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Author: Hafiz Noor Shams
For more about me, please read this.
There is a famous graph depicting how real growth of the economy of the United States of America has been remarkably constant over time. It is remarkable in a sense that history deviates little from such constant growth rate. I was reminded of this after reading a post by Karl Smith at Modeled Behavior.
I had not seen the Malaysian version before and so, I decided to draw it myself.
It does not exactly replicate what the famed US graph replicates. Rather, this is the natural log of the Malaysian nominal GDP instead.
As you can see, the long-run growth rate is pretty much constant. The straight line that cuts through the series is the approximated long-run nominal growth rate (specifically, from 1955 to 2010. Why did I choose that particular period? The data at the IFS of the IMF goes only as far back as 1955. I could draw the real GDP but since real GDP growth will not deviate much from nominal GDP in terms of natural logarithm, I thought nominal values are good enough).
Smith suggests that government policy does not matter in the long-run. I do not share that view but certainly, the tendency for growth to revert to a certain long-run growth rate is remarkable. Perhaps, what is more interesting are the deviations from the long-run growth.
More relevantly, growth from 2008 to 2010 were lower than the long-run trend. That was caused by the global financial crisis.
It is worth noting that the economy might be still operating below its potential, if the black line is a potential output growth to start with. In other words, there is an output gap. Yes, this is despite the great PEMANDU says and whatever their plans are.
For those who claim the growth post-recession is all thanks to the Najib administration — let us pretend a little that their narrative is the right one right now — this is something they can chew on. Even with the base effect producing what seemed to be spectacular growth, the Malaysian economy is possibly still operating below potential.
With the possibility of a double dip coming, we could see a lot of excuses from Putrajaya soon. Claim the credit but cut the blame.
Another interesting point is that the economic condition in the 1960s might have been Malaysia’s worst within the 55 years period when compared to the long-run trend. It also reaffirms that the 1990s were among the best years.
What is mind boggling is that the Asian Financial Crisis does not register. I tend to believe that the crisis of the late 1990s was more severe than the recession of the late 2000s. I may need to check my premise.
Though a libertarian and in many ways individualistic in the sense that I am protective of my individual negative rights, I am highly conscious of the fact I live in a society. Even with these rights intact, there has to be a give and take, some kind of mutual and voluntary compromises.
The realization that we do not live as an island is doubly important in times when rights are unclear. The exercise of these unclear rights does create tension and ultimately bad blood in society. That is not a way to live by. This is especially so in a multicultural society where no certain way of life is necessarily taken for granted.
Yes, this about the call to prayer controversy in Penang. Although it happened it Penang, it has happened elsewhere in the past and it is really a case applicable nationwide, even elsewhere.
In Malaysia where everything done in the name of Islam is accepted by the conservatives as sacrosanct, criticism against the use of loudspeaker by mosques has been considered as an attack by Islam, at least by them. I do not think this can be seen separately from the Malay right narrative, where rightly or wrongly within local context, the idea of Malayness is seen as Islamic.
Noise (I use noise here without prejudice and only in a very general sense that it is a series of loud sound regardless of its human origin) is a complex issue as far as rights are concerned. On the default, I think I am happy to have the right of making noise stands as it own. It does seem to me like a negative liberty.
It is not a primary right I suppose but only a derived right, derived from freedom of expression. One perhaps could derive it from religious freedom but I tend to believe religious freedom itself is a derived right, and as far as the Islamic call to prayer in Malaysia is concerned, I think freedom of expression is more relevant than religious freedom. That does not mean religious freedom is being negated. I am simply stating that freedom of expression is more relevant. Sometimes, reiterating that in useful as an emphasis. I have found that typical readers read only to forget what they read in the previous sentence.
In any case, given the default position, there clearly is a problem with individual or organization like mosques using its right in early morning in a residential area, causing discomfort to others, especially for those who do not appreciate being effectively shouted at with a loudspeaker.
I personally have bad experience with mosques and call to prayer. My childhood home in Malaysia is surrounded by at least three large mosques, never mind the smaller ones dotting the neighborhood. During call to prayer, the three will seemingly engage in a competition with the loudest call will win the day.
This is very, highly annoying. Things are made worse when these mosques use loudspeakers and project their reading of the Koran or the actual prayer outward.
While the default position belongs to the mosques, it is much better for the general harmony of the neighborhood to not, at least, use the loudspeakers at every single chance these mosques have. Even with the right, voluntary compromise goes a long way in creating tolerating neighborhood. One does not what to live a neighborhood which bad blood prevails.
Respect, compromise and harmony may be a something-in-the-cloud or everything-and-nothing kind of approach. It sounds nice, but what exactly does it entail?
Well, I think it means mosques need to use their loudspeakers discriminately. Personally, I think the best is by turning the loudspeaker inward rather than outward. Realistically, use it only for actual call to prayer, and be extra mindful about its morning usage. Lower the volume by some notch, especially when there are oppositions. If there were none, the problem would not have existed in the first place.
Be as that may be, with the default case of right belonging to the mosque, freedom of expression and free speech is a two-way street. If the mosques insist in using its right, then criticism will be mounted. The mount of such criticism is also part of negative individual right. It is part of free speech.
So, if negative rights and liberties are adopted as the way forward by the mosques to justify their use of loudspeaker and projecting it outward to show its Islamic credential, they must face the criticism in the spirit of free society. Do not issue threat. Do not think that that criticism is some kind of unfair demand.
This goes with churches and temples as well.
In fact, I think it goes for all of us. Loud radio, loud TV, loud party, firecrackers, speaking into the phone loudly in the train, etc.
Just be mindful of your neighbors. Do not be obnoxious.
And I think that is reasonable.
p/s — while I am supportive of any move of reducing the use of loudspeakers by mosque, I do not support having a central authority telling local mosques what to do. That however is another issue that I will give it a pass right now.
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[2409] Yet another day to panic
It was earlier this week when CNBC (or was it Bloomberg?), several economics and finance commentators were highlighting the supposedly inconsistency of S&P’s downgrade of US debts. They showed that several other European countries had higher probabilities of defaulting their obligations than the US, yet these European ratings were higher than that of the US. One of the countries was France.
Yesterday, the French finance minister had to come out to defend the state of the French economy and government finance.[1] Rumors about Société Générale are flying around.[2] And the global markets tumbled just as some thought we were out of hole that was Friday and Monday. As the Asian markets open today, there seems to be a kind of pessimism as everybody braces for a bad day yet again. Yesterday, before the French fright set in, was a swallow, and it did not make a summer.
It is unclear what is driving the fear in the market at the moment. Sure, some pointed out specific events but at the end of the day, it is all a guess. There are no real definite concrete events that one can say, those are the actual causes of the fear. Nobody really knows. Right now, there are so many uncertainties that the markets do not know what to fear and being prudent, they fear everything.
Even its own shadows.
This perhaps highlights the Austrian belief that not a single person is able to process all available information in a timely manner, which is a strong defense for the free market.
Nevertheless, it seems that the markets are fighting rumors more than anything else right now. Money is moved based on the petty rumors, without its truth reasonably checked. Better safe than sorry, maybe. Although speculation itself is useful in testing the truth value of certain statements that might be true in the end, it can also be a kind of self-fulfilling prophecy, turning statement with its initial state as false to true.
[1] — PARIS (Dow Jones)–The French Finance Ministry Wednesday said speculation that the country is about to lose its triple-a rating is “totally unfounded. The three [ratings] agencies have confirmed there is no risk of downgrade of the French rating, and these rumors are completely unfounded,” an advisor for French Finance Minister Francois Baroin told Dow Jones Newswires. [William Horobin. French Finance Ministry:Rumors On France AAA Totally Unfounded. Wall Street Journal. August 10 2011]
[2] — PARIS (Dow Jones)–Societe Generale SA (GLE.FR, SCGLY) said Wednesday it has asked France’s financial markets watchdog Autorite des Marches Financiers to investigate the origin of rumors that caused the bank’s share price to plunge more than 20% at one point in hectic trading Wednesday. Societe Generale asked the AMF to “open an inquiry into the origin of these rumors, which are extremely harmful to the interests of its shareholders,” the bank said in a statement. [David Pearson. Societe Generale Seeks AMF Probe Of Market Rumors . Wall Street Journal. August 10 2011]
And so, S&P has decided to cut US debt rating, essentially stripping the T-Bills of its risk-free status from S&P’s perspective.[1] This is likely to trigger other agencies to follow suit. Theoretically, this has wide implication because risk-free asset is an important basis in asset pricing.
Although the cut is expected, I am maybe dissatisfied at the wide influence of rating agencies. Yields of the debt were relatively low before the cut despite everything that we know. What will make me positively dissatisfied is if yields increase after the cut. We will have to wait for Monday for that.
In that case, increase in yields after the announcement of the cut will feel artificial. It will feel inefficient in terms of information dispersion.
It will be dissatisfying because market players will mainly react to the cut rather than directly to the financial health of the issuers.
Perhaps through some kind of procedure or programming demanding risk-free status, the downgrade by S&P may trigger a rush out of the bonds (to where is a harder question to answer). If the S&P did not issue a downgrade, yields will probably be low still. So, the implementation of the rule that funds have to hold the highest rated debts rated by these agencies divorces its outcome from what an ideal free market outcome.
I would think a more efficient approach would see market players responding to the quality of the bonds even before S&P’s announcement. Yields should have gone up before the announcement. This has happened in some way as reported by the article at the New York Times, but not with the speed that I think is identifiable to efficient market in terms of information.
One could say that S&P is part of the market. One could say that S&P reacted to the health of the issuers and market participants only reacted accordingly by trusting S&P as the arbitrator of ratings, never mind the credibility of S&P and other rating agencies after the subprime crisis. S&P with its specialized skills helps distribute the relevant information as efficient as it can.
But the ideal outcome will not rely on just S&P, or any one rating agency. There are thousands if not millions of players out there. An efficient market would preempt any decision by these rating agencies: after all, the information these agencies rely on are very public information. Yields should have gone down earlier before the announcement.
If yields rise on Monday, that may suggest that rating agencies have too much power to decide on behalf of the market, a market which is more diverse than a couple of rating agencies. It will also suggest that the market is inefficient. To put it more clearly, an efficient market would have these agencies lag behind market sentiment, not the other way round.
[1] — WASHINGTON — Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications. [Binyamin Appelbaum. Eric Dash S.& P. Cuts U.S. Debt Rating for First Time. Wall Street Journal. August 5 2011]