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Friday, October 31, 2008
Hi Folks, My third book 'Things In Common' should be available at MPH and major bookstores starting in a day or two. The book is 442 pages long. Retails at RM39.90. It maybe slightly thick but it is very easy reading.
Similar to my second book 'Malaysia & The Club of Doom - The Collapse of the Islamic Countries' this book also discusses religious issues, Islam and the current economic and political situation in Malaysia. I think you will all find it very interesting.
For starters the cover is also very interesting. None of the people pictured on the cover of the book are Muslims.
My good friend, the lawyer Jahaberdeen has done a teaser of the book at his Blogsite RAPERA. He will also be doing a review of my book at his Blog tomorrrow. Do visit his Blog to get a quick idea of the book.
This is an interesting video here:
Its long, over one hour but I think its worth watching. You will hear phrases like economic hitman.
Also that 'Alqaeda' was the IT name given to the US Department of Defense Database on CIA sponsored Mujahidin fighters in Afghanistan in the 1990s.
A friend sent it to me. You will need some free time to watch it though. Regards.
Syed Akbar Ali.
Thursday, October 30, 2008
By Syed Akbar Ali
Folks, here is an interesting news report from today's The Star (Thurs 30/10/08) :
National Fatwa Council to make a ruling on yoga
GEORGE TOWN: "The National Fatwa Council will soon come out with a ruling on yoga exercise.The Islamic Development Department’s deputy director-general (operations) Othman Mustapha said the council’s chairman, Prof Datuk Dr Abdul Shukor Husin, would make the announcement. Othman told reporters this after opening the two-day seminar on Islamic Jurisprudence and Eternal Islamic Thinking at Universiti Sains Malaysia here yesterday. On Tuesday, lecturer Prof Zakaria Stapa of Universiti Kebangsaan Malaysia’s Islamic Studies Centre advised Muslims who have taken up yoga to stop practising it as it could deviate from their belief. – Bernama"
Well I guess that the National Fatwa Council has plenty of unresolved, extremely important issues that they must deal with which can uplift the Muslims in this country and make good, succesful and useful human beings out of them, maybe even help them improve their health too. So perhaps with all these important objectives in mind as well, the National Fatwa Council will soon come out with their ruling about yoga.
At this seminar on 'Islamic Jurisprudence and Eternal Islamic Thinking' some spark has "advised Muslims who have taken up yoga to stop practising it as it could deviate from their belief. – Bernama"
Since it was a seminar on eternal thinking, that means it is for eternity. Yoga is therefore bad for the Muslims. But yoga has proved to be very good for non Muslims. Yoga has developed very succesfully over 5500 years and has helped millions of people (including my late father who was an avid yoga practitioner way before in the 1960s) exercise, keep their limbs supple in old age, help diabetics, help stressed out people deal with their lives and a million other things.
Plus a good yoga session can make you lose litres of sweat and fat. A good example is my friend Rodi who is about my age but looks much better than me. She is a Yoga practitioner.
As a child in the 1960s I used to be thrilled to see my diabetic father, who was almost 50 at that time, standing on his head - as part of his yoga exercises. I used to mimic my father and stand on my head too, something I just cannot do anymore with almost 200 pounds of lemak on my body now. Then he used to sit down and twist his body in what appeared to me to be a difficult position. The yoga folks say it is a good posture to 'massage' the internal organs.
By the way my father was a highly religious person. He spent his retirement giving talks about Islam as how he understood it, including travelling overseas with his friends in the Tabligh missionary group. He even died while on such a 'Tabligh mission' in Pakistan in 1985. It was November and very cold there. He had stood up and delivered a passionate talk in the masjid and later just collapsed and died of a heart attack. He is buried in Pakistan. So I never got to see my father again or attend his funeral - something I have never really gotten over even 23 years on. But I doubt the yoga which he practised for a long time had deviated his belief in God.
Here is something about official fatwas. It is an offense which can be punishable by jail or fine if any Muslim goes against or melanggar an official fatwa which has been gazetted. To our knowledge the Majlis Fatwa Kebangsaan has not yet made an official fatwa about yoga.
The Bernama report says they will soon come out with a ruling.
The other thing we should know is that Islam is a State matter in Malaysia, under the suzerainty of the Malay Rulers or the Yang Di Pertua Negeri (YDP) in those States which do not have Malay rulers. Hence each State makes its own fatwa through the State Mufti and the State Legislature and must be consented by the Rulers or YDP.
Fatwa must be gazetted in the Government Gazette before they can assume legal force. Fatwa made in one State is not enforceable in another State. In Selangor there is a fatwa which says smoking cigarettes is haram for Muslims. I dont think all the other States have passed the same fatwa.
The word kebangsaan in the Majlis Fatwa Kebangsaan (MFK) implies a Federal level fatwa making body. In reality the MFK cannot make fatwa that is applicable throughout the country for the very reasons that I have mentioned here - ie religion is a State matter under the authority of the Malay Rulers or the YDP. However the fatwa made by the Majlis Fatwa Kebangsaan is applicable in the Federal Territories like Kuala Lumpur, Putrajaya and Labuan.
In practice the Majlis Fatwa Kebangsaan becomes a reference point to streamline fatwa among the States. In other words on any one matter (say yoga) the States may refer to the MFK for direction. However this may not happen all the time. If the MFK makes a fatwa that Muslims must not practise yoga, it may not be necessary that all the States may make and implement the same fatwa.
Here is an interesting story. When RTM first started telecasting live the Parliamentary sessions, we were all shocked how the YBs were jumping, hooting and hollering at each other. It was like a circus inside the Parliament. But a State Mufti I know sent me an sms saying 'Kalau live telecast mesyuarat majlis fatwa, lagi tahu'.
Well if yoga is bad for Muslims what about qigong (the Chinese martial art which also incorporates meditation)? And what about the Indian dances like bharathanatiyam and odissi which is so favoured by our national dancer Ramli Ibrahim and his buddies? I am just thinking aloud.
Is there an Islamic version of yoga? Maybe then Muslims can still get their stretching and twisting done but minus the threat of having their beliefs twisted. There are just so many things that the Muslims cannot do or should not do. By the way the picture is that of coconut shells or tempurung. I could not find any pictures of coconut shells and frogs.
p.s. To anyone who comments on this posting, please maintain your cool. Dont attack me too wildly or dont attack the topic here too wildly either. Be frank and logical. Thank you.
Wednesday, October 29, 2008
By Syed Akbar Ali.
Today's Star has the following news :
Shahrir wants petrol priced not lower than RM1.92
PETALING JAYA: The minimum price of petrol should be RM1.92 per litre even if the global oil price continues to fall, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad said.
He said this would bring some stability to the retail price of petrol and minimise losses by petrol station owners. Setting a minimum price would also enable the Government to reduce its subsidy on petrol if the global price fell further.'For the life of me I really dont know how or where the Minister derived this logic? It simply does not make sense. What is the logic in putting a floor price at RM1.92 even if the global oil price continues to fall? Analysts say that world oil prices could hit USD30 per barrel (currently around USD60 per barrel, highest was USD147 per barrel).
The Minister says this has to be the case to minimise losses by the petrol station owners. This logic totally fails me. Are we to believe that the living costs and the standard of living of 27 million Malaysians are to be compromised for the sake of the petrol station owners?
If the Minister is wondering what businesses are affected they include palm oil, rice, gold, plastic and even cement. All their prices are coming down. So using Shahrir's logic the Government should also try to prevent the prices of all these other goods from going down too. Otherwise the rice merchants, gold jewellery shops, palm oil factories and so on may all suffer losses.
There is no real logic to the Minister's statement. It also causes negative backlash. Rightly or wrongly the restaurant owners have said if the price of petrol does not go down, then they too will not reduce their prices. Here is The Star again:Restaurateurs explain why food won’t get cheaper
PETALING JAYA: Food at restaurants and hawker stalls will not be cheaper despite the price cut of consumer goods by hypermarkets.
“It does not make sense for us to reduce the price of food at restaurants unless the petrol price is reverted to RM1.92,” said Malaysian Muslim Restaurant Owners Association president Jamarulkhan Kadir."Well what else can we expect? Why should the restaurant owners cut their prices when the Minister says the gas stations need not cut their prices too much?
And how many petrol station dealers is the Minister talking about? Petronas has about 700 petrol stations around the country. Shell Malaysia operates 870 petrol stations in Malaysia. BHP, Esso, Caltex etc may have another 700 stations (all combined). That is about 2300 petrol stations nationwide (give or take a few).
Since when can the welfare of 27 million people be sacrificed so that 2300 gas station dealers can make an extra two sen per liter of gas? Lojik apa ini?
There are tens of thousands of restaurants, warong makan, curry houses and mamak restaurants around the country serving food for millions of people everyday. There are millions of cars, school buses, lorries and taxis who all need to lower their prices so that the suffering public can save some money. All these people have to bear the sacrifices to 'minimise losses by the petrol station owners!', who number about 2300 only.
We have always been told to make sacrifices for the greater good of the majority, the greater good of the country and so on. But here 27 million Malaysians are being asked to make huge sacrifices for the greater good of about 2300 gas station operators. Can someone figure this out please.
Sunday, October 26, 2008
By Syed Akbar Ali
Well folks, here is some news analysis. There is wonderful clarity as well as illogical statements that simply do not make sense (needless to say again).
Firstly amid all the doom and gloom here is some very good news from the Hypermarkets. Perhaps now we will really appreciate the need to allow free for all competition in the grocery and supermarket businesses. It saves the public much money.
And I am so glad to read that for once the man also leading the charge here is my good friend Dato Ameer Ali Mydin, the Boss of Mydin Hypermarkets, not just because I know him, but because he is a bumiputra businessman. Who says the bumiputras should not compete? This is from Star (Sunday 26th Oct 2008)
Prices slashed by next week
PETALING JAYA: Consumers, long hard hit by increasing price tags, will have more cash to spare in their pockets from next week as hypermarkets slash prices by as much as 30%. Reduced prices at fuel pumps will now translate to cheaper goods at hypermarkets. Hypermarket chains are preparing to lower the prices of canned and fresh food, and other foodstuff like instant noodles and even clothing. Mydin Hypermarkets managing director Datuk Ameer Mydin estimated that 300 to 500 items would be cheaper from Tuesday, with “discounts” of up to 33% in stores.
Bayam (spinach), sawi and kangkung will be cut in price from RM1.80 to RM1.20 per kg, while whole chicken with head and feet would be reduced to RM5.99 from RM6.49 per kilo, he added. Other items which the local hypermarket chain is lowering is canned and bottled food, milk powder, rice and instant noodles. That’s not all. Non-essential items such as clothing are also in for a price cut by as much as 20% to 30%.Well coming from the horses' mouth, we can rest assured that Mydin Hypermarkets will be slashing their prices.
Over in the French corner, "Carrefour public relations and corporate social responsibility director Ras Adiba Radzi said the chain would lower the prices of between 1,000 and 1,500 items early next month. She however could not say what the quantum of price reduction will be, adding that this was still being worked out.
And in the British corner, "Tesco Hypermarket corporate and legal affairs director Azlam Shah Alias said the chain would cut the prices of vegetables, fruit, seafood and other fresh food, adding that the price cuts would be announced later."Dato Ameer Ali Mydin expressed the hope that “Hopefully, others will also follow suit and reduce their prices."
Well folks this is the private sector. Since it is driven by competition, if one hypermarket cuts its prices, we can rest assured that the others must also follow. If they do not, they will lose their customers and their businesses.
And the good news continues. Again from The Star, here is what the Cabinet has said about fuel prices:
Cabinet has given okay for petrol price reduction, says NajibPEKAN: The Cabinet has given the go-ahead to further reduce petrol pump prices and an announcement may be made within a week. “We had promised that if the global oil price goes down, the domestic fuel price will reflect the actual market price." “The Cabinet has already given the mandate to the Economic Council to make the decision,” said Deputy Prime Minister Datuk Seri Najib Tun Razak. On when the new prices would be announced, he said: “It can be within a week depending on when the meeting (of the Council) is held.” Najib, who is Finance Minister, was commenting on the continuing fall of oil price which registered US$62 (RM221) per barrel on Friday.
Well this is very good news from the Cabinet. My only concern is the very slow speed in which the Government reacts to reduce fuel prices.
The Hypermarkets will be reducing prices of foods and clothing beginning 29th October. In the United States the prices at the petrol stations vary almost on a daily basis - in tandem with world oil prices. People say that in Singapore the prices of petrol have been adjusted downwards three times in the recent past.
So why does it take so long for fuel prices to be adjusted here in Malaysia? Why does it need a Cabinet decision to decide on fuel prices?
If there are savings to the suffering Malaysian public and the economy, then those savings should be passed on immediately and not tomorrow.
When oil was at USD147 per barrel on the world markets, our pump prices were RM2.70 per liter. Logic dictates that since world oil prices are now USD62 per barrel, (57% decrease) our pump prices should also be 57% down ie RM1.16 per liter. Why is it not logical? OK if RM1.16 is not feasible, what about RM1.50 per liter?
Well folks that is the end of the good news. Now here is something which should make us break out in rashes. This report is also from the Sunday Star.
Electricity tariffs not coming down
TAMPIN: Electricity tariffs will not be cut despite the massive drop in global crude oil prices. Energy, Water and Communications Minister Datuk Shaziman Abu Mansor said despite the fall, it did not directly affect the cost of electricity generation.
“We must bear in mind that 60% of electricity produced in this country is generated from gas and another 30% from coal,” he said at his Hari Raya open house here.
In elaborating, Shaziman said Petronas still sold gas at RM14.31 per million British thermal units (mmBtu) to independent power producers (IPPs), although it cost between RM28 and RM30 to produce the same volume.
“The market price of per mmBtu of gas is RM40 and Petronas is already selling it to the IPPs way below market price.
“The Government cannot possibly reduce electricity tariffs as the gas sold to the IPPs is already highly subsidised,” he said.
On June 1, the Government revised the price of gas upwards by 123% to RM14.31 per mmBTU from RM6.40 per mmBTU following the increases in petrol and diesel prices.
Shaziman said the present electricity tariffs, which were revised in June this year, would however be reviewed again after a year.
The Government, said Shaziman, would also review its earlier decision to remove gas subsidies by only 5% annually.
On Oct 14, Penang Chief Minister Lim Guan Eng said Tenaga Nasional Bhd should review its tariffs to help curb inflation and ease the burden on the people.
Tenaga Nasional raised the electricity tariff by 12% on June 1, citing spiralling oil prices.
Well lets look at what the Minister has said. Firstly he said that although the price of world oil prices have gone down, it does not affect the cost of electricity generation.
Come again? If so then why did Tenaga Nasional increase the electricity tariffs when the oil prices went up? As the report says "TNB raised the electricity tariff by 12% on June 1, citing spiralling oil prices."
It is quite illogical to say that electricity tariffs went up because of higher oil prices but will not go down because of lower oil prices. May I humbly venture a simple question : So under what circumstances can electricity tariffs come down?
Then Shaziman said the electricity tariffs would not be cut because 60% of the electricity in this country is generated by gas, which Petronas was selling to the IPPs at a subsidised price of RM14.31 per mmBTU.
So Shaziman is blaming the IPPs again. But gas is sold by Petronas, not by TNB. TNB will benefit from lower gas prices, not higher gas prices. It is Petronas that will benefit from higher gas prices. Which hat exactly is Shaziman wearing?
But the truth is the largest capacity of gas fired power stations firing subsidised gas are owned by TNB.
According to TNB's own website they have 4435 MW of capacity in their own Thermal Power stations which are all gas fired. This means TNB enjoys the subsidised gas prices, maybe more than anyone else. See TNB's website at : http://www.tnb.com.my/tnb/index.php
And according to TNB's website the IPPs like TNB Janamnjung and Kapar Energy Ventures are actually wholly owned subsidiaries of TNB too. According to their website these TNB owned IPPs generate another 4950 MW of power using subsidised gas.
This means that TNB owns gas fired power plants which produce over 9000 MW of electricity using subsidised gas from Petronas.
Considering that TNB's total power generation capacity is 11,200 MW (refer TNB website), it means that 80% of TNB's power generation capacity uses subsidised gas. Someone should inform Shaziman that all this information is available freely on the Internet.
But even this 'subsidised gas' theory has more holes in it because The Star says that on June 1 this year, the Government (Petronas) raised the price of gas by 123% from RM6.40 per mmBTU to RM14.31 per mmBTU. (Perhaps this is why Petronas was able to contribute RM62.8 Billion to the Government's coffers this year, including a special windfall dividend).
Since world oil prices have reduced by more than half (from USD147 per barrel to USD62 per barrel) is it not possible for Petronas to reverse the 123% jump in gas price from RM14.31 per mmBTU back to RM6.40 per mmBTU? Then as a follow up, TNB can also reverse back the electricity tariff by 12%? Or is that just me being naieve?
So in brief
i. TNB owns over 9000 MW of gas fired power plants which make up 80% of TNB's generating capacity of 11,200MW. They burn subsidised gas.
ii. On June 1st this year Petronas/Government raised gas prices by 123% from RM6.40 per mmBTU to RM14.31 per mmBTU.
iii. On June 1st this year TNB raised electricity tariffs by 12%, citing high oil prices.
iv. the price of petrol at the pumps will be going down to reflect the lower world oil prices. However TNB tariffs will not be reduced.
v. Hypermarkets will be slashing the prices of foods and clothing to reflect the lower world oil prices. However TNB tariffs will not be reduced.
One wonders what is the real reason the electricity tariffs will not be going down?
A few days ago it was stated that the Government's Budget and planning was based on Petronas oil revenue coming in at USD125 a barrel. The drop in oil prices to USD62 a barrel seriously impacts on the Government's projected revenue. The drastic drop in palm oil prices to RM1350 per tonne will also affect Government coffers. This may be a reason why the Government wants to preserve its cashflow.
In our Malaysian context another easier method of generating cashflow is to stop wasteful spending or paying many times market prices for products and services.
Saturday, October 25, 2008
Folks do watch these two You Tube videos.
In the first one Alan Greenspan is clearly bullshitting. He says "I am shocked" at the current financial crisis - which Greenspan says is the "worst financial tsunami in this century". Well this century is only eight years old. I think Greenspan is living in the last century. He has also possibly never heard of Lyndon Larouche or the Executive Intelligence Review. Greenspan says he never saw the financial crisis coming.
I dont think Greenspan is telling the truth here. Please also watch the second video which shows a Congressman strongly voicing his concerns to Greenspan over the state of the US economy, three years ago in 2005. The complaints were loud and clear more than three years ago.
In the second video though I am inclined to believe some of the 'policy thinking' that Greenspan is saying. Populist politics says the US must protect its jobs from going over to China, India, Phillipines etc. But wisdom dictates that if a Chinese worker can make a can of Coca Cola for 30 US cents an hour wages, then better make the Coca Cola in China.
Think up better and more technology intensive things for the American worker to do. The same applies for us.
But what I am really impressed with in this video is the knowledge and acumen exhibited in these Congressional hearings. The Congressman who is grilling Greenspan is well briefed and articulate.
I believe that this type of transparency and free speech as well as knowledgeable and capable politicians will see America through any troubles. Itu pasal they are First World.
Friday, October 24, 2008
By Syed Akbar Ali
A few days ago there was a report that a whale had beached itself on a beach in a place called Kampung Kuala Nenasi near Pekan.
The 10-metre-long Bryde's whale was first stranded in the shallow waters at the Kuala Nenasi estuary early Monday morning. People managed to free the whale late on Monday night, but it ended up on the beach again Tuesday morning.
Why do whales beach themselves? Sometimes whole pods of smaller whales and also dolphins just swim up a beach and die. Various reasons have been suggested for these suicidal runs. They all do not make sense. Some suggest that diseases and viral infections make the whales commit mass suicide. This is quite baseless.
We have never heard old historical reports of whales beaching themselves. This is a more 'modern' phenomenon. There is most likely a more nefarious reason why the whales periodically commit suicide. And of course it must come from the Yew-nited States of America. Here is something from the Washington Post:
Sounding Out Whales for Clues to Sonar's Effects
By Marc Kaufman
Monday, October 15, 2007; Page A07
"Twenty-two varieties of beaked whales roam the seas, diving as deep as a mile to feed on bottom-dwelling squid and small fish on the dark ocean floor. Shy and seldom seen by man, they are among the least understood large creatures on Earth.
But in recent years, these deepest-diving whales have sent out an unexpected distress signal, alerting researchers and marine mammal advocates, through their confused behavior and beachings, to an environmental hazard that until 10 years ago was not known to exist. The threat comes from very loud noises, especially from Navy sonar, that on at least several occasions have proved fatal to the whales.
The realization that sonar can disorient or frighten whales sufficiently to leave them beached and dying has spurred protests and lawsuits, and has given the Navy a problem that it first denied but now, to some extent, acknowledges.
Navy officials, however, have strenuously resisted efforts to limit testing of their sonar, saying it is essential to national security. In response to angry protests, as well as some pressure from Congress and the marine mammal scientific community, the Navy has now funded an ambitious, $6 million project to learn more about beaked whales and their response to sonar and other loud ocean noises.
The research began in earnest last month in the Bahamas under the leadership of the National Oceanic and Atmospheric Administration (NOAA), not far from the spot where, in 2000, the stranding of 17 beaked whales after a Navy sonar exercise first brought the issue to public attention. At least six of those animals died."
I think this is indeed the real reason why whales often beach themselves. For those who are interested just search the Net for 'Sonar Effects On Whales'.
SONAR (Sound Navigation And Ranging) is a technique that uses underwater sound propagation to navigate, communicate or to detect other vessels.
Dalam bahasa kita it means a device used by submarines and anti submarine warfare ships to search for other submarines, detect the ocean floor, undersea cliffs, obstructions and so on.
Not pointing any fingers but Singapore already has four submarines in operation. Since they cannot dive in Keppel Harbour, they usually nose around the region. Singapore's Challenger class submarines are the RSS Challenger, Conqueror, Centurion and Chieftain. Two more Vastergotland Class submarines are on order from Kockums of Sweden.
The US and British Navies also conduct extensive submarine patrols in our area. So do the Chinese, Russian and Indian navies. The next time you go diving or snorkeling be thankful that we are not whales.
Thursday, October 23, 2008
Tuesday, October 21, 2008
By Syed Akbar Ali
Up to this point in time there is still a great necessity for a coalition Government in Malaysia. Why 'up to this point in time'?
We must look at the demographics. I have the feeling that the public is not fully informed of the make up of the Malaysian population. By now, 65% of our population is Malay bumiputra. It used to be less. The non Malays are about 35% and this proportion is getting smaller.
On Sunday (19/10) my son and I were in Perak nosing around Papan, Pusing, Sitiawan and Ipoh. I was born in Ipoh and in the 60s these places were overwhelmingly Chinese in presence and character. But now the majority of the folks are visibly Malays. Their numbers have increased tremendously. In non vernacular Government schools, there are hardly any non Malays in some of the classes.
By 2020 (12 years away) the proportion of Malay bumiputras will likely exceed 70% of the population and by 2030 it may reach 80%. At that time non Malays may become tourist attractions in places like Cheneh in Terengganu or Kampong Lalat in Kelantan. At that point in time coalition Government may become academic - meaning practically not necessary at all - because the Malay bumiputra majority will be overwhelming.
Presently at 35%, the non Malays still have considerable clout at the polls. In the present situation where the Malay vote is almost evenly split (between BN and Pakatan) the non Malays can be the deciding votes. To a great extent this was evident on March 8th where the Malay protest vote as well as the non Malay votes determined the balance of power between the BN and the Pakatan. Simple logic dictates that the non Malays use their full potential at the ballot while they still make up 35% of the population.
Just last month, before September 16th, Dr Mahathir had suggested that any BN MPs who thought of switching sides should not join the Pakatan either. They should remain aloof. He said that in this way the BN Government would fall and the 31 MPs (?) could then decide who they wanted as the Prime Minister. Dr Mahathir takes the grand prize for thinking outside the box.
Taking the cue from Dr Mahathir, the non Malay voters have the option of playing kingmaker if they remain aloof from both the BN and the Pakatan and make their votes really count. This means the non Malays can trade their votes with whoever offers the best deal for them. After all isnt this the purpose of democratic elections - as enshrined in our Federal Constitution? But after choosing sides for over 50 years (starting with the Kuomintang supporting the Colonial Government since 1945) this may be a little too late.
Abandoning both the BN and the Pakatan will also earn the permanent distrust of both.
This is where forging multi racial politics minus racial identity is important before 2020. Latest by 2030. To a very large extent this depends on the speed of assimilation among our multi racial population. Putting it another way, the propensity of our people to assimilate will determine the fate of multi racial politics in this country. But we have not been able to do this too well over the past 51 years, especially since racial sentiment became the bulldozer of party politics. So will we have more luck over the next 12 or 20 years?
Our country needs multi racial politics. Why? Because many races live here (This is another 'needless to say' statement). And ultimately all of us need clean water, good homes, good health, good education and unfettered opportunities to pursue wealth and happiness. This is what our multi racial politics must deliver - to each and every citizen.
But it is possible to have an effective multi racial delivery mechanism without having multi racial politics. This means one dominant race is in power but it can take good care of all the citizenry. Everyone is happy. However concentrating power in the hands of one group can be subject to abuse or misuse, especially in the eyes of other groups. Multi racialism is therefore a preferred option.
No one can blame us for not trying enough. We have been attempting multi racialism for over 50 years. We started off on a multiracial footing in 1955. It lasted for 14 years till 1969. Obviously it did not do the best job. In 1970 we tweaked it. The NEP lasted for 18 years until 1990 when we tweaked it again. It became NEP Plus. Now 18 years later in 2008 it looks like we have to tweak things again.
I believe that whatever policy we make, must be based on respect. MUTUAL RESPECT. Hormat dan saling menghormati. Not the forced to hormat type of thing (like when the Japanese forced people to bow to their flag etc). That simply does not work. The dignity and the respect of all parties must be preserved. And respect must take cognizance of local conditions. We cannot simply make 'Tina Fey making fun of Sarah Palin' type jokes or comments into our local context. Do look out the window. We are still Third World.
For the time being the success of coalition Government is still important - for both BN (which controls the Federal Government and eight States) and Pakatan (which has five States). The old boys (UMNO/BN) have lost considerable ground.
Looking at the new kids on the block, check out this Star report about the PAS Government in Kedah.
The PAS MB of Kedah said recently that the "Kedah government is sticking to its new policy of having a 50% bumiputra quota in housing schemes in the state despite dissatisfaction expressed by developers. Mentri Besar Datuk Seri Azizan Abdul Razak said the state introduced the policy to compel developers to build affordable homes for all Kedahans."
What the MB meant was that Malays in Kedah were not able to buy quality houses at market prices. So the developers should build cheaper homes, within reach of the Malays. By forcing the developers (mostly Chinese) to reserve a 50% quota for bumiputras, it effectively kills off housing development in Kedah.
Over in Perak, the PAS MB there has taken quite the opposite approach. Soon after taking office he freed up unsold bumiputra housing lots. They can now be sold to non Malays. This should generate more business activity in Perak.
Just in this matter alone, it would seem that there is no cohesion even between two PAS MBs. What about the DAP's views over in Chinese majority Penang? What about the PKR MB over in Selangor?
Many people, including readers of my Blog are ecstatic and euphoric that the BN juggernaut has been bloodied. But now comes the job of governing this most complex nation. If they do not want to lose public support (or dampen the ecstasy and euphoria), the Pakatan must sit down quickly and hammer out one consistent policy which can be clearly identified with them. More importantly it must serve all their constituents well.
The Alliance / BN is the result of a good philosophy ie the Coalition Philosophy which has been in place since 1955. At that time the demographics were very different. This is a philosophy of power sharing and mutual respect. We cannot deny that the country is relatively safe and prosperous for 51 years because of this philosophy.
The actors who embraced this philosophy do come and go. Pas joined and left the BN, Gerakan was out then joined later. Now Gerakan is contemplating leaving again. PPP was out then joined BN. PBS was out, then joined, then left, then joined back again.
The implementation of the power sharing formula may have its ups and downs but the necessity for power sharing will be around for a while. Even when the Malay bumiputras become 75% or 80% of the population there will still be at least 10 million non Malay citizenry. That is a large number of people by any measure.
The flat tyre which has hobbled the BN Coalition Philosophy is the derailment of the New Economic Policy. This problem has to be fixed quickly. Because of this derailment, the Pakatan now seems attractive to the voters. But the Pakatan has not yet hammered out a standard Coalition Philosophy of its own nor an acceptable economic policy for everyone, which they can all agree upon. Left to its own ends, in its present form, the Pakatan is looking at failure.
The BN needs to tweak the failed NEP and refocus on the Coalition Philosophy.
In conclusion, Coalition Government is a creature of necessity. When the necessity changes, so will the Coalition Government. Everyone should understand this very well.
Coming next : Notions That Malays Are Immigrants.
Tuesday, October 14, 2008
When I was in Form 3, my English teacher Miss Chee taught us about the English phrase 'needless to say'. It is sometimes used when the writer wants to say something that is already obvious. But Miss Chee told us if something is needless to say, then why say it? Thus do teachers incite seeds of rebellion in the minds of their wards!
But only the phrase itself need not be used. It does not mean that the subject of the matter need not be repeated. Because the fact is sometimes we have to repeat something a dozen times or more to get the message across.
So here is an understatement : there is a lot of pent up anger and frustration in our country. There are numerous facets to this anger. Just one of them is the frustration that we cannot speak freely, that we do not have avenues to freely express our thoughts. This is just one of the thousands of reasons why I think the voting pattern in this country has changed, most likely quite permanently, since March 8th, 2008.
A few years ago I was invited to brief a foreign military delegation (from a Third World country) about the general political and economic situation in our country. This was after the 9-11 event. In my briefing I also spoke about the Press and the media here. The reason I recall that event is because what I said then about the traditional media (printed and electronic) has not changed much - except for one significant detail : Blogging has now become the new mainstream media in the country.
In fact Malaysian Blogs are now setting the agenda on influencing public opinion. People who are under constant public scrutiny ignore this fact at their own peril. And Blogging is growing by the day.
The printed media here can be broadly differentiated between the MSM or mainstream media and the 'others'. In reality the MSM media (Malay, English and Tamil) represents the political-party owned or linked print media which basically champion their respective political masters, toe their line and so forth. This also applies for the MSM electronic media like the TV and radio stations in the country.
The non MSM print media also include political party owned newspapers, publications put out by NGOs as well as non partisan tabloids and gossip newspapers. They are mostly in Malay with some being available in English. Only recently a full fledged non partisan Malay news daily has been launched.
But what really is mainstream media today in Malaysia? A long time ago, the MSM was also the most widely read, the most widely watched or enjoyed the largest circulation. But this does not hold true anymore. Then who actually the readers or the viewers are, is also confusing the definition of what is mainstream media. If the media is read by the Government, does it make it mainstream? Not anymore. If it is read by rural Malays, is it mainstream? If a Chinese newspaper which weighs about a kilo, has a DAILY circulation of about two million readers, is it NOT mainstream?
We have 'newspapers' like the Malay language Harakah which also have circulations that are larger than some other MSM newspapers. Among television stations, the ASTRO satellite TV has perhaps replaced the regular MSM TV stations in popularity. But this also depends on which mainstream you are looking at. A very large number of Chinese watch Astro and so do many urban Malays. But what they watch on Astro is completely different. So what exactly is mainstream?
Going by circulation alone, some of the MSM newspapers are on their way to oblivion. Minus the free newspapers and other giveaways they hardly have the numbers to break even. Revenues from advertisements placed by the Government, Government universities, Government Linked Companies and other such crutches keeps them going. But if their circulation physically keeps decreasing by the day, even these crutches cannot prop them up. Are they still considered MSM?
So to me it is unclear today what exactly is the mainstream media in the country. Even the idea of a controlled Press is hazy. The pro Government MSM media is definitely heavily censored and suffers many restrictions.
But we cannot say the same for the Harakah plus the tens of 'surat khabar nyamuk' which we can buy at the newstands. English reading Malaysians may not avail themselves of such publications but the Malay speaking readers have access to a very large number of publications and tabloids which are quite unrestricted in what they say. The Harakah for example outsells many other newspapers. The Harakah definitely does not suffer the same restrictions as the other newspapers.
Then the vernacular Press especially the Chinese press is said to be (I dont read Chinese) relatively less restricted than other MSM media. And now with the Blogs so strongly influencing the public's opinion, the idea of restricting or censuring news dissemination, analysis and comment is becoming almost impossible.
As far as news censorship and Press freedoms are concerned the pro Government media seem to toe the line very well. The non political media as well as the politically linked pro-Opposition media are less restricted.
But for the politicians, not understanding which media is mainstream or non-mainstream, or which part of the populace is mainstream, non-mainstream etc can be fatal. For example some politicians who never imagined that they could lose the support of the voters (but they have lost in the recent elections) have even misunderstood the idea of Blogging. They think that just by opening their own Blogs will make them more acceptable now. Wrong.
You are only acceptable if what you say makes sense and is practically useful to the people who voted you out of office. If you open a Blog and say the same things that made people dislike you in the first place, your Blog simply becomes a beacon to remind the people everyday to continue not voting for you. Your Blog becomes a place where you shoot yourself in the foot everyday. A Blog is just a tool. It is what you say and do that will make the difference. Just having your name on the Blog does not mean anything.
Well dear reader, I hope you are not too bored. That was just the opener. I really wanted to talk about libel, slander, defamation and such. For the future of this country in particular, I think that we have to amend our laws on defamation accordingly, to better serve us the human beings who populate this country.
The ISA, the OSA, the restrictions on the mainstream media, the other outdated laws that we have and so forth are symptomatic of a narrow mindedness, of where we came from, from a time long ago which we have now left far behind. Of course they become evil when they are misused. People are made to suffer through the interpretations and misinterpretations of these laws. And any law can be misused. We need to tweak our thinking and hence we need to tweak some of our laws.
What do we all want? We want to progress - to move on in life at par with the best in the world. Other than the education system (which is a shambles) and the economic system (another shambles) the laws of the country must also help us along this path. Are we there yet? I dont think so. Are we close to getting there? We are not even in the parking lot. So our laws have to bear part of the blame for not advancing us at a rapid enough clip. We must change many of our laws.
To progress in double quick time science, technology, industry, economics, arts and culture should play a gigantic role in our daily lives. But they do not have an important enough role in the lives of a vast number of our people. (Those who bought RM450 tickets for Mamma Mia, RM250 tickets for the Petronas Philharmonic or RM45 tickets for Indy and Andy's show may disagree but you are in the truly minority league.)
Instead what is taking up so much of our time is the drama of politics, politics and more politics. And it is a very low quality production where the actors are shabbily dressed on a poorly lit stage. Despite the Third World script, our actors cannot even memorise their lines. Yet these are the characters who distract the nation's thinking. The bulk of our waking hours are wasted listening to these stage players.
And this situation is not going to change anytime soon (no matter who makes up the State or Federal Government). And the fault is ours. We as a populace have agreed to extend the same courtesy to all and sundry, including to this class of people who have now become the single largest cause of much of our unhappiness - the politicians. This must change.
OK lets get to the point. There is such a thing as 'a public personality' who should bear more scrutiny (hence indignity) than the ordinary man or woman in the street. Recalling my law classes 22 years ago in college in the Yew-nited States, my law teacher Mr Frueh (pronounced Free) explained that a 'public personality is any person who offers himself to the public to earn a living, to establish his fame or to win stature in society'.
Politicians definitely fall into this category. So should Government workers (aka Public servants), artistes, pisang goreng sellers, Bloggers and all. We all put ourselves to the public to sell them a product, win their support or sway their thinking. Because we depend on the public, the public must therefore be given a free hand to scrutinise, question and criticise us. This has been done in the United States.
In the US, if you fall into this category of a public personality, then it is extremely very difficult for you to sue people in Court for defamation. Other than real malicious intent, the public can say almost anything about you and you must put up with it - it is very difficult for you to sue them in Court. This is why the US comedy shows (like Jay Leno and Saturday Night Live) can make so much fun of George Bush, Obama, McCain, Sarah Palin, Joe Biden etc and get away with it.
The Courts in the US recognise that not all members of the public have attended law classes, not all people have the same levels of education. Not all members of the public are equally eloquent in a popular language to voice their opinion. Yet all these people have the right to say whatever they wish to say about the people who are demanding either their money, their votes, their support, their endorsement and so on. In other words the Courts in the US are saying that if you are a politician, an actor, a supermarket operator etc then you must grow up. You must be prepared to take the verbal bricks people may want to throw at you.
I feel strongly that the defamation laws (laws of libel and slander) here in Malaysia must be tweaked to accomodate this. We must amend the defamation laws such that the politicians especially, almost cannot sue anyone for defamation.
We dont have our home grown type of McDonald's, General Motors, Toyota, 20th Century Fox, CNN etc who have such a big impact on American or Japanese society. Hence these corporations are so heavily regulated in the US, Japan etc. Here our continued happiness and wealth depends so much on the polticians. Maklumlah we are Third World. This means they must be exposed to complete comment and scrutiny.
I strongly believe that just this alone (making the politicians almost exempt from the defamation laws) will go a long way towards making our country a safer and more prosperous place.
To their credit the PAS has never sued anyone for defamation despite what anyone has said about them. Neither has UMNO. It is part of the rough and tumble of politics.
To my knowledge Tun Dr Mahathir Mohamad sued the Far Eastern Economic Review magazine just once in the 80s when they said that he had gone to meet the Sultan of Brunei to discuss the sale of Limbang (in Sarawak) to Brunei. Dr Mahathir succesfully sued the FEER because that was a particularly malicious accusation affecting the peace and unity of our country. For the reader's note the FEER went bust sometime ago.
To conclude this piece I would like to say that, yes we all know how to complain and point fingers when something goes wrong or when something happens that we do not like. We should not stop this practise. In fact we should be even more critical. It is our right. But it will help a lot if we also make constructive suggestions, put forward practical ideas and proposals for the people in authority to consider.
Often times even the people in authority realise that something is not right. But thanks to our education system, they themselves do not know how to move things forward. They lack ideas.
The smart folks like the Bar Council , the NGOs, the professionals etc must play a role here. Dont just complain. Make good, workable suggestions.
Coming Next : Saudara Anwar Bin Ibrahim.
p.s. My following pieces will be shorter & hopefully no more wingdings too.
Friday, October 10, 2008
By Syed Akbar Ali.
First of all I wish to thank everyone for your taking the time to read my Blog and also for all the comments. Thank you very much. Rest assured this will be my last piece on economic issues for a while. Dont want to bore you.
Just to excite your interest (keep you from yawning) in this Part 2 of 'US Dollar Almighty' I will talk about the following:
i. Why is the US Dollar such an international currency, why is it so widely used and what is its future role?
ii. Where should our own currency be? Should we strive for a strong Ringgit or a weak Ringgit or is there an in between? What are the implications for us Malaysians?
To start off, first allow me to choose my words carefully and talk like a politician or in this case like the economists who sometimes say "on the one hand its like this, but on the other hand its like that").
To be widely accepted and to be succesful, any currency must be perceived to represent value.
In the beginning gold and silver were used as currencies. Whether they were used as currency or not, gold and silver carried their own value. In the beginning (say in India in 6th century BC) gold and silver coins did not have 'token' values or face values. The weight of the coin was widely known, but there was no mention of how much 'money' it represented. So the monetary value of the coin could vary.
Later coins started having token values or face values higher than the amount of metal inside them, just like paper currencies today. This became 'fiat' money.
But the more basic question is why gold ? Well the simple answer to that is because gold does not rust. You can burn it, melt it, blow it up or whatever but you can always put it back together again as a piece of gold and it would still be gold. Plus the fact that it is rare. You must dig up mountains to obtain gold.
There are other metals which are more expensive than gold and are also rarer - like uranium. But I think if we carried uranium coins in our pocket, we would start glowing quite embarrasingly. Gold has withstood the test of time.
In short, human beings need something that is dependable, something that will not disappear, something that is unchanging, something that is valuable. This is why human beings have given such high value to gold.
This is a simple but very important point, please remember this because we will revisit this point when we come to see why the US Dollar is so succesful as an international currency.
And plus the fact that gold is also rare - it became a perfect store of value and a medium of exchange, both rolled into one. You could store your wealth in the form of gold bars and gold jewellery in all shapes and sizes. Or you could use gold coins as money, a medium of exchange.
OK, not to bore you any longer. In my humble opinion, this is also exactly why the US Dollar, is perceived to have value, by almost the whole world. The US Dollar (also called 'greenback') is actually printed on cotton. The US Dollar represents a country, the United States of America (a country with 306 million people now?) which is perceived to be dependable, unchanging, has great 'economic' value and will not disappear anytime in the foreseeable future.
Let me say something about the gold standard, the famous Bretton Woods agreement of 1944 and such. I really dont know what it all means. It has stopped functioning since 1971. The world has moved on quite well since then. During World War 2, even before the Bretton Woods agreement, the British Pound was pegged to the US Dollar and vice versa. In 1944, at the height of WW2, the Brits and the US met at a golf club in Bretton Woods, New Hampshire and agreed that their currencies, plus that of their wartinme allies, should have a fixed exchange rate.
How would they achieve this? They would each hold gold in their central banks to back up their currencies. But this was not enough. Also at that time, the IMF and the IDRB (Int'l Bank for Reconstruction and Development - at that time mostly for orang putih sahaja because half the world was the British Empire and the other half was the French, Dutch, American and German empire) had also come into being. So they agreed that if any of the Bretton Woods countries had foreign exchange reserve problems, the IMF would extend emergency loans to that country.
Based on this agreement, and the safety net provided by the IMF and the IDRB, their exchange rates were kept stable - within a difference of 1% fluctuation only. But there were other more ridiculous aspects of Bretton Woods. Only the US Dollar could be converted into gold, the price of gold had to be maintained at a certain level and stuff. Quite impossible.
Since 1865 (end of American Civil War), the US remains the most viable and robust nation on the surface of the earth. The fact that the US also has aircraft carriers, nuclear bombs and such are secondary. The US Dollar became a global currency even without these weapons of war.
Compared to the US, as late as 1962, France was close to becoming a military dictatorship (the rebel 'colons' almost overthrew General De Gaulle). Around that time France also had to introduce a new currency, the 'new' French Franc. Spain was ruled by the dictator Generalissimo Francisco Franco from 1947 until 1975. Germany was divided and under constant threat of war until 1989. These are not exactly the conditions that build great confidence in your currency's international stature.
Then just six years ago, in 2002 the Western European currencies disappeared and were replaced by the Euro, which was officially introduced in 1999. The Euro was physically launched in 2002 at parity with the US Dollar. But the Euro has now surpassed the US Dollar at 1.36:1. Why? Simply because the Euro zone (15 countries altogether?) is now the largest economic grouping in the world, with a combined GDP that exceeds the USD12.0 Trillion of the US.
The Euro is not yet as popular as the US Dollar but it is geting there.
The US Dollar derives a lot of strength from the fact that many people around the world are reassured that as a country America is quite unshakeable and for the foreseeable future it will remain a rich, powerful and stable country. You can rely on the fact that when we wake up tomorrow America will still be around.
This simply means that whether they like it or not, whether they agree or not, whether they are aware or not, people around the world still place their trust in the United States of America.
In Iraq, after the first Gulf War the currency of choice in Baghdad was the US Dollar. I visited Iraq in the mid nineties. We were able to change US Dollars at any time for shoe boxes full of Saddam Hussein paper money.
And all around the world, currency exchange rates are 'expressed' in US Dollars. For example what is the value of the Malaysian Ringgit today ? If you call the Forex guys at our local banks or ask the mamak moneychanger at the corner they will probably say 'Today Ringgit/Dollar is 3.50'. This means that one US Dollar is worth RM3.50 today (Wed 8 Oct. '08).
(By the way please note with some concern that this is just 30 sen away from the RM3.80 which was the value of the Ringgit when it was pegged against the US Dollar at the height of the Asian Financial Crisis, 10 years ago in 1998. Earlier this year the Ringgit had strengthened to as low as RM3.34 to the Dollar, prompting the Malaysian Institute of Economic Research to boldly but prematurely declare that the Ringgit could achieve RM3.00 to the US Dollar by year end. Despite the beating the US economy is suffering from their financial crisis, our Ringgit is weakening vs the USD.)
The point is, not only oil is priced in US Dollars but even the currencies of countries are valued in US Dollars. And the trade in foreign currencies is many times larger than the trade in oil. How many times larger? The trade in foreign currencies is estimated to be USD2.0 Trillion PER DAY!! And most of this Forex trade is done in US Dollars. So that is how 'Almighty' the US Dollar is. Global oil trade is only a fraction of the currency trade.
Then gold is also traded in US Dollars. But the greatest demand for US Dollars is between countries that export goods. Usually when a country exports goods, it wants payment in its own currency. When we export palm oil to Pakistan, we want to be paid in Ringgit, not in Pakistani Rupees. Therefore Pakistani importers must 'buy' our Ringgit (using their Rupees) and then give us the Ringgit in exchange for the palm oil. So technically the more we export, the more the demand for our Ringgit - hence our Ringgit will increase in value (or strengthen).
But this is not always the case. Sometimes exporters do not want to be paid in the currencies of their home countries. For example in the 80s and 90s (and maybe even now) Indonesian exporters frequently wanted to be paid in US Dollars for their exports - not in their own Indonesian rupiahs. This is because their currency was suffering uncertainty - meaning fluctuation in value on a daily basis, instability etc.
Or their country may be suffering increasing rates of inflation which may make their Rupiah earnings become smaller. So they want to be paid in US Dollars which they will later convert to Rupiahs at a more opportune time. If their currency deteriorates further, they will exchange the US Dollars and get even more Rupiahs.
So the US Dollar is going to be around for a while. The main reason is because America is a stable, rich, very progressive, extremely creative and productive country. And they are a democtracy which values freedom. This is the underlying strength of the US Dollar. This is why the US Dollar is still Almighty. Just for your information, in the last week, despite the financial crisis, the US Dollar has strengthened against almost all world currencies except the Japanese Yen.
What sort of Currency Policy should we have?
In my opinion, we should have a strong Ringgit policy. We should aim to make our Ringgit at par with the Singapore Dollar and then to achieve parity with the Euro. This is not a ridiculous idea. It is something that can be done. The Brunei Dollar is at parity with the Singapore Dollar. At one time the Papua New Guinea kina used to be worth RM7.00.
We cannot just wish for this to come true. We have to make our country a high technology industrial nation. We need to generate wealth on an accelerated basis. This means we must also ensure the freedoms that are necessary for wealth creation. We must harness the natural creativity of all our people. Without people, we cannot depend on monkeys for economic growth.
We have always been an exporting nation. A strong Ringgit will make the imports of raw materials and intermediate goods much cheaper, which can then be inputted into our exports. It is incorrect to say that an expensive currency will dampen exports. The largest exporters in the world like the US, Japan and Germany have strong currencies which does not reduce their export potential. The quality and technology content of our manufactured goods will determine their export potential much more than our currency value.
A strong Ringgit will also make it cheaper for Malaysians to venture overseas, for whatever reasons. We can send our students to study all over the world without too much hassle. (If you dont believe me go to Pangkor Island and meet British janitors enjoying month long holidays there because their Pound is worth RM6.00 or more).
And I feel it is a crime if the value of our Ringgit is suppressed artificially - 'to help with our exports' and so on. It is no different than denying a worker a full day's wages for an honest day's work. Worse when we suppress the value of our Ringgit, we are subsidising the wealth of our major trading partners. Singapore is also our major trade partner.
Coming next : Tweaking Our Libel and Slander Laws (this one very interesting).
Wednesday, October 8, 2008
Just an interlude. A friend sent me this poem from a Persian poet.
Just to share.
Tuesday, October 7, 2008
By Syed Akbar Ali.
In this Two Part series I would like to talk about three things : i. financial risk and the present financial crisis in the US, Europe and elsewhere ii. the role of the US Dollar and iii. where our own Ringgit should ultimately be heading.
So as not to lose you, dear reader, rest assured that I am a layman. I will try to make this as interesting as possible. It is important and I hope you will benefit from this and, who knows, please go on to save the world and stuff.
This is not an academic thesis on currencies and money. But considering the bloodletting that is presently happening in the world financial markets it is obvious that the 'non layman' specialists have seriously botched things up. So the laymen need to participate in this dialogue using our laymen's understanding and hopefully common sense.
The annual GDP of the United States is over US12.0 Trillion, the largest economy in the world. The US financial system may lose up to US1.1 trillion from the subprime housing loans bubble which burst last year, whose effects are still going around the world like a tsunami. The latest casualties are Europe and even Brazil. One Chinese insurance company has also lost USD2.3 Billion from investments in the Fortis Financial Group of Belgium.
But what do they mean by saying 'lose US1.1 trillion' ? Did someone flush all that money down the toilet, never to be recovered? Not exactly. The money is still there somewhere but in someone else's pockets. The US economy has not shrunk by US1.1 trillion either. In fact it is still growing. Ford is still manufacturing the Mustang, Boeing is still making planes and Coke is still being consumed by the millions of litres.
What I am saying is there is no need to lose our heads over this. We just need to take some rational steps. We do not have Wall Street style derivatives trading or 'Liar Loans' asset securitisation here yet. No matter how great the temptation or the arm twisting, we should make sure that these Wall Street genies are kept safely locked up inside the bottle. If we let them out in Malaysia, it will be deja vu for us too.
Risk is directly proportional to the distance between the transaction and its underlying basis
The problem in the US has arisen from putting too much distance between a transaction and the underlying basis of the transaction. It is very simple. Before fiat money (paper currencies, bank notes, cowry shells, beads, metal coins, traders bills of exchange etc) was invented, human beings traded by barter. So many goats for a cow, a chicken for some firewood and so on. This was the 'safest' and least risky 'exchange' system. The buying and the selling (the transaction) was often done with the cows and goats (the underlying basis for the transaction) standing right next to you. You could see them before your eyes.
But barter trade was good for small scale exchange. It was not too efficient. So the humans invented fiat money. Cowry shells, metal coins, paper money and so on. But this increased the exchange risk because now you had to give up your cow in exchange for a piece of paper, a shell or a piece of copper with a king's head stamped on it. As long as there was a king or an emperor still in charge, the shells, paper and copper had some exchangeable value. What if the king died, war broke out or your kingdom ceased to exist? Or the coins were easily counterfeited? So with the advent of paper currencies, coins and such, the distance and hence the risk increased between the transaction and the goods transacted increased.
But even this was not enough. As human activity grew, we invented Banks. The Banks then promoted cheques, banker's drafts and so on. This telescoped further the distances between the transactions and the physical goods transacted. Now you did not even need paper money. You had other pieces of paper (cheques) claiming to represent other pieces of paper (paper money) which could finally be exchanged for a cow (the tangible goods).
The risk has actually multiplied manyfold. (Anyone who has been unfortunate enough to receive a 'rubber' cheque from someone will understand what I am saying). First of all you suffered the risk of the cheque bouncing, ie the writer of the paper cheque did not have enough paper money in his account.
Then you also suffer the risk whether the Bank will still open for business. Please do not take this lightly because this is EXACTLY what is happening now on a gargantuan scale in the US and Europe - Lehman Brothers, Washington Mutual Bank, Wachovia Bank, Hypo Real Estate Bank in Germany, Fortis Financial Group in Belgium and others technically went bust. If they were not bailed out, their cheques and other instruments would have bounced.
Worse they would just not open for business anymore at 9:30 am on weekdays. Try to imagine going to your favourite bank in Kuala Lumpur tomorrow morning and finding it padlocked! Please do not think that it cannot happen here. It is happening, as you are reading this, in the US and Europe.
Then you also suffer the national currency risk. What if the cheque did not bounce, the Bank still remained open for business but the currency was quite valueless - like what happened in Iraq in the 90s. Because of the economic embargo against Iraq, the value of the Iraqi dinar decreased by the day. In contrast please note that despite the banking turmoil in the US, the US Dollar strengthened yesterday (Mon 6th Oct '08) against all major world currencies except the Japanese Yen. We will discuss this further in Part 2.
So the greater the distance between the 'monetary' transaction and the underlying goods involved in that transaction, the greater are the financial risks involved.
In the US, another genie that jumped out of the bottle was derivatives trading. But before that, the devil that uncorked the genie's bottle was the US Banks' action to outsource their housing loan applications to brokers and commission agents. To increase market share, save on staff salaries etc US Banks hired loan brokers to source clients for their housing loans. Because they were commission based, these middlemen started bringing in all sorts of low quality loan applications.
(I would like to point out that some Malaysian banks also outsource their loan sourcing, perhaps not to the extent of the US Banks but it is also practised here).
Soon things got out of hand in the US. People without steady incomes and jobs could just say 'I promise I will pay' without even having to swear on the Quran or in the mosque and still get a housing loan to buy a house. (Only now after the fiasco, they have started calling these the 'Liar Loans'). When these loans started defaulting in large numbers, everything else came crashing down. This is not unlike our credit card companies handing out pre-approved credit cards at shopping complexes to anyone with two arms and legs.
But in the US it was even worse. Poor quality borrowers were even given 100% financing to buy a house (no need deposit) because "house values were going up and up all the time so in a few months the financing will become less than 100% anyway!"
The US Banks were very happy to make all these new loans. Soon they even ran out of money to lend. So they needed more money to make more loans. This is where securitisation comes in. (Dear reader please do not get bored yet because our Banks in Malaysia also do loan securitisation.)
To generate quick cash the US Banks took all these 'Liar Loan' agreements and i) sold them to other Banks, insurance companies and such for cash or ii) used them as collateral or cagaran to borrow more money from other Banks.
They need not physically hand over each and every Loan Agreement. They create other pieces of paper which represents the Loan Agreements. These papers may be called Trust Deeds, Promissory Notes etc. More pieces of paper. Or they may issue Bonds to represent the Loan Agreements. This is called asset securitisation.
Now these Trust Deeds, Promissory Notes and Bonds in turn become tradeable. People can buy and sell these pieces of paper. And how is their value determined? It is determined by the value of the same 'Liar Loans' which become the collateral or cagaran for these pieces of paper. As long as all the house buyers keep paying their monthly instalments, this house of paper cards will hold up.
Other than banks in the US, insurance companies, pension funds, municipal funds (tabung dewan bandaraya) and just about anyone with money in Europe, Japan, China, Singapore and elsewhere could buy these pieces of American paper. China's largest insurance company Ping An just lost USD2.3 billion from their investment in Fortis Group in Belgium. That is how the US crisis is spreading around the world.
I repeat : 'risk is directly proportional to the distance between the transaction and its underlying basis'
Now lets measure the distance between Joe the defaulting house buyer in suburban Middletown, USA and say the Ping An insurance company in China. Joe the housebuyer was a poor quality loan. He defaulted on his housing loan. He missed his monthly instalments. His bank in Middletown, USA which had securitised his housing loan now is short of funds to service its own loans which it raised from a Wall Street bank by using Joe's loan papers as collateral. So now the Wall Street bank is also short of funds. The Wall Street bank in turn may have issued bonds which in turn were raised based on the banks 'good quality loan assets' - which may have included promissory notes or deeds from Joe's Middletown bank. Some of these bonds issued by the Wall Street bank were bought as a 'sound investment' by the Fortis banking group in Belgium, in which China's Ping An insurance company had bought a stake. Fortis went bust and Ping An had to write down US2.3 Billion in the value of its shareholding in Fortis.
The American genie has flown out of the bottle, but the genie has not reached warp speed yet. The genie reaches warp speed when the derivatives traders get into the act.
And here is the interesting part - no one really knows how the derivatives market really moves. (Can anyone recall Nick Leeson and the Barings Bank in Singapore? In 1995 Leeson singlehandedly bankrupted the 100 year old bank through USD1.3 Billion losses from derivatives transactions).
And the whole deck of cards stands on the premise that Joe the housebuyer in Middletown, USA will keep making his monthly instalments. The moment Joe defaulted, everything else collapses. Derivatives traders who do not jump out the window may end up selling hot dogs.
The US Federal Reserve estimates the US housing loan market at USD11 trillion. They say that 10% of these are poor quality sub prime loans that have now defaulted. This is USD1.1 trillion. Even for a USD12.0 trillion GDP economy its a lot of money.
Coming Next - Part 2 of US Dollar Almighty - Where Should Our Ringgit Be?
Monday, October 6, 2008
By Syed Akbar Ali
Well folks, this is my Blog. Have I arrived? I guess I am a writer too. Those of you who have read The Sun newspaper when it first appeared many years ago may recall a column called 'Human Rites' by an Akbar Ali. Well that was me. I wrote that column in The Sun from 1996 until 2002.
In the Malay language, I also wrote the column 'Komentar Hujung Minggu' in the Berita Minggu from 1999 till 2004. Then both my columns sort of faded away. So I took to writing books. My first book 'To Digress A Little' came out in 2005. It has sold over 6000 copies - not bad for a first outing for a local writer writing in English.
My second book 'Malaysia And The Club of Doom - The Collapse of the Islamic Countries' was published in September 2006. It has so far sold over 12000 copies. Both books are still available at the major bookstores. If you have not read them yet, please do. You may find them quite interesting and also informative.
My third book 'Things In Common' is soon going to print. I hope to see it in the bookshops by end October. Do get your copy and read it too. I dont want to sound like a salesman selling his own books but the fact that my first two books have sold 18,000 copies in total in two years is proof enough that many readers find my messages quite useful. I think that I do have something useful to say.
But why Blog (aka write)? It reminds me of the American joke, 'what happens if you cross a rooster with a telephone pole'? The less colourful answer has something to do with wanting to 'reach out and touch someone'. This was the tagline in an AT&T ad that was quite famous in the US. AT&T or American Telephone & Telegraph is the famous US telephone company, also known as Ma Bell.
The Internet started off in Malaysia in the mid nineties. I have been 'Netting' since then. There were no Blogs available at that time. But you could set up a discussion list or a discussion group like Yahoogroups and others. Nowadays they call it blogging but essentially it is writing. Only the format is so advanced now. You can say your piece, add pictures, videos and links which can make your Blog really informative.
I hope the little intro that you will read in my Blog will give you a clear idea of what I would like to say in my Blog. First of all I have chosen the name OutSyed The Box. Its all about thinking. Let me reproduce my Blog intro.
'To embark on unfettered thinking, inside the solitude and privacy of that ocean of space inside our cranium. No one else can access that most spacious of places. The dead cannot think. Those who retain boundaries inside their brains remain uncivilised. Ergo life becomes a slow, sorrowful funeral, full of unhappiness, looking over the shoulder, doom and gloom. Poverty of thought ensures their poverty.'
Even in the US, Europe and elsewhere - people are always talking about 'thinking'. We never stop hearing people say 'we need new thinking, new mindsets, new ideas, we should not be afraid to think freely' etc. Barack Obama's campaign slogan 'Vote For Change' is all about new thinking. Constantly generating new thoughts and new ideas is essential to progress.
However there is one big difference between the US, the Europeans, the other so called First World countries and what are generally known as the Third World countries. The Third World countries would include us. Malaysia is still firmly entrenched in the Third World. Well the difference is that the First World has long ago found out that there must not be any fetters or controls on thinking. This is Step 1.
It does not mean that unfettered thinking automatically generates genius. The unfettered thinking in the US for example in the past ten years has resulted in them shedding the blood of hundreds of thousands of people in Iraq and Afghanistan. Their unfettered thinking has also resulted in the present financial fiasco that is now engulfing their economy.
But the counter argument to that is the fact that under George Bush, American politics has been relying on the infamous 'if you are not with us then you are against us' bullying. This bully mentality has been counter productive to free thinking. You had to toe the line.
Bombing Iraq and Afghanistan is a clear cut case of behaviour sanctioned by non-thinking.
The same argument applies to their financial markets. Over the years certain religious mantras have developed in their financial system which could not be questioned. Financial deregulation, asset securitisation, derivatives and hedging followed by derivatives trading and hedge transactions became huge temple walls which you could not question or attempt to tear down. They developed their own Chief High Priests who soon started making fatwa to condemn any heretics who questioned them.
But the wonderful thing about the First World is that they do not stop thinking. They do not prevent people from thinking what they want. Hence they are able to repair their wrongs and fix what is broken rather quickly. They pick up the broken pieces quickly and move on. It is most likely that the Americans will come out of their present state of affairs, they will heal and move on stronger than ever.
But in the Third World (which includes Malaysia) even the act of thinking is not always allowed. (We have not come to the output of any thought processes yet, we are still stuck at the act of thinking). If you want to say something, you may need a certificate first. Printing licenses, University approvals, religious credentials, Home Ministry approvals etc may be necessary before you even start thinking. If you do not have one, then you cannot even start to think.
Then assuming you have secured these licenses, credentials and so on, and you start thinking, your thoughts must then pass muster. What you think can be censored or even censured. And you may also be prosecuted for what you think.
The end result is that there is not much thinking allowed in our country. What it means is that we remain in the Third World. We remain poor, backward and yes we remain stupid. And complicating things in Malaysia is the fact that the divide between the thinking and the unthinking is often differentiated by race and religion.
The Internet and Blogging must be expedited to change all this. The difference between the Blogs and the mainstream media is that views such as that expressed here will not see the light of day in the mainstream media. The MSM has become the cheerline for the mindless.