Wednesday, July 26, 2006

Azer VS Mantessa - The Illusion Standard of Living

Azer: This is the third time he called me asking my help regarding his debt.
Mantessa: Credit card thing again?

Azer: Yeah.
Mantessa: Avoid him then. He’s a typical guy who’s been heavily hacked.

Azer: Hacked?
Mantessa: Yep. He’s been hacked by the banking system that has been hacking people all over the world since the dawn of time. So avoid him. He is full of diseases with many kinds of viruses, worms, prontox, trojans, spyware whatever, you name it.

Azer: I don’t get it. What do you mean by being hacked?
Mantessa: He is a typical guy who just has no protection upon himself and the banking system knew it. He is without dignity, understanding and emotional control. He never practices safe thinking. Avoid him totally. I won’t blame him though. In fact, the whole nation is hacked.

Azer: Hey man, I still don’t get you.
Mantessa: This is what happens when people start buying what the government is campaigning for. The government wants all of us to keep spending in order to keep the economy rolling. Malaysia’s economy is a purchasing economy. Purchasing economy needs the purchasing power. In order to provide us the purchasing power, the government provides us, you know who … the banks.

Azer: What’s wrong with purchasing? Don’t we all need to eat, to shelter, to wear clothes, to move around, to have fun among so many other things?
Mantessa: Exactly.

Azer: So?
Mantessa: What do you need in order to eat, to shelter, to wear clothes, to move around, to have fun among so many other things?

Azer: Money of course.
Mantessa: Where do you get the money?

Azer: From my salary and don’t you dare telling me that it is wrong for me to receive my salary. The company is working hard for the profits you know.
Mantessa: Exactly. The profits come from sales minus expenses minus tax. Sales come from the current assets being sold which are assets. Assets, well, the company’s assets probably the biggest chunk of origin which come from liabilities. Liabilities are the loans. Loans are from the banks. You are lucky that the salary is from profits. It could be from another liability.

Azer: So what’s wrong with spending? Is it wrong to keep the economy rolling?
Mantessa: Depends on how you spend. If you are not hacked, then it is okay. Trust me, you are hacked too :-)

Azer: I’m hacked?!!
Mantessa: Aren’t we all :-) In many ways, we are all hacked as I told you that the whole nation is hacked. The difference is the level of us being hacked.

Azer: I just don’t get you. Now you really have to explain.
Mantessa: Okay. Sit down and listen. Have pop-corn too.

Azer: Am listening.
Mantessa: When the government decided to go with the Purchasing Economy, they risk us all into this horrifying concept where purchasing power gained by debt creation is always equaled by purchasing power lost by debt liquidation. Same thing, Economic expansion gained by debt creation is always equaled by economic contraction caused by debt liquidation. Thus the purchasing economy is a borrowed economy.

Azer: A Borrowed Economy?
Mantessa: Purchasing power is temporarily borrowed from the future by debt. Your trouble friend should understand this simple reality.

Azer: How does the borrowed economy started?
Mantessa: The minute our nation gained independent of course. Since then, the politicians keep on promising people that they will provide developments. So we start as a developing country. How do we start? They setup Bank Negara which the main function is to borrow money from outside. To make it even worse, they started issuing bonds which is something like . . . look here, I will tender you this much money in the future if you give me this much money now. The minute we borrowed and issued bonds, that is the minute the nation is hacked. Another function is of course to setup other banks for the public.

Azer: That thing about bonds scares me a bit.
Mantessa: Scare you? You should be at least double scared!

Azer: Double scared?
Mantessa: When Bank Negara issued bonds to the outsiders, somebody from the inside have to issue Bank Negara bonds in order to get the money. They are the bankers of course.

Azer: Okay, but double scared?
Mantessa: Let me simplify it to you. Immediately after issue the bond creator and seller has gained: 1) One hundred thousand ringgit units in legal tender currency. 2) The current purchasing power of one hundred ringgit dollar units. Bank Negara pays one hundred thousand ringgit in currency for the bond from a banker. Bank Negara still has the purchasing power of one hundred thousand ringgit units, as long as the bond is liquid and stable in value. Immediately after purchase, Bank Negara neither gained nor lost dollar units or purchasing power. The bond seller or the banker has gained the current purchasing power of one hundred thousand ringgit units. This is called double double expansion.

Azer: I don’t think you really simplify it.
Mantessa: Haiya. Say in the beginning, Bank Negara received RM 100,000 by issuing bonds to the outsiders right?

Azer: Okay.
Mantessa: The nation then has an asset of RM 100,000 in cash and a liability of RM 100,000. I will come to you about the liability later. The nation then is having RM 100,000 to spend.

Azer: Okay.
Mantessa: When a banker issued a bond to Bank Negara to get the money, the banker then has an asset of RM 100,000 in cash and a liability of RM 100,000 to Bank Negara. The bank then is having RM 100,000 to spend. When Bank Negara bought the banker’s bond, the cash asset then is transformed into another kind of asset which is the bond. In other words, bank Negara still having RM 100,000 to spend. Therefore, from RM 100,000 of purchasing power, the nation now has RM 200,000 of purchasing power. This is the Double Double Expansion.

Azer: That’s great!
Mantessa: Oh you forgot. The nation has RM 200,000 of purchasing power but at the same time RM 200,000 of liabilities :-)

Azer: Oh!
Mantessa: Yeah … and what do the bankers do? They started to provide loans to the people. What does Bank Negara do? It provides loans to the government. From here onwards, The Multiple Expansion starts. Note, with both purchasing power and liabilities :-)

Azer: So that’s purchasing economy.
Mantessa: It’s the banker's illusion. The economic prosperity of a debt expansion is illusionary. That economic prosperity is based on the banking illusion that two or more people can each totally own and spend on demand, the very SAME ringgits and the very SAME purchasing power at the very SAME time. Some of the ringgits that you have available to spend in your bank account; another bank customer also has those SAME ringgits ready to spend because of a bank consumer loan. By the accounting illusionary trickery of our banking system; you can both simultaneously spend the SAME ringgits and your collective purchasing power is essentially doubled, but only temporarily. The general economy functions with a highly elevated false prosperity and a highly elevated false standard of living, as if the illusion is reality.

Azer: Errr … Regarding that we are hacked?
Mantessa: In due course, society reaches a point of collective debt saturation - the compound interest of ever increasing debt creates a widespread inability to pay; and, the banker's illusion collapses in a massive debt liquidation and its corresponding massive collapse in purchasing power and an extreme collapse in the general standard of living. Thus, debt liquidation, no matter how it is accomplished, always destroys the purchasing power gained by the original debt creation.

Azer: Again, that we are hacked?
Mantessa: It is the great paradox of our time, while our culture worships the practice of debt as a religion; the concepts and the understanding of the practices of debtism, is perhaps the most obscene taboo in our culture. The debtism that we so devoutly worship and practice to such an extreme, is paradoxically such an obscene intellectual taboo that even the word "debtism" is banished from our dictionaries, our libraries, our classrooms and hence our minds and our thought processes.

Azer: Let me get back to you. Debt liquidation destroys the purchasing power?
Mantessa: Told you! Calculate well and you’ll find out that the interest compound effect is horrible. The bankers or in fact the whole financial community just know the way to fool us with their word jargons. One of the quaint perversities in the use of the language is the practice of calling something the exact opposite of its true meaning. For example, 'sickness insurance' becomes 'health insurance'. 'Death insurance' becomes 'life insurance'; and, 'debtism' becomes 'capitalism', and a 'liability' becomes an 'asset'; and debt becomes a 'credit (card) account'. All the more easy to sell you and me things that are most unpleasant, when they are wrapped in words and concepts most pleasing to the mind. Once our minds are please, our hacked levels increase. The idea is to make us all to spend, spend, spend, spend …

Azer: I don’t really spend on these financial products.
Mantessa: You bought your house on cash? Your car on cash?

Azer: Err
Mantessa: Both the bankers and the government really know how to make us spend. Our kids enter colledges on loans of at least RM 15,000. The government can always change the text books even into another language and they will give us all kinds of reasons. The never-ending road maintenance. Awards via sms like Akademi Fantasia. Build another bridge. Many ways. It is a common that you will hear 'Well, I am going to go to the bank and get some capital and start my own business'. WRONG! You do not get business capital from a bank. You get business debt from a bank. The only business people who get business capital from a bank are embezzlers and bank robbers.

Azer: I spend on necessities.
Mantessa: Right. You spend on your expensive so-called quality polished white rice rather beras kampong which is good for your health. You spend on Starbucks rather making your own coffee, coke rather on plain water and so on. They will make you spend. The menu is young girls, nice vacation, sex, ciggerettes, air-conditioners, perfumes, movies, pubs, bla bla bla bla bla … and if you don’t spend enough, they will offer you the credit cards :-)

Azer: So what should we do?
Mantessa: Start with, if you can't pay cash, don’t try to afford it! There is ONLY ONE exception whereby debt was permissible. One could use debt in order to purchase a home residence. No other exceptions! If you can’t afford a car, take the bus!

Azer: Anything else?
Mantessa: Plenty you can do but have something involving investment on where you should live, what business you should run, what kind of assets you should posses but I am not a financial advisor so I can’t talk to you about it. The government requires the license for many kind of financial advises. Oh yes, nearly forgot. Have a low key life style. Protect your dignity at all times. Avoid euphoria, greed and investment traps. Advise yourself carefully.

Azer: So what is going to happen in the future?
Mantessa: The 1997 Asian Financial Crisis is the beginning. The worst is yet to come. While we all are rolling the economy, actually we are rolling a wheel and the wheel is getting bigger and bigger. Once the wheel is big enough to crush us down, the result is devastating.

Azer: What is happening now as the nation is hacked?
Mantessa: Well … The creditors have all the say. For sure, they can always tell … Malaysia! Sit down and shut the f*ck up!