Category: History & heritage

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Economics History & heritage

[1106] Of fighting inflation by shooting down the zeros

What would one do to fight runaway inflation?

In Venezuela, chop the zeros off:

CARACAS (Reuters) – President Hugo Chavez said he will chop three zeros off new bolivar currency bills to bolster Venezuelans’ perception of a strong currency in a bid to curb inflation, which is now highest in Latin America. [Reuters, Feb 16 2007]

If I remember my history correctly, the German Empire took similar route to combat inflation right after the First World War. Though similar, there is one major difference.

In the aftermath of War to End All Wars that did not only fail to end all wars but instead made way for a larger war, the Allied was victorious and the Central Powers was devastated: the Ottoman Empire ceased to exist, Astro-Hungary disintegrated while the German Empire was humiliated through and through. As if such victory was not enough, the Allied at the Treaty of Versailles imposed heavy war reparation against the German state. Given heavy debt burden as well as the power to print money, the German government indulged in seigniorage.

The ability to print money might be cool but be careful, if you printed too much money, you might end up poorer, as the German learned in the 1920s. The German not only learned a lesson or two about inflation — they learned it the hard way.

In 1923, one US dollar was equivalent to 4.2 trillion mark. No. I am not kidding. That is 4,200,000,000,000 mark; 4.2 x 1012 mark. Imagine, if you lived in Berlin in 1923, you would have to use scientific notation to buy a sack of flour. And converse in German to boot!

And oh shit, imagine the (nominal) cost of roses on Valentine! Inflation on top of inflation cannot be good news.

Further, the nominal interest rate stood at around 900%. For comparison purpose, as of February 2007, the Malaysian nominal interest rate is 3.5%.

The funniest thing is, since prices across the board were raising so fast on daily basis if not on hourly basis, the central bank could not print out enough money to make life a little bit simpler for the Germans. In fact, there is one famous picture that depicts how bad inflation was back in 1923:

Public domain.

On Wikipedia: “A German woman feeding a stove with currency notes, which burn longer than the amount of firewood they can buy.”

Suffice to say, I do not think a person could buy dirt with the mark in 1923.

Some time in the same year, the German government which got tired of probably raising the interest rate almost daily — while the people got tired of running from the banks to the stores just to make sure 4.2 x 1012 mark would still be 4.2 x 1012 mark an hour later — replaced the heavily inflated mark with a new mark. Those outrageous zeros were slashed. While the Venezuela is cutting three zeros, the German cut 12. The new regime brought sanity back to an insane monetary roller coaster ride.

Apart from that, the new mark was anchored to real assets, which, I do not think is true for the Venezuelan bolivar. Because of this — this is the only policy tailored to fight inflation — and the reputation of Venezuelan central banking, I believe that the problem Venezuela is facing would not end anything soon. Reputation is important in the fight against inflation. Given how populist the Venezuelan government is right now, I doubt the central bank — which I assume has no independence on monetary policies — would have the stomach to fight inflation.

Apart from that slashing of zeros, there are other efforts aimed to fight inflation. For instance, Venezuela is cutting down taxes to fight inflation:

Chavez said VAT will first be reduced on March 1 by 3 percentage points and then by a further 2 points on July 1. [Reuters, Feb 15 2007]

And to promise to introduce new taxes to replace the old taxes:

To compensate for the income loss, Chavez, a proud socialist, said the government will create new taxes, including one that could involve the private property of the rich. [Reuters, Feb 15 2007]

With the removal of VAT, prices could fall but it remains unclear what the net effect would be as, as stated in the first Reuters’ article, price could increase with the slashing of zeros. The price increase is similar to the effect of abolishing the pennies.

Moreover, the abolition of VAT encourages consumption, which could lead to demand-push inflation. I am unsure what the net tax shift would be though.

Right or wrong nevertheless, Venezuela will be an exciting economy to watch from far.

Categories
History & heritage

[1105] Of a brand new RM12.8 million Fort A’Famosa

RM12.8 million could buy more than 6 million plates of nasi lemak for a nationwide gathering. Or 1,280 World of Warcraft-friendly computers. Or support the Malay College for roughly two years at its current state. Or support more or less 29 full time students at the University of Michigan for four years. Or, it could be used to reconstruct the fort that was built by the Portuguese in the 16th century, strengthened by the Dutch in the 17th and the 18t century and dismantled by the British in the 19th century, the Fort A Famosa. Come the 21st century, here comes the Malaysian to raise the dead fort!

Yes. The federal government of Malaysia is planning to reconstruct the old fort and it is allocating resources so huge that it could buy 6 million Malaysians with free nasi lemak:

MALACCA: The federal government has approved a RM12.8 million allocation for the reconstruction of Fortaleza D’Malacca or the mighty A’Famosa fort built during the Portuguese or Dutch colonial era in Bandar Hilir here.

Culture, Arts and Heritage Minister Datuk Seri Dr Rais Yatim said said the first phase of the rebuilding work was expected to begin in April or May. [The Star, Feb 18 2007]

It is an odd thing to see the federal government is more interested in rebuilding what has been lost and not save those that have yet to be lost. With that RM12.8 million, it might be possible to entice the owner of the land the Bok House once sat upon to sell it to the public for conservation purposes.

Would the dear minister think the reconstruction of the old fort would qualify Malacca entry into the UNESCO World Heritage list?

Well, whatever the answer would be, if the federal government goes through with the plan, I hope the reconstruction would not damage existing historical buildings.

Categories
Books, essays and others History & heritage

[1097] Of purchasing books liberally

It is Chinese New Year and I got myself more books. I did not mean to purchase anything in the first place. The act was impulsive especially when I have yet to finish up the previous books that I bought earlier. In fact, I am still reading The Origin of Wealth. Furthermore, I have not even started on Clinton’s My Life and Dawkins’ The God Delusion. Yet, here I am, supporting the economy by spending.

At first, since I was in the vicinity of Kinokuniya under the majestic Petronas Twin Towers, I thought I could do with a browse. Alas, temptation got the best of me.

I found myself in the history section. For some reason, I wanted to read more about Srivijaya. It was kind of hard to find a book on the ancient Malay kingdom which in my opinion is greater than the Malay Sultanate of Malacca. If the Malays wanted to look for something to build their pride on, they should look beyond Malacca and embrace the Srivijayan. At the very least, acknowledge Srivijaya as a kingdom as great as Malacca.

Despite the size of the store, its collection is limited. I could not find a specific book on Srivijaya.

Nevertheless, Hugh Clifford’s Farther India looked promising. For those that score F for history without fail, Clifford was one of the more important colonial administrators of British Malaya. He was also one of those foreign administrators that fell in love with the Malays and Malaya, just like Frank Swettenham. At Cambridge Journals, the phrase “doyen of the colonial service” is attributed to Clifford.

The synopsis describes Farther India as one of the most important publications on Southeast Asian history. Yet, it seems to me that the book is concentrating on mainland Southeast Asia and talks about European explorations and discoveries of old Southeast Asian civilizations. I suspect the book does not talk much about Srivijaya. So, when I saw Paul Michel Munoz’s Early Kingdoms of the Indonesian Archipelago and the Malay Peninsula, it placed Clifford’s back on the shelf and grabbed Munoz’s instead.

While on my way out of the history section, I stumbled upon a book entitled British Malaya. That book directly reminded of an article at Wikipedia of the same name that I have been working on for more than a year. I thought this particular book might help me finish up what I started. So, book number two.

While on my way out of the store, somehow, Sophie’s World came across my mind; I made it as my third book.

And so, right now, five books await the completion of The Origin of Wealth. The pressure is now on me.

Ah… the curse of purchasing books liberally.

Categories
Conflict & disaster Economics History & heritage Politics & government

[1089] Of the Scramble for Africa II

During the era of imperialism, European powers as well as a few others scoured the face of the Earth for territories. In Central Asia in the 19th century, the scour was called The Great Game. On the continent which the Nile flows, where the wildebeests roam the Serengeti, the Game had another name: the Scramble for Africa. Two centuries later, history is repeating itself in Africa as well as in Central Asia. Though the race does not come in the form it once took or with players that once played the game, it is a race nonetheless. Africa in particular has been the center of attention by both the United States of America and the People’s Republic of China.

For China, its economic growth requires so much fuel that it is embarking on a massive global search for precious resources to quench its thirst. In quest to secure sustainable growth, realizing that Africa is rich in natural resources, China is buying influence there by promising no-interest loan worth billion of dollar to improvised but resources-rich African nations:

Before arriving, he announced soft loans worth another $3 billion and a doubling of aid to Africa over the next three years.

[…]

This, probably more than anything else, is what makes Mr Hu popular with African governments. His largesse comes with no strings attached, unlike pesky Westerners who insist on anti-corruption drives or improving human-rights records in exchange for money. China’s hand-outs come without the tang of neo-colonial interference so disliked by many Africans.

This is on top various investments made by the Chinese across the continent. It is suffice to say that to Africa at the moment, China is Santa Claus.

In a way, Africa is the perfect target for China. The competition for natural resources might not be as fierce at it is in the Middle East and Central Asia. In the Mideast, there are United States as well as other powerful corporations that in some ways monopolize the world’s supply of fuel. With Iraq in shamble and Iran rattling saber with the US, risk is high.

In Central Asia, there is the ever-jealous Russia trying to reassert its influence on the former states of the Soviet Union. And of course, the United States is everywhere, worthy of the label superpower it claims to. In these two regions, I would use the word crowded to describe the situation. Africa on the contrary has so many places remain unexplored. So far, it is a free for all and China is leading the pack.

The spotlight on Chinese interest on Africa has attracted the world to both. I trust the US is especially suspicious of the Chinese activities in Africa. Further, the US is not new in Africa. Earlier, there was rumor that the US was indirectly involved in the recent conflict in Somalia:

The officials said the C.I.A. effort, run from the agency’s station in Nairobi, Kenya, had channeled hundreds of thousands of dollars over the past year to secular warlords inside Somalia with the aim, among other things, of capturing or killing a handful of suspected members of Al Qaeda believed to be hiding there.

And then, who could forget of CNOOC’s failed bid for Unocal back in August 2005?

To be fair, the US interest in Africa is not mainly due to Chinese presence. The US fears Islamist influence and indirectly, anti-US groups. This is in line with the US alleged role in Somalia. The issue on security has led the United States to establishing a new command center in Africa:

WASHINGTON: The Pentagon will establish a new military command to oversee its operations in Africa, President George W. Bush and Defense Secretary Robert Gates announced.

Creation of the U.S. Africa Command, which had been expected, will “strengthen our security cooperation with Africa and create new opportunities to bolster the capabilities of our partners in Africa,” Bush said Tuesday.

And of course, China and the US are not the only players of the race. Other countries, including Malaysia have already created substantial presence in Africa:

American sanctions have kept many companies from Europe and the United States out of Sudan, but firms from China, Malaysia, India, Kuwait and the United Arab Emirates are racing in. Direct foreign investment has shot up to $2.3 billion this year, from $128 million in 2000, all while the American government has tried to tighten the screws.

Competition will be fierce. In fact, Malaysian national oil and gas company has been kicked out of Chad. Suspiciously, that episode has proven to be profitable for the Chinese.

Nevertheless, while the last scramble brought most of Africa to its knees, I have a feeling that this race will be different. With all the investment coming in and increasing trade, something good is bound to happen. I am optimistic that Africa is looking forward to a better future. I am optimistic that the second scramble is the precursor to the prosperity globalization promises. There will be obstacles of course but this scramble is too precious to squander that I do not think the obstacles would stop Africa from gaining respect from the rest of the world.

Categories
History & heritage Personal

[1088] Of family connection to the death railway

I woke this morning to a documentary entitled the Bridge on the River Kwai on the Discovery Channel. I have seen it before but there nothing on TV on Sunday morning and so, I was sort of stuck with it; too lazy to do anything else. The most exciting news of the day so far might be Obama’s decision to officially run for the Presidency of the United States of America. That however had already been anticipated by too many people that it was not a surprise. My Sunday surprise was the revelation that my great-grandfather, my mother’s granddad might have been a forced laborer for the construction of the infamous death railway connecting Thailand and Myanmar, then Burma.

My mom told me that great-granddad was tapping running early in the morning when a couple of Japanese soldiers picked him up. I am unsure how she knows that but I assume it is one of those stories that are passed down orally. I presume that it happened in Malacca since I have strong family ties to the former Straits Settlements. Since then, he was never heard from again. Family presumed him to have died in Thailand or Burma.

His wife was rather young when that occurred. Back then when the general education level of the population was low especially among Malays, marriage occurred at a very young age. I am unsure when exactly my great-grandparents got married but my mom said she was about 20 by the time the Japanese occupied Malaya. With a kidnapped husband and fear of being disturbed by the Japanese soldiers, she had to place a pillow under her clothes to give her the appearance of being pregnant. It seems that the pregnancy trick works even in times of war.

I looked up for the railway on Wikipedia and discovered that if he was indeed a forced laborer constructing the railway, he would be among 200,000 Asian laborers that contributed to the line. If he had died building the line, he would be one of 100,000 Asians that died during the construction of the death railway. And unlike the Allied prisoners of war, I am unaware of any memorial dedicated to the anonymous Asians, which might include my great-grandfather.

Reading a map of the line on Wikipedia…

Public domain. Wikipedia. User W.wolny

…I wonder where did he work at.