More on Problems

Greed. Greed happens because no one's well being is guaranteed. In the current system, the moment anything happens to you, be it an accident or a terminal disease, you will become a liability and no one will be interested to take care of you. When one feels no security in life, one will have to buckle up, and create security for oneself. The most obvious way in the current system: greed, hoarding of money, by either legal or illegal means, ethical or unethical means.

Greed is a natural response to the current system. We cannot blame people for loving money because it is the only way people can gain some form of security in the current system.

Cost externalisation. If we can keep the cost out of our hands, then we keep the cost out. This is why it is good for some parties to promote things that aren't really good for us as if they are good for us. The cost is not theirs to pay! Imagine a piece of bread with a label stating “colouring” before “salt”, meaning that the piece of bread has more colouring in it than salt. Read your labels carefully and you might see this. Consider this too, a pack of chips with colourings and flavourings. These are companies externalising their costs to us, the consumers. Colourings and flavourings, to them, mean lower raw ingredient cost and higher presentability for higher sales volume. However, colourings and flavourings, to us, mean potential health hazard!

This is a problem with several possible causes. Among them is greed. Another one is because the current system of accounting does not record externalised costs. The shareholders/directors only see the numbers on the financial reports. As long as the reports show lower expenses and/or higher revenues, they are happy. The fact that the processes involved in converting expenses into revenues are causing harm to others may escape the scrutiny of these people. Hence, they may not feel any guilt.

Corruption. Many of the people in power, be it in the highest or the middle positions of power, have grown used to the ease of using the loopholes in the current system in accumulating wealth. Some have even got so addicted to it that they are willing to do very immoral and unethical things to keep themselves in power or gain more power. This has been going on for so many years that any effort at any level to make changes against corruption will be met with resistance at all other levels. The more levels that are involved in making changes, the more likely improvement can be achieved. However, as long as there are benefits to be taken, there will be risk takers who will go for corruption in order to gain an upper hand.

The way money flows. Capitalism dictates that those with assets will be able to grow more assets and the primary asset is money. The banks have money and they charge interest for any forms of loan they can think of. Credit card, business loan, car loan, house mortgage and so on. Whenever we take out a loan, we need to use the loan to produce value, in order to be able to pay back the loan. If the loan produces an excess of value for us after we pay back the loan, then all is good with us. However, if the loan produces a deficit, then we will be personally in toruble.

Let's take a look at the greater system. The government and/or the bank decide on the interest rates of loans. Now, some loans do not create apparent values, such as house mortgage (for people who do actually live in the houses and not for “investment” purpose) and car loans. Given that these values aren't apparent, the borrowers can easily get trapped into deficits without knowing it. And being in such a situation, it is easy for one to lower moral standards for survival. This can, of course, easily be “solved” with financial education on the side of the borrowers. However, it is the banks' best interest to “enslave” as many borrowers as they can, so that they can make more profits! And so, the race to expose and hide this money flow problem takes place. The technical aspects of loans and other financial tools become more and more sophisticate to hide and distort the ability to gauge accurately.

Also, not everyone has the sophistication and time to understand the details of financial literacy. Hence, the problem cannot be solved as easily as initially suggested.

There are also aspects of the financial system that can be categorised as zero-sum game. A zero-sum game is a situation whereby the total amount earned by certain parties is equal with the total amount losed by other parties. Gambling is the classic example for a zero-sum game. The amount won by one player is the loss of another.

Some examples of the financial sectors that can become zero-sum games are the secondary stock markets and derivative markets. There are many people who get sucked into making profits [or attempting to make profit] in these zero-sum games that they are actually leeching money off people who may have earned their money honestly.

The way things are traded, will cause money to flow wherever there are perceived values. Actual values get obscured in the process.

The problems are very inherent in the system and are often interlinked. There is no easy way to solve these problems and all efforts up till now seem to be quite futile, providing only minor symptomatic reliefs to small areas here and there. So, AVOFT is proposing a total replacement of the current system, in hope of eliminating the inherent flaws. There is no guarantee that there will be no more inherent flaws in the new system that we will all be developing. But there is a hope that the inherent problems may be more manageable and less threatening.