The End of the Republic - 1197 Words

Caesar, Pompey, and Crassus joined forces to form a triple leadership called the First Triumvirate. The rulers of Rome’s states and colonies suspected that one man would soon emerge as the complete ruler. Antipater, ruler of Idumea, played one ruler against the other to seek favor. Crassus invaded Jerusalem and stole the temple treasure while war broke out between Pompey and Caesar. Antipater sided with Pompey until Pompey was defeated, and then switched his loyalty to Caesar. Caesar abolished the five districts and named Antipater procurator of all. Caesar became governor of the southern strip of Gaul, which Rome had annexed some sixty years earlier. He defeated the Celtic Gauls, conquering a huge area corresponding to modern France†¦show more content†¦After new victories over former troops of Pompey in Asia Minor, North Africa, and Spain, he returned to Rome in triumph. Less than a year later, on the Ides of March, he lay stabbed to death on the floor of the Senate at the foot of Pompey’s statue, the victim of sixty senators who thought of themselves as heroic tyrannicides. Caesar’s friend, Anthony, defeated Caesar’s enemies in northern Greece. He then named Antipater’s sons, Herod and Phasael, as tetrarchs (rulers of fourths) of Galilee. (Packer) When the Parthians invaded Syria and Palestine to aid a Hasmonean attempt to regain power, Herod fled to his fortress at Masada on the western shore of the Dead Sea. His older brother, Phasael, was captured and committed suicide. Herod traveled to Rome, where the Roman Senate named him king of Judea. Anthony and his troops finally overpowered the Parthians and their Seleucid allies, and Anthony settled in Jerusalem. The strain of imperial expansion was so great that Rome took in no new territories for least fifty years after Caesar’s birth. Rome ruled most of Greece, Syria, Judea, and North Africa. 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The Theory of Financial Intermediation Free Essays

string(148) " and explains a great variety in the behavior of financial intermediaries in the market in their relation to savers and to investors/entrepreneurs\." THE THEORY OF FINANCIAL INTERMEDIATION: AN ESSAY ON WHAT IT DOES (NOT) EXPLAIN by Bert Scholtens and Dick van Wensveen SUERF – The European Money and Finance Forum Vienna 2003 CIP The Theory of Financial Intermediation: An Essay On What It Does (Not) Explain by Bert Scholtens, and Dick van Wensveen Vienna: SUERF (SUERF Studies: 2003/1) ISBN 3-902109-15-7 Keywords: Financial Intermediation, Corporate Finance, Assymetric Information, Economic Development, Risk Management, Value Creation, Risk Transformation. JELclassificationnumbers: E50,G10,G20,L20,O16  © 2003 SUERF, Vienna Copyright reserved. Subject to the exception provided for by law, no part of this publication may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. We will write a custom essay sample on The Theory of Financial Intermediation: or any similar topic only for you Order Now The publisher retains the sole right to collect from third parties fees payable in respect of copying and/or take legal or other action for this purpose. THE THEORY OF FINANCIAL INTERMEDIATION AN ESSAY ON WHAT IT DOES (NOT) EXPLAIN+ by Bert Scholtens* Dick van Wensveen†  Also read: Theories Seen in Ojt Abstract This essay reflects upon the relationship between the current theory of financial intermediation and real-world practice. Our critical analysis of this theory leads to several building blocks of a new theory of financial intermediation. Current financial intermediation theory builds on the notion that intermediaries serve to reduce transaction costs and informational asymmetries. As developments in information technology, deregulation, deepening of financial markets, etc. end to reduce transaction costs and informational asymmetries, financial intermediation theory shall come to the conclusion that intermediation becomes useless. This contrasts with the practitioner’s view of financial intermediation as a value-creating economic process. It also conflicts with the continuing and increasing economic importance of financial intermediaries. From this paradox, we conclude that current financial intermediation theory fails to provide a satisfactory understanding of the exi stence of financial intermediaries. We wish to thank Arnoud Boot, David T. Llewellyn, Martin M. G. Fase and Robert Merton for their help and their stimulating comments. However, all opinions reflect those of the authors and only we are responsible for mistakes and omissions. * Associate Professor of Financial Economics at the University of Groningen; PO Box 800; 9700AVGroningen;TheNetherlands(correspondingauthor). †  Professor of Financial Institutions at the Erasmus University of Rotterdam; PO Box 1738; 3000 DR Rotterdam; The Netherlands, (former Chairman of the Managing Board of MeesPierson). We present building blocks for a theory of financial intermediation that aims at understanding and explaining the existence and the behavior of real-life financial intermediaries. When information asymmetries are not the driving force behind intermediation activity and their elimination is not the commercial motive for financial intermediaries, the question arises which paradigm, as an alternative, could better express the essence of the intermediation process. In our opinion, the concept of value creation in the context of the value chain might serve that purpose. And, in our opinion, it is risk and risk management that drives this value creation. The absorption of risk is the central function of both banking and insurance. The risk function bridges a mismatch between the supply of savings and the demand for investments as savers are on average more risk averse than real investors. Risk, that means maturity risk, counterparty risk, market risk (interest rate and stock prices), life expectancy, income expectancy risk etc. , is the core business of the financial industry. Financial intermediaries can absorb risk on the scale required by the market because their scale permits a sufficiently diversified portfolio of investments needed to offer the security required by savers and policyholders. Financial intermediaries are not just agents who screen and monitor on behalf of savers. They are active counterparts themselves offering a specific product that cannot be offered by individual investors to savers, namely cover for risk. They use their reputation and their balance sheet and off-balance sheet items, rather than their very limited own funds, to act as such counterparts. As such, they have a crucial function within the modern economy. TABLE OF CONTENTS 1. Introduction7 2. The Perfect Model9 3. Financial Intermediaries in the Economy11 4. Modern Theories of Financial Intermediation15 5. Critical Assessment21 6. An Alternative Approach of Financial Intermediation31 7. Building Blocks for an Amended Theory37 8. A New Research Agenda41 References45 Appendix A53 Tables 1. Share of Employment in Financial Services in Total Employment (percentages)12 2. Share of Value-Added in Financial Services in GDP (percentages)12 3. Financial Intermediary Development over Time for About 150 Countries (percentages)12 4. (Stylized) Contemporary and Amended Theory of Financial Intermediation38 SUERF56 SUERF Studies57 1. Introduction When a banker starts to study the theory of financial intermediation in order to better understand what he has done during his professional life, he enters a world unknown to him. That world is full of concepts which he did not, or hardly, knew before and full of expressions he never used himself: asymmetric information, adverse selection, monitoring, costly state verification, moral hazard and a couple more of the same kind. He gets the uneasy feeling that a growing divergence has emerged between the micro- economic theory of banking, as it took shape in the last three decades, and the everyday behavior of bankers according to their business motives, expressed in the language they use. This essay tries to reflect on the merits of the present theory of financial intermediation, on what it does and does not explain from both a practical and a theoretical point of view. The theory is impressive by the multitude of applications in the financial world of the agency theory and the theory of asymmetric information, of adverse selection and moral hazard. As well as by their relevance for important aspects of the financial intermediation process, as is shown in an ever-growing stream of economic studies. But the study of all these theories leaves the practitioner with the impression that they do not provide a satisfactory answer to the basic question; which forces really drive the financial intermediation process? The current theory shows and explains a great variety in the behavior of financial intermediaries in the market in their relation to savers and to investors/entrepreneurs. You read "The Theory of Financial Intermediation:" in category "Essay examples" But as far as the authors of this essay are aware, it does not, or not yet, provide a satisfactory answer to the question of why real-life financial institutions exist, what keeps them alive and what is their essential contribution to (inter)national economic welfare. We believe that this question cannot be addressed by a further extension of the present theory, by the framework of the agency theory and the theory of asymmetric information. The question goes into the heart of the present theory, into the paradigm on which it is based. This paradigm is the famous classical idea of the perfect market, introduced by Marshall and Walras. Since then, it has been the leading principle, the central point of reference in the theory of competition, the neoclassical growth theory, the portfolio theory and also the leading principle of the present theory of financial intermediation. Financial intermediaries, according to that theory, have a function only because financial markets are not perfect. They exist by the grace of market 7 8Introduction imperfections. As long as there are market imperfections, there are intermediaries. As soon as markets are perfect, intermediaries are redundant; they have lost their function because savers and investors dispose of the perfect information needed to find each other directly, immediately and without any impediments, so without costs, and to deal at optimal prices. This is the general equilibrium model a la Arrow-Debreu in which banks cannot exist. Obviously, this contrasts with the huge economic and social importance of financial intermediaries in highly developed modern economies. Empirical observations point at an increasing role for financial intermediaries in economies that experience vastly decreasing information and transaction costs. Our essay goes into this paradox and comes up with an amendment of the existing theory of financial intermediation. The structure of this paper is as follows. First, we introduce the foundations of the modern literature of financial intermediation theory. From this, we infer the key predictions with respect to the role of the financial intermediary within the economy. In Section 3, we will investigate the de facto role of financial intermediaries in modern economies. We discuss views on the theoretical relevance of financial intermediaries for economic growth. We also present some stylized facts and empirical observations about their current position in the economy. The mainstream theory of financial intermediation is briefly presented in Section 4. Of course, we cannot pay sufficient attention to all developments in this area but will focus on the basic rationales for financial intermediaries according to this theory, i. . information problems, transaction costs, and regulation. Section 5 is a critical assessment of this theory of financial intermediation. An alternative approach of financial intermediation is unfolded in Section 6. In Section 7, we present the main building blocks for an alternative theory of financial intermediation that aims at understanding and explaining the behavior of real-life financial intermediaries. Here, we argue that risk management is the core issue in understanding this behavior. Transforming risk for ultimate savers and lenders and risk management by the financial intermediary itself creates economic value, both for the intermediary and for its client. Accordingly, it is the transformation and management of risk that is the intermediaries’ contribution to the economic welfare of the society it operates in. This is – in our opinion – the hidden or neglected economic rationale behind the emergence and the existence and the future of real-life financial intermediaries. In Section 8, we conclude our essay with a proposal for a research agenda for an amended theory of financial intermediation. 2. The Perfect Model Three pillars are at the basis of the modern theory of finance: optimality, arbitrage, and equilibrium. Optimality refers to the notion that rational investors aim at optimal returns. Arbitrage implies that the same asset has the same price in each single period in the absence of restrictions. Equilibrium means that markets are cleared by price adjustment – through arbitrage – at each moment in time. In the neoclassical model of a perfect market, e. g. the perfect market for capital, or the Arrow-Debreu world, the following criteria usually must be met: –no individual party on the market can influence prices; – conditions for borrowing/lending are equal for all parties under equal circumstances; –there are no discriminatory taxes; –absence of scale and scope economies; –all financial titles are homogeneous, divisible and tradable; – there are no information costs, no transaction costs and no insolvency costs; –all market parties have ex ante nd ex post immediate and full information on all factors and events relevant for the (future) value of the traded financial instruments. The Arrow-Debreu world is based on the paradigm of complete markets. In the case of complete markets, present value prices of investment projects are well defined. Savers and investors find each other because they have perfect information on each others prefer ences at no cost in order to exchange savings against readily available financial instruments. These instruments are constructed and traded costlessly and they fully and simultaneously meet the needs of both savers and investors. Thus, each possible future state of the world is fully covered by a so-called Arrow-Debreu security (state contingent claim). Also important is that the supply of capital instruments is sufficiently diversified as to provide the possibility of full risk diversification and, thanks to complete information, market parties have homogenous expectations and act rationally. In so far as this does not occur naturally, intermediaries are useful to bring savers and investors together and to create instruments that meet their needs. They do so with reimbursement of costs, but costs are by definition an element – or, rather, characteristic – of market imperfection. Therefore, intermediaries are at best tolerated and would be eliminated in a move towards market perfection, with all intermediaries becoming 9 10The Perfect Model redundant: the perfect state of disintermediation. This model is the starting point in the present theory of financial intermediation. All deviations from this model which exist in the real world and which cause intermediation by the specialized financial intermediaries, are seen as market imperfections. This wording suggests that intermediation is something which exploits a situation which is not perfect, therefore is undesirable and should or will be temporary. The perfect market is like heaven, it is a teleological perspective, an ideal standard according to which reality is judged. As soon as we are in heaven, intermediaries are superfluous. There is no room for them in that magnificent place. Are we going to heaven? Are intermediaries increasingly becoming superfluous? One would be inclined to answer both questions in the affirmative when looking to what is actually happening: Increasingly, we have to make do with liberalized, deregulated financial markets. All information on important macroeconomic and monetary data and on the quality and activities of market participants is available in ‘real time’, on a global scale, twenty-four hours a day, thanks to the breathtaking developments in information and communication technology. Firms issue shares over the Internet and investors can put their order directly in financial markets thanks to the virtual reality. The communication revolution also reduces information costs tremendously. The liberalization and deregulation give, moreover, a strong stimulus towards the securitization of financial instruments, making them transparent, homogeneous, and tradable in the international financial centers in the world. Only taxes are discriminating, inside and between countries. Transaction costs are still there, but they are declining in relative importance thanks to the cost efficiency of ICT and efficiencies of scale. Insolvency and liquidity risks, however, still are an important source of heterogeneity of financial titles. Furthermore, every new crash or crisis invokes calls for additional and more timely information. For example, the Asia crisis resulted in more advanced and verifiable and controllable international financial statistics, whereas the Enron debacle has put the existing business accounting and reporting standards into question. There appears to be an almost unstoppable demand for additional information. 3. Financial Intermediaries in the Economy So, we are making important progress in our march towards heaven and what happens? Is financial intermediation fading away? One might think so from the forces shaping the current financial environment: deregulation and liberalization, communication, internationalization. But what is actually happening in the real world? Do we really witness the demise of the financial institutions? Are the intermediaries about to vanish from planet Earth? On the contrary, their economic importance is higher than ever and appears to be increasing. This is the case even during the 1990s when markets became almost fully liberalized and when communication on a global scale made a real and almost complete breakthrough. The tendency towards an increasing role of financial intermediation is illustrated in Tables 1 and 2 that give the relative contribution of the financial sector to the two key items of economic wealth and welfare in most nations, i. e. GDP and labor. These tables show that, even in highly developed markets, financial intermediaries tend to play a substantial and increasing role in the current economy. Furthermore, Demirguc-Kunt and Levine (1999) among others, conclude that claims of deposit money banks and of other financial institutions on the private sector have steadily increased as a percentage of GDP in a large number of countries (circa 150), rich and poor, between the 1960s and 1990s. The pace of increase is not declining in the 1990s. This is reflected in Table 3. In the 1960s, Raymond Goldsmith (1969) gave stylized facts on financial structure and economic development (see appendix A). He found that in the course of economic development, a country’s financial system grows more rapidly than national wealth. It appears that the main determinant of the relative size of a country’s financial system is the separation of the functions of saving and investing among different (groups of) economic units. This observation sounds remarkably modern. Since the early 1990s, there has been growing recognition for the positive impact of financial intermediation on the economy. Both theoretical and empirical studies find that a well-developed financial system is beneficial to the economy as a whole. Basically the argument behind this idea is that the efficient allocation of capital within an economy fosters economic growth (see Levine, 1997). Financial intermediation can affect economic growth by acting on the saving rate, on the fraction of saving channeled to investment or on the social marginal productivity of investment. In general, financial development will be positive for economic growth. But some improvements in risk-sharing and in the 11 12Financial Intermediaries in the Economy credit market for households may decrease the saving rate and, hence, the growth rate (Pagano, 1993). Table 1: Share of Employment in Financial Services in Total Employment (percentages) Source: OECD, National Accounts (various issues) Table 2: Share of Value-Added in Financial Services in GDP (percentages) Source: OECD, National Accounts (various issues) Table 3: Financial Intermediary Development over Time for About 150 Countries (percentages) Source: Demirguc-Kunt and Levine (1999, Figure 2A) 1970 1980 1985 1990 1995 2000 Canada 2. 4 2. 7 2. 9 3. 0 3. 2 3. 1 France 1. 8 2. 6 2. 9 2. 8 2. 7 2. 8 Germany 2. 2 2. 8 3. 0 3. 1 3. 3 3. 3 Japan 2. 4 3. 0 3. 2 3. 3 3. 4 3. 5 Switzerland – – 4. 6 4. 8 4. 8 4. 9 United Kingdom – 3. 0 3. 5 4. 6 4. 4 4. 4 United States 3. 8 4. 4 4. 7 4. 8 4. 8 4. 8 1970 980 1985 1990 1995 2000 Canada 2. 2 1. 8 2. 0 2. 8 2. 9 3. 1 France 3. 5 4. 4 4. 8 4. 4 4. 6 4. 8 Germany 3. 2 4. 5 5. 5 4. 8 5. 8 5. 7 Japan 4. 3 4. 5 5. 5 4. 8 5. 6 5. 3 Netherlands 3. 1 4. 0 5. 3 5. 6 5. 5 5. 8 Switzerland – – 10. 4 10. 3 13. 1 12. 8 United States 4. 0 4. 8 5. 5 6. 1 7. 2 7. 1 1960s 1970s 1980s 1990s Liquid liabilities/GDP 32 39 47 51 Claims by deposit money banks on pri vate sector/GDP 20 24 32 39 Financial Intermediaries in the Economy13 There are different views on how the financial structure affects economic growth exactly (Levine, 2000). The bank-based view holds that bank-based systems – particularly at early stages of economic development – foster economic growth to a greater degree than market-based systems. ? The market-based view emphasizes that markets provide key financial services that stimulate innovation and long-run growth. ? The financial services view stresses the role of banks and markets in researching firms, exerting corporate control, creating risk management devices, and mobilizing society’s savings for the most productive endeavors in tandem. As such, it does regard banks and markets as complements rather than substitutes as it focuses on the quality of the financial services produced by the entire financial system. ? The legal-based view rejects the analytical validity of the financial structure debate. It argues that the legal system shapes the quality of financial services (for example La Porta et al. , 1998). The legal-based view stresses that the component of financial development explained by the legal system critically influences long-run growth. Political factors have been introduced too, in order to explain the relationship between financial and economic development (see Fohlin, 2000; Kroszner and Strahan, 2000; Rajan and Zingales, 2000). From empirical research of the relationship between economic and financial development, it appears that history and path-dependency weigh very heavy in determining the growth and design of financial institutions and markets. Furthermore, idiosyncratic shocks that surprise institutions and markets over time appear to be quite important. Despite obvious connections among political, legal, economic, and financial institutions and markets, long-term causal relationships often prove to be elusive and appear to depend upon the methodology chosen to study the relationship. 1 But it is important to realize that efficient financial intermediation confers two important benefits: it raises 1 For example, see Berthelemy and Varoudakis, 1996; Demetriades and Hussein, 1996; Kaplan and Zingales, 1997; Sala-i-Martin, 1997; Fazzari et al. , 1988; Levine and Zervos, 1998; Demirguc-Kunt and Levine, 1999; Filer et al, 1999; Beck and Levine, 2000; Beck et al. 2000; Benhabib and Spiegel, 2000; Demirguc-Kunt and Maksimovic, 2000; Rousseau and Wachtel, 2000; Arestis et al. , 2001; Wachtel, 2001. 14Financial Intermediaries in the Economy the level of investment and savings, and it increases the efficiency in the allocation of financial funds in the economic system. There is a structural tendency in the composition of national wealth repres ented in financial titles in many countries, especially the Anglo Saxon, towards the substitution of bank held assets (bank loans etc. ) by securitized assets held by the public (equity, bonds) (Ross, 1989). This substitution is often interpreted as a proof of the disintermediation process (e. g. Allen and Santomero, 1997). However, this substitution does not imply that bank loans are not growing any more. To the contrary, they continue to grow, even in the U. S. where the substitution is most visible (see Boyd and Gertler, 1994; Berger et al. , 1995). Therefore, this substitution may not be interpreted as a sign of a diminishing role of banking in general. This is because it is the banks that play an essential role in the securitized instruments. They initiate, arrange and underwrite the floating of these instruments. They often maintain a secondary market. They invent a multitude of off-balance instruments derived from securities. They provide for the clearing of the deals. They are the custodians of these constructions. They provide stock lending and they finance market makers in options and futures. Thus, banks are crucial drivers of financial innovation. Furthermore, it is still an unsolved question of how the off-balance instruments should be counted in the statistics of national wealth. Their huge notional amounts do not reflect the constantly varying values for the contracting parties. Banks are moving in an off-balance direction and their purpose is increasingly to develop and provide tradable and non-tradable risk management instruments. And other kinds of financial intermediaries play an increasingly important role in the same direction, both in securitized and non-tradable instruments, both on- and off-balance: insurance companies, pension funds, investments funds, market makers at stock exchanges and derivative markets. These different kinds of financial intermediaries transform risk (concerning future income or accidents or interest rate fluctuations or stock price fluctuations, etc. ). Risk transformation and risk management is their job. Thus, despite the globalization of financial services, driven by deregulation and information technology ,and despite strong price competition, the financial services industry is not declining in importance but it is growing. This seems paradoxical. It points to something important which the modern financial intermediation theory, and the neo-classical market theory on which it is based, do not explain. Might it be the case that it overlooks something crucial? Something that is to be related to information production but that is, so far, not uncovered by the theory of financial intermediation? 4. Modern Theories of Financial Intermediation In order to give firm ground to our argument and to illustrate the paradox, we will first review the doctrines of the theory of financial intermediation. 2 These are specifications, relevant to the financial services industry, of the agency theory, and the theory of imperfect or asymmetric information. Basically, we may distinguish between three lines of reasoning that aim at explaining the raison d’etre of financial intermediaries: information problems, transaction costs and regulatory factors. First, and that used in most studies on financial intermediation, is the informational asymmetries argument. These asymmetries can be of an ex ante nature, generating adverse selection, they can be interim, generating moral hazard, and they can be of an ex post nature, resulting in auditing or costly state verification and enforcement. The informational asymmetries generate market imperfections, i. . deviations from the neoclassical framework in Section 2. Many of these imperfections lead to specific forms of transaction costs. Financial intermediaries appear to overcome these costs, at least partially. For example, Diamond and Dybvig (1983) consider banks as coalitions of depositors that provide households with insurance against idiosyncratic shocks that adversely affect their liqui dity position. Another approach is based on Leland and Pyle (1977). They interpret financial intermediaries as information sharing coalitions. Diamond (1984) shows that these intermediary coalitions can achieve economies of scale. Diamond (1984) is also of the view that financial intermediaries act as delegated monitors on behalf of ultimate savers. Monitoring will involve increasing returns to scale, which implies that specializing may be attractive. Individual households will delegate the monitoring activity to such a specialist, i. e. to the financial intermediary. The households will put their deposits with the intermediary. They may withdraw the deposits in order to discipline the intermediary in his monitoring function. Furthermore, they will positively value the intermediary’s involvement in the ultimate investment (Hart, 1995). Also, there can be assigned a positive incentive effect of short-term debt, and in particular deposits, on bankers (Hart and Moore, 1995). For example, Qi (1998) and Diamond and Rajan (2001) show that deposit finance can create 2 We have used the widely cited reviews by Allen, 1991; Bhattacharya and Thakor, 1993; Van Damme, 1994; Freixas and Rochet 1997; Allen and Gale, 2000b; Gorton and Winton, 2002, as our main sources in this section. 15 6Modern Theories of Financial Intermediation the right incentives for a bank’s management. Illiquid assets of the bank result in a fragile financial structure that is essential for disciplining the bank manager. Note that in the case households that do not turn to intermediated finance but prefer direct finance, there is still a â€Å"brokerage† role for financial intermediaries, such as investment banks (see Baron, 1979 and 1982). Here, the reputation effect is also at stake. In financing, both the reputation of the borrower and that of the financier are relevant (Hart and Moore, 1998). Dinc (2001) studies the effects of financial market competition on a bank reputation mechanism, and argues that the incentive for the bank to keep its commitment is derived from its reputation, the number of competing banks and their reputation, and the competition from bond markets. These four aspects clearly interact (see also Boot, Greenbaum and Thakor, 1993). The â€Å"informational asymmetry† studies focus on the bank/borrower and the bank/lender relation in particular. In bank lending one can basically distinguish transactions-based lending (financial statement lending, asset- based lending, credit scoring, etc. ) and relationship lending. In the former class information that is relatively easily available at the time of loan origination is used. In the latter class, data gathered over the course of the relationship with the borrower is used (see Lehman and Neuberger, 2001; Kroszner and Strahan, 2001; Berger and Udell, 2002). Central themes in the bank/borrower relation are the screening and monitoring function of banks (ex ante information asymmetries), the adverse selection problem (Akerlof, 1970), credit rationing (Stiglitz and Weiss, 1981), the moral hazard problem (Stiglitz and Weiss, 1983) and the ex post verification problem (Gale and Hellwig, 1985). Central themes in the bank/lender relation are bank runs, why they occur, how they can be prevented, and their economic consequences (Kindleberger, 1989; Bernanke, 1983; Diamond and Dybvig, 1983). Another avenue in the bank/lender relationship are models for competition between banks for deposits in relation to their lending policy and the probability that they fulfill their obligations (Boot, 2000; Diamond and Rajan, 2001). Second is the transaction costs approach (examples are Benston and Smith, 1976; Campbell and Kracaw, 1980; Fama, 1980). In contrast to the first, this approach does not contradict the assumption of complete markets. It is based on nonconvexities in transaction technologies. Here, the financial intermediaries act as coalitions of individual lenders or borrowers who exploit economies of scale or scope in the transaction technology. The notion of transaction costs encompasses not only exchange or monetary transaction costs (see Tobin, 1963; Towey, 1974; Fischer, 1983), but also search costs and monitoring and auditing costs (Benston and Smith, 1976). Here, the role of Modern Theories of Financial Intermediation17 he financial intermediaries is to transform particular financial claims into other types of claims (so-called qualitative asset transformation). As such, they offer liquidity (Pyle, 1971) and diversification opportunities (Hellwig, 1991). The provision of liquidity is a key function for savers and investors and increasingly for corporate customers, whereas the provision of diversification increa singly is being appreciated in personal and institutional financing. Holmstrom and Tirole (2001) suggest that this liquidity should play a key role in asset pricing theory. The result is that unique characteristics of bank loans emerge to enhance efficiency between borrower and lender. In loan contract design, it is the urge to be able to efficiently bargain in later (re)negotiations, rather than to fully assess current or expected default risk that structures the ultimate contract (Gorton and Kahn, 2000). With transaction costs, and in contrast to the information asymmetry approach, the reason for the existence of financial intermediaries, namely transaction costs, is exogenous. This is not fully the case in the third approach. The third approach to explain the raison d’etre of financial intermediaries is based on the regulation of money production and of saving in and financing of the economy (see Guttentag and Lindsay, 1968; Fama, 1980; Mankiw, 1986; Merton, 1995b). Regulation affects solvency and liquidity with the financial institution. Diamond and Rajan (2000) show that bank capital affects bank safety, the bank’s ability to refinance, and the bank’s ability to extract repayment from borrowers or its willingness to liquidate them. The legal-based view especially (see Section 3), sees regulation as a crucial factor that shapes the financial economy (La Porta et al. , 1998). Many view financial regulations as something that is completely exogenous to the financial industry. However, the activities of the intermediaries inherently â€Å"ask for regulation†. This is because they, the banks in particular, by the way and the art of their activities (i. e. qualitative asset transformation), are inherently insolvent and illiquid (for the example of deposit insurance, see Merton and Bodie, 1993). Furthermore, money and its value, the key raw material of the financial services industry, to a large extent is both defined and determined by the nation state, i. e. by regulating authorities par excellence. Safety and soundness of the financial system as a whole and the enactment of industrial, financial, and fiscal policies are regarded as the main reasons to regulate the financial industry (see Kareken, 1986; Goodhart, 1987; Boot and Thakor, 1993). Also, the financial history shows a clear interplay between financial institutions and markets and the regulators, be it the present-day specialized financial supervisors or the old-fashioned sovereigns (Kindleberger, 1993). Regulation of financial intermediaries, especially of banks, is costly. There are the direct costs of administration and of employing the supervisors, and 18Modern Theories of Financial Intermediation there are the indirect costs of the distortions generated by monetary and prudential supervision. Regulation however, may also generate rents for the regulated financial intermediaries, since it may hamper market entry as well as exit. So, there is a true dynamic relationship between regulation and financial production. It must be noted that, once again, most of the literature in this category focuses on explaining the functioning of the financial intermediary with regulation as an exogenous force. Kane (1977) and Fohlin (2000) attempt to develop theories that explain the existence of the very extensive regulation of financial intermediaries when they go into the dynamics of financial regulation. Thus, to summarize, according to the modern theory of financial intermediation, financial intermediaries are active because market imperfections prevent savers and investors from trading directly with each other in an optimal way. The most important market imperfections are the informational asymmetries between savers and investors. Financial intermediaries, banks specifically, fill â₠¬â€œ as agents and as delegated monitors – information gaps between ultimate savers and investors. This is because they have a comparative informational advantage over ultimate savers and investors. They screen and monitor investors on behalf of savers. This is their basic function, which justifies the transaction costs they charge to parties. They also bridge the maturity mismatch between savers and investors and facilitate payments between economic parties by providing a payment, settlement and clearing system. Consequently, they engage in qualitative asset transformation activities. To ensure the sustainability of financial intermediation, safety and soundness regulation has to be put in place. Regulation also provides the basis for the intermediaries to enact in the production of their monetary services. All studies on the reasons behind financial intermediation focus on the functioning of intermediaries in the intermediation process; they do not examine the existence of the real-world intermediaries as such. It appears that the latter issue is regarded to be dealt with when satisfactory answers on the former are being provided. Market optimization is the main point of reference 3 The importance of regulation for the existence of the financial intermediary can best be understood if one is prepared to account for the historical and institutional setting of financial intermediation (see Kindleberger, 1993; Merton, 1995b). Interestingly, and illustrating the crucial importance of regulation for financial intermediation, is that there are some authors who suggest that unregulated finance or ‘free banking’ would be highly desirable, as it would be stable and inflation-free. Proponents of this view are, among others, White, 1984; Selgin, 1987; Dowd, 1989. Modern Theories of Financial Intermediation19 in case of the functioning of the intermediaries. The studies that appear in most academic journals analyze situations and conditions under which banks or other intermediaries are making markets less imperfect as well as the impediments to their optimal functioning. Perfect markets are the benchmarks and the intermediating parties are analyzed and judged from the viewpoint of their contribution to an optimal allocation of savings, that means to market perfection. Ideally, financial intermediaries should not be there and, being there, they at best alleviate market imperfections as long as the real market parties have no perfect information. On the other hand, they maintain market imperfections as long as they do not completely eliminate informational asymmetries, and even increase market imperfections when their risk aversion creates credit crunches. So, there appears not to be a heroic role for intermediaries at all! But if this is really true, why are these weird creatures still in business, even despite the fierce competition amongst themselves? Are they truly dinosaurs, completely unaware of the extinction they will face in the very near future? This seems highly unlikely. Section 3 showed and argued that the financial intermediaries are alive and kicking. They have a crucial and even increasing role within the real-world economy. They increasingly are linked up in all kinds of economic transactions and processes. Therefore, the next section is a critical assessment of the modern theory of financial intermediation in the face of the real-world behavior and impact of financial institutions and markets. 5. Critical Assessment Two issues are of key importance. The first is about why we demand banks and other kinds of financial intermediaries. The answer to this question, in our opinion, is risk management rather than informational asymmetries or transaction costs. Economies of scale and scope as well as the delegation of the screening and monitoring function especially apply to dealing with risk itself, rather than only with information. The second issue that matters is why banks and other financial institutions are willing and able to take on the risks that are inevitably involved in their activity. In this respect, it is important to note that financial intermediaries are able to create comparative advantages with respect to information acquisition and processing in relation to their sheer size in relation to the customer whereby they are able to manage risk more efficiently. We suggest Schumpeter’s view of entrepreneurs as innovators and Merton’s functional perspective of financial intermediaries in tandem are very helpful in this respect. One should question whether the existence of financial intermediaries and the structural development of financial intermediation can be fully explained by a theoretical framework based on the neo-classical concept of perfect competition. The mainstream theory of financial intermediation, as it has been developed in the past few decades, has – without any doubt – provided numerous valuable insights into the behavior of banks and other intermediaries and their managers in the financial markets under a broad variety of perceived and observed circumstances. For example, the â€Å"agency revolution†, unleashed by Jensen and Meckling (1976), focussed on principal-agent relation asymmetries. Contracts and conflicts of interest on all levels inside and outside the firm in a world full of information asymmetries became the central theme in the analysis of financial decisions. Important aspects of financial decisions, which previously went unnoticed in the neo- classical theory, could be studied in this approach, and a â€Å"black box† of financial decision making was opened. But the power of the agency heory is also her weakness: it mainly explains ad hoc situations; new models based on different combinations of assumptions continuously extend it. 4 In nearly all 4 To this extent, one can draw a striking parallel with the traditional Newtonian view of the natural world. The planetary orbits round the Sun can be explained very well with the Newtonian laws of gravitation and force. Apparent anomalies in the orbital movement of Ne ptune turned out to be caused by the influence of an hitherto unknown planet (Pluto). Its (predicted) astronomical 21 22Critical Assessment financial decisions, information differences and, as a consequence, conflicts of interest, play a role. Focussed on these aspects, the agency theory is capable of investigating nearly every contingency in the interaction of economic agents deviating from what they would have done in a market with perfect foresight and equal incentives for all agents. However, the applications from agency theory have mainly anecdotal value; they are tested in a multitude of specific cases. But the theory fails to evolve into a general and coherent explanation of what is the basic function of financial intermediaries in the markets and the economy as a whole. Various researchers interested in real world financial phenomena have pointed out that banks in particular do make a difference. They come up with empirical evidence that banks are special. For example, Fama (1985) and James (1987) analyze the incidence of the implicit tax due to reserve requirements. Both conclude that bank loans are special, as bank CDs have not been eliminated by non-bank alternatives that bear no reserve requirements. Mikkelson and Partch (1986) and James (1987) look at the abnormal returns associated with announcements of different types of security offerings and find a positive response to bank loans. Lummer and McConnel (1989) and Best and Zhang (1993) have confirmed these results. Slovin et al. (1993) look into the adverse effect on the borrower in case a borrower’s bank fails. They find Continental Illinois borrowers incur significant negative abnormal returns during the bank’s impending failure. Gibson (1995) finds similar results when studying the effects of the health of Japanese banks on borrowers. Gilson et al. (1990) find that the likelihood of a successful debt restructuring by a firm in distress is positively related to the extent of that firm’s reliance on bank borrowing. James (1996) finds that the higher the proportion of total debt held by the bank, the higher the likelihood the bank debt will be impaired, and so the higher the likelihood that it participates in the restructuring. Hoshi et al. (1991) for Japan and Fohlin (1998) and Gorton and Schmid (1999) for Germany also find that in these countries, banks provide valuable services that cannot be replicated in capital markets. Current intermediation theory treats such observations often as an anomaly. But, in our perspective, it relates rather to the insufficient explanatory power of the current theory of financial intermediation. observation was regarded as an even greater victory for Newtonian theory. However, it took Einstein and Bohr to reveal that this theory is only a limit case as it is completely unable to deal with the behavior of microparticles (see Couper and Henbest, 1985; Ferris, 1988; Hawking, 1988). Critical Assessment23 The basic reason for the insufficient explanatory power of the present intermediation theory has, in our opinion, to be sought in the paradigm of asymmetrical information. Markets are imperfect, according to this paradigm, because the ultimate parties who operate in the markets have insufficient information to conclude a transaction by themselves. Financial intermediaries position themselves as agents (â€Å"middlemen†) between savers and investors, alleviating information asymmetries against transaction costs to a level where total savings are absorbed by real investments at equilibrium real interest rates. But in the real world, financial intermediaries do not consider themselves agents who intermediate between savers and investors by procuring information on investors to savers and by selecting and monitoring investors on behalf of savers. That is not their job. They deal in money and in risk, not in information per se. Information production predominantly is a means to the end of risk management. In the real world, borrowers, lenders, savers, investors and financial supervisors look at them in the same way, i. . risk managers instead of information producers. Financial intermediaries deal in financial services, created by themselves, mostly for their own account, via their balance sheet, so for their own risk. They attract savings from the saver and lend it to the investor, adding value by meeting the specific needs of savers and investors at prices that equilibrate the supply and demand of money. This is a creative process, which cannot be characterized by the reduction of informati on asymmetries. In the intermediation process the financial intermediary transforms savings, given the preferences of the saver with respect to liquidity and risk, into investments according to the needs and the risk profile of the investor. It might be clear that for these reasons the views of Bryant (1980) and of Diamond and Dybvig (1983) on the bank as a coalition of depositors, of Akerlof (1970) and Leland and Pyle (1977) on the bank as an information sharing coalition, and of Diamond (1984) on the bank as delegated (†¦ monitor, do not reflect at all the view of bankers on their own role. Nor does it reflect the way in which society experiences their existence. Even with perfect information, the time and risk preferences of savers and investors fail to be matched completely by the price (interest rate) mechanism: there are (too many) missing markets. It is the financial intermediary that somehow has to make do with these missing links. The financial intermediary manages risks in order to al low for the activities of other types of households within the economy. One would expect that the theory of the firm would pay ample attention to the driving forces behind entrepreneurial activity and could thus explain in more general terms the existence of financial intermediation as an entrepreneurial 24Critical Assessment activity. However, this is not the focus of that theory. The theory of the firm is preoccupied with the functioning of the corporate enterprise in the context of market structures and competition processes. In the wake of Coase (1937), the corporate enterprise is part of the market structure and can even be considered as an alternative for the market. This view laid the foundation for the transaction cost theory (see Williamson, 1988), for the agency theory (Jensen and Meckling, 1976), and for the theory of asymmetric information (see Stiglitz and Weiss, 1981 and 1983). Essential in the approaches of these theories is that the corporate enterprise is not treated as a â€Å"black box†, a uniform entity, as was the case in the traditional micro-economic theory of the firm. It is regarded as a coalition of interests operating as a market by itself and optimizing the opposing and often conflicting interests of different stakeholders (clients, personnel, financiers, management, public authorities, non-governmental organizations). The rationale of the corporate enterprise is that it creates goods and services, which cannot be produced, or only at a higher price, by consumers themselves. This exclusive function justifies transaction costs, which are seen as a form of market imperfection. The mainstream theory of the firm evolved under the paradigm of the agency theory and the transaction costs theory as a theory of economic organization rather than as a theory of entrepreneurship. A separate line of thinking in the theory of the firm is the dynamic market approach of Schumpeter (1912), who stressed the essential function of entrepreneurs as innovators, creating new products and new distribution methods in order to gain competitive advantage in constantly developing and changing markets. In this approach, markets and enterprises are in a continuous process of â€Å"creative destruction† and the entrepreneurial function is pre-eminently dynamic. Basic inventions are more or less exogenous to the economic system; their supply is perhaps influenced by market demand in some way, but their genesis lies outside the existing market structure. Entrepreneurs seize upon these basic inventions and transform them into economic innovations. The successful innovators reap large short-term profits, which are soon bid away by imitators. The effect of the innovations is to disequilibrate and to alter the existing market structure, until the process eventually settles down in wait for the next (wave of) innovation. The result is a punctuated pattern of economic development that is perceived as a series of business cycles. Financial intermediaries, the ones that mobilize savings, allocate capital, manage risk, ease transactions, and monitor firms, are essential for economic growth and development. That is what Joseph Schumpeter argued early in this century. Now there is evidence to support Schumpeter’s view: financial services promote development (see King and Critical Assessment25 Levine, 1993; Benhabib and Spiegel, 2000; Arestis et al. , 2001; Wachtel, 2001). The conceptual link runs as follows: Intermediaries can promote growth by increasing the fraction of resources society saves and/or by improving the ways in which society allocates savings. Consider investments in firms. There are large research, legal, and organizational costs associated with such investment. These costs can include evaluating the firm, coordinating financing for the firm if more than one investor is involved, and monitoring managers. The costs might be prohibitive for any single investor, but an intermediary could perform these tasks for a group of investors and lower the costs per investor. So, by researching many firms and by allocating credit to the best ones, intermediaries can improve the allocation of society’s resources. Intermediaries can also diversify risks and exploit economies of scale. For example, a firm may want to fund a large project with high expected returns, but the investment may require a large lump-sum capital outlay. An individual investor may have neither the resources to finance the entire project nor the desire to devote a disproportionate part of savings to a single investment. Thus profitable opportunities can go unexploited without intermediaries to mobilize and allocate savings. Intermediaries do much more than passively decide whether to fund projects. They can initiate the creation and transformation of firms’ activities. Intermediaries also provide payment, settlement, clearing and netting services. Modern economies, replete with complex interactions, require secure mechanisms to settle transactions. Without these services, many activities would be impossible, and there would be less scope for specialization, with a corresponding loss in efficiency. In addition to improving resource allocation, financial intermediaries stimulate individuals to save more efficiently by offering attractive instruments that combine attributes of depositing, investing and insuring. The securities most useful to entrepreneurs – equities, bonds, bills of exchange – may not have the exact liquidity, security, and risk characteristics savers desire. By offering attractive financial instruments to savers – deposits, insurance policies, mutual funds, and, especially, combinations thereof – intermediaries determine the fraction of resources that individuals save. Intermediaries affect both the quantity and the quality of society’s output devoted to productive activities. Intermediaries also tailor financial instruments to the needs of firms. Thus firms can issue, and savers can hold, financial instruments more attractive to their needs than if intermediaries did not exist. Innovations can also spur the development of financial services. Improvements in computers and communications have triggered financial innovations over the past 20 years. Perhaps, more important for developing countries, growth can increase the demand for financial services, sparking their adoption. 26Critical Assessment In translating these concepts to the world of financial intermediation, one ends up at the so-called functional perspective (see Merton, 1995a). The functions performed by the financial intermediaries are providing a transactions and payments system, a mechanism for the pooling of funds to undertake projects, ways and means to manage uncertainty and to control risk and provide price information. The key functions remain the same, the way they are conducted varies over time. This looks quite similar to what Bhattacharya and Thakor (1993) regard as the qualitative asset transformation operations of financial intermediaries, resulting from informational asymmetries. However, in our perspective, it is not a set of operations per se but the function of the intermediaries that gives way to their presence in the real world. Of course, we are well aware of the fact that in the real-world the everyday performance of these different functions can be experienced by clients as – to quote Boot (2000) – †an annoying set of transactions†. The key functions of financial intermediaries are fairly stable over time. But the agents that are able and willing to perform them are not necessarily so. And neither are the focus and the instruments of the financial supervisors. An insurance company in 2000 is quite dissimilar in its products and distribution channels from one in 1990 or 1960. And a bank in Germany is quite different from one in the UK. Very different financial institutions and also very different financial services can be developed to provide the de facto function. Furthermore, we have witnessed waves of financial innovations, consider swaps, options, futures, warrants, asset backed securities, MTNs, NOW accounts, LBOs, MBOs and MBIs, ATMs, EFTPOS, and the distribution revolution leading to e-finance (e. . see Finnerty, 1992; Claessens et al. , 2000; Allen et al. , 2002). From this, financial institutions and markets increasingly are in part complementary and in part substitutes in providing the financial functions (see also Gorton and Pennacchi, 1992; Levine, 1997). Merton (1995a) suggests a path of the development of financial functions. Instead of a secular trend, away from intermediaries towards markets, he acknowledges a much more cycl ical trend, moving back and forth between the two (see also Rajan and Zingales, 2000). Merton argues that although many financial products tend to move secularly from intermediaries to markets, the providers of a given function (i. e. the financial intermediaries themselves) tend to oscillate according to the product-migration and development cycle. Some products also move in the opposite direction, for example the mutual fund industry changed the composition of the portfolios of US households substantially, that is, from direct held stock to indirect investments via mutual funds (Barth et al. , 1997). In our view, this mutual Critical Assessment27 und revolution in the US – and elsewhere – is a typical example of the increasing role for intermediated finance in the modern economy. Thus, in our opinion, one should view the financial intermediaries from an evolutionary perspective. They perform a crucial economic function in all times and in all places. However, the form they have changes with time and place. Maybe once they were giants, dinosaurs so to sa y, in the US. Nowadays, they are no longer that powerful but they did not lose their key function, their economic niche. Instead, they evolved into much smaller and less visible types of business, just like the dinosaurs evolved into the much smaller omnipresent birds. Note that most of the theoretical and empirical literature actually refers to banks (as a particular form of financial intermediary) rather than to all financial institutions conducting financial intermediation services. However, the bank of the 21st century completely differs from the bank that operated in most of the 20th century. Both its on- and off-balance sheet activities show a qualitatively different composition. That is, away from purely interest related lending and borrowing business towards fee and provision based insurance-investment-advice-management business. At the same time, the traditional insurance, investment and pension funds enter the world of lending and financing. As such, financial institutions tend to become both more similar and more complex organisations. Thus, it appears that the traditional banking theories relate to the creation of loans and deposits by banks, whereas this increasingly becomes a smaller part of their business. This is not only because of the changing composition of their income structure (not only interest-related income but also fee-based income). Also it is the case because of the blurring borders between the operations of the different kinds of financial intermediaries. Therefore, we argue first that the loan and the deposit only are a means to an end – which is acknowledged both by the bank and the customer – and that the bank and the non-bank financial intermediary increasingly develop qualitatively different (financial) instruments to manage risks. Questioning whether informational asymmetry is the principal explanatory variable of the financial intermediation process – what we do – does not imply denial of the pivotal role information plays in the financial intermediation process. On the contrary, under the strong influence of modern communication technologies and of the worldwide liberalization of financial services, the character of the financial intermediation process is rapidly changing. This causes a – until now only relative – decrease in traditional 28Critical Assessment forms of financial intermediation, namely in on-balance sheet banking. But the counterpart of this process – the increasing role of the capital markets where savers and investors deal in marketable securities thanks to world wide real time information – would be completely unthinkable without the growing and innovating role of financial intermediaries (like investment banks, securities brokers, institutional investors, finance companies, investment funds, mergers and acquisition consultants, rating agencies, etc. ). They facilitate the entrepreneurial process, provide bridge finance and invent new financial instruments in order to bridge different risk preferences of market parties by means of derivatives. It would be a misconception to interpret the relatively declining role of traditional banks, from the perspective of the financial sector as a whole, as a general process of disintermediation. To the contrary, the increasing number of different types of intermediaries in the financial markets and their increasing importance as financial innovators point to a swelling process of intermediation. Banks reconfirm their positions as engineers and facilitators of capital market transactions. The result is a secular upward trend in the ratio of financial assets to real assets in all economies from the 1960s onwards (see Table 3). It appears that informational asymmetries are not well-integrated into a dynamic approach of the development of financial intermedation and innovation. Well-considered, information, and the ICT revolution, plays a paradoxical role in this process. The ICT revolution certainly has an excluding effect on intermediary functions in that it bridges informational gaps between savers and investors and facilitates them to deal directly in open markets. This function of ICT promotes the exchange of generally tradable, thus uniform products, and leads to the commoditizing of financial assets. But the ICT revolution provokes still another, and essentially just as revolutionary, effect, namely the customizing of financial products and services. Modern network systems and product software foster the development of ever more sophisticated, specific, finance and investment products, often embodying option-like structures on both contracting parties which are developed in specific deals, thus â€Å"tailor made†, and which are not tradable in open markets. Examples are specific financing and investment schemes (tax driven private equity deals), energy finance and transport finance projects, etc. They give competitive advantages to both contracting parties, who often are opposed to public knowledge of the specifics of the deal (especially when tax aspects are involved). So, general trading of these contracts is normally impossible and, above all, not aimed at. (But imitation after a certain time lag can seldom be prevented! Informational data (on stock prices, interest and exchange rates, commodity and energy prices, Critical Assessment29 macroeconomic data, etc. ) are always a key ingredient of these investment products and project finance constructions. In this respect, information is attracting a pivotal role in the intermediation function because it is mostly the intermediation industry, not the ultimate contract parties that develop these new products and services. The function of information in this process, however, differs widel y from that in the present intermediation How to cite The Theory of Financial Intermediation:, Essay examples

My Papas Waltz and Bitch by Theodore Roethke and Carolyn Kizer Essay Example For Students

My Papas Waltz and Bitch by Theodore Roethke and Carolyn Kizer Essay It is said that it is the disorder in life that makes living real. Therefore as writing is a mirror of life; the conflict disorder in writing creates the feeling of reality and making the poem all the more powerful. In the two poems My Papas Waltz and Bitch by Theodore Roethke and Carolyn Kizer, respectively, conflict is used to convey the main idea. The use of contradicting images emulates the fact that often love is double-sided, whether the conflict occurs simultaneously or sequentially. The images presented in My Papas Waltz are simultaneously loving and violent displaying that the childs relationship with his father was tumultuous but happy. By the two lines, But I hung on like death, Such waltzing was not easy, as found in the first stanza, the reader is lead to violent assumptions regarding this familys life. This is largely due to the term death. Had there been another term in that place, say the clichi I hung on for my life, the connotations that the mind immediately associates to the terms is not nearly so violent. The image would simply be a child dancing quickly with his dizzying whiskey-breath father. Instead, the usage of the word death ignites the imagination into morbid scenes of less than happy times, contrasting with the image of a father and son dancing haphazardly drunkenly in regards to the father around the kitchen. Use of this contradictory imagery, Roethke is able to create a powerful depiction of family life in very little words, as he plays of the readers tendency to think in connotations. While Roethke chooses to deal with connotations, the simpler Bitch by Kizer, opts to create layers of conflict in order to show the clash of emotions that one feels in the wake of love. Rather than choose specific words that evoke certain images as Roethke does, Kizer displays two characters that contradict each other, the bitch and the narrator. These two characters represent two sides of the same person the bitch being the instinctual primal side and the narrator the rational society trained side. Kizer further adds conflict, and thus emphasizing the differences within the two sides, by placing these two characters in a situation that forces their characteristics to collide into each other. Case in point, initially the bitch is angered by the presence of a once lover while the narrator struggles to maintain composure, scolding the bitch inside, Where are your manners, I say. The poem continues as such with the two characters struggling with each other as Kizer continually deflects their opinions. Kizer, in creating this struggle and conflict, displays the need to move on, as displayed by the narrator, and the want to return to the good old times, as displayed by the bitch ultimately. In fact, the part of the bitch fits exactly that of the term, a female wanting a male companion. Kizer writes the bitch as willing to dwell on the good times, rather than that of the bad, yearning to be a good dog and sits by its masters, the once lovers, feet once more. In contrast, Kizer has the narrator wish to gain control once more of the bitch within her and be rid of the man, albeit rather sadly. This play upon the word bitch, as title referring to the bitch within, as a female dog as it certainly is, as well as a female wanting a male with a sense of loyalty that dogs are famously known for, allows Kizer to develop this character with little words, focusing instead on the narrator. .u895ddc254de2590ad5cd17188f44f129 , .u895ddc254de2590ad5cd17188f44f129 .postImageUrl , .u895ddc254de2590ad5cd17188f44f129 .centered-text-area { min-height: 80px; position: relative; } .u895ddc254de2590ad5cd17188f44f129 , .u895ddc254de2590ad5cd17188f44f129:hover , .u895ddc254de2590ad5cd17188f44f129:visited , .u895ddc254de2590ad5cd17188f44f129:active { border:0!important; } .u895ddc254de2590ad5cd17188f44f129 .clearfix:after { content: ""; display: table; clear: both; } .u895ddc254de2590ad5cd17188f44f129 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u895ddc254de2590ad5cd17188f44f129:active , .u895ddc254de2590ad5cd17188f44f129:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u895ddc254de2590ad5cd17188f44f129 .centered-text-area { width: 100%; position: relative ; } .u895ddc254de2590ad5cd17188f44f129 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u895ddc254de2590ad5cd17188f44f129 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u895ddc254de2590ad5cd17188f44f129 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u895ddc254de2590ad5cd17188f44f129:hover .ctaButton { background-color: #34495E!important; } .u895ddc254de2590ad5cd17188f44f129 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u895ddc254de2590ad5cd17188f44f129 .u895ddc254de2590ad5cd17188f44f129-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u895ddc254de2590ad5cd17188f44f129:after { content: ""; display: block; clear: both; } READ: Poetry Explication Analysis EssayThis develops a feeling more akin to reality as it is easier to relate to the narrator, the dominant character of the overall person, rather than those fleeting instances of instinctual thoughts displayed by the bitch. By creating this schizophrenic character, Kizer is able to display all thoughts that one is inclined to think in such a situation, allowing for easier application to ones life. This same play of words found in Kizers title is also evident in Roethkes title. The title My Papas Waltz, leads the reader to believe that the piece is gentle and peaceful. By leading the reader in with this mindset, the violent imagery impacts the readers with greater power due to the surprise. The immediate contradiction foreshadows the method that Roethke utilizes throughout the poem, the same gentle imagery tinged with violence. Simultaneously, this title haunts the reader into discovering the gentle side that is indicated by the title. Thus, Roethkes choice brings into focus his methods of conflicting images that these may not be noted if not done so initially. Aside from this, there is further play with this title and the overall content. The actual rhythm of My Papas Waltz is in the same 3 beat as the actual dance that the poem refers to. In addition, the words chosen dance around the particulars of the event, creating the conflicting imagery that Roethke uses in order to make the work exceed this singular scene. To extend this metaphor, My Papas Waltz is just a portion of the dance as the event recorded in the poem is a portion of the familys life. Through the use of contradictory images, Roethke hints at other portions of the familys life just as the dance still continues. The swaying of images from good to bad, is akin to the swaying of the dance as well as that of the ups and downs of life. Likewise, the alternate rhyming scheme creates a repetitive to and fro motion, all of which simulates the disorder in which life behaves. However, just as the waltz ends with the couple walking off the dance floor, so does the father and child in My Papas Waltz. Roethke ends the poem with the child still clinging to his father indicating that same positive aspect hidden behind the violent connotations. Yet, this same line is also utilized by Roethke to end the poem with a happily ever after thus indicating that no matter what happens the family still manages to remain intact, for their love is strong and double-sided. While Roethke uses a gentle swaying motion, Kizer utilizes a stronger, passionate argumentative manner where the narrator and bitch are in constant battle with each other. This overall structure emphasizes that there are two opposing sides presented. Each time the narrator berates the bitch, the next thing she utters to the once lover is reflective of her previous statement to the bitch. She reminds the bitch of the former lovers ultimate dismissal, afterwards saying Its nice to know you are doing so well as a dismissal to the former lover. The bitch, narrator, and former lover are forever in conflict with each other each representing different aspects of love. The whole situation becomes a tug of war, ending only with the narrator dragging the bitch off by the scruff away from the former lover.

The Light at the End of the Tunnel free essay sample

Like everyone in this convoluted world I have ups and downs; highs and lows. However, sometimes in life you hit bottom, your absolute bitter, dark, godforsaken bottom. Hitting that lowest point changes you. Maybe it makes you more mature, or it forces you to see things differently. Maybe theres just no way to define how it changes you. It just does. Its like when you have sex for the first time. Nothing about you really changes, yet everything does. Youre a different person and sometimes you just cant put into words the metamorphosis that has just occurred. I had that period of defining time and Im not going to say I turned into a beautiful butterfly because of it, but a part of me did change. At the beginning of senior year my life had sunk to an unfamiliar low: my absolute best friends no longer associated with me, worse than that they acted like I didnt exist; my father would just stare at me like he was looking out a window, all the while asking me superficial questions; and I no longer knew who I was. We will write a custom essay sample on The Light at the End of the Tunnel or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Quite frankly I was depressed. I felt as if I meant nothing to everybody and therefore I meant nothing to myself. I understand the ideology of teenagers; depressed, love obsessed, dramatic. But that was never me. I never bought into the partying, drinking, and weed smoking image that people have of teenagers nowadays. I had never drank, smoked, or even had sex. All that mattered to me was my family, my friends, and school. At that moment my small circle of life was in complete disarray, even my school life became twisted and dark. To be honest I had no idea how to handle everything that was going on. I started to slip into a rabbit hole that I didnt know how to climb out of. I would sit in my room, alone, and just sleep. I hated life so much and I hated myself even more. I even turned to extremes to deal with everything. Cutting meant I could control my feelings and it was the only thing during that time that would bring me clarity. Picking up that blade for the first time was my lowest point. The sad thing was I knew it too. I knew that I was hitting my bottom even as I held the razor in my sweaty hand. In those moments something about me changed. Being in such a dark abyss meant leaving behind that innocent, carefree girl. Im not saying that I became an adult but I certainly wasnt a kid anymore either. I realized I could no longer pretend that my world would work itself out. I had to take back some control of my life. First, I set up meetings with my best friends that I hadnt talked to in a month. No matter what happened between us I needed closure. To counteract my antisocial behavior I tried out for cheerleading. Lastly there was my dad and our deteriorating relationship. Unfortunately I was forced to realize that our relationship had been breaking for a long time. I had just kept myself blind to the truth. Then, when things still didnt get better, and that defining darkness still loomed over me, I went to see a psychiatrist. With help from an antidepressant, counseling, and the people I love I was able to bring a sense of normalcy back to my life but things would always be different. There was just no way to go back to who I was before those pitch black months, looking for the light at the end of the tunnel. It was as if I went into that tunnel an ignorant child and the only way to come out of the tunnel, back to the light, was a part of me had to grow up.

Skin Cancers essays

Skin Cancers essays There are three different types of skin cancer which consist of melanoma, basal cell carcinoma, and squamous cell carcinoma. Melanoma is a cancer in the pigment-producing cells in the skin. Melanoma is the eighth most common cancer in the United States and causes 1-2% of all cancer deaths. The way to decrease your chance of developing melanoma is to recognize if you are at risk. Ways that you can tell if you are at risk is if you have a mole thats changing, having a mole that is more than 15cm in diameter and has been present since birth, white raced, a prior skin cancer, a close family member with melanoma, using a tanning bed ten times a year or more before age 30, more than 50 moles on your body, and the tendency to burn and freckle instead of tan. These are some different ways to prevent melanoma always use sunscreen with at least an SPF of 15 whenever in the sun and if you recognize any risk factors talk to a doctor. Treatment of melanoma starts with excision of the lesion also taking at least a 1 cm border of healthy tissue around it. To make sure the cancer hasn't spread to other areas of the body, a chest x-ray is taken and a lab test checking the liver is also done. Depending on several factors, sometimes lymph nodes in the area are removed and examined to see if they contain cancerous cells. The best treatment is to remove the cancerous tissue if possible. Sometimes, chemotherapy is used along with removal. Radiation therapy is generally not helpful. Basal cell carcinoma arises in cells called basal keratinocytes in the deepest layer of the epidermis hair follicles, and sweat ducts. Basal cell carcinoma is the most common type of skin cancer. It occurs more often in men than in women. Most basal cell carcinoma is seen after the age of 40, but those seen in patients who are younger than 35 tend to be more aggressive. Some common risk factors for basal cell carcinoma include chronic sun exposure mainly to UVB radiation bu...

When and How People Learned to Make Cloth

When and How People Learned to Make Cloth Textiles, to archaeologists anyway, can mean woven cloth, bags, nets, basketry, string-making, cord impressions in pots, sandals, or other objects created out of organic fibers. This technology is at least 30,000 years old, although preservation of the textiles themselves is rare in prehistory, so it may be quite a bit older still. Because textiles are perishable, often the oldest evidence of the use of textiles is implied from impressions left in burned clay or the presence of weaving-related tools such as awls, loom weights, or spindle whorls. Preservation of intact fragments of cloth or other textiles has known to occur when archaeological sites are in extreme conditions of cold, wet or dry; when fibers come into contact with metals such as copper; or when textiles are preserved by accidental charring. Discovery of Early Textiles The oldest example of textiles yet identified by archaeologists is at the Dzudzuana Cave in the former Soviet state of Georgia. There, a handful of flax fibers was discovered that had been twisted, cut and even dyed a range of colors. The fibers were radiocarbon-dated to between 30,000-36,000 years ago. Much of the early use of cloth began with making string. The earliest string-making to date was identified at the Ohalo II site in modern Israel, where three fragments of twisted and plied plant fibers were discovered and dated to 19,000 years ago. The Jomon culture in Japan - believed to be among the earliest pottery makers in the world - shows evidence of cord-making in the form of impressions in ceramic vessels from Fukui Cave that are dated to roughly 13,000 years ago. Archaeologists chose the word Jomon to refer to this ancient hunter-gather culture because it means cord-impressed. The occupation layers discovered at Guitarrero Cave in the Andes mountains of Peru contained agave fibers and textile fragments that were dated to about 12,000 years ago. Thats the oldest evidence of textile use in the Americas to date. The earliest example of cordage in North America is at Windover Bog in Florida, where the special circumstances of the bog chemistry preserved textiles (among other things) dated to 8,000 years ago. Silk making, which is made from thread derived from insect cases rather than plant material, was invented during the Longshan period in China, ca 3500-2000 BCE. Finally, one extremely important (and unique in the world) use of string in South America was as quipu, a system of communication composed of knotted and dyed cotton and llama wool string used by many South American civilizations at least 5,000 years ago.

Sustainability In global business (a construction company and the Essay

Sustainability In global business (a construction company and the industry, in India and USA) - Essay Example Via an account of the national need for development in countries such as the United States and India, a significant set of sustainability issues in the construction industry form the basis of this study. A globally sustainable construction business entails one operating in an environment that that greatly empowers it to becoming more productive. This is where a construction company business employs a process where it manages its financial, social and environmental risks, compulsions and opportunities. In other words, these three requirements for a sustainable business are known as profits, people and the planet at large. In essence, for a business to be sustainable, it has to find a way on balancing out the challenges imposed to it by government rule and regulations and global business advancements. In addition, more considerations have to be done on the expected profits thus making it necessary that an analysis of the strengths and weaknesses is well conducted. This plays in a signi ficant role in promoting a construction industry business to becoming highly sustainable. It is necessary to note that globally, every company tries to be more sustainable so that to aid it in outperforming its competitors. In both the United States of America and India, several impacts exist on the sustainability of a construction industry business in the respective regions. Construction companies in both countries do all their best to ensure that they become highly sustainable. As one of the most resource and economically gifted countries, the United States Construction industry has always been at the forehead of many investors in and outside the country. Several construction companies exist in the country. Sustainability has always been the goal of all construction companies in the country to aid them build their reputation outdo respective competitors both within the country and globally. Sustainable Construction Company in the country has several impacts. Being a globally tradi ng country, a sustainable construction business in United States plays a significant role in provision of access to new markets both within and outside the country. It gives an improvised sensitivity to the workers of the company thus providing room and ability to attract current and new markets. In addition, sustainability in the country aids a construction in retaining its talents. This is important in that, one’s more sustainable competitors can attract very important talents. Thus, in the United States, sustainability in the industry is essential in retaining a companies set of innovative and productive employees. Generally, in the construction company’s sustainability character in the United States is crucial in promoting the company’s reputation thus providing an edge in competitive advantage. The United States construction industry is a fundamental in the development of the country both environmentally and economically. Based on this fact, a number of gov ernment laws and regulations are in place and influence a lot in the sustainable decision-making by respective shareholders in the industry. The violation of United States’ environmental and Clean Water Act brings in considerable influential factors to the country’s industry stakeholder decision making. Polluting the environment and storm water run off from construction industries leads to great penalties starting from $4 million. The

Evolution of the internet and the impacts on travel agencies Assignment

Evolution of the internet and the impacts on travel agencies - Assignment Example In the essay "Evolution of the Internet and the impacts on Travel Agencies" outlines how Internet changed the way how travel agencies work. For instance, now customers can directly access the internet sites and can book the tickets within a quick period of time. There are several negative impacts of the evolution of information technology on the travel agencies too. Third party cost is the major business barrier of several airlines, hotels, and restaurants. Therefore, the organizations had to pay a commission rate to these travel agents. These activities automatically increase the business operation cost. Nowadays, people can book their tickets on their own through online networking sites without any kind of help of third parties. The implementation of online strategies helped the organizations and customers in several ways. It can reduce the business operation cost for the organizations. The travel agents can get, store and provide a large number of data and information. On the other hand, implementation of online ticketing strategies helps the organizations to reduce third-party booking costs so that they can provide low fare tickets to the customers. People of several developed countries generally prefer online booking of tickets and leisure facilities. It is true that US is technologically developed country. Recent financial crisis and economic recession affected the global economic environment. Low disposable income of people and limited purchasing power are the major consequences of this economic slowdown. Earlier, during the Brick-and-mortar age organizations had to effectively rely upon the third party business partners in order to increase their sales margin. On the other hand, customers also had to depend upon these third party individuals to book

Yeats’s Versification in ‘Adam’s Curse’ and ‘the Wild Swans at Coole’ Essay Example for Free

Yeats’s Versification in ‘Adam’s Curse’ and ‘the Wild Swans at Coole’ Essay How do the characters of Therese, Laurent and Meursault change after they have committed their respective murders? The protagonists in both the novels â€Å"Therese Raquin† by Emile Zola, and â€Å"The Outsider† by Albert Camus, ultimately commit murder. This is the turning point in both cases, and the way in which their various characters change because of this will be analysed and compared. In Therese Raquin, after the murder of Camille, both Therese and Laurent react at first with shock, Therese flying into fits of hysterics and Laurent with a rationality that seems to be his coping mechanism at first. However, as time passes, it seems as though the characters begin to relax again, although Zola foreshadows upheaval to come: â€Å"it was changing them, for a hidden process had taken place within them†. The first indication of this is their loss of passion; â€Å"love had lost its appeal, their appetite had disappeared the touching of their skin made them feel slightly queasy†. Their decision to get married brings up tortuous nightmares in L, as he imagines the corpse of Camille in the place of Therese’s body. This is the very beginning of the agonising torment that the two characters suffer as a result of the memory, perhaps even the guilt, of their crime. â€Å"Therese too had been visited by the ghost of Camille during that feverish night†. These imaginings and hallucinations, at times becoming palpable visions that convince them of the dead man’s existence, eventually drive the two characters over the brink of insanity. â€Å"The lovers’ panic grew worse, and every day their nightmares made them more demented and distraught†, before they even got married. They looked upon their forthcoming wedding as an alleviation to save them from their terrible imaginings. However, we see just how misguided this expectation is on their wedding night; they feel they are â€Å"still separated by a gaping chasm they dreamed that they had been violently separated and flung in opposite directions†. This signals the drastic changes to come about in their lives, and is highlighted by the dynamic verb â€Å"flung† and the emphasis on violence. They begin to believe the dreadful memory of Camille separates them no t only in their minds, but physically, feeling that â€Å"his body is still here between us, turning our limbs to ice†, and this idea stays at the foremost of their suffering – that the ghost of Camille is haunting them and making its presence felt. Zola portrays their response to this as they are â€Å"experiencing profound disturbancesthey found themselves in the grip of a common terror seized by a feverish delusion: they could touch the body, see it stretched out there like a greenish, half-putrefiedmass of decomposing humanity† which constantly stays in their awareness for the rest of their miserable lives. The physical and psychological anguish for the two â€Å"lovers† was so great that Therese â€Å"would have flung herself into the fire, had she thought that the flames would purify her flesh and deliver her from her pain† and Laurent being driven to distraction as he sees â€Å"five Camilles in front of him, created by the power of his own hands† simply because the playing of the dead man on his conscience is enough to take root in everything he does, whether it is painting or touching his wife. However, it is not clear whether the two characters actually ever feel any sense of remorse for their crime. Their terror is undeniably because of the act they committed, but probably down to the actual experience, and their fear of being discovered, than a sense of regret or guilt – Laurent even goes as far as to say that they would â€Å"chuck him in again if we had to†. Despite Laurent and Therese’s dread of being discovered, the forced endurance of psychological battering eventually causes them to confess their crime to Madame Raquin, when â€Å"Laurent had a kind of fit during which he talked like a man hallucinating†. We can question the basis of their terror of being found out by others, and whether it is guilt in that they believe they have done wrong, or simply their fear of the guillotine. However, we learn that â€Å"they were frustrated with their crime itself, and despairing that it had ruined their lives for good†, showing their utterly selfish nature in that they are repenting not because of the actual murder of a man, but because of the toll it takes on their own lives. Zola demonstrates the effects of this internal turmoil, as â€Å"it was inevitable that it would come to hatred in the end. They had loved each other like animals, with the hot passions of the blood; then, in the nervous upheaval following their crime, love had turned to fear and they had felt a physical horror at the thought of their embraces.† This acute hatred for one another takes shape as night after night, Therese and Laurent fight viciously, Laurent often striking Therese as she desperately provoked him; until their whole lives are swallowed up in this bitter feuding, a colossal irony considering their earlier passion and love, and their plotting of murder to allow themselves to live a life of luxury and sensual pleasures. Their animalistic traits are what governs them – and leads them into such a state that â€Å"they lived in a hell bitterly and cruelly†¦ trying to push each other over the brink of the precipice which they felt yawning at their feet, and into which they were in fact both already plunging†. The horror that Therese feels is perfectly depicted when she believes herself to be pregnant, and the thought fills her with such despair and dread that she â€Å"offers her stomach to [Laurent’s] blow. She allowed herself to be kicked almost to death in that way, and the next day she had a miscarriage†. Laurent, on the other hand, possesses none of Therese’s apparent rationality – he is driven to distraction, to the point that â€Å"he was literally afraid of Francois [the cat]and flung it with all his strength against the black wall†. Therese and Laurent experience these various stages of fear, hate, indifference, remorse (feigned so well that she ends up believing it) on the part of Therese, and depression. Laurent is described as having â€Å"all the lifegone out of his flesh†. The madness that they succumb to leads them to murder each other – yet, at the point of their ensuing deaths, the two discover that they need the unconsciousness of death; as it is the one place where their torment cannot follow them; â€Å"as they thought back over the past, they felt so weary and disgusted with themselves that they were filled with an immense need for rest, for oblivion. They exchanged a final glanceof gratitude, beforethe glass of poison†. There are some significant similarities with this process that Therese and Laurent undergo and that of Meurseault as he comes to terms with his murder of the Arab. In the early part of the book, the reader sees a Meursault devoid of a spoken consciousness and one who feels total adversity towards society and vice versa. Camus has juxtaposed his character against the norms of society to bring out his stark differences through the usage of Meursaults uncanny ability to register cold, hard facts. Meursault refuses to spend the time and effort required in connecting these facts. This narrative effect can be seen from the opening passage, Mother died today. Or maybe yesterday; I dont know. Here, we see Meursaults shocking indifference to his mothers death and his event stating quality. He merely recounts the dubious facts of his mothers death as plainly as the telegram had stated it. Throughout the whole process of his attending the funeral is treated with the same jarring coldness. Events and conversation are retold in a photo-journalistic like frankness, chronologically precise from the moment he catches the bus to time when he crawls into bed. Meursault is also one who has virtually no emotion, detached from basic human experiences of love and affection. This can be seen when his fiancà ©e, Marie, provokes an answer, She asked me again if I loved her. I replied, much before, that her question meant nothing or next to nothing- but I supposed I didnt. Curious, she then asks whether he would have given the same answer to another girl who had asked you to marry her, to which he replies in total honesty, Naturally. His inability to feel love is coupled with his almost animalistic mating-like quality where it is a question of when, not whom. His indifference, lack of emotion, and his way of reporting his impressions factually shows little involvement in society, as if he were an outsider, a spectator, who must judge objectively and it is from this that his estrangement from society be felt. Meursault; a middle class bachelor with a painfully simple life, is viewed as indifferent in the eyes of society. He does not care and is not ashamed of it. But his indifference is not one of callousness but stems instead from the â€Å"benign indifference of the universe† in relations to his own existence. The murder which signifies the end of Part One, unwittingly commits Meursault to the laws of society. He suddenly finds himself a victim of societal norms, the very thing he shunned. Here Meursault is obliged to accustom himself to society for his impending fate depends on it. He finds society absurd and it is through this experience that the reader comes to sympathize with Meursaults point of view and evaluates the absurdity of society. While being held, the prison guard discusses with him: â€Å"‘you’re being deprived of your liberty.’ I saw his point. Thats true, I said. Otherwise it wouldnt be a punishment.† Meursault finds this all completely baffling to the point that he has to talk with the warden to find out that prison deprives one of freedom which totally defeats the initial purpose of putting him in jail. While society tries to enforce its ideals on its Meursault, he acts in honest aloofness. In a conversation with the magistrate, In the same weary tone he asked me a last question: Did I regret what I had done? After thinking a bit, I said that what I felt was less regret than a kind of vexation. But he didnt seem to understand. The magistrate wanted to hear that Meursault felt guilty and sorry for what he had done. Instead, Meursault feels annoyance rather than regret, to the frustration of the magistrate. Faced with these challenges, Meursault attempts to make sense of what is happening around him and through it, tries to understand society. In his cell, he makes a conscious effort to learn about his new surroundings, I made a point of visualizing every piece of furniture, and each article upon it, and then every detail, so to speak: a tiny dent or incrustation, or a chipped edge, and the exact grain and colour of the woodwork. This symbolizes his willingness to acquaint himself with an entrapment which is alien to him: society and its workings. However, even on close inspection, he fails to make sense of it and this drives him father away from society. This is evident from an episode he had with his lawyer: â€Å"I wasnt to have any say and my fate was to be decided out of hand. It was quite an effort at times for me to refrain from cutting them all short, and saying: ‘But damn it all, whos on trial in this court, Id like to know? Its a serious matter for a man, being accused of murder. And Ive something really important to tell you.’† Meursault clearly feels frustration from this estrangement which fuels even more reason for his dislike of society and its morals. Through this, he gathers experiential evidence that society is indeed absurd and it does one no good to be a part of it, hence forging an even greater alienation from it. In the concluding chapters, Meursault accepts his fate which enables him to squarely face his death and come to terms with his position in this world. While undergoing this metamorphosis, Meursault discovers his independent consciousness. In prison, he relates, †¦I heard something that I hadnt heard for months. It was the sound of a voice; my own voice, there was no mistaking it†¦ the voice that for many a day of late had been buzzing in my ears. This voice he speaks of is his consciousness, spoken freely, unrestricted, and wholly accessible to his thoughts. This sudden enlightenment allows Meursault the grace of accepting his death. He rationalizes for the first time: â€Å"†¦Its common knowledge that life isnt worth living anyhow†¦ it makes little difference whether one dies†¦ the world would go on as before.† Although he does not wish his death, he embraces it as an end. It did not matter how or when he achieved this end for to him, all ends ended the same- in death. In the final moments before his death, the absurdity of society no longer bothers Meursault for now he deals with the greater elements of truth and reality. Meursault makes peace with himself, but not without a sudden purging of restrained convictions. He gets tangled in an argument with the prison chaplain who in the last moments of his doom, tries to convert him. In his rage, he reveals his ultimate assurance: that he â€Å"was sure of myself, sure about everything†¦ Id been right, I was still right, I was always right. Id pass my life in a certain way, and I might have passed it in a different way, if Id felt like it.† Meursault develops such a rational consciousness that it becomes his moral code of belief, his belief of truth. This sudden outburst gradually forces the felt but unspoken philosophy of his existence to emerge into the open, and to finally express itself in words. It was necessary too for it gave him a new sense of direction: â€Å"I, too, felt ready to start life over again. It was as if that great gush of anger had washed me clean, emptied me of hope, and, I laid my heart open to the benign indifference of the universe†¦ Id been happy, and I was happy still.† Meursault at last finds peace within himself. Alienated from society and life itself, he finds honour in death, taking nothing from this world with him, because it gave him nothing. Thus, Meursaults journey towards discovery (and, ironically, death) can be seen as a celebration of the human consciousness, grounded in the human spirit and its ability to overcome the absurd, to triumph when failure seems so imminent. Meursault finally realizes his estrangement from society and disregards what society thinks about him – as long as he is happy with who he is and what he had done. This is on a whole separate level to the feelings of Therese and Laurent: while all three find death a means of escape, and wish it on themselves, they view it as a comfort, to end their tired, self-destructive lives, whereas Meursault seems to find happiness and fulfilment in the idea that he is reaching his destination.