Corona Virus – Global Pandemic

March 17, 2020

Corona Virus – Global Pandemic

Padmini Arhant

Corona virus COVID-19 has brought the world under lock down claiming lives, affecting thousands in different parts of the world and paralyzing the global economy. Politics and political authorities colossal failure to take timely decisive actions in Wuhan, Hubei Province, China has led to the contagion effect. The travel ban in the wake of initial outbreak in Wuhan should have been the preliminary step that could have limited the spread of the virus now causing significant stress, anxiety and economic meltdown.

Citizens across the globe exercising due diligence in adherence of medical warnings and advisory on hygiene, restricting social contacts until the virus containment is critical for self-protection and those in the family and community.

The health crisis affecting most parts of the world is a serious matter with the world having become smaller and closer from transportation and technological advancement in the twenty first century. The novel corona virus nCoV or COVID-19 originating from Wuhan City in Hubei province China claiming many lives over there with global impact is unfortunate and squarely falls on the local and central authorities in China for the inadequate containment of this deadly virus. 

China having experienced earlier outbreaks of corona virus family and other virus strains in the past two decades could have adopted stringent methods and imposed rules along the line prioritizing public health and safety in the prevention measure. The subsequent steps in Wuhan’s lock down was rather aggressive in terms of welding apartment buildings gates and doors prohibiting exit of residents slighting grave danger of such actions in the event of incidents like fire and other possible emergencies arising in the apartment complex. 

There was obvious failure in response mechanism and handling of the repeat outbreak in Wuhan, China with a contagion effect worldwide. The Chinese authorities in Beijing muzzling the whistleblower, the young physician Li Wenliang alerting the community and authorities having to pay a price with his life and several other citizens in China who fell victims to COVID-19 followed by those in many parts of the world speaks volume on the state of affairs i.e. politics endangering lives with authorities exerting power to silence legitimate concerns like the one from Dr. Li Wenliang and series of lapses in addressing the problem from the very beginning considering the history of epidemics from China or anywhere rapidly shared with the rest of the world through constant stream of travelers criss crossing various destinations world over. 

The nCoV or COVID-19 being attributed to transmission from animal to human and mutation thereafter causing the pandemic clearly indicative of the lack of appropriate system monitoring and curbing incidents in wet markets and animal husbandry identified as the catalysts not for the first time but also previously noted in the wake of H1N1, SARS, MERS and now COVID-19 clarify the absence of critical inspections and importance to clean healthy environments in handling meat products sold to the public in open markets. 

Yet another issue is wild animals and variety of species landing on the food table as delicacies for human consumption beckon attention and discernment to spare them as they cause disruption in nature designed food chain with dire consequences on natural habitat and ecological balance depriving members in the wilderness from their original prey for survival contributing to endangered category. Nature has provided more than enough food produces and choices for humans to feed on without having to indulge in far reaching wild life menu not necessarily meant for satisfying normal appetite instead exploring extravagant desires like the items serving as aphrodisiacs for some and others experimenting medicinal value to deal with illnesses in a raw condition often proved to be recipes of disaster.

The government intervention through education and orientation on the health hazards of such practices in the rural, remote and urban areas of the country is essential to save lives in all frontiers i.e. humans and natural conservation. 

Since the preparedness to combat pandemic is always challenging regardless of economic and health care affordability for nations worldwide, the preventative course would significantly mitigate the spread of the disease upon individual discipline and commitment in adherence of public health care advisory on hygiene and limiting social contacts given the nature of the virus to contaminate anyone or anything resulting in massive suffering notwithstanding the toll on global economy. 

Citizens across the globe respecting health care experts warnings and heeding recommendations on the ways and means to cope with the virus and cooperation in deescalation of the current pandemic would effectively restrict the proliferation of the victims and reduce casualties from the alarming COVID-19. 

I extend my sincere condolences to families in Wuhan and rest of China as well as all in other parts of the world who have lost their loved ones to the preventable pandemic and hold the ones affected by the virus in my thoughts and prayers for speedy recovery.

Be wise and stay healthy.

Thank you.

Padmini Arhant

Author & Presenter 

PadminiArhant.com

Prakrithi.PadminiArhant.com

 

 

World without Government – Update

August 2, 2019

World without Government

Update

Padmini Arhant

Is it a coincidence to witness history repeating itself today in India and with Indian economy? 

The information in this video is a revelation on establishment of caste system along with divide and conquer strategy dispelling the false propaganda on Lord Krishna behind creation of casteism in India. 

Source – Srijan Talks – Thank you. 

Who is Government? Whom do they Represent?

The topic is to dispel the myth surrounding government and republic status in the world.

Government is a privileged society on their own abusing power, resources and public to benefit political members in the hierarchy and those to whom they pledge allegiance viz. oligarchy and diverse influential forces in global society. 

Unfortunately, the beneficiaries are certainly not the ordinary people used as electorate to legitimize illegitimacy in false representation and delivery on economic, political and social interests. 

Government as proxies to global clique and internal organizations with specific agenda to subjugate population over generations and silence rational voices insist on maintaining status quo against natural science on expiration of all things tangible and otherwise. 

Government entrenched in corruption, nepotism through political dynasty in acknowledgment of Royalty, the self-proclaimed elites surviving on so-called commoners charity since time immemorial has run its course and exhausted means creating the canyon between haves and have nots with wealth lasting several generations and yet having no sense of contentment in the eternal quest for power, fame and fortune. 

Governments role in nation and their actions as well as decisions impact on average citizens thus far discussed in this update.

In general world over, oligarchy run governments collect taxes from average citizens with penalty upon late payments or default while exempting selves and those installed in government to serve oligarchy and special interests from taxes and rules and regulations in the state and nationwide.

The governments beginning with City council, county or municipal corporations, state and federal governments impose stern rules on local taxpayers constantly reminding citizenry of severe implications on non-compliance on tax payments and various responsibilities transferred over to citizens absolving them from host of duties whether maintenance of pavement repairs, sewage, street lights, roadways, bridges, infrastructure and many public service or important economic aspects such as job creation, crime containment and security, addressing farmers and workers plight. 

Increasing property tax regardless of market downturns, automobile registration fees, consumer goods and services taxes other than personal income tax to state and federal governments constitute revenue to governments that are not accounted for to citizens expected to pay and oblige with no questions on public matter. 

The City council, County, Municipal body, state and central or federal authorities, government agencies and affiliates numerous delinquencies and non-performance is never subject to scrutiny or independent oversight facilitating the governments’ right to impropriety and inefficiency as their prerogative. 

The Citizens Right to information that are referred to as Freedom of Information Act aka The Right to Information (RTI) is either streamlined as classified information alternatively watered down through legislation prohibiting public access to key facts and figures on government statistics and data. 

Where is my TAX money going and how is it being spent if I have to incur all expenses related to public service?

Why are citizens expected to fear authority and not allowed to raise questions and concerns on dysfunctional governments starting with the City, County or municipal level to federal government?

Who authorized political immunity on corruption, embezzlements, tax evasions, murder, terrorizing average citizens, minorities, women and other weak vulnerable demography in society?

Why can’t people employed government be held accountable for erroneous decisions and massive fraud on many occasions depriving average citizens their lifetime savings, retirement funds and /or livelihood paralyzing citizens present and future?

The governments’ misuse of tax payers i.e.ordinary public funded law enforcement agencies to curb peaceful dissent, assembly or submission of citizens petition to government continues unabated in many parts of the world denying citizens basic rights to know the reasons and motives behind government legislations affecting ordinary lives in society. 

Transparency and accountability enforced on law abiding ordinary citizens are not applicable on oligarchy controlled governments and their partners in the economic, entertainment and even religious domains with religion and communal profile used as political tools to win elections. 

The financial transactions on various government deals with economic sector besides trade relations between public and private sector involving ordinary tax payer funds are conducted in secrecy barring accountability.

The terms transparency and accountability are antithetical to those wielding authority and clout in politics and economic activities squandering mainstream population generated national income to exclusively benefit political campaign bidders and stakeholders in politics and economic sector.

The top brass in government posts beginning with Prime Minister or President and cabinet ministers together with selective members in administration make a fortune during the term in office.

What makes those entering public office penniless or maxed out credit cards exit as multimillionaires in the absence of public disclosure on such income?

Not content with wealth amassment at ordinary citizens peril, their family members i.e. spouse and children use every opportunity to lavishly avail extraordinary privileges like using national aircraft meant for only Presidential or Prime Minister official foreign visits for family vacations costing tax payers to a tune of over $100 million or fly to Paris and exotic locations for example on shopping spree with their children. 

The tax payers money splurged in such instances are hardly a concern for these political families assuming privileged status in the sudden transformation of their economic background. 

As if these are not enough, the children from political families are also guaranteed admissions in elite educational institutions under Presidential or influential members quota with majority of them not even qualifying enrollment in any academic or vocational schools let alone any major education center.

College admissions bribing elite schools through endowments is widely practiced among the rich, famous and powerful boasting their educational accolades evidently not on merit but monetary donations in the apparently democratic systems. 

Meanwhile, the illicit entry of ineligible into colleges displacing the eligible, meritorious and competent students make their way into politics, economic, and entertainment…to name a few in diverse occupation reflected in status quo i.e. lack luster growth fudged as fast development. 

Rapid development indeed in fast tracking through short cuts and shady tactics that begins earlier on in their life and continues until their last breath as many are incorrigible in nature. 

Tragically, the able and capable common citizens resign to fait accompli and choose to be burdened with these economic, political and social liabilities much to pervasive ramifications.

They endure generational suffering empowering the so-called elected government victimize those used in the process as electorate to personal gains and oligarchy profits. 

The worst for the electorate is governments term range from four to five years with some extending the tenure deploying devious course like vote rigging, manipulation or plain aggression. 

Governments are fiduciaries appointed and managed by corporate funders, economic merchants alongside fundamental, radical organizations and institutions poised as think tanks promoting own policies and ideologies to deter real progress and a realistic free society or free world forcing prevalent fake environment.

In a nutshell, the corrupt, incompetent, criminal, unscrupulous, promiscuous, nefarious and above all subservient to architects and agents of destruction and chaos are the preference for the ruling class,

Who needs such government engaged in subverting democracy, constitution and human values for selective dominance, prosperity and supremacy? 

Thank you.

Padmini Arhant 

Author & Presenter PadminiArhant.com

Prakrithi.PadminiArhant.com 

 

 

Self-Empowerment

July 13, 2019

Self-Empowerment

Padmini Arhant

 

Welcome to Self-Empowerment.

Self-Empowerment is the base for Republic empowerment.

The governments are run by oligarchy i.e. Corporatized system using public funds. Privatization is the trend in the globalized economy. The chief beneficiaries in privatization are corporations and shareholders. Corporatized governance deny ordinary citizens fair access and opportunity.

Corporate run government policies exclusively favor them. Corporatized governance bear no responsibility on losses to taxpayers and severe damages to economy as well as environment. There is minimal or no oversight on deals benefitting companies on government projects viz. defense contracts handled by private company.

Hence, no checks and balances which means none held accountable on corruption. Transparency is a misnomer with no internal and importantly external audit.

For example – The U.S. government deployed private army Blackwater later dubbed as Xe and now changed into Academi committed atrocities in Iraq, Afghanistan…and in Ukraine with license to kill besides gross human rights violations.

Oligarchy run governments use national defense force as private army for wars, destabilization of sovereign foreign nations and derail economy via sanctions. These actions are directed by organizations, think tanks and institutions representing oligarchy hegemonic goals and strategic dominance.

Government in reality is Corporation’s proxy delivering corporate interests. Government’s other wing is special interests group with own political ideology.

This leaves the government as representatives of private entities and organizations. Citizens are merely used as instrument to legitimize illegitimacy through election. Elections are run by oligarchy with massive funding in campaigns and candidacy.

Governments pledge allegiance to corporate financiers behind election campaign.

In fact, it is ordinary folks money circulated between governments and corporate funders. Ordinary people tax money generously handed to corporations by government. These handouts involve major tax breaks, government subsidies and many exemptions seldom distributed or trickle down to bottom in the workforce. The big corporations in return utilize a portion of common citizens money converted into slush funds and invested in election campaigns to secure government loyalty.

Major corporations enjoy the most favored company (MFC) status in quid pro quo.

Corporate owned media and political party run TV networks to control communication.

Free speech is a one way street with a dead end allowing only government to mislead muted audience. Ordinary citizens voices are muzzled and their advocates subject to government scrutiny. The system is fraudulently declared democracy while stifling republic status.

There is little or no tolerance to alternative perspectives and they are regarded a threat to authority.

As a result, freedom is under siege creating do or die situation. However, there is hope.

How can citizens free themselves from shackles?

Ordinary people in society are taxpayers, workers and consumers at large. Yet, average citizens are denied fair economic opportunity, income and social equality.

First, identify corporations behind government including companies and groups in disguise.

Then, remember you – the consumer possess the power towards Self-Empowerment.

Your decision to buy or avail products and services as end customer impact business.

Accordingly, boycott companies engaged in depriving your individual rights and economic progress.

Election reform is mandatorily required. Enforce ballot paper electoral process to prevent vote rigging and fraud witnessed time and time again in the so-called democratic elections.

Public mandate via referendum on public financing of election is the beginning. Setting election expenditure with strict limits and guidelines is critical. Similarly, demand political parties to disclose their donors and funders in public domain.

Set up cross verification process to confirm accuracy on political funding and voting. Political parties funding should be checked at all times and not just limited to election season. 

Reject political factions and candidates vying for public office as corporate agent.

Bar candidates with criminal records, serious civic violations and corruption charges.

These are preliminary steps towards freeing society from oligarchy and organizations run government.

Again, remind yourself and them that consumer is the ultimate authority determining success and failure of economy and politics.

Watch out for fake government critics launched on social media and main street to deceive public on factual events confirming democracy and constitution crises in society. The government organized pseudo semi-baked clowns are paid trolls to stymie genuine voice. Poor imitation is self-mockery and buffoonery of the paid performer. 

Audience exercising discernment in recognizing original from fakery dished out of bakery would be wise. 

Rise to the occasion and claim your liberty, the inalienable natural right of all beings in the world. 

Freedom is non-negotiable right of all citizens barring hierarchy and prejudice. 

Get started in Self-Empowerment to make this world a better place for all not selective few in society. 

Thank you.

Padmini Arhant

Auhtor & Presenter PadminiArhant.com

Prakrithi.PadminiArhant.com

 

Oligarchy Run Governments

June 8, 2019

Oligarchy Run Governments

Padmini Arhant

Who is government?

Government is selective cadre backed, funded and installed as fiduciaries for oligarchy and special interests imposing their will and agenda for mass subjugation.

Such governance is deceptively and deceitfully described as democracy much to human intelligence insult. The system essentially a kleptocracy camouflaged as democracy epitomize hypocrisy.

Oligarchy favorite choices are despots groomed into demagogues in their absolute surrender to cartel. They are managed and maneuvered to suit perilous aspirations. 

History is testimony to despotism’s ruinous cause and means to power ending in self-destruction and autocracy termination.

The so-called election in pseudo democracy is basically conducted with black money and slush funds disguised in electoral bonds and other nefarious methods flooded into campaigns buying votes using notes and candidacies with a price tag largely representing criminality and corruption. 

Accordingly they are expected to serve  election financiers goals during and after their term in office misusing political mandate and status until their last minute of survival.

What is the need for government?

The government is set up to amass collective wealth of ordinary citizens from their hard labor to benefit selective forces behind the gamut.

People are eternal human capital exploited to maximum for selective groups’ power, prosperity and security.

The labor force toiling over generations consistently struggle to achieve and maintain decent living standard while enriching oligarchy with wealth lasting several generations and yet the latter never content in their quest for fortune.

The citizens enlisted law enforcement such as police, judiciary and above all the national defense i.e. military is claimed and treated as the private army of political power and their behind the scenes operatives profiteering from defense contracts.

Besides, false assertions and embellishments  on attacks and air strikes to enhance political image during and after election is the norm.

The military is predominantly deployed in foreign lands for hegemonic ambitions to access economic resources offshore and establish strategic dominance in the regions  flaunting Superpower status.

How do governments come into force?

Using and abusing people. Turning people against people creating communal divide, caste, class and gender based prejudice highlighted in political appointments as the political class favor to marginalized segments reeking condescendence rather than merit determined acknowledgment.

The average and overwhelming population suffering in abject poverty are perfect targets for persistent violations leaving them at the rich and powerful’s mercy.

These famished parasites exerting authority as birth right are control freaks however lacking control over their distinct predator instincts delineating them from human race.

Ordinary citizens paid taxes and labor oriented revenues are shared among the few in the circle through tax evasions, embezzlement and plain daylight robbery from various government deals in oligarchy shadow.

The looted treasure from people is reinvested in election to bribe voters ironically using electorate money to submit to oligarchy designed electoral outcome.

The chief protagonists in this structure are not limited to political members but in fact comprise oligarchy owned and directed diverse communication media across the spectrum.

The media powerhouse are heavily delegated to propaganda and misinformation together with entertainment industry involvement unleashing big and small screens undeserving as well as worthless famous opportunists to deflect public focus and mislead captive audience.

The police force, para military and troopers as members of mainstream population with relations to common citizens as family, friends and neighbors are estranged for political purpose and authorized to exercise brute force and violence against unarmed civilians in peaceful protest on economic, social and environment abuse.

What is the government policy on individual rights, civil liberty, freedom of expression and peaceful dissent?

There is zero tolerance to positive, peaceful and constructive criticism casting and treating such voices as threat to political establishment and primarily to international clique calling the shots on operation to dissemination. 

Those daring to challenge status quo are isolated and made anonymous producing proxies and puppets to discredit and defame genuine truth. In many situations political dissenters are murdered and imprisoned or made to disappear by political power.

The violence from the state are justified as political license to kill and commit heinous crimes against citizens used to win elections.

How do oligarchy run governments respond to public call for transparency and accountability? 

Transparency and accountability are antithetical to government pledged to shadow power shady deals.

Those in power as members in politics and their benefactors in economic sector are provided immunity on crimes holding them above law that are ordinarily applicable to average citizens including members in national defense in the country.

The political class recruitment of controversial and criminal background candidacies are increasingly promoted as the strength of democracy ploughing sentiments to polarize society.

How do governments use religion?

Religion is the pawn for players in politics, social and religious domain.

The era declaring devil as deus in the evil worship is prominent in the dark age. Whether satanic rituals in bohemian grove or cult fundamentalism rise in politics, the trend currently experiencing psychedelic euphoria slighting reality around and within.

Naturally, anything contradictory to these traits are expected to agitate elements devoted in endangering earth’s sanctity and sanity.

Although insisting on church and state to be separate, religion cited to influence government actions ranging from women reproductive issues to their ability to perform duties in religious centers in the otherwise patriarchal sphere.

The world is forced into accepting contentious 1% dominance over 99% posing life and death decisions. The unrestricted general access to nature’s clean air, pure drinking water and food is not regarded a necessity instead left at oligarchy run governments discretion.

In these circumferences and extreme conditions, the government’s illegitimacy legitimized via calibrated and monetarily infused electoral process characterized as free and fair polls leaving the electorate in dismay.

The unsustainable rule imposing unreasonable demands beyond endurance is classic setting for imminent collapse. 

Thank you.

Padmini Arhant

Author & Presenter PadminiArhant.com

Prakrithi.PadminiArhant.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

India – Indian Election 2019

February 3, 2019

Indian Election 2019

Padmini Arhant

 

Politics governed by corruption, cronyism and
criminality is unsustainable. Change comes
only upon determination among those affected
rise to the occasion to be part of the process
initiating alternative. Indian politics controlled
by internal and external diktat and ideology has
long subjugated the overwhelming majority
struggling to make ends meet under the guise
of independence.
The entertainment industry deployed to distract
public attention from problems and real issues
play a pivotal role in exacerbating citizens
suffering in society while making a fortune
on such complicity.
Mass consciousness on this devious failed
agenda aimed at mind control using celluloid
fallacious presentations is critical to free the
nation from corruption, nepotism and
perennial duplicity.
Thank you.
Padmini Arhant
Author & Presenter PadminiArhant.com
Prakrithi.PadminiArhant.com

Who is Government?

January 18, 2019

Who is Government?

Padmini Arhant

 

Who is Government?

Is it really the representative of the people, by the people and for the people? The video explains the real representation of power.

 

It is important for citizens, the isolated, marginalized, discriminated and disenfranchised in particular to know your rights and rise to the occasion in exercising freedom to exist and live life with dignity and fair opportunity for you and next generation.

Thank you.

Padmini Arhant

Author & Presenter PadminiArhant.com

Prakrithi.PadminiArhant.com

Save the Nations’ Newspapers – OP-ED

April 9, 2009

Like everything else in this economy, the newspaper industry is on the brink of demise. The reasons according to the publishers are the competition from various sources ranging from the Information Superhighway to electronic gizmos producing data with the touch of a button.

The survival of the newspaper industry is paramount in a democracy. It is appropriate to pledge unequivocal support to print press as someone having grown up knowing the world events and current affairs through newspapers. Personally, the newspaper was a window to the outside world and enabled a better understanding of issues unfolding at home and elsewhere. The newspapers offer knowledge, awareness and critical thinking on different topics.

One might argue why subscribe to a newspaper when the same information is accessible on-line free of charge? Although, it is a valid argument, it still does not match the convenience of a newspaper in hand while traveling or commuting to work on public transport and reading in a relaxed manner at home without Google search and browsing Yahoo/AOL articles. Further, the conventional source relieves common stress caused by prolonged use of computers. It is a healthy diversion in a manner books remain popular over audio and video versions.

Some national as well as local newspapers’ editorials, columns and articles are praiseworthy on many issues concerning life. The investigative and independent journalists deserve special recognition for their contribution to humanity due to risks involved in the exposure of subjects that may or may not be challenged in legal terms and otherwise. Similarly, there are reporters providing vital information from war zones and remote corners of the world by endangering their lives. These veteran newsmakers cannot be isolated in this context.

However, it is essential to bring certain issues to the publishers’ attention that could rescue the dying industry. The lack of objectivity in few columns and news articles is one of them. In an era of idolization of political figures, some journalists traveling with public entities tend to edge over the professional ethics and present conflicting content of the same article from other mass media such as television particularly cable news network, international channels and the potent internet. Unfortunately, the authors of such articles fail to recognize the fact that any information from them is verifiable through other sources for authenticity and to an extent affect their credibility if proven false. When they represent a reputable news organization, the conspicuous flaw reveals the devil in the detail magnified on comparison with live images on-line and television. The general public prefer facts not fiction in a newspaper article related to public figures , government affairs and corporate activities.

Another factor behind the decline of the newspaper industry is the ideology driven concept not barring political affiliations and the pandering to the authorities in government and business rather than a neutral position in the presentation of facts to confirm fair and balanced reporting. The educated and technologically savvy mass justifiably turned off by the extreme views and polarization in the newspaper industry. If the internet sources blamed as the major threat to the print press, perhaps it is time for newspaper publishers to exercise the freedom of press and responsible journalism like their on-line competitors and dedicate service to people more than any others in a democracy.

Whenever the press and television newsmedia regardless of the status as mainstream or not assumes the role of personal talking points to the authorities in power, democracy is in jeopardy forcing majority population to seek alternative sources for reliable information. It defeats the purpose of free press in a democracy that prioritizes politics over people, when the primary focus should be accuracy, transparency and accountabilty in public matter.

As stated earlier in numerous blogposts on this website www.padminiarhant.com industries and government ultimately depend on the main street, as they are the consumers and voters with real power in a functioning democracy.

On that note, a sincere request to all citizens across the nation to salvage the local and favorite newspaper through subscription since the survival of newspaper industry means restoration of voice in a democracy.

Thank you.

Padmini Arhant

Stock Market Performance

October 14, 2008

The Stock Market came roaring back on October 13, 2008 and was a major cause for celebration across the globe.

The collective and collaborative effort by the “Heads of Government” through G7 and G20 meetings, in coordination with the global monetary authorities like the World Bank and the International Monetary Fund yielded the much-required morale boost in the financial markets. Their immediate action to respond to the crisis is praiseworthy.

Despite the consolidated action to jumpstart the markets, the stock market is struggling to sustain the momentum gained on the previous day. Obviously, the indication is that the measures in the past hours and days to guarantee the smooth functioning of the financial system is not adequate.

A selective opinion highlighting the reasons for the problems currently experienced in the credit markets –

Source – http://www.americaneconomicalert.org – Thank you.

Why Federal Reserve Policy is Failing

Monday, October 06, 2008

Commentary by Thomas I. Paley, Ph.D.

The Federal Reserve and U.S. Treasury continue to fail in their attempts to stabilize the U.S. financial system. That is due to failure to grasp the nature of the problem, which concerns the parallel banking system. Rescue policy remains stuck in the past, focused on the traditional banking system while ignoring the parallel unregulated system that was permitted to develop over the past twenty-five years.

This parallel banking system financed vast amounts of real estate lending and consumer borrowing. The system (which included the likes of Thornburg Mortgage, Bear Stearns and Lehman Brothers) made loans but had no deposit base. Instead, it relied on roll-over funding obtained through money markets. Additionally, it operated with little capital and extremely high leverage ratios, which was critical to its tremendous profitability. Finally, loans were often securitized and traded among financial firms.

This business model has now proven extremely fragile. First, the model created a fundamental maturity mismatch, whereby loans were of a long term nature but funding was short-term. That left firms vulnerable to disruptions of money market funding, as has now occurred.

Second, securitization converted loans into financial instruments that could be priced according to market conditions. That was fine when prices were rising, but when they started falling firms had to take large mark-to-market losses. Given their low capital ratios, those losses quickly wiped out firms’ capital bases, thereby freezing roll-over funding.

In effect, the parallel banking business model completely lacked shock absorbers, and it has now imploded in a vicious cycle. Lack of roll-over financing has compelled asset sales, which has driven down prices. That has further eroded capital, triggering margin calls that have caused more asset sales and even lower prices, making financing impossible for even the best firms.

Though the parallel banking system engaged in riskier lending than the traditional banking system, those differences were a matter of degree. Traditional banks like Washington Mutual, Wachovia, and Citigroup have also all lost huge sums. However, the traditional banking system is more protected for two reasons.

First, traditional banks are significantly funded by customer deposits. Ironically, such deposits can be withdrawn on demand and are in principle even more insecure than short term roll-over funding. However, they stay in place because of federally provided deposit insurance.

Second, traditional banks are significantly shielded from mark-to-market accounting because they hold on to many of their loans. These loans are therefore priced by auditors on a mark-to-realization basis. However, if they were securitized their market value would be significantly lower owing to current disruptive market conditions.

The bottom line is that the banking system is in better shape not because of its virtues, but because of policy. Deposit funding is safe because of deposit insurance. Banks are spared mark-to market losses because of different accounting rules. And the Federal Reserve is providing banks with massive liquidity infusions through its discount window and its various emergency auction facilities.

Policy has therefore ring-fenced traditional banks. But in the meantime it has left the parallel system in the cold, leaving a gaping hole in the policy dyke.

This policy stance reflects the Fed’s continuing attachment to an antiquated view of the system whereby it takes responsibility for traditional banks and nothing else. Such a policy makes no sense and will fail. The Fed encouraged development of the parallel system, and that system undertakes many of the same activities as traditional banks. Meanwhile, failure of the parallel banking system will continue putting downward pressure on asset prices and lender confidence.

The Treasury’s proposed seven hundred billion dollar asset purchase program will help put a needed floor under asset prices. However, it does nothing to tackle the parallel banking system’s roll-over funding crisis that is crimping lending and pushing firms into bankruptcy. That is causing distress to spread far beyond the mortgage market, undermining the ability of any asset purchase program to put a floor under asset prices.

The urgent implication is the Fed (and other central banks) must extend its safety network to include the parallel banking system. Just as the traditional banking system needs liquidity assistance, so too does the parallel system. That assistance can be provided through such vehicles as the discount window and Federal Reserve auction facilities, and it should be allocated to qualified firms able to post appropriate collateral.

A credit based system is a chain, and a chain is only as strong as its weakest link. The Federal Reserve’s antiquated view has it protecting links connected to the traditional banking system while neglecting everything else. That is a recipe for failure.

Dr. Thomas Palley is a widely published economist and was formerly Chief Economist at the US-China Economic and Security Review Commission.
____________________________

Analysis: Certainly, the emphasis is on the oversight with effective policies for the entire financial structure to alleviate stagnation in the liquidity markets. The investor confidence overall is marred with concerns and skepticism despite stunning performance on October 13, 2008.

The resistance from the free market system towards proposed measures is one of the factors for the current trend. However, the necessary action could eliminate many underlying problems surrounding the entire financial infrastructure, contributing to the volatility in the markets.

Meanwhile, the investors’ active participation to restore momentum and strengthening market gains across all sectors is important for the common good and benefit in the short and long run.

An optimistic approach to the crisis with an absolute integrity in the implementation of policies will assist the markets to rebound now and in the future.

Thank you.

Padmini Arhant