16 September, 2008

How Risky Are American Assets ?

Michael Lewis pointedly says "this is the day that American financiers, from the point of view of the Asians who sit on top of the world's biggest pile of mobile capital, became a bad risk. " and concludes with "For 25 years Asian financial firms have been amazingly indulgent of U.S. investment bankers. What do you think they're saying about them -- and us --now? "


Anonymous said...

Why do you turn a question of financial impropriety and human frailty (whole world believing that only way for prices is to go up!) into a racial question i.e. Western vs. Asian?
You are making the same mistakes that is usually done by mainstream western press when they say that democratic and liberal values are somehow "western" and wont be supported in non-western societies.
Two Wrongs dont make a Right.

- Anurag

Santosh Chitale said...

No asset if in physical form is risky. All risks pertain to the ether medium (Internet) and Americans being amongst the first ones to grab and spread on the internet have the highest risks. Asians still keep money at home and in the Fixed Deposits and Lockers and also accumulate Gold,Silver, Diamonds as per individual capacity. Americans use PLASTIC and than go and enjoy more and more in a vicious cycle.
This has lead to the HIGH RISK of american assests as they are not only pledged once or twice, but several times over through various financial instruments which have no standing as per correct process of the Law and also by pledging an asset several times over, the risk does not double or triple, it increases in logarithmic terms. Why only Americans, any system that allows multiple asset pledging is bound to fail sooner or later.
This has lead to the great fall of Heavyweights in America where the financial condition of both the private sector and the government is in ruins.
Another pointer to the collaspe is the cost of the Wars undertaken in the name of FREEDOM. It has cost not only lives of American Soldiers but has eaten into to the TREASURY so much that now the assets attached to the treasury are also becoming worthless.
Being aware of the huge risk in such investments is a prerequisite of those Investing Managers who cannot manage a simple credit card account /s and are now holding worthless scraps of paper holdings.

Hemant K Chitale said...

Why do I think it is a "Western vs Asian" issue in your words ? OR why don't I think like you that all people should be alike -- like Americans ? Why don't I think that cultural differences shouldn't matter ?
Oh, wait a minute. I am making the same mistakes that the mainstream western press makes. I wonder how many times you write to the mainstream western press ?
Two Wrongs dont make a Right ?
Two Wrongs are two *different* wrongs.
Why do you think that I think that they make a right ?

Anonymous said...


Firstly, to clarify this comment was in response to recent three postings of your blogs where I could distinctly feel an attitude of 'Schadenfreude' towards the crisis roiling US financial world.

Now coming in particular to your queries let me try to answer them one at a time.

1. "Why do I think it is a "Western vs Asian" issue in your words? OR why don't I think like you that all people should be alike -- like Americans? Why don't I think that cultural differences shouldn't matter?”

Nobody, not even Americans (I lived there for seven years so could claim some first hand experience) wants you to become like them or give up your culture. What most of the angst in "other" world (French politicians for one) is against the popularity of McDonald, Coke, Hollywood etc. But these are NOT being thrust on the other world as it used to be before 20th century when imperialism meant that conquering power pretty much dictated the way you live for e.g. Indians/Hindus have to adopt Persian/Turkish/Arabic culture to survive, Classical Egyptian and Persian culture are pretty much lost, Native American culture (Mayan, Incas, and North American) is wiped away from its homeland this list goes on and on.
American power has been the most benign power world has known but that does not mean that they do not have blemishes or have not done any wrong(s) its just that in larger historical context it is part of evolution of human society whereby humans in general have less genocidal/murderous.

And, to clarify I don’t think people have to be mono-cultural, American or otherwise. Humans have adapted to their surroundings and have chosen whatever that works best for them as a group. In future also this will continue so if Chinese/Indian/French think that they have better opportunity by learning English language wearing western clothes, following Christian religion (after all religion is part of a culture too!) they will do so, no amount of hectoring will stop them from doing so (I am assuming that humans will not return to Alexander/Genghis Khan style of conversion soon but that’s just my assumption ;-).

2. Oh, wait a minute. I am making the same mistakes that the mainstream western press makes. I wonder how many times you write to the mainstream western press?
Two Wrongs dont make a Right?
Two Wrongs are two *different* wrongs.
Why do you think that I think that they make a right?

Maybe I was wrong in ascribing to you the attitude of ‘Schadenfreude’ but that could only be verified by yourself, what I could definitely see was a lack of constructive criticism in these postings. What I meant to say that Asian and US crisis are not events where by we can point the finger to them and vice-versa and forget about it.

Yes, there is no denying the fact that something fundamentally went very wrong (in my humble opinion that was due to stretching de-regulation to no-regulation and allowing a shadowy financial world to be created but that’s for discussion some other time) and it will need major re-structuring of financial businesses to get back to normal.

PS: FYI, I do write to mainstream western press and yes have observed a change for better in their coverage of events/story in other part of the world it might be driven due to commercial reason but none the less its welcome.

- Anurag

Hemant K Chitale said...

Cultures are different. Economic and social expectations are different.
Note that I quote Michael Lewis saying "American" and "Asian".
I've lived out of India for two decades and I do know that India and Asia aren't the same. I don't necessarily agree that American power has been benign -- there have been instances of excess.
As for regulatory environments, although America is highly regulated, the 2001 and 2008 economic episodes show that culture (i.e. *behaviour*) doesn't normally match what society / regulators expect of those who can.