Categories
Society

[2478] The banality of mass opinions

I found myself in a party full of strangers once. I generally dislike this kind of parties (I like small intimate parties) but there I was in a middle of conversation among strangers. I was disinterested. I did not show it but tiring facade that is social etiquette demands participation and I had really nowhere to go without being rude. The settings was not a one-time encounter where I could risk being labeled as an impolite stranger. They know me personally, even if superficially, and I know them personally, even if superficially. One lesson arising from “repeated game” is that reputation matters. I did not want to be known that rude person. And I have been labeled as anti-social, sometimes even arrogant by some, but I guess, not without basis. Some stereotypes like being an alum of certain schools also work against me.

So, I try to be friendlier sometimes, but I distrust strangers, and that is a huge barrier for me.

But I listened to the conversation at hand even as I wished I was somewhere else, even as the topic of the conversation switched from one that bores to one that dulls.

Many have short attention span, forgetting what was said five sentences ago. I marked every single point of switch of topic, trying to entertain myself amid banality of mass opinions regurgitated to me, as if these opinions were the product of individual creative endeavor that worth the seconds and minutes and heavens, the hour it consumed. In truth, those opinions were first maybe written or said very well and good, but later repackaged for popular consumption, for the masses.

The mass opinions focus on the punch line, because it is easy. The logic, the rationale, the origin, the context, all pushed to the backroom, hidden, doors locked. Slowly, voila! The development of clichés. Gradually and suddenly, an argument designed for specific issue became the general punch line for all issues, losing its context.

There I was, listening to clichéd arguments on 1,001 issues by the conversationists, being polite.

Categories
Books, essays and others Economics History & heritage Science & technology Society

[2477] Diamond, consumer choice theory, marginal revolution, Marxian economics and the paradox of value

From those precursors of food production already practiced by hunter-gatherers, it developed stepwise. Not all the necessary techniques were developed within a short time, and not all the wild plants and animals that were eventually domesticated in a given area were domesticated simultaneously. Even in the cases of most rapid independent development of food production from a hunting-gathering lifestyle, it took thousands of years to shift from complete dependence on wild foods to a diet with very few wild foods. In early stages of food production, people simultaneously collected wild foods and raised cultivated ones, and diverse types of collecting activities diminished in importance at different times as reliance on crops increased.

The underlying reason why this transition was piecemeal is that food production systems evolved as a result of the accumulation of many separate decisions about allocation time and effort. Foraging humans, like foraging animals, have only finite time and energy, which they can spend in various ways. We can picture an incipient farmer waking up and asking: Shall I spend today hoeing my garden (predictably yielding a lot of vegetables several months from now), gathering shellfish (predictably yielding a little meat today)? or hunting deer (yielding possibly a lot of meat today, but more likely nothing)? Human and animal foragers are constantly prioritizing and making effort-allocation decisions, even if only unconsciously. The concentrate first on favorite foods, or ones that yield the highest payoff. If these are unavailable, they shift to less and less preferred foods. [Guns, Germs, and Steel. Chapter 6: To Farm or Not to Farm. Page 107. Jared Diamond. 1999]

A lot of words.

Luckily, any economics student who has his or her bases covered will understand this as [latex]\frac{dy}{dx} = \frac{P_x}{P_y}[/latex] in one way or the other. Simple! We can thank the marginal revolution that began in the late 19th century for that. Marginal revolution also solved the paradox of value. Indeed, marginalism is the foundation of modern microeconomics, regardless of your cup of tea.

And oh, did you know that the marginal revolution also made Marxian economics in its original interpretation completely obsolete?

Categories
Economics

[2476] Postponing the European crisis to 2013

I am in the opinion that the expected sovereign debt and banking crises in Europe have been postponed to the end of 2012 or early 2013. There are two reasons why I think so.

The crisis in Europe is essentially two-fold. One is due to government debts. Two is the risk of default by European banks. The two sides are interrelated but it is useful to separate them.

The sovereign debt crisis has been postponed thanks to the establishment and the expansion of the European Financial Stability fund. The EFSF would not be exhausted until the end of 2012 even if all debts repayment or refinancing by the infamous PIIGS (Portugal, Ireland, Italy, Greece and Spain) is financed through facility. The potential rating downgrade of sovereign debts of stronger economies, namely Germany and France, may hurt the likelihood of success of on the EFSF front but I will wait until that actually happens.

I am taking this position because by December 2012, total principal and interest payments made by the PIIGS government is projected to be EUR700 billion. That is below the total size of the EFSF.

The following graph shows principal and interest payment obligation of all the PIIGS government cumulatively. Looking at it, without the more permanent European Stability Mechanism which is supposed to kick start in the middle of next year, trouble will come only around February or March 2013.

The banking crisis meanwhile has been postponed until next year thanks to the soft loan facility provided by the European Central Bank. It has been reportedthat banks in Europe will require EUR700 billion next year to pay up their debts. Since the facility offered by the ECB is at the moment limitless (there will be a limit because already the total loans made by the ECB attract considerable question), the problem on this front too has been postponed to 2013.

This of course says nothing of recession and economic recession is another issue altogether.

Categories
Economics

[2475] Issues with the ECB’s soft loan

It was reported that European banks took out EUR489 billion worth of cheap loan from a facility provided by the European Central Bank. The Wall Street Journal revealed these banks will require more than EUR700 billion to meet their obligation next year, with more than EUR200 billion debt maturing in the first quarter of 2012 alone.

The facility is designed to avert or reduce liquidity crunch in Europe. These are two-fold. One, so that the bank have enough money to not default. Two, so that these banks do not cut loans to individuals and businesses.

Given the near panic that prevails in today environment that is ever looking for the big bazooka solution, it is understandable that the facility provides comfort and reduces the likelihood of bank runs.

But the interest rate of 1% is so low that there is an opportunity for some banks that have a better position than others to profit at the expense of the ECB. Some could probably borrow and reinvest in higher yielding assets like government finance to get essentially free pure profits. The Journal indeed did mention that the French President Nicholas Sarkozy has suggested this to kill two birds in one stone: the banks get their refinancing and the money flows into government coffer through the sales of sovereign debts to further postpone the sovereign debt crisis farther into the future.

Discounting banks which actually need the facility to refinance themselves in time when massive amount of debts are maturing, would the presence of the better-positioned banks compete with those who truly need the funds?

I would imagine some kind of controls is present in the ECB but in time of near-panic like this, I expect the controls to be weak. The tighter the controls, the longer it will take to disburse the money and that is not good. There is no time decide who really needs it. Just give it out and worry about it later.

The tightness of the loans would depend on the size of the facility. I tried to look for it but I have not found it. I would think it should be more than EUR700 billion so that the facility would be too big for the whole of 2012 requirement.

So, I would guess some banks would make pure profit. So, the presence of controls would not answer the crowding out concern.

Also, even if some of the banks actually needed the loan, what exactly prevents the banks from hoarding it like what happened in the United States with money from Troubled Asset Relief Program. Lending cost to businesses and consumers were high but the banks had access to cheap fund. The banks were saved

So, really, the facility is saving the banks. Liquidity issued faced by individuals and businesses will not be solved by the loan facility from the ECB.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved
p/s – an extremely helpful Q&A by FT Alphaville.

Categories
Politics & government

[2474] So bankrupt of issues, they squabble over an insignificant banner

I have been using the word farce all too often these days. I find this is really bad because it suggests that my vocabulary is limited. I admit, it is limited to simple words but to demonstrate it in the public so openly, especially for a person who regularly pretends to write columns in both online and the more traditional newspapers, it is bad business. But I really cannot help it. There are so many instances where the word describes exactly what the instances are.

Here is yet another one of those farces that is becoming a national issue: at a small protest at UMNO headquarters organized by university students, somebody without approval lowered down a banner that had the Prime Minister’s face on it. The protestors were highlighting the issue of academic freedom, responding to events that demonstrated much more needs to be done with respect to undue political influence exerted by the federal government on Malaysian campuses.

And guess what attracted the most attention nationally?

You would be too kind to the farcical politics to suggest the issue of academic freedom is the crux. Or maybe even freedom of assembly.

The biggest issue by far that has arisen from the whole brouhaha is the act of lowering the banner. Granted, the act itself was wrong but is that really the biggest issue UMNO has over the incident?

And it does not end there. The education deputy minister Saifuddin Abdullah whom decided to entertain the protestors at UMNO HQ by agreeing to accept a memorandum from the student group has been asked to resign by some for the whole farce.[1] Indirectly, some UMNO members and supporters are blaming the deputy minister for that.

Really? Seriously? A resignation for such a trivial thing?

C’mon, UMNO members. There are ministers with actual scandal like Shahrizat Jalil and she is getting away with murder.

In the end, do you know what does this illustrate?

Quite simply, it is the bankruptcy of issues. Of all issues there to pick from, UMNO and its members chose the most trivial to fight for.

I say it again. This is a farcical fraca. Petty. This should be a comedy or a satire played in the theater, not on the national stage. Alas…

Maybe, this is a manifestation of a conservative-liberal tussle within UMNO, but surely, there are bigger conflicts to play out, something less petty to sweat over.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — KUALA LUMPUR, 20 Dis — Datuk Saifuddin Abdullah kini berhadapan dengan serangan daripada beberapa pihak dari dalam Umno dan proparti itu, dengan ada yang mendesak agar beliau meletakkan jawatan berhubung insiden menurunkan bendera wajah Datuk Seri Najib Razak, Ahad lalu.

Serangan itu dibuat menerusi mesej-mesej Twitter dan entri dalam blog-blog.

Timbalan Menteri Pengajian Tinggi itu, yang dilihat sebagai antara pemimpin Umno bersikap terbuka dalam isu-isu berkaitan penuntut institusi pengajian tinggi (IPT) dan Akta Universiti dan Kolej Universiti (AUKU) digesa memikul tanggungjawab insiden kumpulan mahasiswa menurunkan dan kemudian menaikkan semula bendera Najib di pekarangan ibu pejabat Umno di sini.

Selain kritikan di dunia siber, Persatuan Alumni Pemimpin Pelajar IPT Malaysia bercadang berhimpun di pekarangan Kementerian Pengajian Tinggi di Putrajaya petang esok.

Presidennya Mohd Shahar Abdullah berkata, pihaknya mahu melahirkan sokongan kepada kepimpinan Najib selaku perdana menteri dan presiden Umno susulan insiden kelmarin. [Saifuddin jadi sasaran desakan letak jawatan susulan insiden bendera Najib. The Malaysian Insider. December 20 2011]