Category Archives: Insurance Definition

The Bursting Asset Bubbles

The Bursting Asset Bubbles

The recent implosion of the global equity markets – from Hong Kong to New York – engendered yet another round of the semipternal debate: should central banks contemplate abrupt adjustments in the prices of assets – such as stocks or real estate – as they do changes in the consumer price indices? Are asset bubbles indeed inflationary and their bursting deflationary?

Central bankers counter that it is hard to tell a bubble until it bursts and that market intervention bring about that which it is intended to prevent. There is insufficient historical data, they reprimand errant scholars who insist otherwise. This is disingenuous. Ponzi and pyramid schemes have been a fixture of Western civilization at least since the middle Renaissance.

Assets tend to accumulate in “asset stocks”. Residences built in the 19th century still serve their purpose today. The quantity of new assets created at any given period is, inevitably, negligible compared to the stock of the same class of assets accumulated over decades and, sometimes, centuries. This is why the prices of assets are not anchored – they are only loosely connected to their production costs or even to their replacement value.

Asset bubbles are not the exclusive domain of stock exchanges and shares. “Real” assets include land and the property built on it, machinery, and other tangibles. “Financial” assets include anything that stores value and can serve as means of exchange – from cash to securities. Even tulip bulbs will do.

In 1634, in what later came o be known as “tulipmania”, tulip bulbs were traded in a special marketplace in Amsterdam, the scene of a rabid speculative frenzy. Some rare black tulip bulbs changed hands for the price of a big mansion house. For four feverish years it seemed like the craze would last forever. But the bubble burst in 1637. In a matter of a few days, the price of tulip bulbs was slashed by 96%!

Uniquely, tulipmania was not an organized scam with an identifiable group of movers and shakers, which controlled and directed it. Nor has anyone made explicit promises to investors regarding guaranteed future profits. The hysteria was evenly distributed and fed on itself. Subsequent investment fiddles were different, though.

Modern dodges entangle a large number of victims. Their size and all-pervasiveness sometimes threaten the national economy and the very fabric of society and incur grave political and social costs.

There are two types of bubbles.

Asset bubbles of the first type are run or fanned by financial intermediaries such as banks or brokerage houses. They consist of “pumping” the price of an asset or an asset class. The assets concerned can be shares, currencies, other securities and financial instruments – or even savings accounts. To promise unearthly yields on one’s savings is to artificially inflate the “price”, or the “value” of one’s savings account.

More than one fifth of the population of 1983 Israel were involved in a banking scandal of Albanian proportions. It was a classic pyramid scheme. All the banks, bar one, promised to gullible investors ever increasing returns on the banks’ own publicly-traded shares.

These explicit and incredible promises were included in prospectuses of the banks’ public offerings and won the implicit acquiescence and collaboration of successive Israeli governments. The banks used deposits, their capital, retained earnings and funds illegally borrowed through shady offshore subsidiaries to try to keep their impossible and unhealthy promises. Everyone knew what was going on and everyone was involved. It lasted 7 years. The prices of some shares increased by 1-2 percent daily.

On October 6, 1983, the entire banking sector of Israel crumbled. Faced with ominously mounting civil unrest, the government was forced to compensate shareholders. It offered them an elaborate share buyback plan over 9 years. The cost of this plan was pegged at billion – almost 15 percent of Israel’s annual GDP. The indirect damage remains unknown.

Avaricious and susceptible investors are lured into investment swindles by the promise of impossibly high profits or interest payments. The organizers use the money entrusted to them by new investors to pay off the old ones and thus establish a credible reputation. Charles Ponzi perpetrated many such schemes in 1919-1925 in Boston and later the Florida real estate market in the USA. Hence a “Ponzi scheme”.

In Macedonia, a savings bank named TAT collapsed in 1997, erasing the economy of an entire major city, Bitola. After much wrangling and recriminations – many politicians seem to have benefited from the scam – the government, faced with elections in September, has recently decided, in defiance of IMF diktats, to offer meager compensation to the afflicted savers. TAT was only one of a few similar cases. Similar scandals took place in Russia and Bulgaria in the 1990’s.

One third of the impoverished population of Albania was cast into destitution by the collapse of a series of nation-wide leveraged investment plans in 1997. Inept political and financial crisis management led Albania to the verge of disintegration and a civil war. Rioters invaded police stations and army barracks and expropriated hundreds of thousands of weapons.

Islam forbids its adherents to charge interest on money lent – as does Judaism. To circumvent this onerous decree, entrepreneurs and religious figures in Egypt and in Pakistan established “Islamic banks”. These institutions pay no interest on deposits, nor do they demand interest from borrowers. Instead, depositors are made partners in the banks’ – largely fictitious – profits. Clients are charged for – no less fictitious – losses. A few Islamic banks were in the habit of offering vertiginously high “profits”. They went the way of other, less pious, pyramid schemes. They melted down and dragged economies and political establishments with them.

By definition, pyramid schemes are doomed to failure. The number of new “investors” – and the new money they make available to the pyramid’s organizers – is limited. When the funds run out and the old investors can no longer be paid, panic ensues. In a classic “run on the bank”, everyone attempts to draw his money simultaneously. Even healthy banks – a distant relative of pyramid schemes – cannot cope with such stampedes. Some of the money is invested long-term, or lent. Few financial institutions keep more than 10 percent of their deposits in liquid on-call reserves.

Studies repeatedly demonstrated that investors in pyramid schemes realize their dubious nature and stand forewarned by the collapse of other contemporaneous scams. But they are swayed by recurrent promises that they could draw their money at will (“liquidity”) and, in the meantime, receive alluring returns on it (“capital gains”, “interest payments”, “profits”).

People know that they are likelier to lose all or part of their money as time passes. But they convince themselves that they can outwit the organizers of the pyramid, that their withdrawals of profits or interest payments prior to the inevitable collapse will more than amply compensate them for the loss of their money. Many believe that they will succeed to accurately time the extraction of their original investment based on – mostly useless and superstitious – “warning signs”.

While the speculative rash lasts, a host of pundits, analysts, and scholars aim to justify it. The “new economy” is exempt from “old rules and archaic modes of thinking”. Productivity has surged and established a steeper, but sustainable, trend line. Information technology is as revolutionary as electricity. No, more than electricity. Stock valuations are reasonable. The Dow is on its way to 33,000. People want to believe these “objective, disinterested analyses” from “experts”.

Investments by households are only one of the engines of this first kind of asset bubbles. A lot of the money that pours into pyramid schemes and stock exchange booms is laundered, the fruits of illicit pursuits. The laundering of tax-evaded money or the proceeds of criminal activities, mainly drugs, is effected through regular banking channels. The money changes ownership a few times to obscure its trail and the identities of the true owners.

Many offshore banks manage shady investment ploys. They maintain two sets of books. The “public” or “cooked” set is made available to the authorities – the tax administration, bank supervision, deposit insurance, law enforcement agencies, and securities and exchange commission. The true record is kept in the second, inaccessible, set of files.

This second set of accounts reflects reality: who deposited how much, when and subject to which conditions – and who borrowed what, when and subject to what terms. These arrangements are so stealthy and convoluted that sometimes even the shareholders of the bank lose track of its activities and misapprehend its real situation. Unscrupulous management and staff sometimes take advantage of the situation. Embezzlement, abuse of authority, mysterious trades, misuse of funds are more widespread than acknowledged.

The thunderous disintegration of the Bank for Credit and Commerce International (BCCI) in London in 1991 revealed that, for the better part of a decade, the executives and employees of this penumbral institution were busy stealing and misappropriating billion. The Bank of England’s supervision department failed to spot the rot on time. Depositors were – partially – compensated by the main shareholder of the bank, an Arab sheikh. The story repeated itself with Nick Leeson and his unauthorized disastrous trades which brought down the venerable and veteran Barings Bank in 1995.

The combination of black money, shoddy financial controls, shady bank accounts and shredded documents renders a true account of the cash flows and damages in such cases all but impossible. There is no telling what were the contributions of drug barons, American off-shore corporations, or European and Japanese tax-evaders – channeled precisely through such institutions – to the stratospheric rise in Wall-Street in the last few years.

But there is another – potentially the most pernicious – type of asset bubble. When financial institutions lend to the unworthy but the politically well-connected, to cronies, and family members of influential politicians – they often end up fostering a bubble. South Korean chaebols, Japanese keiretsu, as well as American conglomerates frequently used these cheap funds to prop up their stock or to invest in real estate, driving prices up in both markets artificially.

Moreover, despite decades of bitter experiences – from Mexico in 1982 to Asia in 1997 and Russia in 1998 – financial institutions still bow to fads and fashions. They act herd-like in conformity with “lending trends”. They shift assets to garner the highest yields in the shortest possible period of time. In this respect, they are not very different from investors in pyramid investment schemes.

Balancing Your Work, Family and Social Life

Balancing Your Work, Family and Social Life

Many of us have an image of personal balance as a set of scales in perfect balance every day. But that’s an unrealistic goal. You are in for a lot of frustration if you try to allocate within every day a predetermined portion of time for work, family and your social life. An illness may upset all your plans. A business project may demand peaks of intense work, followed by valleys of slow time.
Balance requires continual adjustments, like an acrobat on a high wire who constantly shifts his weight to the right and to the left. By focusing on four main areas of your life – emotional/spiritual needs, relationships, intellectual needs and physical needs – at work and away from work, you can begin to walk the high wire safely.
Here, drawn from my conversations with many high successful Americans, are ten ideas for balancing all aspects of your life:
1. Make an appointment with yourself. Banish from your mind the idea that everyone takes precedence over you. Don’t use your organizer or calendar just for appointments with others. Give yourself some prime time. Regularly do something you enjoy. It will recharge your batteries. Once you’ve put yourself on your calendar, guard those appointments. Kay Koplovitz founder of the USA cable television network, which is on the air 24 hours a day, seven days a week, 52 weeks a year. Koplovitz ran the daily operations of the network for 21 years. For more than two decades, there was always some potential claim on her time. Therefore she vigilantly protected a scheduled tennis match just as she would a business appointment.
2. Care for your body. Having a high energy level is a trait held by many highly successful people. No matter what your present level of energy, you can increase it by following these steps:
Eat. Don’t skip meals. Your physical and mental energy depend upon nourishment. Irregular eating patterns can cause a frayed temper, depression, lack of creativity and a nervous stomach.
Exercise. Over and over again, highly successful people mention the benefit of exercise routines. Johnetta Cole, president of Bennett College for Women and former president of Spelman College, does a four-mile walk each morning. She calls it her mobile meditation. The benefits of exercise are mental, emotional, physical and spiritual. If you are healthier and have more stamina, you can work better and longer.
Rest. A psychologist who has studied creative people reports that they rest often and sleep a lot.
3. Cut some slack. You do not have to do everything. Just the right things. Publisher Steve Forbes taught me a lesson: “Don’t be a slave to your in-box. Just because there’s something there doesn’t mean you have to do it.” As a result, every evening, I extract from my long list to-do list just a few “musts” for the following day. If, but three o’clock the next day, I’ve crossed off all the “musts,” I know that everything else I do that day will be icing on the cake. It is a great psychological plus for me.
There is nothing wrong with pushing yourself hard, disciplining yourself to do what needs to be done when you hold yourself to the highest standards. That builds up stamina and turns you into a pro. At time, though, you must forgive yourself. You will never become 100 percent efficient, nor should you expect to be. After something does not work, ask yourself, “Did I do my best? If you did, accept the outcome. All you can do is all you can do.
4. Blur the boundaries. Some very successful people achieve balance by setting aside times or days for family, recreation, hobbies or the like. They create boundaries around certain activities and protect them. Other individuals who are just as successful do just the opposite. They blur the boundaries. Says consultant Alan Weiss, “I work out of my home. In the afternoon, I might be watching my kids play at the pool or be out with my wife. On Saturday, or at ten o’clock on a weeknight, I might be working. I do things when the spirit moves me, and when they’re appropriate.”
Some jobs don’t lend themselves to this strategy. But blurring the boundaries is possible more often than you may think. One way is to involve people you care about in what you do. For example, many companies encourage employees to bring their spouses to conferences and annual meetings. It’s a good idea. If people who mean a great deal to you understand what you do, they can share more fully in your successes and failures. They also are more likely to be a good sounding board for your ideas.
5. Take a break. Many therapists believe that taking a break from a work routine can have major benefits for mental and physical health. Professional speaker and executive coach Barbara Pagano practices a kind of quick charge, by scheduling a day every few months with no agenda. For her, that means staying in her pajamas, unplugging the phone, watching old movie or reading a novel in bed. For that one day, nothing happens, except what she decides from hour to hour. Adds singer and composer Billy Joel, “There are times when you need to let the field lie fallow.” Joel is describing what farmers often do: let a plot rest so the soil can replenish itself.
6. Take the road less traveled. Occasionally, get off the expressway and take a side road, literally and figuratively. That road may take you to the library or to the golf course. Do something out of the ordinary to avoid the well-worn grooves of your life. Try a new route to work, a different radio station or a different cereal. Break out of your old mold occasionally, with a new way to dress or a different hobby. The road less traveled can be a reward after a demanding event, a carrot that you reward your self with or it can be a good way to loosen up before a big event. Bobby Dodd, the legendary football coach at Georgia Tech, knew the power of this concept. While other coaches were putting their teams through brutal twice-a-day practices, Dodd’s team did their drills and practices, but then took time to relax, play touch football and enjoy the bowl sites. Did the idea work? In six straight championships games!
7. Be still. Susan Taylor, editorial director of Essence, sees to it that she has quiet time every morning. She regards it as a time for centering – for being still and listening. She keeps a paper and pen with her to jot down ideas that come to her. The way you use solitary time should match your values, beliefs and temperament. Some individuals devote a regular time each day to visualize themselves attaining their goals and dreams. Others read, pray, meditate, do yoga or just contemplate a sunrise or sunset. Whatever form it takes, time spent alone can have an enormous payoff. Achievers talk about an inner strength they find and how it helps them put competing demands into perspective. They feel more confident about their choices and more self-reliant. They discover a sense of balance, a centeredness.
8. Be a peacetime patriot. Joe Posner has achieved wealth and recognition selling life insurance. Several years ago, Posner helped form an organization in his hometown of Rochester, NY to prepare underprivileged children for school and life and, he hopes, break the poverty cycle. You may find some equally worthy way to give something back through your church, hospital, civic club, alumni association or by doing some pro bono work. Or you may help individuals privately, even anonymously. There are powerful rewards for balancing personal interests with the needs of the common good. One of the most wonderful is the sheer joy that can come from giving. Another reward is the better world that you help create.
9. Do what you love to do. As a boy, Aaron Copeland spent hours listening to his sister practice the piano because he loved music. By following that love, he became America’s most famous composer of classical must. When I asked him years later if he had even been disappointed by that choice Copeland replied, “My life has been enchanting.” What a word to sum up a life. By itself, loving what you do does not ensure success. You need to be good at what you love. But if you love what you do, the time you spend becoming competent is less likely to be drudgery.
10. Focus on strategy. As important as it is, how to save time for balancing your life is not the ultimate question. That question is, “What am I saving time for?” Strategy has to do with being successful – but successful at what? If others pay your salary, being strategic generally means convincing them that you are spending your time in a way that benefits them. If there is a dispute over how you should use your time, either convince the people who can reward or punish you that your idea about using time is appropriate, or look for another job. The “what for?” question should also be asked about the life you live. It is truly a comprehensive question and gets at the question of wholeness.
So what makes for a successful balance life? I can think of no better definition than the one given by Ralph Waldo Emerson:
To laugh often and much; to win the respect of intelligent people and affection of children; to earn the appreciation of honest critics and to endure the betrayal of false friends; to appreciate beauty, to find the best in others; to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because I have lived. This is to have succeeded.

Money Laundering in A Changed World

Money Laundering in A Changed World

If you shop with a major bank, chances are that all the transactions in your account are scrutinized by AML (Anti Money Laundering) software. Billions of dollars are being invested in these applications. They are supposed to track suspicious transfers, deposits, and withdrawals based on overall statistical patterns. Bank directors, exposed, under the Patriot Act, to personal liability for money laundering in their establishments, swear by it as a legal shield and the holy grail of the on-going war against financial crime and the finances of terrorism.

Quoted in Wired.com, Neil Katkov of Celent Communications, pegs future investments in compliance-related activities and products by American banks alone at close to billion in the next 3 years (2005-2008). The United State’s Treasury Department’s Financial Crimes Enforcement Network (finCEN) received c. 15 million reports in each of the years 2003 and 2004.

But this is a drop in the seething ocean of illicit financial transactions, sometimes egged on and abetted even by the very Western governments ostensibly dead set against them.

Israel has always turned a blind eye to the origin of funds deposited by Jews from South Africa to Russia. In Britain it is perfectly legal to hide the true ownership of a company. Underpaid Asian bank clerks on immigrant work permits in the Gulf states rarely require identity documents from the mysterious and well-connected owners of multi-million dollar deposits.

Hawaladars continue plying their paperless and trust-based trade – the transfer of billions of US dollars around the world. American and Swiss banks collaborate with dubious correspondent banks in off shore centres. Multinationals shift money through tax free territories in what is euphemistically known as “tax planning”. Internet gambling outfits and casinos serve as fronts for narco-dollars. British Bureaux de Change launder up to 2.6 billion British pounds annually.

The 500 Euro note makes it much easier to smuggle cash out of Europe. A French parliamentary committee accused the City of London of being a money laundering haven in a 400 page report. Intelligence services cover the tracks of covert operations by opening accounts in obscure tax havens, from Cyprus to Nauru. Money laundering, its venues and techniques, are an integral part of the economic fabric of the world. Business as usual?

Not really. In retrospect, as far as money laundering goes, September 11 may be perceived as a watershed as important as the precipitous collapse of communism in 1989. Both events have forever altered the patterns of the global flows of illicit capital.

What is Money Laundering?

Strictly speaking, money laundering is the age-old process of disguising the illegal origin and criminal nature of funds (obtained in sanctions-busting arms sales, smuggling, trafficking in humans, organized crime, drug trafficking, prostitution rings, embezzlement, insider trading, bribery, and computer fraud) by moving them untraceably and investing them in legitimate businesses, securities, or bank deposits. But this narrow definition masks the fact that the bulk of money laundered is the result of tax evasion, tax avoidance, and outright tax fraud, such as the “VAT carousel scheme” in the EU (moving goods among businesses in various jurisdictions to capitalize on differences in VAT rates). Tax-related laundering nets between 10-20 billion US dollars annually from France and Russia alone. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.

The Scale of the Problem

According to a 1996 IMF estimate, money laundered annually amounts to 2-5% of world GDP (between 800 billion and 2 trillion US dollars in today’s terms). The lower figure is considerably larger than an average European economy, such as Spain’s.

The System

It is important to realize that money laundering takes place within the banking system. Big amounts of cash are spread among numerous accounts (sometimes in free economic zones, financial off shore centers, and tax havens), converted to bearer financial instruments (money orders, bonds), or placed with trusts and charities. The money is then transferred to other locations, sometimes as bogus payments for “goods and services” against fake or inflated invoices issued by holding companies owned by lawyers or accountants on behalf of unnamed beneficiaries. The transferred funds are re-assembled in their destination and often “shipped” back to the point of origin under a new identity. The laundered funds are then invested in the legitimate economy. It is a simple procedure – yet an effective one. It results in either no paper trail – or too much of it. The accounts are invariably liquidated and all traces erased.

Why is It a Problem?

Criminal and tax evading funds are idle and non-productive. Their injection, however surreptitiously, into the economy transforms them into a productive (and cheap) source of capital. Why is this negative?

Because it corrupts government officials, banks and their officers, contaminates legal sectors of the economy, crowds out legitimate and foreign capital, makes money supply unpredictable and uncontrollable, and increases cross-border capital movements, thereby enhancing the volatility of exchange rates.

A multilateral, co-ordinated, effort (exchange of information, uniform laws, extra-territorial legal powers) is required to counter the international dimensions of money laundering. Many countries opt in because money laundering has also become a domestic political and economic concern. The United Nations, the Bank for International Settlements, the OECD’s FATF (Financial Action Task Force), the EU, the Council of Europe, the Organisation of American States, all published anti-money laundering standards. Regional groupings were formed (or are being established) in the Caribbean, Asia, Europe, southern Africa, western Africa, and Latin America.

Money Laundering in the Wake of the September 11 Attacks

Regulation

The least important trend is the tightening of financial regulations and the establishment or enhancement of compulsory (as opposed to industry or voluntary) regulatory and enforcement agencies.

New legislation in the US which amounts to extending the powers of the CIA domestically and of the DOJ extra-territorially, was rather xenophobically described by a DOJ official, Michael Chertoff, as intended to “make sure the American banking system does not become a haven for foreign corrupt leaders or other kinds of foreign organized criminals.”

Privacy and bank secrecy laws have been watered down. Collaboration with off shore “shell” banks has been banned. Business with clients of correspondent banks was curtailed. Banks were effectively transformed into law enforcement agencies, responsible to verify both the identities of their (foreign) clients and the source and origin of their funds. Cash transactions were partly criminalized. And the securities and currency trading industry, insurance companies, and money transfer services are subjected to growing scrutiny as a conduit for “dirty cash”.

Still, such legislation is highly ineffective. The American Bankers’ Association puts the cost of compliance with the laxer anti-money-laundering laws in force in 1998 at 10 billion US dollars – or more than 10 million US dollars per obtained conviction. Even when the system does work, critical alerts drown in the torrent of reports mandated by the regulations. One bank actually reported a suspicious transaction in the account of one of the September 11 hijackers – only to be ignored.

The Treasury Department established Operation Green Quest, an investigative team charged with monitoring charities, NGO’s, credit card fraud, cash smuggling, counterfeiting, and the Hawala networks. This is not without precedent. Previous teams tackled drug money, the biggest money laundering venue ever, BCCI (Bank of Credit and Commerce International), and … Al Capone. The more veteran, New-York based, El-Dorado anti money laundering Task Force (established in 1992) will lend a hand and share information.

More than 150 countries promised to co-operate with the US in its fight against the financing of terrorism – 81 of which (including the Bahamas, Argentina, Kuwait, Indonesia, Pakistan, Switzerland, and the EU) actually froze assets of suspicious individuals, suspected charities, and dubious firms, or passed new anti money laundering laws and stricter regulations (the Philippines, the UK, Germany).

A EU directive now forces lawyers to disclose incriminating information about their clients’ money laundering activities. Pakistan initiated a “loyalty scheme”, awarding expatriates who prefer official bank channels to the much maligned (but cheaper and more efficient) Hawala, with extra baggage allowance and special treatment in airports.

The magnitude of this international collaboration is unprecedented. But this burst of solidarity may yet fade. China, for instance, refuses to chime in. As a result, the statement issued by APEC in November 2001 on measures to stem the finances of terrorism was lukewarm at best. And, protestations of close collaboration to the contrary, Saudi Arabia has done nothing to combat money laundering “Islamic charities” (of which it is proud) on its territory.

Still, a universal code is emerging, based on the work of the OECD’s FATF (Financial Action Task Force) since 1989 (its famous “40 recommendations”) and on the relevant UN conventions. All countries are expected by the West, on pain of possible sanctions, to adopt a uniform legal platform (including reporting on suspicious transactions and freezing assets) and to apply it to all types of financial intermediaries, not only to banks. This is likely to result in…

The Decline of off Shore Financial Centres and Tax Havens

By far the most important outcome of this new-fangled juridical homogeneity is the acceleration of the decline of off shore financial and banking centres and tax havens. The distinction between off-shore and on-shore will vanish. Of the FATF’s “name and shame” blacklist of 19 “black holes” (poorly regulated territories, including Israel, Indonesia, and Russia) – 11 have substantially revamped their banking laws and financial regulators.

Coupled with the tightening of US, UK, and EU laws and the wider interpretation of money laundering to include political corruption, bribery, and embezzlement – this would make life a lot more difficult for venal politicians and major tax evaders. The likes of Sani Abacha (late President of Nigeria), Ferdinand Marcos (late President of the Philippines), Vladimiro Montesinos (former, now standing trial, chief of the intelligence services of Peru), or Raul Salinas (the brother of Mexico’s President) – would have found it impossible to loot their countries to the same disgraceful extent in today’s financial environment. And Osama bin Laden would not have been able to wire funds to US accounts from the Sudanese Al Shamal Bank, the “correspondent” of 33 American banks.

Quo Vadis, Money Laundering?

Crime is resilient and fast adapting to new realities. Organized crime is in the process of establishing an alternative banking system, only tangentially connected to the West’s, in the fringes, and by proxy. This is done by purchasing defunct banks or banking licences in territories with lax regulation, cash economies, corrupt politicians, no tax collection, but reasonable infrastructure.

The countries of Eastern Europe – Yugoslavia (Montenegro and Serbia), Macedonia, Ukraine, Moldova, Belarus, Albania, to mention a few – are natural targets. In some cases, organized crime is so all-pervasive and local politicians so corrupt that the distinction between criminal and politician is spurious.

Gradually, money laundering rings move their operations to these new, accommodating territories. The laundered funds are used to purchase assets in intentionally botched privatizations, real estate, existing businesses, and to finance trading operations. The wasteland that is Eastern Europe craves private capital and no questions are asked by investor and recipient alike.

The next frontier is cyberspace. Internet banking, Internet gambling, day trading, foreign exchange cyber transactions, e-cash, e-commerce, fictitious invoicing of the launderer’s genuine credit cards – hold the promise of the future. Impossible to track and monitor, ex-territorial, totally digital, amenable to identity theft and fake identities – this is the ideal vehicle for money launderers. This nascent platform is way too small to accommodate the enormous amounts of cash laundered daily – but in ten years time, it may. The problem is likely to be exacerbated by the introduction of smart cards, electronic purses, and payment-enabled mobile phones.

In its “Report on Money Laundering Typologies” (February 2001) the FATF was able to document concrete and suspected abuses of online banking, Internet casinos, and web-based financial services. It is difficult to identify a customer and to get to know it in cyberspace, was the alarming conclusion. It is equally complicated to establish jurisdiction.

Many capable professionals – stockbrokers, lawyers, accountants, traders, insurance brokers, real estate agents, sellers of high value items such as gold, diamonds, and art – are employed or co-opted by money laundering operations. Money launderers are likely to make increased use of global, around the clock, trading in foreign currencies and derivatives. These provide instantaneous transfer of funds and no audit trail.

The underlying securities involved are susceptible to market manipulation and fraud. Complex insurance policies (with the “wrong” beneficiaries), and the securitization of receivables, leasing contracts, mortgages, and low grade bonds are already used in money laundering schemes. In general, money laundering goes well with risk arbitraging financial instruments.

Trust-based, globe-spanning, money transfer systems based on authentication codes and generations of commercial relationships cemented in honour and blood – are another wave of the future. The Hawala and Chinese networks in Asia, the Black Market Peso Exchange (BMPE) in Latin America, other evolving courier systems in Eastern Europe (mainly in Russia, Ukraine, and Albania) and in Western Europe (mainly in France and Spain).

In conjunction with encrypted e-mail and web anonymizers, these networks are virtually impenetrable. As emigration increases, diasporas established, and transport and telecommunications become ubiquitous, “ethnic banking” along the tradition of the Lombards and the Jews in medieval Europe may become the the preferred venue of money laundering. September 11 may have retarded world civilization in more than one way.

How Safe Are Shares Or The Forex?

How Safe Are Shares Or The Forex?

As an investment category, yes. All sorts of prudent and conservative institutions colleges, pension funds, foundations, trust departments invest in stocks.

There is, technically, greater risk in common stocks than in the Forex. But as any experienced investor can tell you, there are many not-unusual situations in which a common stock can be viewed as a better safer investment than the issues ahead of it.

Or, take the common stocks of corporations like General Electric and Union Carbide. These, as it happens, are the only issues on the companies’ books. Who would argue that the bonds of even a first-class railroad, for example, were necessarily safer?

Safety also depends, to an extent, on the price at which the stock was bought. A company may be solid as a rock, but eager investors may have bid its stock to an unrealistically high level in terms of the per-share earnings likely to be attained. If a quarterly or year-end earnings statement does not bear out the optimism of the eager buyers, they may begin to unload.

The man who has bought near the top and wants to hang on may see a dismaying depreciation in his holdings, even though, by all investment standards, he does own a good, safe stock.

The point is, some stocks are safer than others, and the value of all stocks may shift and vary and thereby alter temporarily their safety—the possibility of cashing them at the price paid—for the investor.

It is not hard to find a safe stock, if by that you mean one representing a lively, alert, efficient company that is unlikely to collapse and fail. While not every stock listed on the New York Stock Exchange is a daisy, the mere fact that it has met the requirements for listing says much in its favor. For one thing, to obtain listing a company must agree to report its financial condition regularly. This alone makes it possible to evaluate the company’s performance and prospects, and thus estimate whether its stock is a good buy.

This in not to say that unlisted stocks or stocks carried on other exchanges are chancy. As you can quickly discover, some rather fine companies are not on the so-called Big Board—the New York Stock Exchange. The Great Atlantic and Pacific Tea Company, Humble Oil, and Creole Petroleum are listed on the American Stock Exchange. Such representative companies as Anheuser Busch, Eli Lilly, and Time, Inc. are unlisted, and traded only in the over-the-counter market. Few insurance companies and no banks both quite stable stock categories—are listed on the New York Stock Exchange.

Still and all, the new investor will be wise to confine his dealings to stocks that are relatively well-known and have a ready market. For out of the estimated 5,000 public, stock-issuing corporations in the United States there are, inescapably, some dogs. They do not have to be thieving and corrupt. Poor management, wobbly financing, and an inability to keep pace with the times in production and distribution are reason enough for the investor to avoid them.

Here, too, may be mentioned the “penny stocks,” which have enjoyed an unfortunate vogue in recent years. These glitter like a prize in a shooting gallery, but they promise something for nothing, and this is no premise for a smart investor to accept. Many are out-and-out swindles. Others are legitimate enough, but rank as the wildest sort of speculation; double-0 on the roulette wheel, or a mare in the Kentucky Derby will come home a winner more frequently than these babies.

For the man who can only be called the ignorant investor, they have a certain attraction. The small investment— or bet—of 0 may purchase 500 or 1,000 shares which make a man feel big, whereas the same amount buys only a fraction more than one share of American Tel and Tel, which is discouraging and makes a man feel small. Furthermore, a penny stock only has to rise a penny to double in value; AT&T has to go to around 160; and with the cunning of the ignorant, even penny-stock investors seem to know that the rate of movement—up or down—is swifter among low-priced stocks than high. And finally—and this is the most insidious argument of all—the penny-stock buyer persuades himself that the amount of money he puts up isn’t too important; after all, he’s riding a long shot.

What is wrong with all of this is that at no point does value enter into the calculation. Anyone who does not consider the worth of what he is buying is a gambler, not an investor. The sorry result is that a few bad gambles can sour an otherwise sane person on the true value of investment.

Beyond this, safety is largely a matter of sanity. There are many ways of examining a stock and of judging the time to buy it or sell it. All of them are available to the average investor. Learn them and use them. You will never get stuck with a poor stock masquerading as a safe one.

Hedging Against Inflation: One of the big arguments in favor of stocks bears on another aspect of safety. This is the fact that stocks may frequently act as a hedge against inflation.

Inflation, according to the classic definition, is the economic condition resulting in a rise in prices and a drop in the purchasing power of the dollar. In effect, goods are scarcer than money. Thus, through the operation of the forces of supply and demand, goods become more expensive. Dollars, relatively more plentiful, become cheaper—more of them are needed to buy this item or that.

In the United States, inflation has been at work for some time. It is not runaway inflation. Our productivity (goods) is managing to stay fairly well abreast of our prosperity (money). Still and all, since 1939 the Consumer’s Price Index means of measuring the fluctuation in the prevailing prices of certain basic household commodities—-has jumped from 99.4 to 195.7, almost a 100 per cent rise. In the same period, the dollar’s value has dwindled from 100 cents to 47.3 cents—value, of course, representing what the dollar will buy.

In a fluid situation like this, safety of investment takes on a new dimension. Many conventional ways to save through a savings account, an annuity, a Government bond held to maturity can practically guarantee safety of principal. You will always get out the same number of dollars you put in. But there is no assurance as to how much those dollars will buy.

Stocks cannot guarantee that the amount you have invested will be returned to you, safe and sound. But when dollars are plentiful and goods bring a fat price, it is possible that a company in whose earnings you have a share will be distributing dividend dollars more liberally.

So shares and the Forex have risks but if you are aware of them you can make sure you limit them.

If you invest in Forex or shares “paper trade” first and only use real money once you feel comfortable.

With the Forex you can use good Forex software that is available to limit your losses.

A good rule is worth mentioning: Never risk more than you can aford to lose.

Looking to Increase Employee Performance? Motivation is Critical.

Looking to Increase Employee Performance? Motivation is Critical.

What’s an organization to do when all of its honest and genuine efforts to motivate Sally and Sam to come to work on time, work safely, deliver efficient services, and act as if they were happy to be a part of the team, fail? There is no shortage of pop-psych books and motivational speakers who’ll tell you a thousand-and-one ways to light a fire in Sam’s belly. But what do you do when the fire goes out and none of those thousand-and-one ways seem to work any more? What do we really know about motivation?
Does anything work?
Given the constant barrage of pep talks and posters, slogans and free advice on the topic of motivation, there should certainly be at least a couple of core principles that predictably work every time. Aren’t there? Or are we stuck with the notion that everybody’s an individual, and what’s a turn-on for Sally is likely to be a turn-off for Sam?
Rather than speculate, let’s gather some data. Think back through all the jobs you’ve ever had, and bring to mind the job you had that produced the greatest amount of motivation in you. It doesn’t matter what the job was — it might be the job you have right now; it might be a part-time job you had in high school. Doesn’t matter.
It also doesn’t matter what the word, “motivation,” means to you. However you choose to define the term is fine. Simply bring to mind the job that you had when you had the greatest degree of job satisfaction, excitement, enthusiasm, turned-on-ness.
Now that you’ve got the job clearly in mind, quickly jot down the factors that caused you to feel so motivated, so satisfied, and so turned on. If you’re like most people, the factors you listed are highly predictable — and so are the ones that didn’t make your list.
On your list appear such items as recognition, opportunities for achievement, freedom and autonomy, challenge, the chance to learn and grow, and the work itself. What was missing? You probably didn’t write down such important items as job security, benefits, working conditions, and the organization’s policies and procedures.
It turns out that the missing link in understanding motivation is understanding that there are two very different factors at work. On one hand there are the things that motivate us, that turn us on, that cause us to feel satisfied with the job. On the other are those things that dissatisfy us, that turn us off, that demotivate us. There are two separate variables at work, and you have to attack both of them. Psychologist Fred Herzberg stated it best, “Job satisfaction and job dissatisfaction are not flip sides of the same coin. They are entirely different coins, and the wise manager uses both those coins to buy better performance.”
What is motivation?
A good working definition of motivation is this: motivation represents a measurable increase in both job satisfaction and productivity. The motivated worker does his job better and likes it more than those folks who are not so motivated. What generates real motivation is the first set of factors mentioned: opportunities for achievement and accomplishment, recognition, learning and growth, having some say in how the job is done, and worthwhile work. Those are the items that generate strong feelings of loyalty, satisfaction, enthusiasm, and all those other important attributes we want to see in those whose paychecks we sign.
But you can’t get away with working exclusively on the satisfiers scale. You have to make sure that you clean up the job to reduce or eliminate those things that cause people to be unhappy and quit.
Wait a minute, some of you are saying — where does money fit into this scheme? Pay is the ringer in the equation; the one factor that shows up as both a source of satisfaction and a source of dissatisfaction. People are dissatisfied with their pay when they feel it isn’t commensurate with their efforts, or is distributed inequitably, or doesn’t reflect the responsibilities of the job, or is out of touch with market realities. If you don’t pay competitive wages, people will be unhappy and they will quit. But no matter how much you raise salaries, you won’t generate motivation and job satisfaction, because job satisfaction is a function of the content of the job.
Look at it this way: Hire me to wash dirty dishes and pay me chickenfeed and I’ll be unhappy and demotivated. But raise my wages to a princely sum and guess what — I’ll still hate washing dirty dishes. But I won’t complain any more about my crummy compensation; I probably won’t quit; and I may even improve my attendance record (if you pay me my munificent wages on an hourly basis). What you have bought with the generous pay increase you provided me was not real job satisfaction. All you have bought is the absence of dissatisfaction. They are not the same thing. If you really want me to be a happy camper, you’d better change the nature of my work.
And changing the nature of the work is the true key to motivation. The message is clear: do everything you can to get rid of the things that generate employee unhappiness, recognizing that no matter how big an investment you make you’ll get precious little in return. All your money will buy is the absence of dissatisfaction. Listen up — you have no choice! You must pay people competitive wages, you must provide a healthy, safe and attractive work environment, you must give at least as good insurance policies and vacations and retirements plans as people could get working for the bagel joint down the street. If you don’t, people will quit and you won’t be able to hire replacements. But all you’ll get for the fortune you spend in this effort is a bunch of people who have to search hard for something to complain about.
If you want genuine motivation, though, you’ve got to look at the job itself. Does the work provide me with the chance to really accomplish something? Does my job allow me to do something that makes an actual difference? Do I have a lot of say in how I do my job or am I totally constricted by standard operating procedures? Can I learn and grow and develop on this job, or will I be tightening the same nut on the same bolt for the next thirty years? Do I get any recognition when I do something particularly well?
Providing recognition of good performance is the best place to start. Recognizing good performance any time it’s encountered — with just a “Thanks” or a literal pat on the back — can be enough to get the motivational engine working. Sally and Sam will need more than just an attaboy, but acknowledging excellent work every time it appears is a wonderful place to start the engine of motivation running.

Female Genital Cutting (FGC): An Introduction

Female Genital Cutting (FGC): An Introduction

In the United States it is estimated that about ten thousand girls are at risk of this practice. FGC in a variety of its forms is practiced in Middle Eastern countries (the two Yemens, Saudi Arabia, Iraq, Jordan, Syria, and Southern Algeria). In Africa it is practiced in the majority of the continent including Kenya, Nigeria, Mali, Upper Volta, Ivory Coast, Egypt, Mozambique, and Sudan.

Even though FGC is practiced in mostly Islamic countries, it is not an Islamic practice. FGC is a cross-cultural and cross-religious ritual. In Africa and the Middle East it is performed by Muslims, Coptic Christians, members of various indigenous groups, Protestants, and Catholics, to name a few.

Definition:

FGC is a term used to refer to any practice which includes the removal or the alteration of the female genitalia. There are three main types of FGC that are practiced through the world: Type I or Sunna circumcision, Type II or excision, and Type III or infibulation. These three operations range in intensity, from the “mildness” of Type I, to the extreme Type III. Type II is a recent addition to FGC. I will explain in the next sections what each of these practices involve, and outline some of the short-term and long-term effects that they have.

Type I — Sunna Circumcision

The first and mildest type of FGC is called “sunna circumcision” or Type I. The term “Sunna” refers to tradition as taught by the prophet Muhammad. This involves the “removal of the prepuce with or without the excision of part or all of the clitoris (See the World Health Organization definition).

Type I is practiced in a broad area all across Africa parallel to the equator. Fran Hosken enumerates the following countries: Egypt, Ethiopia, Somalia, Kenya, and Tanzania in East Africa to the West African coast, from Sierra Leone to Mauritania, and in all countries in-between including Nigeria, the most populous one. There are also reports of Type I taking place in areas of the Middle East such as in Oman, Yemen, Saudi Arabia and United Arab Emirates.

Type II – Clitoridectomy

The second type of FGC, Type II, involves the partial or entire removal of the clitoris, as well as the scraping off of the labia majora and labia minora. This takes place in countries where infibulation has been outlawed such as Sudan. Clitoridectomy was invented by Sudanese midwives as a compromise when British legislation forbade the most extreme operations in 1946.

Type III – Infibulation or Pharaonic Circumcision

The third and most drastic type of FGC is Type III. This most extreme form, consists of the removal of the clitoris, the adjacent labia (majora and minora), and the joining of the scraped sides of the vulva across the vagina, where they are secured with thorns or sewn with catgut or thread. A small opening is kept to allow passage of urine and menstrual blood. An infibulated woman must be cut open to allow intercourse on the wedding night and is closed again afterwards to secure fidelity to the husband. Hosken also reports that infibulation is “practiced on all females, almost without exception, in all of Somalia and wherever ethnic Somalis live (Ethiopia, Kenya and Djibouti). It is also performed throughout the Nile Valley, including Southern Egypt, and all along the Red Sea’s Coast.

FGC is mostly done in unsanitary conditions in which a midwife uses unclean sharp instruments such as razor blades, scissors, kitchen knives, and pieces of glass. These instruments are frequently used on several girls in succession and are rarely cleaned, causing the transmission of a variety of viruses such as the HIV virus, and other infections. Antiseptic techniques and anesthesia are generally not used, or for that matter, heard of. This is akin to a doctor who uses the same surgical instrument on a number of women at the same time without cleaning any of them.

Effects of Female Genital Cutting:

Beyond the obvious initial pains of the operations, FGC has long-term physiological, sexual, and psychological effects. The unsanitary environment under which FGC takes place results in infections of the genital and surrounding areas and often results in the transmission of the HIV virus which can cause AIDS. Some of the other health consequences of FGC include primary fatalities as a result of shock, hemorrhage or septicemia. In order to minimize the risk of the transmission of the viruses, some countries like Egypt made it illegal for FGC to be practiced by any other practitioners than trained doctors and nurses in hospitals. While this seems to be a more humane way to deal with FGC and try to reduce its health risks, more tissue is apt to be taken away due to the lack of struggle by the child if anesthesia is used.

Long-term complications include sexual frigidity, genital malformation, delayed menarche, chronic pelvic complications, recurrent urinary retention and infection, and an entire range of obstetric complications whereas the fetus is exposed to a range of infectious diseases as well as facing the risk of having his or her head crushed in the damaged birth canal. In such cases the infibulated mother must undergo another operation whereby she is “opened” further to insure the safe birthing of her child.

Girls undergo FGC when they are around three years old, though some of them are much older than that when they undergo the operation. The age varies depending on the type of the ritual and the customs of the local village or region.

Justifications:

In various cultures there are many “justifications” for these practices. A girl who is not circumcised is considered “unclean” by local villagers and therefore unmarriageable. A girl who does not have her clitoris removed is considered a great danger and ultimately fatal to a man if her clitoris touches his penis.

One of the most common explanations of FGC is local custom. Women are often heard saying that they are unwilling to change these customs since they have always done it this way and are not about to change. Oftentimes the practitioners are kept ignorant of the real implications of FGC, and the extreme health risks that it represents.

Family honor, cleanliness, protection against spells, insurance of virginity and faithfulness to the husband, or simply terrorizing women out of sex are sometimes used as excuses for the practice of FGC.

Some people believe that FGC is a barbaric practice done to girls and women in some remote villages in foreign countries of the world. However, up until a few decades ago, it was still believed that the clitoris is a very dangerous part of the female anatomy. Who can forget S. Freud who stated in one of his books entitled Sexuality and the Psychology of Love that the “elimination of clitoral sexuality is a necessary precondition for the development of femininity.”

As recently as 1979, the “Love Surgery” was performed on women in the United States. Dr. James E. Burt, the so-called Love Surgeon, introduced “clitoral relocation” (i.e. sunna circumcision) to the medical establishment. He believed and acted upon the idea that excision does not prevent sexual pleasure but enhances it. Dr. Burt practiced in Ohio for almost ten years before he was exposed after which he gave up his license.

Because of the large number of cases of FGC and some of the deaths it has caused, FGC is now outlawed in some European countries (Britain, France, Sweden, and Switzerland) and some African countries (Egypt, Kenya, Senegal).

Eradication:

It is also important to note that even though FGC is currently illegal in many countries in Africa and the Middle East, this has not reduced the number of the girls that are mutilated every year. The governments of these countries have no way of monitoring the spread and practice of FGC. The United Nations, UNICEF, and the World Health Organization have considered FGC to be a violation of Human Rights and have made recommendations to eradicate this practice. However, trying to fight FGC on legal terms is ineffective since those who practice it oftentimes do not report it. FGC is also widely practiced in villages and remote places where the government does not have an easy access.

A better and more effective approach would be a cooperation on the national level as well as the international level. The UN and the WHO have already taken the first step in abolishing these practices. Countries also need to have rigid laws that deal with FGC cases. This is also insufficient by itself. Anthropologists, educators, social scientists, and activists have to go into these villages and areas and educate the practitioners of the dangers of FGC. Female Genital Cutting can only be abolished by a grassroots approach which would take into consideration all aspects of a particular culture and try to work within that system of beliefs to eradicate this practice.

In many cultures, FGC serves as an initiation rite, and any efforts to eradicate it must take this into consideration. Some of the most successful eradication efforts have taken place in areas where FGC was replaced with “initiation without cutting” programs whereas a girl still goes through some initiation rites but this time, without any blood.

On the United States level, there are many efforts that are being made in order to abolish the practice locally and internationally. The National Organization of Circumcision Information Resource Centers (NOCIRC), a networking organization have brought together social scientists and medical practitioners from all over the world who are fighting FGC as well as male circumcision. NOCIRC has also founded the FGC Awareness and Education Project in August 1996. One of the goals of the project is to create an FGC Module which will provide information and training material to health care professionals. NOCIRC has also organized the International Symposium on Sexual Mutilations.

The Research, Actiona & Information Network for Bodily Integrity of Women (RAINBO) has been conducting research and grass-roots programs internationally as well as in the United States on women’s reproductive sexual health as well as on female genital mutilation. On the National Level, Congresswoman Patricia Shroeder introduced H.R. 3247, a bill to outlaw FGC in the United States in the fall of 1994. The bill was then combined with The Minority Health Initiatives Act, H.R.3864. This bill was then combined with H.R. 941 on February 14, 1995 which was to be cited as the “Federal Prohibition of Female Genital Mutilation of 1995.”

The bill was passed in September 1996. Some overdue effort is being made to abolish FGC, but there is still much work to be done. Educating ourselves, as well as others is a way that we can begin acting upon the convictions that human rights should not violated, and that violence against women is intolerable. Many people are still unaware that practices such as FGC are still widely practiced, and only an awareness can bring this inhumane practice to a halt.