Monday, August 18, 2014

Subsidies & Taxes

There are subsidies because there are taxes. Or, put it the other way round, because there are taxes, therefore there must also be subsidies. After all, there are the opposites of each other and both are needed to strike a balance.

Of course, the current debate in public in our part of the world is that there should be an increase in taxes and there should absolutely be no subsidies.

The major argument against subsidies is that subsidies lead to economic inefficiency. This is from the argument that the economy, left it itself, is efficient. Or, rather, will be efficient. This is not a statement of fact; it is a value judgement from laissez faire economics. The statement may be less incorrect if we were to say that subsidies, if improperly introduced and implemented, may leave to economic inefficiency or make the economy less efficient or more inefficient. We do not know that; we have to find out.

But the economy, as it is, is not without interference - not least, taxes from the government. Why is it not argued that because the government taxes people for working through the income tax, the income tax is making the economy less efficient by making people less inclined to work harder. There is also the tax on consumption and this discourages people from consuming because they have to give a portion of their little income to the government (and what is the government going to do with that extra revenue) which the people would have spent feeding their families.

There are also taxes on imports so that imports which we cannot produce ourselves will be more expensive - if the hope (?) that we can make those imports ourselves. The best example must be cars and we are paying good money to drive lousily-made local cars. Whereas, there are things that we have - for example, oil and gas, which we would put to good use ourselves are exported so that we, the producers of oil and gas, have to pay for oil and gas just like other people in the world who do not have oil and gas in their backyard.

If we study the direction of the various taxes, we can see that they are piled up haphazardly by the government as a form of getting more and more revenue because they have been advised by some mediocre economists that the best way for the government to stimulate (whatever this means) the economy is for the government to spend more and more. But taking more and more money from the general public for the government to spend does not encourage the people to want to invest in their future here. They want to get out of the way of the government before the government steamrolled them to death. The government seems to have a life of its own, and it will try to survive at the expense of the people.

There is a need for subsidies. Subsidies are needed in areas which protect the traditional livelihood of the society which defines our traditional culture. As the economy advances, it is inevitable that land and resource based activities will be unable to catch up technologically compared with the other sectors. But the traditional sectors are the food sectors, the agriculture, which are the soul of the society. We are not an island economy which is confined by its size to be super efficient in a small space. We are big enough to have sufficient space for every person who want to continue with our traditional activities. It is something else to argue whether things like cars are essential to the livelihood of society, or that they are mere toys which contribute to the ego of certain leaders of ours - and cars are now the bane of our society.

Tuesday, August 12, 2014

Robin Williams: Comedy - Life Is Not A Joke

Robin Williams, being the greatest comedian the world has seen, may have been the saddest man on earth.

He joked about cocaine was God's way of saying that you had too much money. But success has a way of isolating one from the rest of mankind. And out of that loneliness, one becomes an individual. When an individual connects with every individual at the same time, it is as if he could connect with the whole world, even when the whole world is not at one with itself.

No comedian ever intends to be funny. The comedian merely presents the world as it is not what everybody sees it to be, and as a result the situation seems funny to everybody - but not to the comedian. The comedian is dead serious in making a point about the reality of the world, and that reality is disbelieved and hence the comedian seems funny to the audience. Being laughed at, the comedian takes a bow and happily accepts the cash as the applause and duly blow that cash on cocaine. It completes the cycle of the madness of the world, and when the laughing stops, the comedian does not seem that funny anymore. Comedy is dead serious, and life is not a joke.

The world relishes comedy because the world is a sad place. That we can all laugh despite the meaninglessness of everything is that laughter is the only sane response to nervousness, to uncertainty, to ignore, to not knowing what is going to come next. Bit by bit, things happen all the time, sometimes to us but most of the time to everywhere else. Things are happening all the time and we don't know what they are. That's when we try to make sense of life. And when we can't make any sense of the life, that is when we think that life is a joke.

But to go on living, we cannot think that life is a joke. The next level down is that we think that life is funny. And we laugh life off and after the laughter, we get on with the drudgery of life again. And that is called living life.

It is therefore moment by moment that we prod along and when the next moment does not come, that is the end of the game for us.

The blip then goes on elsewhere, and life goes on regardless of us.

RIP, Robin Williams.

Monday, August 11, 2014

Extremism & Its Shades

The current fashion in social networking is to attack the extremism of the current Israeli government which is ultra-right in the sense that it is strongly in defense of the existence of the Israeli state and will do everything it can to eliminate its enemies, real or perceived.

The real culprit, in this case, is the current Israeli government. If they change government, then it may be an entirely different kettle of fish - we do not know yet.

The perceived culprits, in so far as the current fashion of the social network is concerned, is now everything that is Israeli or Jewish. This is a very dangerous generalisation - so dangerous that it is, in fact, the biggest plague in the current flash of human civilisation. So now, everything Jewish or Jewish-related is under attack - even companies doing business in Israel.

I do not agree with the editor of a local newspaper who said for once the local extreme racist group has got it right by shouting abuse, burning the Israeli flag and then went home - for they did not do stupid things like some neitizens who abused local workers of a targeted company by the extreme anti-Isreali gang. It is extreme groups with their mentality in holding to their own special need for survival at the expense of others not of their kind that is the root of social troubles which may simply boil over at the right time for violence against fellow human beings not of their kind to take place.

We cannot support extremism of any kind or in any shade.

Monday, July 21, 2014

Unfortunate Victims Of Unforeseen Circumstances

Misfortune is when something bad happens to us when we least expected it. Death in itself is not wholly unexpected. All humans are mortal. When when death arrives at a moment when we thought there is the next moment, that is tragic. When death is unexpected and sudden, those who died might have felt it for a moment and it is gone. Their last thoughts may not be death, but something pleasant - like looking forward to a holiday in the tropics or meeting up with loved ones. Or, it could also equally be the thought of trying to cheat death, but scurrying along alleyways ducking bullets and bombs which are being indiscriminately rained on an area which the other side is trying to remove a perceived threat or danger.

But to the loved ones who know of the death, their pain and sorrow will stay with them for the rest of their lives. The living mourns for the dead - never the dead for the living. Suddenly, life is not about the material luxury of life, but life itself - the absence of which deprives the living the company of those who are no more with them in this world. The pains or sorrows of mothers and fathers, sisters and brothers, daughters and sons, wives and husbands, grandmothers and grandfathers - images we now unfortunately have to witness on prime time TV nowadays - is a constant daily assault on our inner peace and quiet, on our perception and understanding of what reality is all about, on our faith in the humanness of human beings, on the need for the good to fight evil, on the vulnerability of the good to turn into evil, on the great risk that we all suffer when we do not watch ourselves lest we unwittingly becomes the very monsters that we would have condemned at leisure.

The reality of the world is that it is both good and evil, it be both light and dark in this world of duality where the two poles can switch from one to the other before our very eyes without us ever knowing it when that switch is taking place. Everybody deludes himself or herself to be good, no matter how evil he or she may have become. Good and evil is a value that arise when we are dealing with fellow human beings or fellow living things. Life goes on by the very force of survival, the constant craving for existence, that the very thought of death is appalling - even when one personally wills death because of the unbearable bodily pain one may unfortunately have to suffer. Death is often a respite to life. Some wise man has said the only way to fight pain and suffering is to deny life raising its head in the first place. To banish the thought of life. To focus on the present. Life until there is no more. But for those who are alive, fight pain and suffering through wisdom, wisdom of the truth of realty, and accept reality for what it is - both the fortunate and unfortunate things.

Monday, July 14, 2014

Urban Poor: Homeless, Jobless & Loveless

The homeless is a problem for the Federal Government as they try to bring Malaysia up to the First World level while being irked by the presence of dirty hungry men and women in the streets of the Golden Triangle in Kuala Lumpur.

Economists are fully aware that the economic model of growth they build are rest squarely on the energies and ingenuity of the clever and able-bodied people. The rest falls by the wayside of mainstream economic development - the disadvantaged, the very young, the very old, the very sick, the uneducated, single parents, the physically handicapped, the mentally handicapped. While the best solution is to help as many of these people to find stable jobs, it is most likely that they may have already failed the conventional social system and hence are being left out in the cold and therefore are difficult to rehabilitate back into the mainstream. There is therefore a need for society to act to help these people, at least, as a means for society to save its own soul so that it can think of itself as a caring society.

This moral obligation of society to itself could have been easier in the good old days of monoculturalism - whatever that may mean, but surely it exists when the whole society sees itself as one. This sense of monoculturism seems to break down when a section of society is seen as alien, and it is mostly likely to be recent immigrants whom the so-called locals feel uncomfortable with because they are unfamiliar with them. It means that the moral obligation of society is unlikely to be stretched to include foreigners in the country.

The response of the government of the day to the homeless is to provide a home for these people to stay, and to keep them off the streets. This follows logically from the idea that all that the homeless needs is a home, so the government provides a shelter and nothing else. We have the welfare minister saying that they provide shelter but no food. This is being typically government servant mentally - they do the barest minimum and justify that they have done their job.

The response of the NGOs is to provide first food and then shelter, in that order of priority. The biggest curse for human beings and all living creatures is that the ingestion of nutrient is a daily requirement, failing which we die. I am always amazed by the persistence of life to cling on to life - this must be a tautology, for without the clinging on to life, there is no life, by definition. (It is only politics and religions that make heroes of death, for it is so counter-intuitive.)

The most stupid argument I have read so far is for the minister to suggest the NGOs go and feed their people in the welfare homes, and not in the streets.

The now more acceptable approach to solve social problems is for the government to consult the affected people and communities to find out what their problems are and to listen to what these people have to say about how they would like to have their problems solved. It is most likely that well-fed politicians will have a different perspective from those who unwillingly have to go hungry when their circumstances are outside their control. These people may want to have a sense of dignity and self-respect and that can only be got from a sense of control of their situation rather than be caught in bureaucracy.

Monday, May 19, 2014

Perception Of Prosperity, Prosperity Of Perception

I am not too sure that I agree completely with the Bank Of England Governor who recently said that there is a structural problem in the UK housing industry in that not enough houses are being built every year.

There is certainly a need to build more houses every year in every country in order to accommodate more new people being born and new families being formed. The number of new houses that has to be built must be equal or proportional to the birth rate or the rate of household formation. This would be in the vein of classical economic analysis. Or in the mode of Marxian argument. But, in modern Keynesian-type analysis, that would called notional demand - the ideal situation when everybody who needs a house would be built a house, regardless of ability to support that notion with the ability to pay. The Keynesians are adamant that your demand is effective only when you have past or future savings to support your wish for a house - effective demand. (Students of economics wasted a substantial amount of time in college debating this point in the seventies.)

I am of course a bit apprehensive over the BOE Governor's recent statement because that statement could in principle be applied anywhere in the world today - if we that into consideration the globalising effect of the three decades of QE, starting with Japan which was then happily exported to the US by Greenspan. We know that the QE is now being tapered off, in the sense that the quantity of pumping cash into the US financial system - and then the global financial system - is now being gradually reduced. We are still talking about net injections, but net withdrawals of funds from the system. In old economics language, monetary policy is still said to be expansionary albeit at a reduced pace.

Under a sustained expansionary global monetary position, it is unlikely that global interest rates will rise. Downward pressure is still being put on interest rates as the system continues to be flooded with liquidity, albeit at a slower pace. The tropical storm is still on although you may feel that the rain is falling not as hard as before.

It is this global QE effect that, in the initial phase, drove the liquidity from the US to China which caused the latter economy to boom and now threatens to be the second largest economy in the world. When China has worn out its competitive advantage of super low wages, that liquidity which has since filtered from US hands to China hands then converted fertile farmlands into construction sites. Blocks and blocks of residential housing are built and left vacant so that speculators can sell as pristine properties for the next buyers who are afraid that they will be left out in the asset-inflation game. When the China authorities begin to curb that asset inflation, the speculators, having learned their tricks, now play their game of speculation outside China. London, among others, becomes the current favourite.

That speculative demand is now driving London properties prices is a truth that cannot be denied. But what to make of it. Of course, such waves of speculation on London properties are inevitable, starting with the Arabs in the 1970s and 1980s, the Japanese during their bubbles years in the 1990s, and now the Chinese. No doubt, London seems to be most precious jewel for the world, with its rich history and culture, or rather its history and cultural richly told to the whole world.

If the intention of the BOE statement is to suggest that foreign (Chinese) buyers are now competing with resident buyers for London properties and that there is a need to build more houses in London, then while more houses may be built it is unlikely that local buyers will be able to afford those houses as surely London property prices will rise according to the demand of the foreign speculative buyers. If the BOE statement is to say those who originally grew up in London will now have to move out of London because they cannot afford to stay in London any more, then there is very much a need to have a major structural plans to build new urban centres outside of London in a way that locals can afford to buy them. This will need a further integration of the public inter-city transport system.

The above analysis can apply to a place like Kuala Lumpur or the Klang Valley, but I am not too sure about Singapore or Hong Kong. Unless you bridges to connect the islands to the nearest mainland.

Now, the danger of all property speculative bubbles is that bubbles will burst. It's a question of whether you allow the bubbles to burst with a bang - which inevitably means banking bankruptcies- or you try to reduce the bubble with a deflation that can take decades to reach equilibrium and during which time incomes will fall faster than prices - and which means a slow and painful death.

The real danger for the BOE or any central bank with a hitherto vibrant real-estate sector is now engineer an adjustment of asset prices which are consistent with current incomes. Most residential properties in urban centres are beyond the reach of ordinary working professionals. Maybe the best thing is for the new potential buyers to hold out and what for sellers to be sensible and even cut losses.

You are king when you have cash in your pocket or a good credit rating. I think the speculators must bite their nails.

Having said that, though, prime is prime and future values are always held in prime locations - until the centre shifts.


Tuesday, May 6, 2014

Perception Of Poverty, Poverty Of Perception

We were just being told that some people, "to our naked eyes, look like poor people" or people who earn "small salaries but they can still send their children abroad" at their own expenses. "This means they could have under-declared their income." But the GST system "is more progressive as it depends on how much our expenses are."

I think it is dangerous when the Government make statements like this - based not on proper analysis but on impressions. One may be clever at making statements on isolated issues. But isolated issues may be the outcome of an error in the whole system

To my naked mind, there is absolutely nothing wrong with the person who dressed down and live a simple life so that he can save his salaries for the education of his children abroad. There is even something to be admired about such a person because he does not rely on the government for scholarships for his children's education as he knows they will never get the scholarships based on their ethnicity. He knows that, for the future of his children, an overseas education may be worth the money as the local education may not be good enough for his children. Of all persons, a salaried man is likely to be the only salaried man who is honestly paying his taxes. There is just so much ignorance in such a short statement.

The GST should be held up as a major contender against income tax. The debate is whether you tax effort or you tax expenditure. In the old world where money (capital) was scarce, there was the view that profit made out of capital should be taxed, and that incomes from salaries should be taxed to pay for pensions and healthcare and education, and other public services.

Then along came Keynes who said that spending is good for the economy, the more you spend the better the economy. Keynes was right to suggest that government spending should be used to smooth out a temporary cyclical glitch. But expansionary fiscal policy are now wrongly used to cover up the problems of slow growth of an economy with structural errors. Instead of correcting structures, the government continues to spend and it is looking for all kinds of ways to tax in order to keep feeding a badly managed economy.

If the currently thinking is that spending is good for the economy, then this is the wrong time to implement the GST which taxes spending.

If you think that GST is the better revenue generator, then you must let off the consumers by removing totally the taxes on personal incomes. You can keep the taxes on profits.

Just to think that the government will berate the poor citizen who has to live the life of a simple person so that he can rise above the wrongs that his government and his country is doing to him and his family...