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I love paintings, especially if there are inspiring stories behind it. I have said so earlier and I do not mind saying it again. And below is one of those paintings.
Painted by Cesare Maccari, the painting is entitled Cicero Denouncing Catiline.
Here, Cicero, standing in the middle of the forum, is exposing a plot to overthrow the Roman Republic to the Senate. Sitting alone in the far right is Catiline, the leader of the conspiracy; it would be sucked to be him.
The Fed, in a surprise announcement in Washington, lowered the so-called discount rate by 0.5 percentage point, to 5.75 percent. Policy makers dropped language indicating their bias toward fighting inflation, and instead highlighted a rising threat to economic growth. [Fed Cuts Discount Rate to 5.75% to Ease Credit Crunch (Update4). Bloomberg. August 17 2007]
Economic slowdown has taken over inflation as the greater concern!
I cannot wait to see what will happen to the federal fund rate in about a month time! By the way the market is reacting, the FFR might stay unchanged though.
It is worth noting that the T-bills yield curve is slight inverted in the short run and pretty much flat in the long run.
p/s — amid the cut, dissent emerges. The reason for dissent against rate cut revolves around the economic concept of moral hazard.
The subprime crisis is really created by borrowers lending to those that do not have the credit rating to borrow money. With the Fed coming out to bail a risky market, it only encourages risky activities to continue because lenders know that the Fed provides them with a safety net. This is why bail out is usually frowned upon.
Normatively, I am against rate cut but a rate cut is what I am expecting as far as the subprime mortgage episode is concerned.
This issue surrounding moral hazard might prevent the FFR from declining next month. So, the roller coaster ride might not end just yet.
PUTRAJAYA: Datuk Alimuddin Mohd Dom has been named the Education Ministry’s new director-general.
Minister Datuk Seri Hishammuddin Tun Hussein described Alimuddin, formerly deputy director-general (schools), as experienced, fair and hardworking. [Alimuddin named Education Ministry’s new DG. The Star. August 17 2007]
He was appointed to the position of deputy DG back in March.
I find it amazing how too many people are preoccupied with Namewee’s Negarakuku, especially but those that want punishment to be brought upon him for whatever he did. The thing is, he did nothing but criticized the state of our society. His action affects nothing but a lot of people’s ego, being too sensitive to criticism. It’s okay to disagree with any criticism but demanding a person to be silence by force because we disagree with him?
So much for a matured society.
Islamists and nationalists, the Cabinet even, are harping on the issue so hard as if there is nothing else that is important, more deserving of their attention. To me, the issue surrounding fiasco surrounding the Port Klang Free Zone, is much more crucial to our society.
And here is something that affects a lot of people but receives too little attention as well. According to last week edition of HSBC Research, quoted by The Edge, total trade for June 2007 is 0.9% lower than a year ago. It is pretty much attributed to a 22% drop in export to the US.
From the Malaysian Department of Statistics:
In June 2007, external trade data posted a surplus of RM8.7 billion as compared with RM8.2 billion in the same month of 2006. A growth of 5.6% or RM458.1 million in the trade surplus was due to a lower decline in exports of 0.4% or RM186.8 million vis-a-vis a higher decline in imports of 1.6% or RM645.0 million. Total imports and exports for the month were valued at RM40.3 billion and RM49.0 billion respectively as against RM41.0 billion (imports) and RM49.2 billion (exports) a year ago. [Malaysian external trade statistics, June 2007. Malaysian Department of Statistics. August 9 2007]
On the surface, several factors could be attributed to the fall in export. One is the fall in demand for electronics in the US, which itself could be attributed to the current slowdown in the US economy. Second is the appreciating MYR against the USD.
I however unable to find a reason for a fall in import. It might be due to slowdown in consumption component of the GDP which could signal an economic slowdown. I have yet to see a data on consumption to strengthen the base of my suspicion.
Regardless, issue of subprime mortgage in the US brought the Fed to do a helicopter drop. Several others central banks went to do the same thing in hope to increase market liquidity. In fact, increasing number of people now believe a rate cut is coming.
A rate cut would signal this: a transfer of focus from inflation to economic slowdown; there are few that prefer to use the word recession instead. The FOMC convened earlier this month and decided to keep the federal fund rate untouched, apparently confused whether the economy was growing or shrinking.
Given how important the US economy is to the Malaysian economy, I expect a dent though government spending via the Ninth Malaysia Plan might take up the slack. Keynesians would love that possibility.
As for the election, well, suffice to say, I think the government of the day has missed the chance to dissolve the Parliament during a time of exuberance. From now onwards, only uncertainty remains.
