Categories
Economics

[1846] Of forward indices, forward!

Is the Malaysian economy in trouble? Or rather, was it in trouble in September?

Judging by the latest lagging, coincident and leading indicators, the answer to the question is not really in the positive.

The Coincident Index (CI), a measure of current economic activity, decreased by 0.1% in September 2008 registering at 123.6 points. Negative change was recorded by Index of Industrial Production (-0.3%), real salaries & wages (-0.2%) and real sales in manufacturing sector (-0.1). The six-month smoothed growth rate of CI remain positive at 0.2% in the current month.

The Leading Index (LI) moved up 0.8% to reach 158.8 points in September 2008 as compared to 157.5 points in the previous month. Two out of the eight existing components posted an increase, namely, real money supply, M1 (0.8%) and number of housing permits approved (0.8%). The six-month smoothed growth rate of LI recorded an increase of 1.2% in the current month.

The recent trend of the LI six-month smoothed growth rate indicates that the Malaysian economy is expected to sustain its slow growth in the month ahead. [Malaysia Economic Indicators – Leading, Coincident And Lagging Indices September 2008. Department of Statistics Malaysia. Assessed December 7 2008]

It was slowing down but not as bad as feared. The Lagging Index for September especially was higher when seasonally adjusted to the year before.

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

p/s — The Bank Negara totally needs an RSS feed.

Categories
Liberty Politics & government Society

[1845] Of status quo for the monarchy

Various anecdotes insist that the act of placing a baht note in your pants back pocket is a terrible faux pas to commit in Thailand. It is because all bills have a portrait of Thai King Bhumibol Adulyadej and placing one in that particular pocket is a sign of disrespect. More so if a person actually sits on it. As it goes, anybody caught doing so by the Thais would be admonished, or sometimes worse.

Though the veracity of the anecdotes is unconfirmed, the message is clear: the Thai monarchy commands tremendous respect from the people of Thailand. This enables the King to exert some influence in Thai politics especially in times of turmoil. Perhaps envious of their counterpart up north, several Malaysian royal houses are looking to play greater roles and claim greater power within Malaysian society. Whether that is a good idea is debatable.

This idea first came to mainstream consciousness in recent times when the Thai monarchy apparently brought the country’s political deadlock to an end. This proved to be temporary but at that particular time, it inspired Malaysians to turn to the monarchy in search of ways to challenge the Barisan Nasional-led government.

In a time when the Barisan Nasional government exercised stifling control over almost all tools of the state to silence disagreements towards its policies, it did not take much of a nudge for many Malaysians to imitate their neighbor up north. Bersih, in particular, held a huge rally to raise concerns to the Yang di-Pertuan Agong, in protest of the executive arm of the state.

The support for the monarchy was further strengthened when the royal houses of Terengganu and Perak were deeply involved in the appointment of the Menteri Besar of the respective states. The Sultan of Terengganu rejected the BN-preferred candidate for the MB post, preferring a person more palatable to the taste of the royal house. In Perak, the Sultan played an active role in the appointment to the state’s highest executive office and in doing so effectively resolved the uncertainty that followed immediately after the March 8 general election.

Both episodes demonstrated the capability and the usefulness of the institution. The monarchy proved that it could provide leadership when the situation requires so.

Nevertheless, this does not necessarily mean the monarchy deserves an expansion in role or in power. Rather, it is just the case that the status quo works.

While the status quo works, the role of the monarch over society may have been overstated. Just as Thailand inspired Malaysians to turn to the monarchy, the case for overstatement also inspired the events in Thailand as turmoil riddles the country.

This was seen during the September 2007 coup d’état by the Royal Thai Army. Almost immediately after tanks secured Bangkok, the military rushed to the palace to obtain endorsement from the King. The endorsement however came after the military coup happened, not before. Regardless whether the King was in favor of the military coup mounted against an elected government, the King could have acted merely as a rubber stamp. In a practical sense, it was the military that gained control of Thailand, not the King.

It is true however all the successful coups had the endorsement of the Thai King while the ones that failed — namely in 1981 and 1985 — did not get royal endorsement.

Yet, the military’s action was more or less aligned with the People’s Alliance for Democracy, the group opposed to former Thai Premier Thaksin Shinawatra and the two successive Thai Prime Ministers allegedly tied to him.

PAD positions itself as royalists and assumes yellow — the royal color — as its own. It has frequently accused its rivals of being disloyal to the King. With an association like that, it is hard not to disagree with the PAD without being accused as disloyal, especially in a country which makes criminal any criticism against the royal house.

The frequent accusations of disloyalty however have brought suspicion that the PAD is manipulating its relationship with the royal class to forward its own agenda with gross disrespect for the democratic process.

In any case, Bersih was a show of organic power and hardly had anything to do with royalty. As much as many would want to believe, there is not enough proof to show how receptive the Malaysian King was to the movement. Bersih, like PAD, only associated itself with the monarchy as a strategy to pit the executive and the institution to forward its own agenda.

The democratic process itself is not sacred since from time to time, tyranny of the majority does occur. Democracy does suffer from failure, especially when all its checks and balances have been exhausted.

Early liberals held a deep suspicion for democracy because of the fear of tyranny of the majority. Voltaire, for instance, advocated enlightened absolutism where idiocy of the masses is kept in check while preserving liberty and everything relating to the Enlightenment.

This is the same thinking PAD is applying in rationalising its action. It argued that the majority of Thais — the rural voters — are not educated enough to do the right action, like voting properly. By using this argument, it could basically reject any democratic outcome against its favor and refer to the King who, in its view, is an enlightened monarch.

Liberal thoughts however do not stop at Voltaire, and classical liberals distrust absolutism as much as crass majoritarianism. Evolution of ideas later introduced the concept of liberal democracy superior to Voltaire’s. The monarchy is replaced by a liberal constitution which ferociously defends individual liberty from infringement by the majority.

The reason for the superiority of liberal democracy to an enlightened monarch is obvious: not all monarchs are enlightened. And enlightened monarchs do not exist all the time either. Voltaire, somehow, overlooked this.

In the case of Malaysia, the country has neither an absolutist nor a liberal constitution in its purest sense. The county does however, perhaps, have several enlightened monarchs who are able to rise above the noise to appeal to the greater good. And there is some security over individual liberty in this country. The imperfections in the protection of liberty by the state may sometimes call upon the enlightened monarchs to play, in some ways, part of the role that Voltaire advocated.

Thus, the monarchy finds itself as a check and balance apparatus. In times when the power of the executive is beyond disgust, the resurgence of the monarchy to check the excesses is most welcome.

It has to be noted that the idea of checks and balances imbeds within the system parts which are capable of limiting the power of the other parts and vice versa. If one part has the ability to overwhelm the other, however, the idea of checks and balances simply loses its meaning.

The same applies to the monarchy. If invested with greater power, chances are the monarchy will stop functioning as part of a check and balance mechanism. The greater power could upset any balance that exists in Malaysia at the moment.

And one of the easiest ways to upset the balance is to grant all nine monarchies in Malaysia with immunity. Immunity will place any royalty above the law, well beyond the reach of any check and balance mechanism.

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

A version of this article was first published in The Malaysian Insider.

Categories
Politics & government

[1844] Of creative clarification is like creative accounting, it is bullshit

Old but Wan Azizah said:

SHAH ALAM, 29 Nov 2008: Parti Keadilan Rakyat (PKR) wants to restore the royal veto power and the dignity of the constitutional monarchy.

That restoring of veto power means the Agong will have the discretion to reject certain types of legislation passed in Parliament before they are gazetted and enforced as laws.

“PKR is prepared to restore the immunity of the royalty in the spirit of constitutional monarchy,” she said in her speech at the opening of the party’s fifth national congress here today. [PKR wants royal veto power restored. The Nut Graph. November 29 2008]

This happens after a person belonging to the Negeri Sembilan’s royal house called for the restoration of immunity for the royalty.

Seriously, surely PKR is not that desperate. Surely, after becoming the largest opposition party on the federal level and controlling several state, PKR is not desperate at all.

She later backpedaled:

Later in a press conference, Wan Azizah clarified that the party does not support the restoration of absolute immunity of the royalty as called for by the Regent of Negeri Sembilan, Tunku Naquiyuddin Tuanku Jaafar, recently. [PKR wants royal veto power restored. The Nut Graph. November 29 2008]

Clarified? That is redefinition, not clarification.

Then somebody tried to save the day:

To a question in the press conference, deputy president Dr Syed Husin Ali further explained that the party wants only the restoration of veto legislation power to royalty, and will not touch on restoring royal immunity from prosecution. [PKR wants royal veto power restored. The Nut Graph. November 29 2008]

Yes, I will buy that 100%. Or not.

I find it hard to link restoration of “the immunity of the royalty” to the “restoration of veto legislation power to royalty”. That is one incredibly large leap of logic to make. In fact, the connection sounds more like faith than logic. I am not prepared to do that.

Regardless, much later, according to a constitutional expert, Dr Shad Saleem Faruqi:

”The Agong never had veto power. He could delay a bill, question it, warn and give advice, but if he continued to delay it, he would end up contravening Article 40(1), which states that he is to act in accordance with advice of the cabinet, except on certain provisions where he may use his discretion, under Clause 2 of the same article,” Shad told The Nut Graph. [Agong never had veto power. The Nut Graph. December 3 2008]

I wonder what was PKR trying to achieve?

Categories
Economics

[1843] Of Michael Lewis on the subprime mortgage

Michael Lewis of the Liar’s Poker‘s fame writes:

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. ”I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. ”We always asked the same question,” says Eisman. ”Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. ”They were just assuming home prices would keep going up,” Eisman says. [The End of Wall Street’s Boom. Michael Lewis. Portfolio.com. December 2008]

This particular article has created a buzz within the econblogosphere. Go and read it.

He also takes a shot at lawyers:

A full nine months earlier, Daniel and ­Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the ­subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-­mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. ”There were like 6,000 people there,” Daniel says. ”There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ”˜You gotta see this.’”‰” [The End of Wall Street’s Boom. Michael Lewis. Portfolio.com. December 2008]

Oh, oh. It gets better:

Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. ”Then he said something that blew my mind,” Eisman tells me. ”He says, ”˜I love guys like you who short my market. Without you, I don’t have anything to buy.’”‰”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. ”They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. ”They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, ”I want to short him.” Lippman thought he was joking; he wasn’t. ”Greg, I want to short his paper,” Eisman repeated. ”Sight unseen.” [The End of Wall Street’s Boom. Michael Lewis. Portfolio.com. December 2008]

Haha! Too funny!

At the market opening in the U.S., everything—every financial asset—went into free fall. ”All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. ”I spent my morning trying to control all this energy and all this information,” he says, ”and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.” [The End of Wall Street’s Boom. Michael Lewis. Portfolio.com. December 2008]

Categories
Politics & government

[1842] Of just face it, the bluff was called

Let us face it. Anwar Ibrahim got his bluff called. Rather than facing the fact and wait for elections for it, he continues to offer false hope and put the blame of the non-event of September 16 — or delay as he calls it — on the refusal of Prime Minister Abdullah Ahmad Badawi to hand power over to him.[1]

Seriously, would anybody actually believe in what the Member of Parliament for Permatang Pauh said about the business-as-usual September 16? Would anybody believe Barisan Nasional would simply hand over power to Pakatan Rakyat just like that? What right does PR have to force the PM to meet Anwar Ibrahim?

Anwar Ibrahim also stated that the BN-controlled House refused to grant PR’s request for an emergency session for a vote of no confidence against the PM. Yet know that we do not really need an emergency session for that. PR could demonstrate its alleged majority power in the House by overturning any bill coming from the BN side.

PR also had the option of convincing the Agong that they have the majority in the House.

Yet, none of that happen. Why has that yet to happen?

These failures are all PR’s.

I was looking forward for a new federal government on September 16 and I was disappointed when it did not materialize. After failing to make good of his self-imposed deadline, he is now looking to enter Putrajaya before December 8, the expected day of Eid al-Adha.[2]

But as Parti Keadilan Rakyat holds its annual congress in late November, enters December.

The tone of the congress says little of the possibility of forming a new federal government in the near future, preferring to steer away from the subject by focusing on other matters, like the state of the economy.[3] Or the upcoming state election of Sarawak.[4]

At least, that is a step in the right direction. Just face it that the defection plan was a bluff, accept responsibility associated with it and move on.

Personal responsibility demands for an individual to own up to his failure. Anwar Ibrahim, by blaming others, is running away from his. That will only hurt his and PR’s credibility further to reduce the gap — which are in PR’s favor at the moment — between the two sides.

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

[1] — SHAH ALAM, Nov 30 — De facto PKR leader Datuk Seri Anwar Ibrahim yesterday blamed Prime Minister Datuk Seri Abdullah Badawi for his failure to topple the government by Sept 16, saying that the takeover now must start with the party’s victory in the Sarawak state election, scheduled to be held by 2011.

“We set a target, so together with Datuk Seri Hadi Awang and Lim Kit Siang we sent a letter to the Prime Minister requesting a meeting, but he refused,” said Anwar to some 5,000 supporters at a ceramah last night as part of the PKR national congress.

“We then asked for an emergency session of Parliament, they refused,” the Opposition Leader said of his attempt two months ago to table a motion of no confidence against the government. [September 16: Anwar blames PM. Adib Zalkapli. Shannon Teoh. The Malaysian Insider. November 30 2008]

[2] — Kuala Lumpur, Oct 12 – Opposition leader Anwar Ibrahim has given a new date by which he claims he would be able to take over the government.

He said he had enough defectors from the Barisan Nasional (BN) coalition to form a new administration possibly before Hari Raya Haji on Dec 8, the mass-selling newspaper Berita Harian yesterday quoted him as saying.

He gave the new deadline in a speech in Kelantan late on Friday. He had missed taking over the government by his self-imposed deadline of Sept 16. [Anwar sets Dec 8 as new deadline to topple govt. Singapore Straits Times via The Malaysian Insider. October 12 2008]

[3] — KUALA LUMPUR, Nov 28 — As Parti Keadilan Rakyat’s (PKR) annual congress convenes tomorrow, it is now hoping to ride the wave of dissatisfaction in a softening economy to recapture the post March 8 momentum which drove them to believe they were on the verge of toppling the Barisan Nasional (BN). [PKR seeks silver lining in economic cloud . Adib Zalkapli. The Malaysian Insider. October 12 2008]

[4] — SHAH ALAM, Nov 29 Has Parti Keadilan Rakyat (PKR) shifted its focus from capturing and forming a Pakatan Rakyat-led federal government, to capturing the largest state in the country- Sarawak?

The mood of certain party leaders and some delegates attending the party’s annual national congress here seems to be heading towards this direction. However, the PKR top leadership maintains there is no shift of plan,except some adjustments, due to the fact that the Sarawak state election was likely to be held soon.

“The plan (to Putrajaya) is still on track. Only now we have some more focus on Sarawak due to the request from our grassroots there. Certainly, we will make some adjustments.

“The other thing is that we expect the Sarawak State Assembly to be dissolved by the second quarter of next year. So, it is just six months before the state election, that’s why we are focusing on this,” said PKR vice-president Azmin Ali. [Is PKR shifting focus to capturing Sarawak?. Bernama via The Malaysian Insider. November 29 2008]