Categories
Economics

[1117] Of Friday morning starts with free trade

Protectionists always argue that free trade hurts the poor. Professor Mankiw quotes the US Treasury Secretary Paulson as the US battles its own rising sentiment of protectionism:

Thus trade helps Americans provide for their families. When special interests seek protection in the name of low-wage workers, we should acknowledge that limitations on imports do not benefit the vast majority of Americans. They deny people the freedom to choose from a broader array of goods and services, and impose a cruel tax on people who rely on low prices to stretch their family budgets. The cost of protectionism falls most heavily on those who are least able to afford it — the poor and the elderly.

It should be noted that free trade means absence of trade-distorting policies which include tariffs and subsidies.

Categories
Politics & government

[1116] Of dear Malaysians, take me to your leader

Question.

The Prime Minister is in Yemen.

The Deputy Prime Minister is in Saudi Arabia.

So, who exactly is in charge?

The king?

Please do not tell me that it is somebody on the fourth floor.

This case also occurred in 2005.

Categories
Economics Politics & government

[1115] Of it is best for BN-led government to dissolve the Parliament soon

I thought yesterday was scary when Shanghai’s benchmark fell about 9%. Yet, I thought it was a mere blip, some sort of a random walk that usually occurs for no good reason. The Dow Jones followed suit later but I thought it was a reaction to the Chinese performance. As of noon, today, the KL Composite Index has fallen nearly 6%. As a whole, it is not pretty for the region either. This might be the start of a vicious cycle and I am beginning to change my mind about the random walk.

I would like to see data on consumer spending to find out what is really happening though. If we truly are in trouble, consumer spending should start falling. It is only unfortunate that there is a lag in reporting.

Meanwhile, talks of recession are yet again running amok:

Still, traders’ dwindling confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, just a day after former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession. [Stocks Have Worst Day Since 9/11 Attacks, AP via Yahoo!, Feb 27 2007]

Alarms have been sounded earlier. That is why I am somewhat skeptical of the feel good atmosphere the Barisan Nasional-led government is trying to paint currently. The economy was relatively good last year — I am willing to accept that much — but between the future and the past, we should concern ourselves with the former, first and foremost.

With a recession expected to hit the US, and — by virtue that the country is Malaysia’s largest trading partner and that Malaysia is hugely dependent on trade — Malaysia, strategically, I feel it is best for the BN-led government to dissolve the Parliament soon. Therefore, I am agreeing with the executive director of MIER, Ariff Abdul Kareem’s opinion.

The later the general election is held, the worse the economy would perform and the worse BN would perform in the election.

Nevertheless, of course, that does not prevent us from savoring the expected Bank Negara’s announcement on last year’s GDP.

Categories
Economics

[1114] Of KKR at the gate

After the euphoria, the important question comes up: how the hell KKR manages to convince other people to pay for their fun ride?

At the NYT today:

In an unusual twist that may soon become common, the banks are going one step further than simply providing the debt financing involved in the deal, in this case a daunting $24 billion of debt.

The banks are also lending $1 billion to TXU’s buyers, Kohlberg Kravis Roberts & Company and the Texas Pacific Group — not as secured debt, but in the form of equity using the bank’s own cash.

[…]

The risk to the banks is that the value of TXU could fall sharply below the $69.25 being offered. Yesterday, TXU shareholders welcomed the deal, driving up the shares 13 percent, to $67.93. [Private Equity Buyout of TXU Is Enormous in Size and in Its Complexity, Feb 27 2007]

Also, humor:

The deal still must undergo months of scrutiny from state and federal regulators. And while the deal has won support through pledges to cut electric rates and scale back a plan to build coal-fired power plants, the private equity firms must still overcome a perception that buyout buyers are temporary owners who are not beholden to shareholders or customers.

Talk about building bridges. [Private Equity Buyout of TXU Is Enormous in Size and in Its Complexity, Feb 27 2007]

If KKR sounds familiar to you and you are unfamiliar with modern economics or finance history, you might be thinking of Barbarians At The Gate, based on the book that goes by the same title. Heh. I bet somebody is going to write a book on this, just like what happened the last time KKR had fun at RJR.

Categories
Environment

[1113] Of intellectual dishonesty, palm oil and biodiversity

I know bullshit when I see one. Dr Yusof Basiron, CEO of Malaysian Palm Oil Council wrote in the NST earlier:

Malaysia utilises 90 per cent of its agricultural land for rubber and oil palm, which are essentially planted forests yielding timber and fibre in addition to rubber and oil as co-products. They contribute significantly to biodiversity as both rubber and oil palm behave as forests. In industrial countries, biodiversity on agricultural land is rarely mentioned. [The palm-oil advantage in biofuel, NST, Feb 24 2007]

Though the article has many valid points, especially on carbon neutrality of palm oil, it asserts that rubber and palm oil plantation contribute to biodiversity is downright absurd.

Consider for instance the biodiversity of a kilometer square of untouched Borneoan rainforest versus a kilometer square of palm oil or rubber plantation. Between the two, which would have more species of flora and fauna per kilometer square?

Any basic sampling will prove the former is richer in term of biodiversity. Therefore, how does converting rainforest into monocultural plantation plots contribute to biodiversity?

Surely, conversion reduces biodiversity.

In my opinion, if the article needs to be effective in convincing concerned individuals and groups that such plantation is sustainable, the article needs to prove that rubber and palm oil plantation-related deforestation does not occur. Alleging monocultural plantations lead to greater biodiversity does not help convince people like me that deforestation related to plantation activities does not occur. It sounds as if the article is defending such conversion!

In fact, such absurd assertion regarding biodiversity amounts to intellectual dishonesty at best, a lie at worst.