Mission possible

It’s virtually impossible to adequately price risk when one is unaware of pertinent information and when rating agencies assign AAA credit ratings to securities that were in effect the equivalent of junk Bonds. The logical prudent action is to avoid investing where there is a lack of information but what we saw at the frenzied height of activity just prior to the Global Financial Crisis was the abandonment of any form of formalised risk assessment practices. Firms and investors and even government agencies consumed by greed threw caution to the wind as successive ‘Collateralized Debt Obligations’ were sliced into so many sub categories that millions of pages of text would need to be read to satisfactorily understand the underlying risk.

Many of these instruments traded such as the so called ‘Synthetic Collateralized Debt Obligations’ were extremely complex and offered investors a share in the issuance proceeds of credit default swaps which resemble a form of Insurance. How they worked was to distribute to eager investors the proceeds from issue whilst investors remained liable for any subsequent losses or defaults in the underlying securities. This was roughly the equivalent to an underwriter in insurance providing cover in exchange for receiving a premium within varying risk rated tranches.

There were many large players and one notable insurer engaged in this practice, with just a select few in the know whilst others remained permanently in the dark. Overall it is fair to say there was no free market where information was available to make any rational decisions or to attempt to adequately price risk. Many analogies have been attempted to explain the position, likening it to selling someone a house whilst conspiring to cause arson, or selling cars with faulty brakes whilst inviting others to underwrite insurance on their roadworthiness against having an accident.

The opportunity for conflicts of interest and or fraud under such an opaque system are all too obvious and especially prevalent when a firm chooses to simultaneously engage in proprietary trading (in house) in relation to those same securities – in the recent case with Goldman Sachs it is alleged by the SEC that Goldman deliberately either betted against those securities sold or knew of others so engaged (Hedge Funds) whilst continuing to sell large amounts to uninformed buyers. It is surprising there are not many more actions like this undertaken by the SEC by now, considering the sheer volume of short selling and the value of synthetics actively traded, which grossly exceeded the world’s gross national product. I understand there are about 50 probes still under consideration.

But understandably there has been a reluctance to use the word fraud and deception and instead make reference to oblique innocuous suggestions about inappropriate gearing and market exuberance. It is also interesting to note the SEC commissioners only narrowly voted 3 to 2 in favour of the lawsuit proceeding, with the 2 Republican commissioners voting against. Let’s hope this ushers in a new era where fraud is no longer tolerated and recognised readily for what it is. But that will be cold comfort for the many sophisticated Investors such as pension funds, insurance companies and large banks who suddenly lost more than $1.8 trillion dollars as a consequence of the worst economic crisis since WW I1.

The popular idea 'caveat emptor' applies is also deservedly losing creditability as it was not only investors who lost large sums of money but substantial sums were also contributed from taxpayers’ funds. The SEC for the past several decades has preferred ‘settled’ cases which have avoided what might otherwise be a prolonged lawsuit against the big Wall Street investment banks, that have moved on after paying penalties and managed to avoid damaging bad publicity. Hopefully those days are past and we see a re-energised regulator capable of instilling more confidence into a fully transparent system.

That system has been far too highly incentivised to become too reliant on short term trading gains. Some good people can become part of a corrupted system to the extent they fail to exercise sufficient resolve to ensure integrity is maintained and pretend ‘caveat emptor’ is perfectly okay within the market place. There is nothing new in the idea of a group of people making unethical decisions under the “psychological umbrella” of a peer pressure group, particularly when those actions are either sanctioned or given the seal of approval by a charismatic leader.

The fact is the whole system was out of kilter and a blight by any measure on good governance and corporate social responsibility. The original concepts involved issuance of securities that were imbedded with CDS’s so that the issuer profited from both the issue and their subsequent demise for two bites of the cherry. What was entertained from their very first embryonic creation might have been clever but ultimately was representative of the brainchild of those who were oblivious to any sense of corporate social responsibility.

The rules of engagement need a very thorough revision. I might add that those who defend proprietary trading are starting to look less and less credible. But central to all of this is the notion that the GFC arose because of a lack of integrity and trading designed to profit the few who were in the know about future catastrophic losses.

Probably the most important but least afforded attention for the current administration contemplating financial reform packages concerns transparency. You can’t legislate morality but you can make it obligatory for a seller to disclose all pertinent information. That sort of principle has long been embedded to determine a price for risk – otherwise it is mission impossible.

This brings me back to the heading “mission possible” and what positive aspects can we assert going forward for a post-GFC world in the provision of financial services. Future success rests on two important planks; to ensure a degree of transparency so that derivatives are traded on a recognised market and that there is obligation to provide all available information pertaining to those securities, including any commissions or interests declared by the seller in such instruments. That might sound all rather simplistic but all busts and fraudulent intent are best thwarted by an open and transparent system.

Corruption always flourishes given excessive secrecy to benefit the few and generally is accompanied by misallocations and poor economic performance. Citizen’s would like to think their savings channeled into investments would reap better returns than bank interest , but this decade has been one of the worst since WW 2.

But the future is not mission impossible, since already there are encouraging signs with the percentage of private savings increasing and consumption falling away markedly. I think there is good chance countries like the United States and other debtor countries will continue to save more, import less and export more than would otherwise be the case. If this favorable trend continues – notwithstanding the extreme misery of current record unemployment - there is no reason why the next decades could be significantly better economically and socially than the last decade. Already instead of 47% of the brightest students electing to try their hand at the business related courses we have less than 20% so that maybe we are already seeing the beginnings in a change in culture.

A turnaround in fortunes towards a more equitable society is a mission possible for the next decade.

Sound Recordings of my Father in Concert with the RAAF Glee Singers 1943

Further to my Australia Day posting I have now obtained a copy of the original sound recordings of the RAAF Glee Singers who performed at a concert in Australia House, on Australia Day, in London in 1943!

The sound recordings were obtained for me kindly from the Australian War Memorial and to listen click here. Click on any of the songs listed.

As previously mentioned my father served as a bomber pilot in the Second World War and the group photos (in my previous post) of the RAAF Glee Singers was taken directly from the Australian War Museum archives. Read more here

Creative accounting

It need not come as a surprise the recent revelations in creative accounting emanating from the US Bankruptcy Court about the non-disclosure in Lehman Brothers accounts of about $50 billion in obligations to repurchase securities sold in exchange for temporary funding lasting only a few days. The only real surprise was the amount of money involved and the blatant nature of the omissions.

The non-disclosure of these arrangements was made easier because of the development of creative accounting practices within the financial services industry where sales of securities to counterparties were no more than the equivalent of a short-term funding arrangement using the security sold as collateral. Simple in execution, a sale of securities (collateralized debt securities) was in consideration for cash paid by a counterparty after deducting interest, but only on the proviso of a future obligation to buy back those same securities in a few days time. In effect all you are gaining is a temporary funding and paying a high interest cost deducted from the sales proceeds. However in reality each time the repurchase agreement became due inevitably another would be executed so that the cash flow acquisition of long term dated securities was subject to inappropriate short term funding covering just a few days. The purchaser could opt to make a margin call (ask for more money) should the underlying securities fall in value or simply decide not to allow any future funding. In the case of Lehman Bros repurchase obligations amounting to $50 billion were not revealed in the accounts nor was that omission uncovered by the auditors.

Although one looks aghast at the size and extent of such practices one need not be surprised since creative accounting pressures have infiltrated other industries throughout the globe driven by the rewards available in circumventing the law or spirit of the law. When I was working as a Financial Controller, I was often in the invidious position of having to defend vigorously one’s integrity in resisting overtures to adopt creative accounting which contravened regulatory provisions or the spirit of such provisions. Simply put you have a choice as to whether or not you opt to maintain good governance and utmost integrity to be applied in a principled manner and to be reflective always in the accounts of the company to provide a true and fair view.

However for the minority who succumb or are complicit in creative accounting the catalyst is oft carefully crafted legal input designed to exploit regulatory loopholes or the spirit of the law to render advantage to the few at the expense of the majority. At the other end of the scale we are all familiar with the less sophisticated more blatant forms of corruption involving secret commissions and bribes to drive inefficiency and misallocation of resources and create the conditions for impoverished economic outcomes.

But at the heart of these issues of varying degrees of sophistication is the ripple down effects of corruption of government officialdom whose use of creative accounting and non disclosures would easily have been stopped in its track’s given the application of half decent internal controls. Invariably all of the exposed failures we read about are from within organizations where internal audit and/or control scarcely existed or was woefully lacking. Creative Instruments developed by many leading US banks allowed politicians to mask additional borrowing in Greece, Italy and most likely in many other countries by receiving an upfront payment in return for forgoing future revenue streams which were then swapped for debt liabilities. The accounting entries involved are not complicated and by all accounts elected officials were lining up eagerly to postpone the reality of the financial mess their country was in. The creative accounting employed made the position look as if they were reducing public debt when in effect they were assigning away future revenue streams in exchange for a fee which was then offset against those public debts.

Creative accounting has always been a temptation in the world but has taken on larger proportions since the real power today resides much more with the large corporations and their CEO’s who play a key pivotal role in exercising that influence.

The modern day corporation hopefully will aspire to not only build sustainable shareholder wealth but to also ensure they exercise good governance. We are fortunate in Australia to have so far largely avoided much of the excesses that applied overseas but have inevitably experienced the flow-on effects since we are an integral part of the global economy.

We have witnessed the failures of the dot-com bubble and the Enron scandal that preceded the GFC – the latter becoming perilously close to a great depression to prompt a clarion call for improved governance. But that clarion call would not have been necessary had the CEOs of those failed companies acted with integrity and ensured adequate internal controls operated across their organizations.

Our evolution has always been more dependent upon survival through co-operation – not on survival of the fittest as evolution’s most misquoted quote suggests – since the way forward so far as our evolution is concerned has always depended upon co-operative efforts, so that CEO’s are coaches and are not solely responsible for the success or otherwise of the corporation. Occasionally you will have psychotic or narcissistic leaders who temporarily prosper but inevitably others will need to step up to the plate and make a stand for integrity which is not always easy. But in the end for inequities to flourish the legal profession has to engage its resources in continually finding loopholes outside the spirit of the law just as there needs to be those who support the presentation of misleading accounts, to be prepared to compromise integrity and to avoid taking a stand against unprincipled practices for a lack of integrity to continue. We all have the power to ensure we act with integrity and for shareholders to demand it at meetings and to ensure that safeguards are apparent within organizational structures.

Governance systems need to ensure responsibility and power is more evenly spread across organizations to place more reliance on leaders as coaches and not in the foolish culture as if they are the equivalent of individual rock stars and or superstars.

Living with HIV/AIDS

AIDS according to the United Nations remains the most deadly disease for sub Saharan Africa where it is estimated 22 million of the 33 million worldwide sufferers reside. Living with HIV/ AIDS not long ago was an early death sentence with ruinous consequences for the people of the region and their economies. In our earlier communications with the communities in Malawi it was evident the disease was having a devastating impact which, combined with poor harvests presented a dire outcome and a less than optimistic view for the country‘s future.

But whilst I was in Malawi last year it was already evident that vastly improved health outcomes are now a reality due to the effectiveness of antiretroviral drugs provided free by the government. If the drug is taken in conjunction with a nutritional diet then the HIV/ AIDS sufferer in all likelihood in many cases will look forward to the equivalent of an almost normal life. The pall over Malawi had lifted together with improved agricultural outcomes which meant for the first time in decades a surplus maize crop was available for export.

The history as to how this all came about has been very slow but also encouraging.
The effective yet very expensive antiretroviral drugs were available to richer countries in 1996. The developing countries were to wait for many years later when finally in 1999, after a good deal of buttressing; a license was finally approved to produce an inexpensive generic version in South Africa. Subsequently four leading drug companies offered cheap drugs to the developing countries. Significant funding was provided in 2001 by the creation of the Global Fund to fight AIDs, tuberculosis and malaria. Click here to visit their website.

The United States which was the then funds largest contributor set up additionally the President’s Emergency Plan for AIDS relief which authorized $48 billion dollars in 2008 spread over 5 years, with Ireland contributing a further $25 billion in the same year. ‘Developments in the fight against AIDS’ Editorial – Africa – St Patrick’s Missions –Ireland February 2010

Whilst in Africa I listened to many people’s stories, including that of a grandmother, whose experience was typical of many in their community in terms of church, faith and children. It wasn’t until later that I learned that her husband had died the previous year from HIV/AIDS. She was also infected and acknowledged her past sorrow, but lived a joyful existence. She had let go of her physical suffering and, by focusing on the spiritual, transcended her past sorrow for present joy. While we have great concern for her and the many others, including orphans, who carry a heavy burden through no fault of their own, their joyful spirits, unimpeded by the severe material hardships they endure, remain a true testament to their faith.
The full article I wrote about The Warm Heart of Africa is to be published in the April edition of 'Africa' by St Patrick's Missionary Society with a number of photos addtional to that which was featured earlier in the catholic newspaper Kairos, click here. should it be of interest.

Meanwhile on a global scale efforts continue: Gaborone/Geneva, 18 February 2010 –‘United Nations AIDS’ is calling for an international effort to renew commitment for countries to achieve universal access to HIV prevention, treatment, care and support. Countries are urged to undertake an open and inclusive consultation process—bringing together governments, development partners, civil society organizations, networks of people living with HIV and community groups to review the progress made in reaching country targets for universal access. UNAIDS will support countries and regional bodies in convening these reviews.
The call to action was made by UNAIDS Executive Director Mr. Michel Sidibé while on an official visit to Botswana.

But the global downturn is affecting the flow of funds into the global AIDS programs which may lead to a decline in many countries.

It is crucial that the governments, churches and voluntary organizations redouble their efforts to prevent new infections and to continue to facilitate treatment and care for those already suffering the effects of the disease.
"Hopeful Developments in the fight against AIDS" -Editorial – Africa – St Patrick’s Missions –Ireland February 2010

Playing by the rules

New regulations recently proposed for publically listed US financial institutions aim to prohibit proprietary trading (that is trading by the bank for the bank rather than on behalf of clients) and restrict investments by those public institutions in hedge funds. In a further recently mooted change hedge fund and private equity traders are to be subject to ordinary income tax rates, in lieu of the lower capital gains tax rate that currently applies to their free equity stakes.These long overdue proposed changes once implemented will limit banks ability to place bets on the markets and reduce some of the speculative trading which featured in the global financial crisis.

A recent poll indicated 77% of investors thought such measures were anti –business and a number of business luminaries continue to be critical of the Obama administration citing the probability for tightening of business credit as an unintended consequence. Personally I think such moves will prove to be very positive for the banking sector, and, combined with recently announced increased support for community banking will not impinge on banking services as feared.

However no effective changes have been announced in response to the more critical causes for the prior global financial collapse which was due to the unprecedented growth in leveraged non transparent derivative trading and particularly in the form of credit default swaps. It was the subsequent failure of counterparties dealing in these instruments, which precipitated the turmoil and collapse in markets and these new measures fail to address these issues excepting that public firms will now be prohibited from taking a principal position in trading firms involved. Credit default swaps continue to be traded under a system where virtually no rules exist over their issuance or in market transparency.

How do they work? –

There is a price paid by a buyer to a seller for cover for a bond or a loan where the seller is liable in the event of a defined event termed a default. Hence the buyer buys protection from a seller in consideration for a future payment if a bond or loan defaults whose events are generally defined as bankruptcy, restructuring or due to a credit rating downgrade.

However this seemingly innocuous idea for parties wishing to cover their exposure to loans or bonds is far removed from the typical Credit default swap which operates in the market today. The amount typically paid is a measure of the decrease in the market value of the referenced obligation arising from a credit event, usually without any regard to whether a holder actually suffers a loss. This has lead to the market participants to characterize credit default swaps as “covered" or "naked." A "covered" CDS refers to a transaction in which the protection buyer has an economic exposure which is more in line with sensible commercial principles. However virtually all credit default swaps provide that the parties to the swap need not own the referenced obligations.

The "naked" Credit Default Swap is where the protection buyer does not own or have economic exposure whatsoever to the underlying instrument.

Furthermore Credit default swaps can be used to mitigate the risk of defaults in a debt portfolio market value where a holder of a bond, may hedge exposure risk by buying protection in a Credit Default Swap with respect to that bond. Should the bond default, the proceeds from the Credit Default Swap will cover the resulting decrease in market value of the underlying bond. But if the bond subsequently recovers value, as is oft the case the Credit Default Swap protection buyer will have received reimbursements despite the fact he never suffered a loss.

By now it is apparent to even the most casual observers Credit Default Swaps although touted as resembling insurance policies are vastly different in a number of critical areas; E.g.

1. There is no requirement to actually hold any asset or suffer any loss as payments can be triggered for various events, providing an opportunity for coercion and market manipulation.
2. There is often no insurable interest between the parties or any incentive not to make claims. Traditional insurance seeks to work out schemes of arrangements with defaulters or to help mitigate respective party losses. There is usually an element of a self insurance loss in any financial or trade insurance which mitigates against fraud or prior inadequate disclosure of the risk.
3. The parties can profit in the demise of a company. It is often in the interest of the holder to hasten the firm’s demise as the holder stands to profit from such an event. Hence the opportunity for market manipulation.
4. Prudential requirements do not apply to the issuer of these instruments and a highly geared hedge fund can sell a large amount of credit default swaps without the need to have mandated reserves to cover any subsequent losses which may be higher than anticipated.
   

One might well ask how such reckless arrangements to open the door to coercion and market manipulation could ever come into existence in the public company arena in the first place.

A significant milestone on the road to the ensuing chaos occurred in 2000, when Congress passed a piece of seemingly innocuous legislation called the Commodity Futures Modernization Act, which made derivatives off-limits to agencies that regulate stocks, bonds and futures contracts and was subsequently signed into law in December 2000. The reality of such legislature to exempt regulatory control was to open the door to a form of derivative trading which was to inflict havoc in markets and lead to some of the worst market excesses in 60 years and subsequent failure of counterparties.

An interesting analogy would be to exempt a sport temporarily so that the rules are, there are no rules. I would suggest severe chaotic outcomes would be experienced immediately since inevitably some form of guidelines is required for any game together with the desire to appoint an umpire. Democracy is after all a system that depends upon fair and equitable distribution where players play by the rules, the alternative being corruption and acceptance of that corruption as your corrupt way of life.

Let’s hope eventually, in addition to the recent moves we also see a return to common sense regulatory measures.

Australia Day 1943

Yesterday was Australia Day which has been celebrated by Australians as a holiday since 1939. The above photos feature my late father (deceased 1969) in a group portrait of eight RAAF members of a Glee Party performing at a concert at Australia House, London on Australia Day 1943. My father served as a bomber pilot in the Second World War and information below and the photos have been taken directly from the Australian War Museum archives.

Caption below the first picture : Their concert songs were received with great enthusiasm by the audience. Identified from left to right: pianist Pilot Officer (PO) Hamilton Roland Dacre Budd (pilot) from Broken Hill, NSW (died 1 August 1943 on operations over the Atlantic Ocean); Frank Sutton Walker (observer) from Wellington, NSW; Squadron Leader (Sqn Ldr) Harry Clifford Thrush (chaplain) from Adelaide, South Australia; Sqn Ldr Gordon Gladstone Wood (chaplain) from Wellington, NSW who conducted the choir (died 18 June 1944 in UK); Sergeant (Sgt) Charles Keith Byrnes (pilot) from Moree, NSW; George Claud Notman (observer) from Skipton, Victoria; PO Donald Zalva Pile (pilot) from Melbourne, Victoria (died 26 October 1943 in Scotland); and PO Leslie Walter Roper (pilot) from Melbourne (died 4 September 1943 on operations over Germany).

The subsequent fatalities listed above are a salutary reminder of the high death rate attributable to RAAF command in which my father flew Wellington Bombers. Losses of about 5% per operation gave little chance of survival after a stint of 30 operations.

Earlier on the 3rd January 1943 my father made 6 records for the BBC which took 3 hours to record and included light and popular numbers - ‘I'll Walk Beside You’, ‘Old King Cole’, ‘Pass Me By’ and the beautiful anthem ‘Thou wilt keep him in perfect peace’. The BBC were very pleased and called in some reporter to take pictures for the papers. My father’s diary mentions that Air marshal Williams made a special trip to the studios to hear the records and was very pleased.

In later life the war had influenced my father and my mother knew this and made allowances that today would seem inconceivable. If you would like to read a story about that click on the title or the link icon next to the title.

Walking in the shadows of the mystics.

Introduction

Out of my childhood were mystical memories of dreamy imagined worlds whose characters cast magical spells in the shadows of the giant hypnotic eucalypts which grew in the tranquil peaceful bush land setting behind our family home. At night my bedroom glass window louvers shimmered in the pale light and rattled to the sounds of wind or rain as I listened to the incessant buzz of cicadas or the more strident cry of - “mowpoke! , mowpoke!" of the mowpoke owl before drifting off into sleep.

Although I would consider myself as a more practical and skeptical type person that mystical dreamy imaginative sense has also stayed with me to emerge in later life, prior to any feelings about religiosity, in the form of a recurring day dreaming state from which I imagined nothing whatsoever existed; after a time when the feeling became uncomfortable I would return to my everyday perception.

In Australia over several decades we have seen a minor renaissance in spirituality in contrast to declining church attendances as increased environmental awareness generates more interest in the wisdom streams of ancient societies. Many older cultures although beholden to magic and lacking scientific knowledge nevertheless were more attuned to harmonious co-existence with nature as a consequence of mystic wisdom streams.

But firstly I should define mysticism which is, according to the definition of my Oxford dictionary:

1. Chiefly the Christian church, the beliefs or mental tendencies characteristic of mystics; belief in the possibility of the union with or absorption into GOD by means of contemplation and self surrender; belief in or reliance on the possibility of spiritual apprehension of knowledge inaccessible to the intellect.

2. Religious belief characterized by self delusion or dreamy confusion of thought; belief based on the assumptions on occult qualities or mysterious agencies.

Aboriginal mysticism

In our oldest known continuous culture of the Australian aborigines’ the ancestral origins of mysticism reside in the dreamtime creation where all living things were believed to be made co-dependant and reactive to one another in one inseparable land.

So it was in the beginning the dreamtime was to dominate every facet of their rich life; in mythical creation stories, ceremonial art, music, ritualistic practice; initiation rites into adulthood; and in the repository of knowledge of the law handed down from one generation to another. Within the tribal system adolescents were isolated away from the rest of the tribe under the control of elders who provided tutelage on all matters of their law until they were sufficiently aware to make the positive transition to adulthood which carried with it the responsibility towards their tribe and the environment upon which they were dependant - Charles P Mountford – The Dawn of time.

As a child just before the time of the record –breaking floods which were to submerge our family home in raging floodwater I recall the inexplicable death of the Aborigine named Kinjika from bone pointing for tribal transgressions. Speculation was that his extreme fear caused his untimely death just five days after admission to hospital as medical authorities were unable to find any injury, poison, disease or medical condition that could be held responsible.

Eugene Stockton is a priest who has spent many years with the aboriginals and talks about their tribes gathered around the campfires at night experiencing a mystical oneness with the environment. To read the full article entitled 'Mysticism in the Australian environment: Calls to a new consciousness' click here .

Like many religions aboriginals were interested in the meaning of dreams which unlike other cultures were perceived as a mystical return to the past rather than to interpret the future.
Aboriginal people often interpret dreams as being the memory of things that happened during this Creation Period. Dreams were important because they were considered the time when one was transformed back into prior ancestral time. This linking of dreams to the Creation Period has led people to adopt the general term “The Dreamtime” in order to describe the time of creation in their religion. The term “Dreamtime” in Aboriginal mythology is not really about a person having a dream, but rather, a reference to this Creation Period.

To read more about aboriginal culture and religion click here

Ineffable mysticism and reverence for life

In modern day terms the divide between mysticism in religion and philosophy has become blurred for although the experiences of mysticism may be claimed to be ineffable (Incapable of being expressed; indescribable or unutterable), nevertheless for those traditions to take root and be successfully handed down from one generation to the next required a teacher able to coherently convey what is meant to ensure a future survival.

In the Taoist religion “The Tao” was considered with such reverence that any references made could no longer be considered the true Tao-Lao Tzu (Taoist), since such supremacy in spirit is also ineffable.

For more on the philosopher Lao Tzu click here

GOD was also ineffable in early Judaism

In early Judaism coherency in teachings was described by reference to GOD’S ways or actions in the mystical stories of the Old Testament. The Jewish approach to mysticism is complicated but generally it is agreed the mystics are to be interpreted in terms of allegory and imagination, a not dissimilar view held by scholars today in relation to the parables contained in the New Testament.

In the end any inherent complexity must become mundane for its future survival, as the old story goes of the student and his understanding of the various contemplative mysteries of the mountain whose enlightened state reveals it is a mountain.

In more recent times the definition of mysticism has also tended to be expanded to include the ecstatic experience of oneness found in Indian religions such as Hinduism or Sufism in Islam which aims at unity or absorption of the divine.

In turn the idea of a oneness has also influenced other philosophers such as Albert Schweitzer who said the “Brahmins, taught as a great secret the mysticism of the identity of the souls of all beings and all things with the Universal Soul. According to this mysticism all that is of the nature of soul belongs to the Universal Soul. Man carries the Universal Soul within him. And because the Universal Soul dwells in all Being, it finds its own self again in all Being, in the life of plants as in the life of gods. This is the meaning of the famous Tat twam asi (That thou art thyself) of the Upanishads."

Schweitzer whilst in the midst of a calm river setting in Africa gazing at a grazing hippopotamus, experienced his mystical insight into the principle of reverence for life, which proved to be ‘ manna from heaven’ for a war ravaged weary world, striking a chord that subsequently led to his Nobel peace prize in 1952.

A similar theme is evident In Tathagatagarbha Buddhism to proffer the idea of an enlightened indestructible nature for all beings, obscured by moral and mental contamination but whose enlightened essence is the Buddha Nature, present also in Tibetan Buddhist texts and traditions. Nothingness does not mean an absence of anything but rather the enlightened state from which attachments bringing moral and mental contamination are removed.

Christian mysticism

Turning to Christian mysticism we find an amazing labyrinth of different strands from the medieval Christian mystics included St. Augustine, St. Bernard of Clairvaux, St. Teresa of Avilia and Meister Eckhart and all of the other successors.

But by far the greatest of all of the Christian mystics is the apostle St Paul whose 13 letters make up half of the New Testament, although most scholars contend that only 7 were actually written or under the direction of Paul. Paul was a scholar, sail maker and mystic whose epic journeys established Christendom throughout the Mediterranean and ensured its spread throughout the world. Paul was seen as an apostle for the gentile’s yet in typical Judaist tradition frequently uses allegory by way of Old Testament references in his letters to the recently established infant communities.

Paul remains an enigmatically unique character – virtually unknown in a historical sense other than to be remembered in Jewish disagreements amongst followers, but one who professes to be willing to understand all things and become ‘as one’ to all men to further the cause of being “in Christ” which arose from his mystical experience on the road to Damascus. I think this factor had led many to interpret his work in a more complicated manner than need be the case.

The phrase ‘In Christ” has prompted many different interpretations and Schweitzer in his work ‘The Mysticism of Paul the Apostle’ on page 380 provides his view

"For him [Paul], believers are redeemed by entering already, through the union with Christ, by means of a mystical dying and rising again with him during the continuance of the natural world-era into a supernatural state of existence, this state being that which they are to possess in the kingdom of God. Through Christ we are removed out of this world and transferred into the state of existence proper to the kingdom of God, notwithstanding the fact that it has not yet appeared. “

Much has been made of the abstract nature of Pauline theology as a bridge from the more individualistic Judaism into Christianity with the idea of justification by faith but I think the primary aim of Paul was one of universal freedom from the law under the Jewish covenant about which he disagreed with Peter. His letters are best read simply as letters, not necessarily to be held as always Paul’s specific views but more to be understood as an encouragement and call to the fledgling communities to co-exist with love and respect for one another without the need for the prior ritualistic imposition of Jewish law.

St Paul is of significant interest to secular philosophers because his ideas carry with them the idea of a universal unencumbered system of unity which presupposes through grace existential philosophical aspects to life; to hold our life existence as sacred, to ascertain and acknowledge ones gifts for the benefit of the whole community, to joyfully exist in a state of grace without fear of death, to be free and remain free from guilt, to share in all things and to place love and affection ahead of all other known things. In the process Paul acknowledges our humanity and the imperfect cradle of existence which will continue to see communities straddle the idealism that is encapsulated in their new understanding and freedom from their law only to fall prey to the usual earthly failings.

In the same way as Schweitzer was to say he knew only Jesus of Nazareth; Paul sends his letters of encouragement and hope in the expectation that the experience of freedom from the law will bring joy to existential living to transcend earthly suffering and sorrow.

From a letter written by Albert Schweitzer to his future wife Helene, dated May 1, 1904, "Sometimes it seems to me as if I had arrived beyond the clouds and the stars, and could see the world in the most wonderful clarity, and therefore have the right to be a heretic. To know only Jesus of Nazareth; to continue his work as the only religion, not to have to bear anymore what Christianity has absorbed over the years in vulgarity. Not to be afraid of hell, not to strive for the joys of heaven, not to live in false fear, and the false submission that has become an essential part of our religion--and yet to understand the one Great One, and to know that one is his disciple."

CONCLUSIONS

Mystical experiences have been crucial in providing the creative imagination which helps shape our philosophies and give us that sense of self that gives rise to our humanity.

What is strikingly apparent from many of the mystics is the similarity in ideas about oneness and interdependence for all living things. Another is the wonderful philosophies which are suggested, through grace, as being available to all regardless of belief, to be simply experienced by engagement in mind and spirit. To find your own meaning to life (as opposed to seeking a meaning for life) as I see it in the use of one’s gifts in the way that was intended for a more complete and energised happy life for oneself and community. In that respect secular philosophers’ views often unintentionally reflect religiosity just as the more skeptical views of some religious commentators can be more secular than religious.

In another sense, in a more generalized universal viewpoint my personal philosophy leads me to believe that all life is sacred. We can learn from the mystics but ultimately we all determine what philosophy and life meaning we personally adopt. If you agree with me that all life is sacred then a call to arms must always be viewed with suspicion except in extraordinary circumstances.

Our forgotten flora – magical mushrooms

After rainy periods in the country as a child I remember seeing the magical sprinkling of white dots barely visible amongst the pastures beside a tranquil river which meandered behind our family home- the arrival of mushrooms! Alone in the company of early morning dews at daybreak I would fill my billycan for a tasty breakfast. There was that special feeling of responsibility in distinguishing between edible and dangerous toxic varieties.

The mushroom has captured our imagination from antiquity when the consumption of ‘magic mushrooms’ containing the chemical hallucinogen (psilocybin) engendered mystical religious type feelings. Some toxic varieties in Australia when consumed can potentially be fatal or cause permanent liver damage. However mushrooms undoubtedly are best known as an attractive nutritional addition to our diet, being high in carbohydrates and providing more protein than green vegetables. Mushrooms belong to the fungi family and although fungi’s cause the majority of plant and crop diseases we can thank the smaller types which are used effectively for the production of bread, beer, wine, cheese, vitamins and penicillin.

The biology of fungi is interesting on a number of counts in terms of composition and evolution. Fungi represent the first life form to colonise the earth, well before the emergence of land based plants. Unlike plants which have leaves representative of a vascular system and which can reproduce via flowers and seeds, fungi reproduce through spores. They vary enormously in size and rely mainly on dead and dying organisms for their food supply. Their DNA is more closely aligned to animals than to plants.

Mushrooms researchers are increasingly becoming excited over the many exciting possibilities in their applications such as treating cancer or in cleaning up toxic wastes.

You can read more about just a brief smattering of some more recent discoveries on Science Daily by clicking here or by simply reading my extracted summaries below.

Treating cancer

Dr Cornelia de Moor of The University of Nottingham and her team have investigated a drug called cordycepin, which was originally extracted from a rare kind of wild mushroom called cordyceps and is now prepared from a cultivated form. Dr de Moor said: “Our discovery will open up the possibility of investigating the range of different cancers that could be treated with cordycepin.

More discoveries of Mushrooms that glow in the dark

San Francisco State University Biology Professor Dennis Desjardin and colleagues discovered the fungi in Belize, Brazil, Dominican Republic, Jamaica, Japan, Malaysia and Puerto Rico. The discoveries include four species new to science and three new reports of luminescence in known species. Three quarters of glowing mushrooms, including the species described in the study, belong to the Mycena genus, a group of mushrooms that feed off and decompose organic matter as a source of nutrients to sustain their growth.

"What interests us is that within Mycena, the luminescent species come from 16 different lineages, which suggests that luminescence evolved at a single point and some species later lost the ability to glow," said Desjardin, lead author of the study. He believes that some fungi glow in order to attract nocturnal animals that aid in the dispersal of the mushroom's spores which are similar to seeds and are capable of growing into new organisms.

Mushrooms may also prove effective to cleaning up toxic contaminations in land areas.
This type of mushroom carries out an indiscriminate acid attack on the mineral particles of the soil and absorbs elements in quantities relative to the mineralogical composition of the soil. "In some contaminated soils, or those with particular mineralogical characteristics, the mushrooms collected can reach such high concentrations of toxic elements that their consumption would be unadvisable," reveals the researcher

Chernobyl tragedy teaches us that Fungus Feeds on Radiation
Researchers at the Albert Einstein College of Medicine (AEC) have found evidence that the fungi possess another talent beyond their ability to decompose matter, the capacity to use radioactivity as an energy source for making food and spurring their growth.

Detailing the research in Public Library of Science ONE, AEC's Arturo Casadevall said his interest was piqued five years ago when he read about how a robot sent into the still-highly-radioactive Chernobyl reactor had returned with samples of black, melanin-rich fungi that were growing on the ruined reactor's walls. "I found that very interesting and began discussing with colleagues whether these fungi might be using the radiation emissions as an energy source," explained Casadevall.

Casadevall and his co-researchers then set about performing a variety of tests using several different fungi. Two types - one that was induced to make melanin (Crytococcus neoformans) and another that naturally contains it (Wangiella dermatitidis) - were exposed to levels of ionizing radiation approximately 500 times higher than background levels. Both of these melanin-containing species grew significantly faster than when exposed to standard background radiation.

"Just as the pigment chlorophyll converts sunlight into chemical energy that allows green plants to live and grow, our research suggests that melanin can use a different portion of the electromagnetic spectrum - ionizing radiation - to benefit the fungi containing it," said co-researcher Ekaterina Dadachova.

Investigating further, the researchers measured the electron spin resonance signal after melanin was exposed to ionizing radiation and found that radiation interacts with melanin to alter its electron structure. This, they believe, is an essential step for capturing radiation and converting it into a different form of energy to make food. Until now, melanin's biological role in fungi - if any - had been a mystery. Interestingly, the melanin in fungi is no different chemically from the melanin in our skin, leading Casadevall to speculate that melanin could be providing energy to skin cells.

And radiation-munching fungi could be on the menu for future space missions. "Since ionizing radiation is prevalent in outer space, astronauts might be able to rely on fungi as an inexhaustible food source on long missions or for colonizing other planets," noted Dadachova.

Click here for this reference.

BRIGHT STAR

New Zealand’s Oscar winning film director, Jane Campion who directed ‘The Piano’-one I particularly liked- has returned after a few years absence with the critically acclaimed film BRIGHT STAR. This bitter sweet screen epic combines John Keats’s letters with his romantic entanglement to the 18 year old impetuous seamstress Fanny Brawne stylishly played by Abbie Cornish. Fanny first meets Keats as her neighbour but soon opens wide the romantic doorway to his heart and subsequent betrothal in flagrant disrespect to a Victorian era evident in the practical words but not actions of Fanny’s compassionate mother.

The film is a moving feast for the eyes, heart and mind set in idyllic eastern England, but laced with humour and pathos for the penniless young Keats whose agonizing life compromises are in deference to the reality he relies on the generosity of others but particularly that of his close friend Brown whose antipathy toward Fanny adds yet another dimension of unanswered questions.

BRIGHT STAR leaves you aware that the words of one of the greatest romanticised poets were only recognised for their eloquence, exquisite beauty and romanticism after his tragic early death. His words continue to be spoken today just as they were spoken out aloud in the woods for many years afterwards by a grieving but no less inspired Fanny Brawne.

Click here for NY Times review

The philosophy of money

Australian Aboriginals lacked an independent currency, but like other indigenous groups traded ceremonial artifacts, grinding stones, sea shells, ochre’s, shields, axe heads, spears and even ‘water rights’ along their trade routes marked by permanent waterways. Trade was a ‘United Nations’ of affinity to the land where scarce resources in one region were exchanged for another’s as one Australian nation shared nature’s bounty. The tribes all spoke different dialects and relied on carved symbolic message on a message stick accompanied by translators to negotiate trade agreements. Their existence as the longest uninterrupted culture for 60,000 years or more bears testament to their idea that the land owns us rather than we own the land-the only real wealth upon which we all depend.

Elsewhere in the globe as an independent currency money was created philosophers debated its merits and use. The philosopher Aristotle (340 BC) asserted money was best understood as a duality; to procure necessary goods or services of which he approved and as an accumulated corruptible means to obtain one’s fortune. His extreme view proved a reliable sage as money has bedevilled humanity in whatever form was adopted be it capitalism, socialism, communism or a mixture as is evident in modern day China.

It was the era of modernism around 1500 that heralded inventive trade to follow the advancements in science. The puritan work ethic from the Reformation cast money in a more favorable light to coincide with the idea hard work was virtuous. Oliver Cromwell subsequently enacted laws to bolster the 'mercantilist' system to give preference to the British enterprise and shipping companies. Although historically we have many monetary empires dating back to the fall of the Roman Empire none rivaled the Industrial Revolution in England from 1740- 1780, - a logical melting pot given the recently discovered Newtonian mechanistic world - as suggested by John Gribbin in ‘Science a History 1543- 2001’

The industrial revolution became the catalyst for western world industrialization, but was a two edged sword in terms of benefits. Whilst inventiveness, division of labor and productivity supported vastly improved living standards capable of supporting a much bigger population it was at the expense of massive exploitation of people and land- to become the genesis of our current ecological disaster.
During the Victorian era philosopher and moral ethicist Adam Smith published in 1776 his influential classical economic work entitled ‘Wealth of Nations’ to criticize the 'mercantilist' system. Smith articulated the view that money as the invisible hand of free markets will produce a satisfactory price return for land, labor and capital because the self interest in any free market benefits the whole of society as competition keeps prices low. Smith was aware any concentration in power would distort a free market and pointed out Merchants wielded monopolistic power afforded them as a consequence of bans on foreign competition. Mercantilism was also associated with a monetary system which used exported bullion to pay for imports- mainly from Asia- which reduced money supply to exert downward pressure on prices and economic activity at the expense of impoverished workers.

Mercantilism also adversely affected the colonies which were forced to use English ships, pay duties and only trade in commodities whose prices were set by the British Empire to effectively create an underclass of colonial citizens - a significant factor that led to world war and eventual American independence. The classical economics of Smith overturned the mercantilist system and his free market ideas remained popular up until the great depression of the 1930’s.

But the period afterwards saw the inevitable boom and bust cycles continue in tandem with the growth of the larger financial institutions such as banks whose occasional lending sprees exceeded loanable funds beyond the level of maintainable voluntary savings to cause social dislocations.

During the depression years in the 1930’s, John Maynard Keynes was to present a new radically different system to offer hope we could avoid recurrences of the painful boom bust trade cycles that had come to haunt modern day societies and brought upon an unsuspecting pre boom population the horror of the great depression. His theory was we cannot rely on markets to automatically adjust to ensure full employment so long as workers remained flexible in their demands. Rather his theory saw an active role for government intervention with both fiscal (taxation and spending measures) and monetary policy (control over the level of interest rates) to ensure economic growth and stability. Banks were to be regulated but enjoy ‘Lender of last resort’ from a reserve to ensure confidence was maintained in the system.

Keynesians thought it was imperative for government action during severe economic cycles to introduce government spending, tax breaks and reductions in interest rates during recessions but to reverse the situation during highly expansionary times. In other words to increase those same levers during inflationary times.
Following the outbreak of World War II Keynes's ideas were universally adopted throughout the western world with commensurate success so that by the time we reached the mid fifties all western capitalist nations mirrored his views to share in the relatively strong, stable economic fortunes of the immediate post war era.

Keynes's influence however began to wane from the 1970s, with the emergence of renowned economist Milton Friedman who was skeptical over the ability of governments to effectively regulate the economy with fiscal policy as suggested by Keynes, explaining that such measures were prone to be both costly and ineffective. Freidman relied on tight control of money to maintain price stability. His elegant theory was easily understood and very appealing at a time of high inflation but selectively seized upon by vested interests promoting a free market economy. Concurrent to that change in economic focus was a type of philosophical materialism which had taken firmer root to assert our wellbeing or happiness is only measurable in terms of money. This became linked to fundamentalist type religions who promised future wealth as if synonymous with salvation. Simply put -‘if it doesn’t make money it doesn’t matter’! A type of economic fundamentalism persuasively joined forces with branded religion to present a rather potent cocktail of political inspiration based upon a minimalist role for regulation, suggesting markets are sufficient as the sole arbitrator except for control over the money supply.

Economic fundamentalism gained traction from the power of entrenched interests under either party to be incorporated into decades of government policy reaching its zenith in more recent times. However the recent stimulatory moves made by Obama, Gordon Brown in England and Kevin Rudd in Australia may well have been taken directly from a Keynesian handbook which is likely to rekindle resurgence in renewed interest in his economics.

Conclusion

Any measures that might help avoid the sizeable crashes of 1987, 1997 and 2007- the latter coming perilously close to emulating a great depression, will, as would be anticipated represent the best of the old and new way of thinking. But ultimately you cannot legislate effectively morality but rather I think one can ensure a system is both transparent and fair. I think it would be fair to say the free market envisaged long before by Adam Smith bears little resemblance to the one now championed as free. The championed free market today in reality is so encumbered with a concentration in monetary power and sufficiently lacking in transparency to necessarily distort the beneficial outcomes envisaged by Smith.

Freidman’s ideas about the advantages of smaller government and reliance on monetary controls have been selectively seized upon to give credence to an economic fundamentalism. What we have witnessed has been a very loose monetary policy which made the cost of money (money being currency and easily liquefied bank deposits) very cheap and acted as a catalyst for the excessive leveraging of corporations whose failure precipitated a financial collapse of grand proportions. I agree with Economist Paul Krugman who suggests we will, going forward, increasingly revert to a Keynesian style of economics in preference to one grounded purely on monetarism.

That is not to say a need arises for a larger government sector or even for more legislation. In fact I think we are in danger of over-acting and imposing such increased regulatory controls with proposed increases in new capital ratios and stricter lending requirements as to risk curtailment of any recovery by inducing a reduction in liquidity just as stimulatory measures globally must be wound back.


What are needed in my view are more descriptive type provisions in tandem with improved regulation, coupled with transparency. Large financial institutions need to have their mainstay commercial business and consumer lending areas separated
into different entities to those involved in derivatives and any proprietary trading.

Additionally markets all need to be afforded transparency so that any derivative trading – particularly in relation to Hedge Funds – can be determined for markets to be informed and not left in the dark as was past practice.

The type of philosophical materialism which led to the idea that the stock exchange represents preferred repositories of money making entities which require freedom from regulation in order for those entities to create the wealth necessary to sustain our economies was always a discredited theory. However to the extent those stocks do represent a sustainable linkage of goods or services that may indeed be true. But because of the remoteness and lack of transparency to many of the corporate inputs the actual outcomes are oft far removed from such a reality. Sucked into a vortex of a money making machine where investors in AAA rated securities (and those securities derivations )were so far removed from those who actually owned the properties,it was hard to grasp initially how such schemes were concocted in the first place. Any renegotiation after default was thwarted by intermediaries who had no interest in any renegotiation or were restrained through legalities. The lack of regulatory oversight and need for improved transparency needs no further elaboration on my part. Any system which trades purely on the expectation of another’s failure is doomed to eventual failure, since integrity never envisaged insurance was to benefit from another’s failure or that one could make a profit from insurance.

However on a more positive note all of the major companies I have studied here in Australia – and from what I understand applies globally – are making strenuous efforts to ensure their business is sustainable and reflects the latest in good governance. Most refer to the savings in carbon reductions per employee and even in relation to their stakeholders. There is realization the old ways are not appropriate and regardless of any inaction by the government, a global transformation is already in full swing. It is also refreshing to read that many of the big banks were dismissive of the overtures of their overseas counterparts when offered trade in collaterised debt securities. That rejection was based upon the unnatural dichotomy between the security holder and the layers of wrapping that preceded the security in the form of the property. Some Banks still like to know who their customers are and to personally evaluate the risk- if you’re unable to do that alarm bells need to go off.

I will close with a link to where I began with the Australian Aboriginals. Money really is only a means of exchange so that we- ideally like our indigenous peoples- share to the extent as is necessary and sustainable.

Similarly our evolution was more dependent upon survival through cooperation - not on survival of the fittest as evolution’s most misquoted quotes suggest- since the way forward so far as our evolution is concerned has always depended upon cooperative efforts.

Best wishes for 2010 – may it offer more hope than the previous decade!