Categories
Economics

[1956] Of somebody is raising some money

Have you ever wondered how the Malaysian government plans to finance its stimulus package as well as its fiscal deficit?

Well…

KUALA LUMPUR: The RM2.5bil Sukuk Simpanan Rakyat government bond launched Tuesday is all snapped up. [RM2.3bil Sukuk bonds snapped up in 2 days. The Star. April 17 2009]

How about borrowing from PNB?

Permodalan Nasional Bhd (PNB), the country’s biggest fund manager managing RM76 billion worth of funds, will offer 3.33 billion new units of Amanah Saham Malaysia (ASM) and two billion Amanah Saham Wawasan 2020 (ASW 2020) units, Prime Minister Datuk Seri Najib Tun Razak announced today. [PNB offers 5 billion unit trust. Bernama via The Sun. April 20 2009]

Show me the money!!!

Malaysia: The government will today auction 4 billion ringgit ($1.1 billion) of Shariah-compliant bonds maturing in 2012. Bidding closes at 11:30 a.m. local time. The securities yielded 3 percent in pre-auction trading yesterday. Industrial production in February fell for a sixth month, declining 14.7 percent from a year earlier, a government report showed yesterday.

The yield on the 5.094 percent note maturing in April 2014 slipped one basis point to 3.66 percent, according to Bursa Malaysia Bhd. [China, Malaysia, South Korea, Thailand: Asia Local Bond Preview. Lilian Karunungan. Bloomberg. April 10 2009]

Oh, oh, oh…

The issuance of government bonds is expected to leapfrog by 80% this year to a gross amount of RM90bil. [Issuance of govt bonds expected to jump to RM90bil. Yap Leng Kuen. The Star. April 20 2009]

Are you keeping track?

Categories
Politics & government Society

[1955] Of a specialized Asian column at The Economist

In the inaugural specialized column on Asia, The Economist pays respect to Perak’s democracy under the banyan tree:

In early March, in Perak in Malaysia, the state assembly convened an emergency session under a tree. It was, said outraged national ministers, a return to the jungle, making Malaysia a laughing-stock. We beg to differ. An ancient connection exists between public business and the banyan tree, as between its huge overarching shade and its deep intertwining roots. In South-East Asia, and Java in particular, the shade was a place of learning and a site where rulers vowed justice. Those are Asian values to which Banyan will happily subscribe. [In the shade of the banyan tree. The Economist. April 8 2009]

Hail.

Categories
Economics

[1954] Of what if ownership to specific bills cannot be ascertained?

Negative nominal interest rate is typically seen as impractical because nobody with profit as motivation would lend at a discount. The borrowers would hoard money at the expense of the lenders, bringing huge losses to the lenders. In a way, the consequence is like an option with unlimited loss. As a result, a supposed lender would rather hold on to their money instead of lending the money. Rather than have the borrower hoards money, the lender decides to hoard money instead.

Greg Mankiw today at the New York Times repeated an idea he blogged about in mid last month[1] to circumvent that restriction by imposing cost on holding money that is higher than the cost of lending at a discount:

At one of my recent Harvard seminars, a graduate student proposed a clever scheme to do exactly that. (I will let the student remain anonymous. In case he ever wants to pursue a career as a central banker, having his name associated with this idea probably won’t help.)

Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.

That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10. [It May Be Time for the Fed to Go Negative. Gregory Mankiw. New York Times. April 18 2009]

I am having trouble imagining how this would work if a person or an entity does not hold cash but instead have all of their money in the banks. How exactly does this proposal work if ownership of wealth does not lead to ownership of specific bills?

Without specific ownership to a particular bill, identifying which bills to be taken out of circulation will be a problematic exercise. I foresee that by the time the time for out-of-circulation announcement arrived, everybody will place their cash in the bank, eliminating proof of ownership of particular bills to a person or entity. In effect, such act will transfer the risk of discounted face value to the banks.

To address that, it may be good to just eliminate any bills. To imitate the effect of the proposed mechanism where digits play a role, 10% (bills with a particular digit will see elimination; there are 10 digits; hence 1 out of 10) of bills should be removed from circulation instead irrespective of their serial number. That however sounds as if, regardless of level of spending, everybody will be hit with an expected 10% loss of wealth, unless a person or an entity spent all of their wealth.

Also, with money taken out of circulation, would that not increase the interest rate, running contrary to the idea of stimulating spending? This question is probably unimportant because the Federal Reserve could easily reprint the same amount of cash taken out of circulation only with different serial numbers.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — [Reloading the Weapons of Monetary Policy. Greg Mankiw. March 19 2009]

Categories
Politics & government

[1953] Of Najib’s BN is trying to outflank Pakatan Rakyat

When Najib Razak said by-elections are distracting attention from things that matters like the economy, he might risk contradiction if he had said Barisan Nasional would participate in the Penanti by-election, made possible by the resignation of former Deputy Chief Minister of Penang, Mohamad Fairus Khairuddin. By indicating that BN may forfeit the by-election, Najib Razak may have taken the battle to another plane where the odds suddenly shift against Pakatan Rakyat.

It is hard to imagine how BN would win in Penanti, despite the possibility of seeing Pakatan on the defensive due to the scandals associated with a number of Pakatan politicians, specifically attached to Parti Keadilan Rakyat. This is so because Penanti is part of Permatang Pauh, the Parliamentary constituency of the wildly popular Anwar Ibrahim.

BN may have taken a fatalistic perspective towards the outcome of Penanti by-election and that is a fair position to take. At the same time, further defeat at the hand of Pakatan will contribute to downward momentum suffered by BN, despite talks of renewal by BN and BN-backed media. Further defeat will work against the BN media, further distancing created image promoted by the mainstream media and reality on the ground.

And so, skipping the by-election is a good option for Najib Razak. Indeed, with it, he kills two birds with one stone.

It is so not only because skipping the by-election puts a stop — notwithstanding time horizon — to the expanding divide between created image and reality by eliminating a possible further proof for BN unpopularity. The act also gives BN and more than anything else, the Najib administration a chip to shore up its position of concentrating on the economy, which is taking a beating despite sporadic good news appearing here and there.

By skipping the by-election and appearing above politics, the Najib administration takes over a moral high ground of fighting for the benefits of the people, the country. While doing so, BN can continue accusing Pakatan of interested only in politicking and not the greater good. This is especially easy to do if Pakatan continues to assault BN on issues of Perak.

That is almost unfair to Pakatan since Perak was wrestled by BN from them and therefore, Pakatan has every right to continue to politically assault BN in Perak. One has to remember however that there are increasing number of individuals becoming tired of such politicking. Already, the phrase voter fatigue is out and about, indicating that Malaysians may have finally approached a politicking saturation point.[1]

This is really a chance for BN to outflank Pakatan. For Najib Razak himself, it is chance to prove that he is a statesman instead of a mere politician. Whether this is real or apparent, that is hard to say but tactically, his maneuver is an effort to achieve that statesman status.

Pakatan should be mindful of being outflanked because that is not the only effort based on outflanking by the Najib administration.

Already the Najib administration tries to appear to be liberal despite the illiberalness of UMNO grassroot. His rhetoric appears as such, talking about a more open society. Najib’s rhetoric may appear empty, fuzzy and cloudy but it does show some effort at becoming a more open government, however small the steps that is.

Liberal attitude, specifically regarding open society, has been the domain of Pakatan. Even the conservative PAS — despite the debate in PAS on the matter — is regarded as more liberal than UMNO with respect to freedom.

If UMNO in particular can prove that it is liberal enough — meaning, not as in a real liberal’s wet dream but just enough to show its commitment to a more open society — UMNO and in general BN may be able to eliminate a reason why many individuals vote for Pakatan.

Whether that gap can be closed or not, the intention or at least the appearance to do so is there. Pakatan must take heed of this trend, lest they may find themselves at a disadvantaged position come the next general election.

Because of this, if BN decides to forfeit Penang, Pakatan should not celebrate too hard. In fact, Pakatan watch out to its sides to secure its flank because Pakatan Rakyat is probably facing a new BN smarting for past mistakes, even if that smarting process is going at a slow rate.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — “By and large, there is fatigue among voters,” says Ibrahim Suffian, chief of opinion research firm Merdeka Centre. However, he says that this by-election is notable as it could be the first where a state assembly representative has resigned on account of integrity issues. [As Penanti by-election looms, polls fatigue a concern . Lee Wei Lian. The Malaysian Insider. April 16 2009]

Categories
Politics & government

[1952] Of the confusion begins to pit the PM with Utusan Malaysia

PM Najib Razak’s slogan One Malaysia — or 1Malaysia however weirdly it is spelled — amounts to nothing to me. At worse it is an undefined slogan with multiple definitions arising from individual efforts to offer explanations and at best, it is a slogan with wishy-washy vague definitions with no substance. I have stated this on April 8. What I know is that his effort at sloganeering fast becoming a disaster he does not need.

If things continue as if it, it probably would not be long before the PM has to fire his public relations team.

Back to the issues at hand, yes, I do not believe in that slogan. Yet, that does not mean I am ignoring the slogan altogether. Far from it, amid piracy off the Horn of Africa, unrest in Thailand, the democratic success in Indonesia and the state of Malaysian economy, I admit I do observe the development surrounding the slogan. At this particular point, I do watch it with amusement.

Days ago, Utusan Malaysia elaborated or suggested the meaning of 1Malaysia based on whatever vague definition haphazardly provided by the new PM. Suffice to say, Utusan Malaysia took a very racial position on the matter.

The PM was asked to comment on Utusan Malaysia’s articles today. His reply was:

That is up to individual interpretation, but to me and I’m speaking not on Utusan but generally, I don’t want an extreme attitude in our country, regardless whether that extremism is from whichever side. [PM says his 1 Malaysia is about sharing power and wealth. Debra Chong. The Malaysian Insider. April 17 2009]

Heh. Did the PM just rebuke Utusan Malaysia?