the words; you also don't have to bother with the rhythms of your sentences since these phrases are generally so arranged as to be more or less euphonious. When you are composing in a hurry — when you are dictating to a stenographer, for instance, or making a public speech — it is natural to fall into a pretentious, Latinized style. Tags like a consideration which we should do well to bear in mind or a conclusion to which all of us would readily assent will save many a sentence from coming down with a bump. By using stale metaphors, similes, and idioms, you save much mental effort, at the cost of leaving your meaning vague, not only for your reader but for yourself. This is the significance of mixed metaphors. The sole aim of a metaphor is to call up a visual image. When these images clash — as in The Fascist octopus has sung its swan song, the jackboot is thrown into the melting pot — it can be taken as certain that the writer is not seeing a mental image of the objects he is naming; in other words he is not really thinking. Look again at the examples I gave at the beginning of this essay. Professor Laski (1) uses five negatives in fifty three words. One of these is superfluous, making nonsense of the whole passage, and in addition there is the slip — alien for akin — making further nonsense, and several avoidable pieces of clumsiness which increase the general vagueness. Professor Hogben (2) plays ducks and drakes with a battery which is able to write prescriptions, and, while disapproving of the everyday phrase put up with, is unwilling to look egregious up in the dictionary and see what it means; (3), if one takes an uncharitable attitude towards it, is simply meaningless: probably one could work out its intended meaning by reading the whole of the article in which it occurs. In (4), the writer knows more or less what he wants to say, but an accumulation of stale phrases chokes him like tea leaves blocking a sink. In (5), words and meaning have almost parted company. People who write in this manner usually have a general emotional meaning — they dislike one thing and want to express solidarity with another — but they are not interested in the detail of what they are saying. A scrupulous writer, in every sentence that he writes, will ask himself at least four questions, thus: What am I trying to say? What words will express it? What image or idiom will make it clearer? Is this image fresh enough to have an effect? And he will probably ask himself two more: Could I put it more shortly? Have I said anything that is avoidably ugly? But you are not obliged to go to all this trouble. You can shirk it by simply throwing your mind open and letting the ready-made phrases come crowding in. The will construct your sentences for you — even think your thoughts for you, to a certain extent — and at need they will perform the important service of partially concealing your meaning even from yourself. It is at this point that the special connection between politics and the debasement of language becomes clear.

In our time it is broadly true that political writing is bad writing. Where it is not true, it will generally be found that the writer is some kind of rebel, expressing his private opinions and not a ‘party line’. Orthodoxy, of whatever colour, seems to demand a lifeless, imitative style. The political dialects to be found in pamphlets, leading articles, manifestos, White papers and the speeches of undersecretaries do, of course, vary from party to party, but they are all alike in that one almost never finds in them a fresh, vivid, homemade turn of speech. When one watches some tired hack on the platform mechanically repeating the familiar phrases — bestial, atrocities, iron heel, bloodstained tyranny, free peoples of the world, stand shoulder to shoulder — one often has a curious feeling that one is not watching a live human being but some kind of dummy: a feeling which suddenly becomes stronger at moments when the light catches the speaker's spectacles and turns them into blank discs which seem to have no eyes behind them. And this is not altogether fanciful. A speaker who uses that kind of phraseology has gone some distance toward turning himself into a machine. The appropriate noises are coming out of his larynx, but his brain is not involved, as it would be if he were choosing his words for himself. If the speech he is making is one that he is accustomed to make over and over again, he may be almost unconscious of what he is saying, as one is when one utters the responses in church. And this reduced state of consciousness, if not indispensable, is at any rate favourable to political conformity.

In our time, political speech and writing are largely the defence of the indefensible. Things like the continuance of British rule in India, the Russian purges and deportations, the dropping of the atom bombs on Japan, can indeed be defended, but only by arguments which are too brutal for most people to face, and which do not square with the professed aims of the political parties. Thus political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness. Defenceless villages are bombarded from the air, the inhabitants driven out into the countryside, the cattle machine-gunned, the huts set on fire with incendiary bullets: this is called pacification. Millions of peasants are robbed of their farms and sent trudging along the roads with no more than they can carry: this is called transfer of population or rectification of frontiers. People are imprisoned for years without trial, or shot in the back of the neck or sent to die of scurvy in Arctic lumber camps: this is called elimination of unreliable elements. Such phraseology is needed if one wants to name things without calling up mental pictures of them. Consider for instance some comfortable English professor defending Russian totalitarianism. He cannot say outright, ‘I believe in killing off your opponents when you can get good results by doing so’. Probably, therefore, he will say something like this:

‘While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigors which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.’

The inflated style itself is a kind of euphemism. A mass of Latin words falls upon the facts like soft snow, blurring the outline and covering up all the details. The great enemy of clear language is insincerity. When there is a gap between one's real and one's declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink. In our age there is no such thing as ‘keeping out of politics’. All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred, and schizophrenia. When the general atmosphere is bad, language must suffer. I should expect to find — this is a guess which I have not sufficient knowledge to verify — that the German, Russian and Italian languages have all deteriorated in the last ten or fifteen years, as a result of dictatorship.

But if thought corrupts language, language can also corrupt thought. A bad usage can spread by tradition and imitation even among people who should and do know better. The debased language that I have been discussing is in some ways very convenient. Phrases like a not unjustifiable assumption, leaves much to be desired, would serve no good purpose, a consideration which we should do well to bear in mind, are a continuous temptation, a packet of aspirins always at one's elbow. Look back through this essay, and for certain you will find that I have again and again committed the very faults I am protesting against. By this morning's post I have received a pamphlet dealing with conditions in Germany. The author tells me that he ‘felt impelled’ to write it. I open it at random, and here is almost the first sentence I see: ‘[The Allies] have an opportunity not only of achieving a radical transformation of Germany's social and political structure in such a way as to avoid a nationalistic reaction in Germany itself, but at the same time of laying the foundations of a co-operative and unified Europe.’ You see, he ‘feels impelled’ to write — feels, presumably, that he has something new to say — and yet his words, like cavalry horses answering the bugle, group themselves automatically into the familiar dreary pattern. This invasion of one's mind by ready-made phrases (lay the foundations, achieve a radical transformation) can only be prevented if one is constantly on guard against them, and every such phrase anaesthetizes a portion of one's brain.

I said earlier that the decadence of our language is probably curable. Those who deny this would argue, if they produced an argument at all, that language merely reflects existing social conditions, and that we cannot influence its development by any direct tinkering with words and constructions. So far as the general tone or spirit of a language goes, this may be true, but it is not true in detail. Silly words and expressions have often disappeared, not through any evolutionary process but owing to the conscious action of a minority. Two recent examples were explore every avenue and leave no stone unturned, which were killed by the jeers of a few journalists. There is a long list of flyblown metaphors which could similarly be got rid of if enough people would interest themselves in the job; and it should also be possible to laugh the not un- formation out of existence(3), to reduce the amount of Latin and Greek in the average sentence, to drive out foreign phrases and strayed scientific words, and, in general, to make pretentiousness unfashionable. But all these are minor points. The defence of the English language implies more than this, and perhaps it is best to start by saying what it does not imply.

To begin with it has nothing to do with archaism, with the salvaging of obsolete words and turns of speech, or with the setting up of a ‘standard English’ which must never be departed from. On the contrary, it is especially concerned with the scrapping of every word or idiom which has outworn its usefulness. It has nothing to do with correct grammar and syntax, which are of no importance so long as one makes one's meaning clear, or with the avoidance of Americanisms, or with having what is called a ‘good prose style’. On the other hand, it is not concerned with fake simplicity and the attempt to make written English colloquial. Nor does it even imply in every case preferring the Saxon word to the Latin one, though it does imply using the fewest and shortest words that will cover one's meaning. What is above all needed is to let the meaning choose the word, and not the other way around. In prose, the worst thing one can do with words is surrender to them. When you think of a concrete object, you think wordlessly, and then, if you want to describe the thing you have been visualising you probably hunt about until you find the exact words that seem to fit it. When you think of something abstract you are more inclined to use words from the start, and unless you make a conscious effort to prevent it, the existing dialect will come rushing in and do the job for you, at the expense of blurring or even changing your meaning. Probably it is better to put off using words as long as possible and get one's meaning as clear as one can through pictures and sensations. Afterward one can choose — not simply accept — the phrases that will best cover the meaning, and then switch round and decide what impressions one's words are likely to make on another person. This last effort of the mind cuts out all stale or mixed images, all prefabricated phrases, needless repetitions, and humbug and vagueness generally. But one can often be in doubt about the effect of a word or a phrase, and one needs rules that one can rely on when instinct fails. I think the following rules will cover most cases:

  1. Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.
  2. Never use a long word where a short one will do.
  3. If it is possible to cut a word out, always cut it out.
  4. Never use the passive where you can use the active.
  5. Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent.
  6. Break any of these rules sooner than say anything outright barbarous.

These rules sound elementary, and so they are, but they demand a deep change of attitude in anyone who has grown used to writing in the style now fashionable. One could keep all of them and still write bad English, but one could not write the kind of stuff that I quoted in those five specimens at the beginning of this article.

I have not here been considering the literary use of language, but merely language as an instrument for expressing and not for concealing or preventing thought. Stuart Chase and others have come near to claiming that all abstract words are meaningless, and have used this as a pretext for advocating a kind of political quietism. Since you don't know what Fascism is, how can you struggle against Fascism? One need not swallow such absurdities as this, but one ought to recognise that the present political chaos is connected with the decay of language, and that one can probably bring about some improvement by starting at the verbal end. If you simplify your English, you are freed from the worst follies of orthodoxy. You cannot speak any of the necessary dialects, and when you make a stupid remark its stupidity will be obvious, even to yourself. Political language — and with variations this is true of all political parties, from Conservatives to Anarchists — is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. One cannot change this all in a moment, but one can at least change one's own habits, and from time to time one can even, if one jeers loudly enough, send some worn-out and useless phrase — some jackboot, Achilles’ heel, hotbed, melting pot, acid test, veritable inferno, or other lump of verbal refuse — into the dustbin where it belongs.

1946

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1) An interesting illustration of this is the way in which the English flower names which were in use till very recently are being ousted by Greek ones, snapdragon becoming antirrhinum, forget-me-not becoming myosotis, etc. It is hard to see any practical reason for this change of fashion: it is probably due to an instinctive turning-awayfrom the more homely word and a vague feeling that the Greek word is scientific. [back]

2) Example: ‘Comfort's catholicity of perception and image, strangely Whitmanesque in range, almost the exact opposite in aesthetic compulsion, continues to evoke that trembling atmospheric accumulative ginting at a cruel, an inexorably selene timelessness... Wrey Gardiner scores by aiming at simple bull's-eyes with precision. Only they are not so simple, and through this contented sadness runs more than the surface bitter-sweet of resignation’. (Poetry Quarterly.) [back]

3) One can cure oneself of the not un- formation by memorizing this sentence: A not unblack dog was chasing a not unsmall rabbit across a not ungreen field. [back]

THE END

____BD____
George Orwell: ‘Politics and the English Language’
First published: Horizon. — GB, London. — April 1946.

Reprinted:
— ‘Shooting an Elephant and Other Essays’. — 1950.
— ‘The Orwell Reader, Fiction, Essays, and Reportage’ — 1956.
— ‘Collected Essays’. — 1961.
— ‘Decline of the English Murder and Other Essays’. — 1965.
— ‘The Collected Essays, Journalism and Letters of George Orwell’. — 1968.

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Machine-readable version: O. Dag
Last modified on: 2004-07-24