Gog and Magog destroy wealth and properties. How:
1. In the financial system today, money can be 'destroyed' and the destruction causes economic contraction
2. 2008 financial crisis is one example of the global scale effect of the system created by Gog and Magog.
The following are verses of al_Qur'an and the tafsir from Ibn Kathir
[وَتَرَكْنَا بَعْضَهُمْ]
(We shall leave some of them) meaning mankind, on that day, the day when the barrier will be breached and these people (Ya'juj and Ma'juj) will come out surging over mankind to destroy their wealth and property.
[وَتَرَكْنَا بَعْضَهُمْ يَوْمَئِذٍ يَمُوجُ فِى بَعْضٍ]
(We shall leave some of them to surge like waves on one another;) As-Suddi said: "That is when they emerge upon the people.'' All of this will happen before the Day of Resurrection and after the Dajjal, as we will explain when discussing the Ayat:
[حَتَّى إِذَا فُتِحَتْ يَأْجُوجُ وَمَأْجُوجُ وَهُمْ مِّن كُلِّ حَدَبٍ يَنسِلُونَ وَاقْتَرَبَ الْوَعْدُ الْحَقُّ]
(Until, when Ya'juj and Ma'juj are let loose, and they swoop down from every Hadab. And the true promise shall draw near...) [21:96-97]
Friday, April 10, 2009
Thursday, April 02, 2009
2008 Crisis Impacts on the Rich
special report on the rich
Easier for a camel
Apr 2nd 2009
From The Economist print edition
After decades of prospering mightily, the wealthy may now be in for an extended period of austerity, says Philip Coggan (interviewed here)
Illustration by Alex Nabaun
EVEN the wealthy burghers of Monaco are feeling the pinch. At the principality’s Le Metropole shopping mall the winter sales were still in full swing in early February. Upmarket retailers such as Lacoste and Christian Lacroix felt obliged to offer 50% reductions.
The rich will get little sympathy, but they have taken a big hit from the financial crisis. After all, they own a disproportionately large share of the equity and property markets. Many of them derive their wealth directly from the financial sector, working for hedge funds, private-equity firms or investment banks. A survey by Oliver Wyman, a consultancy, estimates that the financial crisis has caused high-net-worth individuals (as the banking industry calls the rich) to lose $10 trillion, or a quarter of their wealth. The annual Forbes list found that the global number of billionaires last year fell to 793 from 1,125, and a report by Spectrem Group, a research company, saw a drop in the number of American millionaires from 9.2m to 6.7m between 2007 and 2008.
A few businessmen who borrowed money against the security of their assets have seen their fortunes almost disappear. In Russia the number of billionaire oligarchs has halved, according to Finans magazine, and the assets of the ten richest tycoons have lost two-thirds of their value. Most spectacularly, one Russian businessman who had reportedly agreed to buy a villa in the south of France for €400m is in danger of losing a €39m deposit after backing out of the deal.
To many people this come-uppance of the rich will seem to be a good thing. The extremes of wealth in “Anglo-Saxon” America and Britain had reached levels not seen since the 1920s. The gains from recent economic growth flowed disproportionately to the wealthy. According to one study by Robert Gordon of Northwestern University and Ian Dew-Becker of Harvard, the top 10% of earners received the vast majority of the benefits of the “productivity miracle” of 1996-2005. Another international study found that only Mexico and Russia had more unequal income distributions than America.
Ajay Kapur, a strategist at Mirae Asset Management, dubbed this state of affairs a “plutonomy”, an economy dominated by the spending of the rich. It was a world where the wealthy might be born in France, work in London, park their money in Switzerland and have their business headquarters in the Cayman Islands. Such people seemed to inhabit a different country from other people, which Robert Frank, a writer, called “Richistan”.
That world of the wealthy emerged from economic and political changes in the early 1970s. Fixed exchange rates were abandoned, financial systems were liberalised, trade unions were confronted and taxes were cut, all of which helped usher in the asset-price booms of the 1980s and 1990s. Some of those who played the markets with borrowed money—the founders of hedge-fund and private-equity firms—became billionaires.
A rebound in profits from the low levels of the 1970s, combined with the use of share options as incentives, allowed chief executives to make fortunes. The opening up of the Russian, Indian and Chinese economies, allied to a boom in commodity prices, created a whole new batch of emerging-market plutocrats.
The size of the accumulated wealth was stupendous. The Forbes 400 richest people in 1982 had a combined net worth of $92 billion; by 2006 they owned $1.25 trillion. To make it onto the first list in 1982, you needed a net worth of $75m; by 2006 you had to be a billionaire. A lot more of this money was self-made; inherited wealth made up over 21% of the first list and under 2% of the 2006 roster. And almost a quarter of the 2006 rich owed their fortunes to the finance sector, compared with less than a tenth back in 1982.
The rich man in his castle
It would have been easy to conclude that the tide of history was simply resuming its usual flow towards greater inequality. For much of the time since records began the normal state of affairs has been extremes of wealth, whether in the hands of aristocratic landowners or industrial entrepreneurs. The period after the second world war, labelled by economists as the “great compression”, when wage differentials narrowed and taxes went up, looked like an historical anomaly.
But now the tide is turning again, reflecting widespread resentment of the mess in which the financial sector has landed the economy. The public may have been willing to tolerate extremes of wealth and pay when the economy was producing growth and jobs, but now it has become more suspicious. Why did bankers enjoy bonuses during the boom years but leave taxpayers to foot the bill during the bust? Why should companies be allowed to dodge taxes and sack workers by shifting operations overseas?
What is happening now could mark one of those sea changes in public policy that seem to come along once in every generation. In the late 19th and early 20th century a decline in American farm incomes prompted a rise of populism and progressivism that led to attacks on corporate trusts in America under Theodore Roosevelt. In the 1930s the Depression led to the New Deal and the re-regulation of the financial sector in America, and the rise of fascism in Europe. Reaction to the economic crisis of the 1970s ushered in the Thatcher and Reagan reforms.
Governments are already trying to deal with public anger about manifestly unfair gains by capping bankers’ bonuses. The level of regulation will increase, and taxes will inevitably rise as governments struggle to contain their bulging budget deficits. As President Obama’s budget proposal showed, the rich will be tempting targets for those tax hikes.
It is also possible that globalisation may come under threat as governments seek to placate their voters by protecting local jobs and industries. Already banks are being urged to lend money to domestic rather than foreign businesses. The German and American governments are leading an attack on bank-secrecy laws in tax havens. The elite may no longer find it so easy to move itself and its capital from country to country, depending on where the returns are highest and the taxes lowest.
All this may bring a reduction in inequality, especially in the Anglo-Saxon economies where it seemed to have increased most. The big question is whether this will be short-lived, linked solely to the crisis, or turn out to be something more structural. Social safety nets are much better developed than they were in the 1930s, which may make the poor less desperate and constrain their anger at the rich. But the search for scapegoats will be on.
For the moment the pressure is being felt by businesses that service the rich. Ferretti, a top-of-the-range yacht manufacturer, has defaulted on part of its debt; creditors are set to get just 11 cents on the dollar. The decision by Saks, an exclusive retailer, to slash prices during the 2008 holiday season caused consternation among some luxury-goods groups. Sales at Tiffany’s American jewellery stores have plunged. De Beers has suspended production at one of its biggest diamond mines.
And even wealthy people who are not feeling the pinch may have become more cautious about spending ostentatiously. Net-a-Porter, an upmarket fashion website, now offers the option of having designer outfits delivered in a brown paper bag.
Fee for no service
Those who look after rich clients’ wealth are already in trouble. Surveys indicate that the better-off are highly dissatisfied with the service provided by their private banks, which failed to protect them from the market falls of the past 18 months. The fraud that caused investors who handed their money to Bernard Madoff to lose tens of billions of dollars has raised new doubts about the safety of portfolios and about the due diligence undertaken by wealth managers.
All that said, there are still plenty of rich people around. Someone was confident enough to pay $20m for a Degas bronze at an auction at Sotheby’s in February. Diners at the Hotel Metropole in Monaco are still willing to shell out €137 for a grand dish of rock lobster.
But the outlook for the rich is no longer the “glad, confident morning” that it seemed just two years ago. In a survey of high-net-worth Americans by Harrison Group in January, 78% said their sense of financial security had been undermined by the crisis; only 46% were optimistic about their own future, against 93% in 2005.
This special report will explain how disparities in wealth and income became so wide in the first place and ask whether that process will now go into reverse. And it will examine how well the rich are coping with the crisis—because that will matter for everyone else too.
Easier for a camel
Apr 2nd 2009
From The Economist print edition
After decades of prospering mightily, the wealthy may now be in for an extended period of austerity, says Philip Coggan (interviewed here)
Illustration by Alex Nabaun
EVEN the wealthy burghers of Monaco are feeling the pinch. At the principality’s Le Metropole shopping mall the winter sales were still in full swing in early February. Upmarket retailers such as Lacoste and Christian Lacroix felt obliged to offer 50% reductions.
The rich will get little sympathy, but they have taken a big hit from the financial crisis. After all, they own a disproportionately large share of the equity and property markets. Many of them derive their wealth directly from the financial sector, working for hedge funds, private-equity firms or investment banks. A survey by Oliver Wyman, a consultancy, estimates that the financial crisis has caused high-net-worth individuals (as the banking industry calls the rich) to lose $10 trillion, or a quarter of their wealth. The annual Forbes list found that the global number of billionaires last year fell to 793 from 1,125, and a report by Spectrem Group, a research company, saw a drop in the number of American millionaires from 9.2m to 6.7m between 2007 and 2008.
A few businessmen who borrowed money against the security of their assets have seen their fortunes almost disappear. In Russia the number of billionaire oligarchs has halved, according to Finans magazine, and the assets of the ten richest tycoons have lost two-thirds of their value. Most spectacularly, one Russian businessman who had reportedly agreed to buy a villa in the south of France for €400m is in danger of losing a €39m deposit after backing out of the deal.
To many people this come-uppance of the rich will seem to be a good thing. The extremes of wealth in “Anglo-Saxon” America and Britain had reached levels not seen since the 1920s. The gains from recent economic growth flowed disproportionately to the wealthy. According to one study by Robert Gordon of Northwestern University and Ian Dew-Becker of Harvard, the top 10% of earners received the vast majority of the benefits of the “productivity miracle” of 1996-2005. Another international study found that only Mexico and Russia had more unequal income distributions than America.
Ajay Kapur, a strategist at Mirae Asset Management, dubbed this state of affairs a “plutonomy”, an economy dominated by the spending of the rich. It was a world where the wealthy might be born in France, work in London, park their money in Switzerland and have their business headquarters in the Cayman Islands. Such people seemed to inhabit a different country from other people, which Robert Frank, a writer, called “Richistan”.
That world of the wealthy emerged from economic and political changes in the early 1970s. Fixed exchange rates were abandoned, financial systems were liberalised, trade unions were confronted and taxes were cut, all of which helped usher in the asset-price booms of the 1980s and 1990s. Some of those who played the markets with borrowed money—the founders of hedge-fund and private-equity firms—became billionaires.
A rebound in profits from the low levels of the 1970s, combined with the use of share options as incentives, allowed chief executives to make fortunes. The opening up of the Russian, Indian and Chinese economies, allied to a boom in commodity prices, created a whole new batch of emerging-market plutocrats.
The size of the accumulated wealth was stupendous. The Forbes 400 richest people in 1982 had a combined net worth of $92 billion; by 2006 they owned $1.25 trillion. To make it onto the first list in 1982, you needed a net worth of $75m; by 2006 you had to be a billionaire. A lot more of this money was self-made; inherited wealth made up over 21% of the first list and under 2% of the 2006 roster. And almost a quarter of the 2006 rich owed their fortunes to the finance sector, compared with less than a tenth back in 1982.
The rich man in his castle
It would have been easy to conclude that the tide of history was simply resuming its usual flow towards greater inequality. For much of the time since records began the normal state of affairs has been extremes of wealth, whether in the hands of aristocratic landowners or industrial entrepreneurs. The period after the second world war, labelled by economists as the “great compression”, when wage differentials narrowed and taxes went up, looked like an historical anomaly.
But now the tide is turning again, reflecting widespread resentment of the mess in which the financial sector has landed the economy. The public may have been willing to tolerate extremes of wealth and pay when the economy was producing growth and jobs, but now it has become more suspicious. Why did bankers enjoy bonuses during the boom years but leave taxpayers to foot the bill during the bust? Why should companies be allowed to dodge taxes and sack workers by shifting operations overseas?
What is happening now could mark one of those sea changes in public policy that seem to come along once in every generation. In the late 19th and early 20th century a decline in American farm incomes prompted a rise of populism and progressivism that led to attacks on corporate trusts in America under Theodore Roosevelt. In the 1930s the Depression led to the New Deal and the re-regulation of the financial sector in America, and the rise of fascism in Europe. Reaction to the economic crisis of the 1970s ushered in the Thatcher and Reagan reforms.
Governments are already trying to deal with public anger about manifestly unfair gains by capping bankers’ bonuses. The level of regulation will increase, and taxes will inevitably rise as governments struggle to contain their bulging budget deficits. As President Obama’s budget proposal showed, the rich will be tempting targets for those tax hikes.
It is also possible that globalisation may come under threat as governments seek to placate their voters by protecting local jobs and industries. Already banks are being urged to lend money to domestic rather than foreign businesses. The German and American governments are leading an attack on bank-secrecy laws in tax havens. The elite may no longer find it so easy to move itself and its capital from country to country, depending on where the returns are highest and the taxes lowest.
All this may bring a reduction in inequality, especially in the Anglo-Saxon economies where it seemed to have increased most. The big question is whether this will be short-lived, linked solely to the crisis, or turn out to be something more structural. Social safety nets are much better developed than they were in the 1930s, which may make the poor less desperate and constrain their anger at the rich. But the search for scapegoats will be on.
For the moment the pressure is being felt by businesses that service the rich. Ferretti, a top-of-the-range yacht manufacturer, has defaulted on part of its debt; creditors are set to get just 11 cents on the dollar. The decision by Saks, an exclusive retailer, to slash prices during the 2008 holiday season caused consternation among some luxury-goods groups. Sales at Tiffany’s American jewellery stores have plunged. De Beers has suspended production at one of its biggest diamond mines.
And even wealthy people who are not feeling the pinch may have become more cautious about spending ostentatiously. Net-a-Porter, an upmarket fashion website, now offers the option of having designer outfits delivered in a brown paper bag.
Fee for no service
Those who look after rich clients’ wealth are already in trouble. Surveys indicate that the better-off are highly dissatisfied with the service provided by their private banks, which failed to protect them from the market falls of the past 18 months. The fraud that caused investors who handed their money to Bernard Madoff to lose tens of billions of dollars has raised new doubts about the safety of portfolios and about the due diligence undertaken by wealth managers.
All that said, there are still plenty of rich people around. Someone was confident enough to pay $20m for a Degas bronze at an auction at Sotheby’s in February. Diners at the Hotel Metropole in Monaco are still willing to shell out €137 for a grand dish of rock lobster.
But the outlook for the rich is no longer the “glad, confident morning” that it seemed just two years ago. In a survey of high-net-worth Americans by Harrison Group in January, 78% said their sense of financial security had been undermined by the crisis; only 46% were optimistic about their own future, against 93% in 2005.
This special report will explain how disparities in wealth and income became so wide in the first place and ask whether that process will now go into reverse. And it will examine how well the rich are coping with the crisis—because that will matter for everyone else too.
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