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Totally unexpected!
Oct. 13 (Bloomberg) — Princeton University professor and New York Times columnist Paul Krugman won the Nobel Prize in economics for his work on trade theory. [Princeton’s Paul Krugman Wins Nobel Economics Prize (Update3). Simon Kennedy. Benedikt Kammel Bloomberg. October 13 2008]
And what did the good professor say in his blog?
A funny thing happened to me this morning… [An interesting morning. The Conscience of a Liberal. October 13 2008]
The McCain campaign is going downhill. As much as I would like to see him doing good as he had just weeks ago, these are hard times for McCain in part no thanks to the conservative aspect of the Republican Party. Having Palin in the equation does not help either.
The accusations thrown against Barack Obama by the conservatives are becoming too disgusting that even Senator John McCain could not stomach. Upon hearing a supporter giving off a reek of racism against Barack Obama, McCain valiantly defended Obama.[1]
This is possibly not the way to run a campaign. McCain should really promote his agenda instead of defending Obama. Yet, the conservative supporters — the part of the Republican Party which I truly hate — are forcing McCain to defend Obama in order to have some sort of decorum in the presidential race. McCain is one of those people which honorable fight means something.
I am indeed reserve a lot of respect for John McCain. This respect originates from the days when I was an undergraduate at Michigan. I was simply impressed at the senator’s willingness to break rank to do what he thinks right. His positions on social issues in comparison to average Republicans, on the environment as well as on free market particularly appeal to me. Just tell me who is brave enough to tell to the farmers in the Idaho that ethanol subsidy is unhelpful for the economy? And tell me, who is brave enough to meet the automotive workers in Michigan that they need to compete without government aid?
Even Obama is unwilling tell these groups the truth.
His defense of Obama against his own vulgar supporters earns him even more respect from me. The more his supporters irrationally attack Obama personally and viciously at that instead of focusing on issues, the more McCain would be forced to stand up for Obama. Such action would crowd out time for McCain to use to promote his own agenda.
It is just too bad that when McCain defended Obama, he was booed by his own supporters.[2] That demonstrates how unschooled the conservatives are.
Palin herself is not helpful. Apart from her disappointing uneducated remarks on various items — on Russia for instance which has been made fun by the SNL — her continuous personal and dirty attack on Obama makes McCain’s job harder. Furthermore, her recently publicized abuse of power in Alaska could only makes matter worse.[3]
At the rate things are going, unfortunately, the Republicans are likely to witness a disaster in November. If it continues like this, the Republicans would lose the centrist and independent — the groups which McCain had a hold on at the beginning of the campaign. If the Republicans lose and there is a backtrack in the advances made in the recent decades toward freer market, it would be because the conservatives handed the victory over the Democrats.
Even I, initially eager to be within the McCain’s camp, am being put off by the conservatives.
[1] — [Rage rising on the McCain campaign trail. Ed Henry. Ed Hornick. CNN. October 11 2008]
[2] — McCain’s response was met with boos from the crowd. [Rage rising on the McCain campaign trail. Ed Henry. Ed Hornick. CNN. October 11 2008]
[3] — Sarah Palin, the Republican vice-presidential candidate, unlawfully abused her position as Alaska governor to exert pressure for her former brother-in-law to be sacked as a state trooper, an independent investigator has concluded. [Sarah Palin acted ‘unlawfully’ in feud with state trooper, report says. Philip Sherwell . Telegraph. October 11 2008]
In The Malaysian Insider:
KUALA LUMPUR, Oct 11 — Datuk Seri Abdullah Ahmad Badawi has been dubbed the “Father of Democratic Reforms” by Gerakan president Tan Sri Dr Koh Tsu Koon.
In his opening speech this morning at Gerakan’s national delegates conference, Koh said that “as the Prime Minister, Abdullah has initiated reforms for good governance and promoted commitment to integrity. As an advocate for democracy, he has opened up more space for expression to Malaysians.” [Koh dubs Pak Lah ‘Father of Democratic Reforms’. Shannon Teoh. The Malaysian Insider. October 11 2008]
I am wary of doing the same thing.
While it is during the Abdullah administration when the Malaysian society reclaims greater democratic space and effectively larger liberty stolen from it by the state, practically none of it is due to active action by Prime Minister Abdullah Ahmad Badawi. The greater democracy is made possible through effort of various individuals willing enough to stand up and stare back at the state when the state stares at them.
PM Abdullah has failed to reform anything. Each reform he initiated is going nowhere due to opposition from within his own party.
It took free individuals to push organic reform agendas by pushing the frontier of an illiberal state away from suffocating free individuals. To have PM Abdullah enjoying the appellation denies the real contributors who stand in the front line to contest against an arm of the state, the police which is more interested in suppressing freedom rather than fighting crime.
Having the PM as the “Father of Democratic Reforms” steals the honor from those who actually fought for greater democratic space, those that fought against the PM as well as the relentless machinery of Barisan Nasional. The victory is of individuals too many to list here and not of an ineffective personality as well as the machinery that maintains deep disdain for democratic space.
If there is anybody that deserves that honor, it should be the individuals who fought for it. We do not have a “Father of Democratic Reform”. We instead have “Fathers of Democratic Reform” and the PM is not one of them.
Dr. Koh is committing doublespeak for suggesting the sobriquet for the PM. Would we thank the Nazis for losing World War II? Would we thank PM Abdullah for losing the war in our backyard?
Just several weeks ago, it cost approximately MYR3.00 to get AUD1.00. I know this because I needed considerable amount of Australian dollar soon and I have been watching the exchange rate between the two currencies very closely to figure out when will be the best time for me to purchase the Australian dollar in bulk.
Since then, the Australian dollar has lost over 16% of its value compared to the ringgit. As a direct result, I found whatever cost I need to bare in Australia went down by the same percentage.
The decline is spectacular because of its suddenness as well as the fact that the last time the Malaysian ringgit fared so well against the Australian dollar was over 5 years ago. For this week alone, the dollar lost 8% of its value; on the day after the rate cut was announced, at maximum, it lost 6% of its value compared to the ringgit.
This is definitely a chance for me to buy up Australian dollar cheaply.
I am unsure if I should wait since I am unsure if the Bank Negara would keep the Malaysian rate at its current level. With inflation moderating and the economy slowing down, the Bank might be tempted to reduce the rate. If the interest goes down, the ringgit would likely see some depreciation against the Australian dollar.
Also, with the impressive coordinated rate cuts across the world yesterday, the ringgit has appreciated markedly against the British pound sterling and the Euro, among economies saw a rate cut.
But for those interested in the economic implication rather than my networth, does this mean the Malaysian economy is doing good?
That is hard to say because the exchange rate is not a good measure of economic health. Especially in the case between the Australian dollar and the Malaysian ringgit, it is clear that the rate differential plays a huge part in the depreciation of the Australian dollar rather than the health of the Malaysian economy per se. Indeed, the cause of the depreciation is the confidence crisis faced by the Australian economy and less to do with improvement of confidence in the Malaysian economy on general. This causal relationship becomes more convincing when the Australian dollar is depreciating in large magnitude against its trading partners.
This is an important factor to remember the next time you heard anybody trying to pass off the strengh of the ringgit against any currency, including the US dollar, as a reflection of the Malaysian economy. The relationship between the two is not quite so simple. Before believing that person, among other things, check out what is happening in the other economy first. In other words, check the various indicators of the real economy.
The Malaysia Deposit Insurance Corporation sure does take its job seriously. Amid news of bank runs, financial meltdowns, recession abroad and the spectre of — heaven forbid — depression in the United States, the corporation or PIDM is going all out to inform the public that their savings are insured up to a certain level. It is great that the PIDM is taking the initiative to assure savers but I wonder how justified is it for savers and the public in general to take such a negative perspective of the local economy.
I certainly do not expect a bank run to occur in Malaysia. To expect otherwise just because there are bank run in other countries seems excessively pessimistic. The reason is that the economic circumstances in countries where bank runs have occurred in the past months are different from that in Malaysia despite the fact that the world economy is more integrated than ever before.
But then again, a bank run is usually about a crisis of confidence and rarely about the soundness of a bank. With doomsayers and conspiracy theorists working overtime all over to undermine public confidence, maybe explaining to the public the benefits of savings insurance is not a bad idea after all.
Perhaps, especially so when even the latest data released by the Merdeka Centre showed that “economic issues” is among the top concerns of Malaysians. With the stock market not doing too good either, the headlines in the business section typically play an unhappy tune.
Despite the concerns, yet, looking at various economic indicators, the Malaysian real economy seems to be doing okay. It is not doing great but the sky is not falling either.
One of the few things which may be helpful in judging the state of the economy is to watch for the yield curve of Malaysian government bonds.
An inverted yield curve could signal an economic slowdown because a yield curve in a way measures the expected economic environment in the future. A rising yield curve may indicate better expected returns in the future while an inverted curve may indicate worsening expected returns in the future.
A brief check shows that the yield curve for Malaysian government bonds is healthily normal. The yield for a three-year bond is over 1 per cent lower than that of 20-year bond. Suffice to say, the future does not look too gloomy from this perspective.
Meanwhile, the consumer price index is expected to tatter the further we go into the future. At the same time, core inflation remains relatively low. The reason Bank Negara did not increase the overnight lending rate the last time it deliberated on the matter is exactly because expected inflation is expected to be low in the near future.
Granted, Bank Negara’s loose policy may increase inflation rate in the future and even the yield seems to show that inflation may rise. Still, with falling crude oil prices in part due to an economic slowdown as well as perhaps persistent adaptive responses made earlier with respect to record fuel prices, a tendency for the rate to increase will be met with a downward force.
And how many people are jobless right now?
Surely we would expect a lot of people to be out of jobs if the Malaysian economy is melting away like an ice cream in a middle of a field at noon time. Yet, the unemployment rate was just about 3.5 per cent in the second quarter of 2008. That is pretty much the same for the second quarter of 2007 as well as 2006. How similar?
Well, the unemployment rate for the second quarter of 2006 and 2007 was both 3.4 per cent. That is not exactly a disaster, if you ask me.
Furthermore, it is quite hard to see how the measure of joblessness would increase dramatically, especially when the industrial production index does not show a decrease according to the latest figures we have for this year.
The prospect of growth also does not convince me that the unemployment rate would go up after controlling for seasonal effect. The growth rate of Malaysia’s Gross Domestic Product is expected to be positive in spite of mountains of bad news from overseas. In the most liberal manner, a recession happens if two consecutive quarters see negative growth rate. Malaysia has yet to see that and probably would not see that happening anytime soon.
Malaysia will miss its target but the rate will still be positive; both the Asian Development Bank and RAM expect the country to grow by at least 5 per cent. To make it clear how the fundamentals do not align with the prevalent pessimism in the market, the GDP growth rate for the second quarter of 2008 actually is higher than that for the same period a year ago.
Despite the respectable showing of various indicators including those of the real economy, the public and even the media are accepting the stock market as the barometer of the economy. Hell, some even take whatever direction the Dow Jones would take as indicative of the future path of the Malaysian economy.
The stock markets, however, do not measure the real economy. In fact, the stock market actually lags behind economic cycles. What it means is that whenever the stock markets are down, it is probably already too late to do anything. On top of that, the stock markets take into account various information which has little to do with the real economy. And the fact is that the real economy is doing better than the stock markets.
However, I am not belittling the economic slowdown we are experiencing. For some people, it is getting harder to make a living. After all, the coincident and the lagging indices do suggest that the economy is slowing down. Indeed, the situation in the US, the largest trading partner of Malaysia, is adversely affecting the local economy. Yet, despite dire prediction, the exports sectors are doing better than expected. Truly, believe it or not, the electronics sector is actually growing. The growth is at a snail pace but growing nonetheless.
What I am trying to get at is you should take your eyes off the stock markets and watch the indicators of the real economy instead. That, and keep your chin up.
A version of this article was published in The Malaysian Insider.