All That Glitters is Not Gold

November 22, 2008 by
Filed under: Current Affairs and Politics, Dr Wong Wee Nam 

Written by Dr Wong Wee Nam
21 November 2008

“All professions are conspiracies against the laity.”
— George Bernard Shaw

When we were in school, one of the unforgettable proverbs we learnt was “All That Glitters is Not Gold”. Another was “Don’t Judge a Book by its Cover”. For all intents and purposes these proverbs taught us to be more skeptical, more discerning and not to be easily taken in by propaganda.

The recent financial crises and economic events show that in this world of mass marketing, botox, silicone implants, controlled media, irresponsible press and proliferation of experts on whose opinions seem like absolute truths, it is not easy to inoculate ourselves against mass persuasion and herd–thinking. In the world where pursuit of money has become the primary goal, it is not hard to be blinded by any glitter.

For years we have been told that we must pay for top talents of the world. Without the top talents, we would lag behind. We accepted that because we thought that the world was too complex for ordinary mortals to manage without the handing over the reins to the talents and experts.

But where are the experts now? Instead of bringing prosperity and wealth, the financial experts are the main cause of the economic catastrophe that we are witnessing now. Now we know that top talents, when they make a mess, can really create havoc and bring a lot misery to common people by causing them to lose their life-savings. Though experts have appeared to try and find a solution to the crises, we know they are as helpless as every one of us. They must appear to do something so that when the problem irons itself up everyone will be grateful to them.

John Kenneth Galbraith had seen through this hollowness of expertise. In his book, “The Economics of Innocent Fraud”, commenting on experts, he said that in the economic, and especially the financial world, prediction of the unknown and unknowable is a cherished and often well-rewarded occupation.

“The men and women so engaged believe and are believed by others to have knowledge of the unknown; research is thought to create such knowledge. Because what is predicted is what others wish to hear and what they wish to profit or have some return from, hope or needs cover from reality,” he wrote. “….those employed or self-employed who tell of the future financial performance of an industry or firm, given the unpredictable but controlling influence of the larger economy, normally do not know that they do not know.”

In Singapore, we too like to pay top money for so-called top talents, especially foreign ones. We even pay good money for second-rated foreign talents. With so much top and second-rate talents around, it is surprising they could not help prevent us from being the earliest in this region to go into recession.

The beauty of being a talent is not only in the high pay but in the absence of blame. For example, when things turn bad, the blame is not on the management but on the market forces, absence of public restraint, competition, high oil prices and so on. Of course when remedial actions are taken, the top talent is not sacked but may even be rewarded with severance pay and other compensations that are written into the contract. It is often the ordinary workers, who are the least responsible for the bad performance of the corporation, who will be asked to give up the jobs to save the company.

So in this world of mass marketing, botox, silicone implants, mass media and paper-armed experts, the common folks must wake up and realise that there are plenty of mediocre posers and rotten apples, very well-camouflaged with titles, degrees and impressive dossiers, around.

This, however, is not a new and modern phenomenon. These people have been around even in ancient times as this story told by Liu Ji (明刘基)of Ming Dynasty shows:

In Hangzhou, there was a fruit seller whose oranges were so good that they could last the whole year without losing their lustre and colour. The skin was as smooth as jade and as shiny as gold. However, when a buyer peeled off the skin, the inside was as rotten as cotton.

When an irate customer asked him why he had tried to deceive people, he replied with a smile, “Oh, the world is full of people who swindle and deceive. Am I the only one? Take those arrogant generals sitting on chairs covered with tiger skins and armed with military tallies. Do you think they can even fight a war? How about those officials wearing the exalted black gauze cap and the jade belt? Are they really capable of running the country? At the moment, the people are suffering but they do nothing to help. They are also doing nothing to check the evil doings of the lower officials. They are doing nothing the whole day except eating the grains produced by the common folks. Aren’t these people like gold and jade on the outside but as rotten as cotton inwardly? Why are you blind to these people but only focus on a poor fruit seller like me?”

【原文】杭有卖果者,善藏柑,涉寒暑不溃。出之烨然,玉质而金色。置于市,贾十倍,人争鬻之。予贸得其一,剖之,如有烟扑口鼻,视其中,干若败絮。予怪而问之曰:“若所市于人者,将以实笾豆,奉祭祀,供宾客乎?将炫外以惑愚瞽也?甚矣哉为欺也。”

卖者笑曰:“吾业是有年矣,吾赖是以食吾躯。吾售之,人取之,未尝有言,而独不足子所乎?世之 为欺者不寡矣,而独我也乎?吾子未之思也。今夫佩虎符、坐皋比者,洸洸乎干城之具也,果能授孙吴之略耶?峨大冠、拖长绅者,昂昂乎庙堂之器也,果能建伊皋 之业耶?盗起而不知御,民困而不知救,吏奸而不知禁,法斁而不知理,坐糜廪粟而不知耻。观其坐高堂,骑大马,醉醇醴而饫肥鲜者,孰不巍巍乎可畏,赫赫乎可 象也?又何往而不金玉其外,败絮其中也哉!今子是之不察,而以察吾柑!”

Alas, unlike the days of the fruit seller, this is now the world of advertising, packaging, media manipulation and creative accounting. Even if you keep your eyes wide open or are gifted with a helicopter vision, it is now more difficult to catch the crooks. They now look very respectable in coat and tie. And when these people cause damage, the harm is massive.

Even a great economist like Kenneth Galbraith had found it difficult to detect a fraud. He said, “Over a professional lifetime in economics, as a teacher, author and sometime public official, and from some personal interest, I have read through dozens, perhaps hundreds of corporate financial statements. That some were a disguise for quiet larceny did not cross my mind.”

So the next time someone tells you “you pay peanuts, you get monkeys”, tell yourself: “how can I be sure that I would not be paying a bomb for a dud?”

Comments

6 Comments on All That Glitters is Not Gold

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  1. DavidSeeLeongKit on Sat, 22nd Nov 2008 9:05 pm
  2. Quick Summary:

    > Cunningly-Clever [not Competently-Clever] PAP say:
    “Pay peanuts, and you will get monkeys!”

    > Not-Stupid/Not-Gullible S’poreans say:
    “Pay big bananas, but still get incompetent monkeys!!!”

  3. Peter Loh on Wed, 3rd Dec 2008 3:19 pm
  4. It’s a case of moving on
    all over again.
    What sack?
    It’s moving on with the sack emptied of gold.
    Time a stop be put to this.
    Off with it….
    Time to move off
    make way
    make a retreat
    get off
    roll off the heads
    lest
    we forget too easily
    and that
    we will not do
    this time

  5. Chikukunia on Wed, 10th Dec 2008 8:03 am
  6. When an official once said: Fine until feel the pain, he too got away with mistake by explaining how the lapses happen while others are sacked, demoted and fined. Yes this big monkey is paid big banana but very irresponsible.

  7. Martin D. Weiss on Tue, 24th Feb 2009 10:57 pm
  8. The nation’s largest banks are so close to collapse and the world economy is coming unglued so rapidly, a major Wall Street meltdown is now imminent.

    Specifically, it’s now increasingly likely that virtually all of our forecasts of recent months could come to pass in a very short period of time, including …

    * Stock market crash: A swift plunge in stocks to about 5000 on the Dow, 500 on the S&P 500 and 900 on the Nasdaq … or lower. (For our reasons, see “Stocks to fall AT LEAST another 40%!“)

    * Corporate bankruptcies: A chain reaction of Chapter 11 filings or federal takeovers, including not only General Motors and Chrysler, but also Ann Taylor, Best Buy, Jet Blue, Macy’s, Saks Fifth Avenue, Sears, Toys “R” Us, U.S. Airways and even giants like Ford or General Electric.

    * Megabank failures: Bankruptcies or nationalization not only of Citigroup and Bank of America, but also JPMorgan Chase and HSBC. (See my January issue, “Megabanks Could Fail Despite Federal Aid.”)

    * Nationwide epidemic of small and medium-sized bank failures: Outright FDIC takeovers, with little prospect of nationalization. (I’ll give you a link to our free guide with a more extensive list in a moment.)

    * Insurance failures: State takeovers of companies like Ambac Assurance, Bankers Life and Casualty, Conseco, FGIC, Medical Liability Mutual, Mortgage Guaranty Insurance, Nuclear Electric Insurance, PMI Mortgage, Standard Life of Indiana and many others. (Our free guide also contains a more extensive list of insurers.)

    * Cities and states: An epidemic of defaults by thousands of cities, states and other issuers of tax-exempt municipal bonds.

    * Stock market shutdowns: Trading halts on major, big-cap stocks … plus on-again, off-again exchange shutdowns, making it increasingly difficult for investors to liquidate their holdings at any price.

    * Credit market deep freeze: A virtual shutdown in all debt markets except U.S. Treasuries. An avalanche of selling — and virtually no buyers — for corporate bonds, commercial paper, asset-backed securities, municipal bonds and all forms of bank loans.

    * Government bond collapse: A steep decline in the price of medium-and long-term government securities, as the U.S. Treasury bids aggressively for scarce funds to finance a ballooning budget deficit.

    Shocking? Perhaps. Avoidable? No.

    Nor am I alone in anticipating this rapid unraveling of the economy and financial markets. This past Friday, at a Columbia University dinner reported by Reuters …

    * George Soros said the financial system has effectively disintegrated, with the turbulence more severe than during the Great Depression and with the decline comparable to the fall of the Soviet Union, while …

    * Paul Volcker said he could not remember any time, even in the Great Depression, when things went down so fast and quite so uniformly around the world.

    Both recognize that we’re in a new era of chaos. What’s the landmark event that separates us from the past era of relative stability?

    According to Soros, it’s precisely the same event we forecast in 2007 and the same event we have repeatedly highlighted here in Money and Markets: The bankruptcy of Lehman Brothers. (See “Dangerously Close to a Money Panic,” December 3, 2007 and “Closer to a Financial Meltdown,” March 17, 2008.)

    That was the final straw that punctured the already imploding bubble. And it was the first major domino that set off the chain reaction of events now careening out of control: The collapse of consumer credit markets … surging unemployment … and now, a new set of even larger financial failures looming.

    The Raging Debate Right Now Is How To Prevent
    A Banking Collapse: To Nationalize Or Not To
    Nationalize. But It’s A Moot Point.

    Based on the analysis we presented here in August 2008 (”The Next Big Failures“) …

    Based on the frank recognition of the catastrophe by Soros and Volcker on Friday …

    And based on the trillions in government bailout funds already spent, lent or guaranteed (”The Obama Stimulus: Truth and Consequences“) …

    The fact is that the banking collapse has already occurred!

    So the relevant question is not “How can we prevent it?” Instead, it’s “How can you protect yourself from the inevitable fallout?”

    Washington and Wall Street, however, are either too cowered or too confused to give you the answers you need.

    They won’t tell you which banks are the most likely to fail or which ones are the most likely to survive.

    They won’t offer you alternative safe havens for your money.

    They won’t even guide you to publicly available information provided by the U.S. Treasury Department itself.

  9. Erin on Mon, 2nd Mar 2009 11:26 am
  10. The banking industry is so shaky that I think our government should dip into our national reserves to buy large amounts of gold and some silver to back up our Singapore dollar. The Feds and Treasury are talking about printing trillions of dollars which will further depreciate the USD.

    And if we still pitch our SGD against USD, should anything happens to the dollar, we will fall with them.

    As of now Switzerland has already 43% of gold backing their money up and I believe we should do the same.

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