"In this world nothing can be said to be certain, except death and taxes." Benjamin Franklin wrote this iconic saying, in a letter to Jean-Baptiste Leroy in 1789. During the last 225 years we have seen unprecedented economic, scientific and technological growth. The three combined have given futurists the optimism that an average human lifespan of 100 years is only a generation away from becoming a reality. Is a 75 year mortgage, an 85 year retirement age and a century of living something that we all want?
Death and taxes, the two most inevitable consequences of human existence. You can try and cheat your way out of both but one will eventually catch up on you first and the other will be discovered later. Extending our life is something we all supposedly want. But have we thought about the consequences? I am not sure if I want to live long enough to witness the first internet court but space solar power sounds pretty cool. A longer life inevitably means a very late retirement, a long mortgage and a huge pension pot to cover it.
There are also global risks that we haven't seen or that have not been discovered yet. For instance, if they find a mobile phone link to cancer, it would be incredibly ironic to think that our drive to improve communication, resulted in none of us being able to communicate because we had become extinct as a species. I don't particularly want to be here when nuclear terrorism becomes a reality. Nor do I want to witness the green energy bubble bursting, a major earthquake in a mega city or an attack on urban water supply. Increasing our own timeline might be a data headache for Facebook but it might force us to be more careful about our planet as we might still be here when are children's children's children are having to sort it all out. By then it will be too late.
So what does the future hold. Human organ farms, virtual water and a single global e-currency might be welcomed with open arms. A graphic novel winning the Booker Prize and all babies being implanted with GPS and ID chips perhaps not.
Friday, 27 January 2012
Tuesday, 12 July 2011
Should death still be a taboo?
It is easy not to think about death when it doesn't or hasn't really affected your life. One of my neighbours passed away recently, just like that. Puff and she was gone, like smoke. She left behind a wonderful husband, a parrot called Max (who has been on Britain's got talent and in a James Bond Film) and a street of people who adored her and who all knew each other thanks to her friendly and warm persona. It is very rare for a street in south east London to be like a parody of Coronation Street, believe me. We will all miss Irene but it does beg the question: Why hadn't I really thought about death until this happened and why is the subject of death considered taboo in the western world?
Sogyal Rinpoche offers us a lucid explanation of his views in his work: "The Tibetan Book of Living and Dying." Sogyal believes that death is like a mirror, in which the true meaning of life is reflected. From his perspective, in Western society we don't look at life and death as a whole, we isolate death which is why there is so much fear and taboo around the subject. This makes complete sense to me. Whenever we ignore anything in life, it has a tendency to catch up and inject fear into us. If we aren't in control of when we die, maybe there isn't much point in worrying about it too much, yet still be unafraid to confront it like a mirror when it happens.
The pain and sense of loss I feel for Irene is burning strong. Maybe, now living with the immediacy of death is helping me sort out my priorities in life. Perhaps it will help me to live a less trivial life. I definitely feel more prepared to deal with death than I did last week. I hope I can continue to feel this way.
Sogyal Rinpoche offers us a lucid explanation of his views in his work: "The Tibetan Book of Living and Dying." Sogyal believes that death is like a mirror, in which the true meaning of life is reflected. From his perspective, in Western society we don't look at life and death as a whole, we isolate death which is why there is so much fear and taboo around the subject. This makes complete sense to me. Whenever we ignore anything in life, it has a tendency to catch up and inject fear into us. If we aren't in control of when we die, maybe there isn't much point in worrying about it too much, yet still be unafraid to confront it like a mirror when it happens.
The pain and sense of loss I feel for Irene is burning strong. Maybe, now living with the immediacy of death is helping me sort out my priorities in life. Perhaps it will help me to live a less trivial life. I definitely feel more prepared to deal with death than I did last week. I hope I can continue to feel this way.
Friday, 18 March 2011
Will everything in the future be connected?
In a world where we are becoming increasingly obsessed with technology and how it can save us time and money, I am already worrying about the repercussions it might be having on our society. When I was growing up, I used to play football outside my house every day with my group of friends. Cast your eyes on to playing fields all over the country and you don't see jumpers for goalposts any more. Instead our young ones are playing games against each other in the comfort of their bedrooms via their apple macs, Xboxes and Iphones. I have coined them the 'LOL' generation. Not only do they choose to communicate on-line, instead of the old fashioned way, they would rather abbreviate as much as possible. Here are a few examples:
EZ - Easy
CWOT - Complete Waste of Time
ROFL - Rolling on the floor laughing
And my favourite by far....
ROFLMFAO - Rolling on the floor laughing my fu**ing a**e off
How lazy can you get? Another concern is that a very popular abbreviation is FML - Fu*k my life, so clearly they aren't particularly happy about the situation. So what does this mean for the future? Apparently technology will accelerate so much throughout 2011 that eventually every device will have a web address. This could well include your oven, television, fridge and your phone! We can already e-mail a picture from a mobile to a digital frame. I'd like to think that even the cork or plastic in a wine bottle will also have an address. This would mean I could be receiving e-mails in the near future from Malbec, Merlot or Chateau Neuf Du Pape Daddy himself, to tell me today is the best day to get it out of the wine rack! Does this sound like a perfect world? You can imagine if my wine bottle could e-mail me, the government would force it to include some horrible health warning about responsible drinking. LOL!!!
EZ - Easy
CWOT - Complete Waste of Time
ROFL - Rolling on the floor laughing
And my favourite by far....
ROFLMFAO - Rolling on the floor laughing my fu**ing a**e off
How lazy can you get? Another concern is that a very popular abbreviation is FML - Fu*k my life, so clearly they aren't particularly happy about the situation. So what does this mean for the future? Apparently technology will accelerate so much throughout 2011 that eventually every device will have a web address. This could well include your oven, television, fridge and your phone! We can already e-mail a picture from a mobile to a digital frame. I'd like to think that even the cork or plastic in a wine bottle will also have an address. This would mean I could be receiving e-mails in the near future from Malbec, Merlot or Chateau Neuf Du Pape Daddy himself, to tell me today is the best day to get it out of the wine rack! Does this sound like a perfect world? You can imagine if my wine bottle could e-mail me, the government would force it to include some horrible health warning about responsible drinking. LOL!!!
Tuesday, 15 February 2011
The Credit Crunch - What actually caused our recession?
In one way or another we have all been affected by the recession. It is a topic that has been exhausted by the media, film, art, books, university lecturers and banter amongst friends down the local boozer. There are clearly many different opinions as to what caused this economic recession. I have heard family, friends and colleagues use many recognisable sound bites such as: the credit crunch, the War in Iraq, September 11th, Subprime mortgages, bad lending, the banks, the government and the list goes on. I decided to do some research and try, in my own words, to summarise objectively what has really happened to our economy.
Perhaps the best place to start is to clarify the difference between the Global Credit Crunch and a recession. Some people are under the illusion that both are the same thing. A credit crunch is simply the result of the banks becoming too nervous to lend us money and to each other. The irony is that this is usually the direct result of bad lending in the first place but we can come to that later. A recession is defined as two quarters of negative growth. It is essentially an indicator that the economy has slowed down. This is a result of people spending less, which causes jobs to be lost and even less money spent, spiralling the economy downwards. The credit crunch and the recession are obviously linked, with one causing the other. The media especially, have been quick to pass the buck of blame on to the banks. Perhaps in order to comprehend how the credit crunch happened, it is important to understand the concept of modern banking.
Banking in the UK can be traced back to the 17th Century. Goldsmiths were arguably the first real bankers and after the dissolution of monasteries by Henry VIII, began to accumulate vast stocks of gold. Many goldsmiths were associated with the Crown but following a seizure of gold held at the Royal Mint in the Tower of London by Charles I, they offered their services to the gentry and the aristocracy, as the Royal Mint was no longer deemed a safe place to store gold. Goldsmiths would keep the gold of wealthy merchants safe and give them notes of ownerships to exchange at other branches, the first bank notes. The goldsmiths had an epiphany moment, when they realised that the average customer only withdrew about 10% of their gold in any one year. They realised they could lend out the remaining gold at interest, in order to profit from their customers' gold deposits. So for every ounce of gold deposited, Goldsmiths were able to lend 10 ounces of gold and make interest on it. They realised they could secure property and all sorts of other assets against the loans, creating money out of thin air. The modern banking system was born. It might seem tempting to blame the bankers themselves for this system but it wouldn't have been possible if it wasn't for the obvious demand for credit. The only flaw of this system, is when credit is given to people who can't afford to pay it back, at the rate it has been lent to them.
Fast forward to the 2001 dot com bubble bursting and September 11th. Initially the costs of the terrorist attacks were borne disproportionately by a few industries, especially airlines, tourism and insurance; small businesses in the target areas and the City of New York as a whole. Not even thinking about their tragic impact on human life, the effects of the terrorist attacks were too small to significantly impact the USA's overall economic output. The events were too geographically localised to cause a national recession, unemployment rose much more sharply in New York compared to the rest of the country. What it did cause, however, was a crisis in consumer confidence and led to the Federal Reserve, which sets interest rates in the US and in a way for the world, to lower interest rates to as little as 1%. This caused a sharp fall in the cost of money and the supply of credit soared because the great exporting countries such as China, Japan and the Middle East were amassing vast surpluses of cash, which they could lend back to the west. It suddenly became cheap to borrow money anywhere. Leverage became common place and potentially explains the next step in the chain of events.
Leverage simply means borrowing to invest. During the last decade it was common place for people to borrow more against the already inflated value of their assets. For example, when we borrow for a mortgage we are leveraging. Take this common scenario a few years ago when the property market was booming. If I put a 10K deposit on a 100K home and borrow the other 90K and the cost of the house rises to 110K, I have doubled my initial investment to 20K, a 100% profit. The magic of using the banks money means the more you borrow, the more money you can make. This set a very dangerous precedent, because it only takes a batch of bad credit to cause a ripple effect on the market. Take a bow ladies and gentlemen, Mr Subprime.
Subprime lending simply means making loans to people who may have difficulty keeping up with the repayment schedule. Therefore a subprime mortgage or a subprime credit card is a loan given to someone that has a bad credit rating. Another term commonly used is a Ninja loan; no income, no job and a no assets loan. The Investment Banks realised that the Building Societies giving people mortgages, wanted to keep their books clean and so the Goldmans, Morgan and Stanleys and JP Morgans of the world discovered they could take on this debt and repackage it into financial securities they could then sell to investors. A Mortgage Backed Security or an MBS, is similar to a Bond but created from mortgage debts. A CDO (Collateralised Debt Obligation), is created by bundling a bunch of people's mortgages and putting them into different risk classes or tranches. Lets say for arguments sake you have three different entry levels to invest in; tranche A, tranche B and tranche C. Tranche A would mean little to no risk, B would mean medium risk and C a high risk. In theory the banks are supposed to pay a ratings agency such as Moody's or Fitch to rate the risk of each person's mortgage or credit, so that they can be categorised properly. But what would happen if instead of doing this, they cut a few corners and simply mixed the bad eggs (subprime mortgages) with the good eggs. The subprime mortgage crisis was caused by doing exactly this, 'bundling' American subprime and American regular mortgages, which were supposed to be sold in separate markets. The rate of return in theory looks superb to an investor, as subprime borrowers pay higher premiums and the loans were secured against saleable real-estate so theoretically could not fail. But finally and perhaps inevitably, such borrowers began to default in large numbers.The inflated housing market bubble burst, property valuations plummeted and the real rate of return could not be estimated. Therefore, confidence in these financial instruments such as CDOs collapsed and were almost worthless and considered to be 'toxic assets', regardless of their composition or performance. This caused banks such as Lehman Brothers to declare bankruptcy as they were heavily exposed to the subprime mortgage crisis, as their books were littered with these toxic assets. When Lehman's was allowed to fail, (beautifully parodied in the film Wall Street, Money Never Sleeps) the governments of the world realised they had to bail out the rest of the banks to stop the financial markets collapsing. Cue the media frenzy that followed and negativity towards the bankers, we needed a scape goat and we found one.
So who is actually to blame for the mess we find ourselves in? Do we blame the origins of the banking system that encouraged lending? Do we blame the terrorists for September 11th who caused the world to panic and the Federal Reserve to keep interest rates low, making credit cheap and readily available? Do we blame the banks for failing to properly create financial instruments that caused the market to implode? Do we blame the governments of the world for not regulating the banks properly? Or do we blame the consumers themselves for getting into debt when they knew they had no realistic chance of making their repayments? The answer perhaps is that everyone is to blame. A lack of education and understanding throughout our history could be the answer but then that poses the same finger blaming as to who should have been educating us. We probably should have all been educating ourselves. Greed is an inordinate desire to acquire or possess more than one deserves especially with respect to material wealth. Could the answer to all of this simply be 'Greed'? Maybe Gordon Gekko was on to something.
Perhaps the best place to start is to clarify the difference between the Global Credit Crunch and a recession. Some people are under the illusion that both are the same thing. A credit crunch is simply the result of the banks becoming too nervous to lend us money and to each other. The irony is that this is usually the direct result of bad lending in the first place but we can come to that later. A recession is defined as two quarters of negative growth. It is essentially an indicator that the economy has slowed down. This is a result of people spending less, which causes jobs to be lost and even less money spent, spiralling the economy downwards. The credit crunch and the recession are obviously linked, with one causing the other. The media especially, have been quick to pass the buck of blame on to the banks. Perhaps in order to comprehend how the credit crunch happened, it is important to understand the concept of modern banking.
Banking in the UK can be traced back to the 17th Century. Goldsmiths were arguably the first real bankers and after the dissolution of monasteries by Henry VIII, began to accumulate vast stocks of gold. Many goldsmiths were associated with the Crown but following a seizure of gold held at the Royal Mint in the Tower of London by Charles I, they offered their services to the gentry and the aristocracy, as the Royal Mint was no longer deemed a safe place to store gold. Goldsmiths would keep the gold of wealthy merchants safe and give them notes of ownerships to exchange at other branches, the first bank notes. The goldsmiths had an epiphany moment, when they realised that the average customer only withdrew about 10% of their gold in any one year. They realised they could lend out the remaining gold at interest, in order to profit from their customers' gold deposits. So for every ounce of gold deposited, Goldsmiths were able to lend 10 ounces of gold and make interest on it. They realised they could secure property and all sorts of other assets against the loans, creating money out of thin air. The modern banking system was born. It might seem tempting to blame the bankers themselves for this system but it wouldn't have been possible if it wasn't for the obvious demand for credit. The only flaw of this system, is when credit is given to people who can't afford to pay it back, at the rate it has been lent to them.
Fast forward to the 2001 dot com bubble bursting and September 11th. Initially the costs of the terrorist attacks were borne disproportionately by a few industries, especially airlines, tourism and insurance; small businesses in the target areas and the City of New York as a whole. Not even thinking about their tragic impact on human life, the effects of the terrorist attacks were too small to significantly impact the USA's overall economic output. The events were too geographically localised to cause a national recession, unemployment rose much more sharply in New York compared to the rest of the country. What it did cause, however, was a crisis in consumer confidence and led to the Federal Reserve, which sets interest rates in the US and in a way for the world, to lower interest rates to as little as 1%. This caused a sharp fall in the cost of money and the supply of credit soared because the great exporting countries such as China, Japan and the Middle East were amassing vast surpluses of cash, which they could lend back to the west. It suddenly became cheap to borrow money anywhere. Leverage became common place and potentially explains the next step in the chain of events.
Leverage simply means borrowing to invest. During the last decade it was common place for people to borrow more against the already inflated value of their assets. For example, when we borrow for a mortgage we are leveraging. Take this common scenario a few years ago when the property market was booming. If I put a 10K deposit on a 100K home and borrow the other 90K and the cost of the house rises to 110K, I have doubled my initial investment to 20K, a 100% profit. The magic of using the banks money means the more you borrow, the more money you can make. This set a very dangerous precedent, because it only takes a batch of bad credit to cause a ripple effect on the market. Take a bow ladies and gentlemen, Mr Subprime.
Subprime lending simply means making loans to people who may have difficulty keeping up with the repayment schedule. Therefore a subprime mortgage or a subprime credit card is a loan given to someone that has a bad credit rating. Another term commonly used is a Ninja loan; no income, no job and a no assets loan. The Investment Banks realised that the Building Societies giving people mortgages, wanted to keep their books clean and so the Goldmans, Morgan and Stanleys and JP Morgans of the world discovered they could take on this debt and repackage it into financial securities they could then sell to investors. A Mortgage Backed Security or an MBS, is similar to a Bond but created from mortgage debts. A CDO (Collateralised Debt Obligation), is created by bundling a bunch of people's mortgages and putting them into different risk classes or tranches. Lets say for arguments sake you have three different entry levels to invest in; tranche A, tranche B and tranche C. Tranche A would mean little to no risk, B would mean medium risk and C a high risk. In theory the banks are supposed to pay a ratings agency such as Moody's or Fitch to rate the risk of each person's mortgage or credit, so that they can be categorised properly. But what would happen if instead of doing this, they cut a few corners and simply mixed the bad eggs (subprime mortgages) with the good eggs. The subprime mortgage crisis was caused by doing exactly this, 'bundling' American subprime and American regular mortgages, which were supposed to be sold in separate markets. The rate of return in theory looks superb to an investor, as subprime borrowers pay higher premiums and the loans were secured against saleable real-estate so theoretically could not fail. But finally and perhaps inevitably, such borrowers began to default in large numbers.The inflated housing market bubble burst, property valuations plummeted and the real rate of return could not be estimated. Therefore, confidence in these financial instruments such as CDOs collapsed and were almost worthless and considered to be 'toxic assets', regardless of their composition or performance. This caused banks such as Lehman Brothers to declare bankruptcy as they were heavily exposed to the subprime mortgage crisis, as their books were littered with these toxic assets. When Lehman's was allowed to fail, (beautifully parodied in the film Wall Street, Money Never Sleeps) the governments of the world realised they had to bail out the rest of the banks to stop the financial markets collapsing. Cue the media frenzy that followed and negativity towards the bankers, we needed a scape goat and we found one.
So who is actually to blame for the mess we find ourselves in? Do we blame the origins of the banking system that encouraged lending? Do we blame the terrorists for September 11th who caused the world to panic and the Federal Reserve to keep interest rates low, making credit cheap and readily available? Do we blame the banks for failing to properly create financial instruments that caused the market to implode? Do we blame the governments of the world for not regulating the banks properly? Or do we blame the consumers themselves for getting into debt when they knew they had no realistic chance of making their repayments? The answer perhaps is that everyone is to blame. A lack of education and understanding throughout our history could be the answer but then that poses the same finger blaming as to who should have been educating us. We probably should have all been educating ourselves. Greed is an inordinate desire to acquire or possess more than one deserves especially with respect to material wealth. Could the answer to all of this simply be 'Greed'? Maybe Gordon Gekko was on to something.
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