Tuesday, April 23, 2013

Turning Point & Disequilibrium

I suppose with global warming, everything is getting a bit heated up and emotions run high.

Or, is it simply boredom!

Change is in everybody's mind, and we all imagine that change will be for the better.

Some are so bored that change, any change, is better than the status quo.

When the status quo has existed for so long, it may take a sizeable amount of force to overcome the inertia. When that critical mass of change does occur, we will all be so surprised that it actually can happen that we may be numbed into not knowing what to expect.

In the face of uncertainty, we would all tend to over-provide and suddenly find ourselves over-burden by what we really do not need.

We will have to spend sometime to get ourselves out from under the load.

With change, we go from happy or unhappy equilibrium into disequilibrium and hopefully not further discontent.

We will have to exert a certain amount of force to stop the change. It is unlikely to be a one-step move and stop. Change could just roll on, like the waves.

The world today does look quite dramatic, when all the possible happenings in the world are concentrated into a small screen in a small window of waking time.

See what type of change we are going to get - the outer clothes or the inner wear.

Monday, April 15, 2013

Election & Economy

The election is a regular thing that modern societies try to emulate the old. In traditional societies, everybody sit around and each has a chance to speak their minds, in between drinks and food and smoke. The atmosphere is general genial, but once in a while, someone may have drunk too much, or ate too much or smoke too much, and goes into a trance state and start talking in strange language and making strange sounds. Otherwise, everyone would have emptied themselves and eventually everybody agreed and the meeting is over. Life goes on.

But in the modern day and age, attempts are made to influence others and to persuade or even coerce others to accept your views. When our views are not heard or are not the majority view, we become upset and throw tantrums. We demand that things should be done right, as if being right means that our views will prevail.

It is quite impossible to obtain consensus. Not everybody will agree with everybody every time. In a close society, social manner calls for us to be polite. In the modern social media work, we are not intimately known to each other although we try to connect. We may become less concern with politeness, when we then tend towards rudeness, as if rudeness is indicative of truth.

The world, alas, is not perfect. Although we wish for one that is, and even pray for it, we are unfortunately stuck with our feet in the mud. We live with life's imperfections.

The one thing we think we can fix is the economy. There are economic experts. They know theories and they run econometric models.

But the modern economy is an artificial construct. The modern economy is a matrix and we are all caught in the web. Being entangled is no fun. We can't extricate ourselves.

But we keep on trying. We try new things. We try new leaders. We do not want to be dictated by some persons or some groups who seem to be able to get away by entrapping us.

Monday, April 8, 2013

When Both Promise the Same

If, for example, both opposing parties make essentially the same promises, then, the interesting question is what is the difference?

The difference will be (1) whether all the promises can be fulfilled at the same time, and (2) the style by which the promises will be fulfilled.

In making similar pledges, whether achievable or not, the conclusion is that there is really no disagreement over the nature of policy anymore. Specifically, both have zeroed in on the voters are individuals - rather than as businessmen or investors or professionals or workers - and the promise is to make life easier for everybody, especially during such trying times.

As economists, we know that in trying to soften the blows on individuals, the brunt of the adjustment will be undertaken by government spending which means that, other things being equal, the government deficit will enlarge. An enlarging government deficit is a contentious issue now and this has got to do with how the central bank is trying to keep its monetary policy in balance - a topic that is very carefully left out by all policy discussions around the world which is being inundated with the quantitative easing (QE) ideology.

Note that it is interesting to observe in reality how, after the endless printing of money, the end of the printing of money - when its creditors refuse to lend any more for a small-country central bank - will result in the collapse of the banks and the evaporation of their customers' deposits in varying degrees.

Unless, of course, the government tries to raise its revenue by raising taxes, other things being equal. If income growth and job creation is an issue, then it is inevitable that income tax will be left alone or cut, and the burden of the government budgetary balance then befalls the consumers. For those who are badly brought up in economic theory, they will suggest an increase in the consumption tax.

If this really is the case, then we are going round one big circle or trying to help the consumers by pushing the  consumers. This circle points to the problem of income growth which I think both parties have not been very good at elaborating. Or, if I may think in nastily, that they think that growth can be induced by more government spending which is the last order of business in stimulating growth.

The crux of the matter when the general public raises issues concerning corruption, crime, education and language is really about building the human and social capital of the nation - after having piled up the financial capital with cheap easy credit and empty buildings on government spending. Solving traffic problems is not about commuters only but about the efficiency of logistics. There is a whole discussion on economic efficiency which has been overlooked especially we are talking about elevating ourselves from a middle income nation to a high income nation.

So, are we being stuck in the middle income trap? Are we suffering from mid-life crisis? If the nation is like an individual person, I would say that Malaysia, after 56 years of independence (after some foreign elite), is now suffering from a middle-age spread. Poverty is a thing of the past for most (those who reminisce their poor old days), whilst new forms of poverty are emerging, and those of us with a house or some of us with houses would now wonder what to do with the time on our hand (apart from thinking how clever we all are about solving the problems of our world except those of our own minds). We may even discourage our children from working "too" hard, for "it is not worth it." Our skills extend sideways - how to multiple the same old things we had done, but repeating them in new environments (like overseas). We simply refuse to invest, in putting our resources back into our own system so that we can do the same things better (with less drudgery) or to do new things. We have all become capitalists, putting our money and time into ventures that require other people (modern slaves) to put in the effort and pull in the cash. This is where the services industries are the worst, especially if we venture into casinos, tourism and all forms of services (except quality time with our own family members or friends). In these days of inflation (some would argue "Inflation, what inflation?"), the future of the younger generation is being forfeited so that the old and self-satisfied can rest on their laurels. Instead of building more buildings and more roads, it may be better if projects are being created to put the skills of the young and talented to work. If we create an environment of transitory wealth creation through trading of unproductive products such as bad houses in bad locations, it is no wonder that, after a prolonged period, the young gives up putting an effort and mentally switched off and merely staring at that blinking screen on their palms.

So, which style will prevail after the election results are out?