Somewhere near Kota Damansara.
I yearn to be free.
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I was there at the MSLS yesterday, I was there when the Prime Minister gave his speech and I was there to witness how badly Prime Minister Abdullah Ahmad Badawi performed on the stage. It was a dreadful experience and I do not think I would not want to listen to the PM’s speeches in person anymore.
What makes it even worse was that he was delivering a prepared speech. If it were impromptu, it might be okay because not everybody is an orator but his prepared speech took a 180° turn and then to somewhere uncharted and irrelevant. It was uninspiring and more importantly, the speech lacked critical content. There is no real content worth mentioning at all and so, I shall not even try to paraphrase anything from his speech.
While struggling to stay awake, a friend sitting several tables in front texted me, replying to my earlier text about how I was falling asleep. The reply: “done that.”
A student later walked up to the microphone and requested the PM to address his topic, which he failed. The floor came alive, disapprovingly of the PM’s performance.
The consolation is that the Education Minister, Hishammuddin Hussein, performed marvelously. He got me when he said schools are free to do whatever they like as long as they deliver results. He answered questions and did not shy from it even once. Though the speech lacked fire, it contained ideas and policies. He knew his stuff. I truly hate a politician that palliates and my respect for a politician goes down to the drain each time a politician does not answer a question.
Hishammuddin Hussein earnestly engaged questions asked instead of palliating. And each time he directly answered a question, my respect for him grew little by little.
I thought he carefully explained the rationale for vernacular school. And I thought, he appealed to liberty when he said the government cannot force people to go “national schools and national schools only.” I have established this for myself and I found myself nodding at the speech.
The same friend in a conversation said to me in a three-party libertarian circle later after the speech, ” I wouldn’t mind having Hishammuddin Hussein as the Prime Minister”.
I think, I would not mind either.
The question who should be the next Prime Minister is a question that has never been answered ever since PM Mahathir Mohammed stepped down. PM Abdullah is ineffective though his style allows organic reforms somewhat reign over top-down approaches. I am somewhat suspicious of Anwar Ibrahim but previously, he remained the sole choice thanks to his charisma and intellect.
Now, after attending Hishammuddin Hussein’s speech, I now think there is a choice. I am still reserving some dose of skepticism however. Politicians, Anwar Ibrahim included, or especially, tend to play to the gallery. I am sure Hishammuddin Hussein does that too but how much, that I will have to find out.
In any case, the Education Minister, yesterday, did not play to the gallery and appeal to rationalism. That, alone, deserve an applause. Apart from the PM for which I stood up and clapped just for the sake of respecting the Office, the Education Minister got my applause because I approved of his speech and the policy explained in his speech.
Malaysian central bankers have become victims of a running joke lately: if you are divided between maintaining a low unemployment rate and containing inflation, pray and do nothing.
On Friday last week, Bank Negara made known its decision to maintain the Overnight Policy Rate at 3.5% even as the local real interest rate is negative.
The recently published monetary policy statement is too hilarious for me to read quietly. It reminds me of what US President Harry Truman once famously said: “Give me a one-handed economist… All my economists say, ‘On the one hand… on the other’.” For sure, Truman would not find a one-handed economist on Jalan Dato’ Onn either.
The statement opens with a pessimistic tone by making references to the wage-price spiral and persistent inflation. It is all doom and gloom but then Bank Negara vows to take the “appropriate monetary policy response” to “maintain medium-term price stability and ensure that the high inflation does not undermine the longer growth prospects of the Malaysian economy.”
After comforting the public that the bank is prepared to do whatever is necessary to fight inflation, the bank says “while both the risks to higher inflation and the risks to slower growth have increased, the immediate concern is to avoid a fundamental economic slowdown that would involve higher unemployment”.
The statement ends with “based on this assessment, the Monetary Policy Committee has decided to keep the Overnight Policy Rate unchanged at 3.50%.”
Smooth.
To be fair, however, the bank did indicate that projected slower economic growth is expected to keep inflation in check. The statement also seems to suggest, or at least I interpret it as such, that the inflation rate we are experiencing is likely only a one-time spike.
The fact that there are lags between wages and prices would discourage a wage-price spiral, further providing the case that this high rate of inflation is unsustainable. All those control mechanisms over prices, though lamentable, do a good job at delaying the catch-up game between wages and prices. In other words, it helps keep inflation tamer than what it could have been.
I think the possibility that this is a one-time hike in inflation is important in understanding why the bank did not increase the OPR last week.
Ben Benarke in a speech last year said: “”¦With inflation expectations well anchored, a one-time increase in energy prices should not lead to a permanent increase in inflation but only to a change in relative prices.”
This is probably what is happening at the moment, fuelling the rationale for Bank Negara to maintain the OPR.
But how confident are we that this is merely a one-off hike?
Well, the 7.7% inflation rate is mainly due to the June 5 hike in local retail fuel prices. It is fair to assume, especially with all the control regimes the state has put in place, that if there is another hike in inflation rate, it would probably be caused by another hike in retail fuel prices.
Within that context, world crude oil prices at the moment have taken a dive and the fall is nothing less dramatic. From close to US$150 per barrel, a record even in real price, it now hovers below US$125 per barrel.
Now, the jury may still be out but the demand curve has to contract sooner or later as market participants adapt to a new reality which calls for less reliance on fossil fuel. Just as how the 1970s taught us about our amazing versatility in solving crises, there is little reason for us to embrace the Malthusian logic now and throw in the towel.
If indeed the demand curve has shifted, then Bank Negara has all the more reason to expect that the current high rate of inflation is temporary in nature despite the expressed concern about persistent inflation. And the bank did indicate how temporary is temporary in the statement: by mid-2009, we should be able to party on and laugh all this off.
Perhaps more importantly, the government has little reason to increase prices at the pump if prices stabilize at the current level. With current global crude oil prices being so favorable to the state’s coffers, there has been talk within the Barisan Nasional government about reducing local retail fuel prices.
Apart from politically undercutting the Pakatan Rakyat, reduction of prices has the potential to bring down the inflation rate without the need to raise interest rate, thus providing the bank some room to do something about the unemployment rate.
But damn, negative real interest rate!
A version of this article was first published in The Malaysian Insider.
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[1735] Of I love the whole world
I watched The Dark Knight with a couple of friends last week and the movie was great. It definitely one of the best movies ever but the highlight of the day was certainly this:
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