Economic Policy

The End of the Year (2011)

2011-12-14T15:43:00.002+08:00

The end of the year is nothing but an idea
That time has an end and we should all be looking
Forward to it so that we can have a new beginning
Because the old year has been such a mess
And we hope that things will be different
When we symbolically throw away old things
That new things and new ideas will be better
Just simply because we merely want a change
Even if that change is nothing but the same old thing
As we hold on dearly to our same old habits
And feel comforted in our old familiar surroundings
Only our mind may have become a bit different
Now that we have made new mistakes this past year
And surely we will have become wiser in the new year
By not repeating the old mistakes but creating new ones
And so, the newness of our life is nothing but the same
That somehow has acquired a new beginning
But with the same old ending.
Alas! Accept.

The End Of The World?

2011-11-13T23:42:00.002+08:00

Recent events around the world, as presented to us by television and the mass media, would give one the impression that the end of the world is near. How near?

Certainly the world ended for the many innocent and not so innocent killed in the Middle East thanks to the US and other military operations as well as by desperate attempts by despots to protect their little pots of honey. The end of the world seems to be closing in on some regimes are deemed to be totalitarian by their people. The best of luck to the despots and the people.

In Europe, the totalitarian of the euro as a single currency seems also to be at the brink of cracking with Germany and France desperately trying to shore up the broken finances of Greece and Italy. That's what you get when you have a lousy civil service that is not only bloated and not doing nothing but doing everything possible to stop the rest of the society from getting ahead. France is the next in line for exposure to sloppy financial behaviour although some say that it's troubles are tied to exposure to Greece and Italy, which is the same thing as bad behaviour isn't it.

I am quite taken by Obama poniticating about the problems of the world without mentioning the problems of the US itself which the American people having enjoyed and now suffering from years or decades of consuming the output of the world paid for by simply printing paper money. This is sheer abuse of its global leadership in monetary policy. I have said it before: Volcker did an excellent job, Greenspan abused it, thereby passing the global finacial baton to China bypassing Europe.

China, onced it has learned financial discipline and controlled domestic inflation, will go for domestic consumption by raising local wages and local agriculture prices and hence to sustainable prosperity through endogenous growth with imports for raw materials from the rest of the world, competing for natural resources around the world for its own internal consumption. Then, it enters an era of bloated Chinese.

Double Dip Or Fallout

2011-08-08T10:20:00.003+08:00

It is sad that this has to happen but it has been obvious for a long time - that the structural break of the US economy is now firmly evidenced by the inability of monetary expansion to paper over. We should now expect deflation in the US as it has been in Japan since the early 1990s.

We cannot be thinking about marginal adjustments in the global economy. It is not as if the US economy is still structurally sound and that a sharp depreciation of the US dollar will correct its external imbalance which it doesn't have much relatively. With the rise of China (and India), the US (and Japan) collapses. Germany may hold, but the Euro may break.

The rise of China not only took away manufacturing jobs from the world, but competes with the rest of the world for food and resources. That a billion of Chinese now chooses not to go hungry means food production must rise by 1/6th or a billion people outside China must starve.

Central banks must reduce monetary expansion and direct the new expansion towards food production and away from real estate, stock purchases and credit cards.

Deflation is a needed adjustment after the sustained monetary expansion. This could put more people into productive work to increase output (especially food). This alternative has been viewed negatively as a rise in unemployment which is true in technically unprepared societies.

The Struggle For Power

2011-07-11T10:23:00.002+08:00

It is quite interesting to observe how the struggle for power -potentially absolute power - can lead to very desperate acts.

We imagine that the struggle for political power - for Malaysia, and recently for South Sudan (congratulations!) - is made for the purpose of independence - to define one's own destiny - as opposed to be abused as an agent for someone's benefit which therefore all points to a common good that the people of a society can nurture for itself.

The greatness of George Orwell in his Animal Farm is how the objective of the struggle can metamorphosise from high level to more degraded levels. In South Sudan, we are hearing worries over tribal warfare and potentially huge economic survival issues at all levels. In Malaysia, we have descended from an inspired greater commonwealth to one of sectarianism. We have not done ourselves justice.

We thought we started with a fairly good institutional structure of checks and balances, but with a very big loophole in the shape of the Internal Security Act which allows the authorities to detain people without trial for 60 days plus 2 years - which unfortunately has been abused to kill dissent. As a result, the inherited institutional structure devolved into a lopsided one with the power accumulated in the hands of the very top. The question now becomes: How can this concentrated power be opposed or even disposed?

It is interesting to note that with the concentration of political power comes the concentration of economic power. "I say this is mine" and it is his or hers. This phenomenon is being justified as the building up of the war chests of political parties, which invariably is the war chest of the political party of the incumbent government and, by extension, of the few individuals who control everything. With that sense of power, it is extremely difficult to dream of fair play and a more balanced approach to how things can turn out in the future for our country and our people. Thoughts are likely to be focused on "how I can siphon the money out without being caught." (Those caught would be considered stupid and ostracized in order not to damage the whole branch.)

When things come to an extreme, how do we proceed as a country? We can continue to let the system squeeze the juice out of the economy and the strength of the people, inviting inflation to redistribute wealth from the very poor to the very rich through "rapid growth of the money supply and loans at low interest rates." This has been going on. "It is not our fault - it is imported global inflation, crop failures in other parts of the world." The nation stares and justifies as a bystander to this global drama.

There are those who figure that they may be able to provide a change - a breath of fresh air, so to speak. The great beauty of democracy is that everybody has a chance to try their hands at governing the nation. How can one claim to know more than another, except through long years of dictatorship which the modern world is trying to do away with. The answer is really to limit the term of tenure so that ideas do get rotated. Do not believe in dictators however benevolent they are making themselves to be - the world can always be a better place without them.

With flexibility and adaptability and room for change and hopefully improvement, the nation and society can evolve and adjust into an animal that is the product of no one person's mind but that of the facets of many people's views - rightly or wrongly. This is where the storytelling comes in for the nation. This is where the wise men and women and sages and prophets come in to guide the people towards redemption. Lest, we are all caught in the quagmire of our own conceit.

There is no mystery to why private investments here have tanked. It spells how much confidence we have in ourselves. We have abused ourselves, our own people, we have spit at each other. We do this because we still have the luxury of past wealth which is slowly being eroded by mismanagement. We are being arrogant.

The path out of this darkness is the light of trust and cooperation, of exerting our selves and making efforts to serve our neighbours by providing them with goods and services in return for what they can provide for what we need. Whether we should persist in what we are doing depends on the vote of society in the exercise of their right to decide what they want to want and do not want. It is the freedom of choice. It is the demonstration of revealed preference.

Malaysians' Right To (MRT) Speak

2011-07-11T00:28:00.004+08:00

The 9 July 2011 Bersih rally is significant. It shows clearly that the ordinary Malaysian citizen is now reduced to nothing but an ant for the authorities who is supposed to look after us to step on.

It is the fundamental right of a Malaysian citizen to raise his or her concern over any aspect of the nation. Not to do so is to fail in one's duty to serve the country. Does the government of the day think that after being elected into power it has the absolute power to do whatever it likes until the next election? Isn't there any recourse in the interim?

Is Malaysia still a democratic country, or is it now a dictatorship, or is it now a police state?

What happens to civil liberties? Or, don't the authorities do not understand any of these things anymore?

The recent event has shown that while the government of the day may put on a smiling face, it may not desist from using crude methods to prevent dissent. This is dangerous.

Of all the transformations that the government is trying to institute to get the economy into high income, I fear that the current transformation of civil society from a once proud society to dirt is probably the most potent and alas! the most dreadful.

Unpleasant it may be to the government of the day, it should have the good of society at heart to let the people demonstrate the seriousness of their call for a clean election, no matter how clean the government or the election commission may insist that it is. Truth will prevail. The recent event in Thailand how that truth will eventually re-assert itself, no matter how much it may be supposed.

I do not think that the government of the day is doing itself a service with its recent actions, with collusion from an authority which should have been more competent and professional in handling such a difficult situation. It is only when a situation becomes intricate that professionals are called in. We do not seem to have any.

Cry, my beloved country!

Six Strategic Reform Initiatives (SRIs)

2011-07-07T09:09:00.002+08:00

This latest set of initiatives is to wrap up the New Economic Model, with focus on trying to solve the problems of running a proper government machinery and correct the abuses of the past (or rather, the present). But somehow it lacks the Oomph! for the private sector - which I suppose the EPPs are suppose to be doing.

SRI 1: Public Finance: Increasing Revenue, Reducing Cost
+RM13 billion (contractionary on economy)
Improving tax administration
Rationalising corporate tax incentives
Transparent procurement
Control expenditure
Accrual accounting
Implement GST

SRI 2: Government's Role in Business
Since the government has a funding problem, the government will divest its stable of companies and will only be involved in business in strategic and "GNI-positive" areas:
Regional corridor developments
Procurement of defence technology, etc
Investment in "large growth capital, catalytic or new technology"
Biotechnology, renewable energy, public transport systems, etc

SRI 3: Human Capital Development for High-Income Economy
Minimum wage to be instituted
Talent Corporation to draw up a plan
Unemployment insurance to be introduced
To study labour market
Gender issues
SMEs workforce requirements

SRI 4: Public Service Delivery: Lean, Efficient, Facilitative Government
Remove overlapping processes
Standardise functions
Clear governance structure
Real-time performance monitoring
Real-time feedback rating mechanism
Greater public involvement in high level policy review
"Strategic human resources practices"
Open recruitment within civil service and public-private sectors
Enhancing "cross-moblility" by introducing "mobility characteristics" in new superannuation schemes and enhancing current pension scheme (meaning that civil servants can quit or be sacked halfway through their career and still get pension?)

SRI 5: International Standards and Liberalisation: Improving Malaysia's Competitiveness
Liberalisation of the services sector: healthcare, education, business services (professional businesses)
Standards
Competition law - to promote "competition, private investment and market dynamism" and safeguard against "anti-competition practices and abuse of market power"

SRI 6: Narrowing Disparities (Bumiputera SMEs): Capacity Building Boost
Develop Bumiputera SMEs
Promote wealth creation
Uplift low-income Malaysian households
TERAJU to "lead, coordinate, drive Bumiputera economic participation and to strengthen the Bumiputera development agenda"
High-Performance Bumiputera SME programme
Develop next generation of world-class Bumiputera entrepreneurs
To be able to compete in "open market without heavy reliance on Government contracts"

The Beatles In Mono

2011-06-29T09:20:00.002+08:00

I am resisted acquiring the set since its release in 2009, arguing the stereo set is good enough and it is not that inexpensive. After all, it was just another ploy by the marketing guys to extract more hard earned money from the average consumer. But, last week, in a moment of fiduciary irresponsibility (the kids are still studying), I relented and bought it. Printed in Japan.

The mono sound jumps out. The mono sound is clear and tight, with a punch which creates excitement in the music that engages every sense of one's being. The boys are having fun, and I am having fun. That's entertainment.

The old CDs for the first four albums are also mono but unremastered. There is a loss of clarity. The new remastered stereo albums are a significant improvement over the unremastered in terms of definition, but the remastered mono stands out on clarity, tightness and punch. Ringo has never sung so well before, with his drumming a significant contributor to the songs and not a mere last minute addendum.

The brilliancy of the mono over the stereo is therefore the definition as well as the tightness of sound which ensues as one. Stereo, the new technology of the late sixties and early seventies, is an attempt at polarisation with a view to creating a greater "soundstage" at home (as if in a concert hall) - and this could be the manufacturers' way of doubling their sales by selling two speakers at one go rather than one by one. This could be related to increasing affluence where houses and homes get bigger and there is more space in the living room for the income earner to relax and enjoy after a hard day's work in the office.

The stereo tries to create an artificiality of sound through their separation to create an illusion of space. Some instrumental sounds are placed on the left and some on the right, with yet the key ones such as main vocal and drums would be placed in the centre to provide a centrality to the sound right in front of the listener - on the assumption that the listener sits comfortably in the centre in a large armchair. To enhance the illusion - and the ideal - some hifi freaks even suggest drawing the curtains and listening in the dark in order to create space.

The attempt to separate sound goes even further into the quadraphonic (4.0) and the 5.1 for the home theatre (with centre and subwoofer) all now is the rage as people imagine that sound could be given more space through separation and alienation.

Cohesion in sound and the creating of sound can take a more destructive path when the idolised Beatles each could not stand each other anymore (probably because increasing wealth has created increasing intolerance for others' idiosyncrasy) that they are quite happy to each go their own separate ways - and pursue their "solo" careers which, in my mind, though fairly successful were not as brilliant as the Beatles as a group. Each had their own peculiarity which were accentuated to the extent of being a bore, whereas the Beatles as a group was a much more considered attempt at creating good and enjoyable songs for the enjoyment of the public, by paring down on the outrageous and keeping things to the centre of an infinite variations.

The Beatles in mono, therefore, is a brilliant act and piece of work which combines the best of the group and of what is good in sound technology. Listening to The Beatles in mono is an enlightening experience, which shows how the simple and sharing and working together can be good and beautiful. Much better than the dominant of a member over the group or the pursuit of their solo careers.

The Beatles in mono could be a lesson for Malaysia, on how keeping the nation together is such a critically important thing.

The Middle East Turmoil & High Oil Prices

2011-06-13T16:34:00.003+08:00

I was struck by this simple juxtaposition: As the people in the Middle East become unhappy because of the difficulties of earning a good living and high cost of living, Iran, with the help of Venezuela, Iraq, Algeria, Angola and Libya, fought against the Saudi's efforts to increase output by 1.5 m bpd and soft the price of oil in Vienna on June 9. Apparently, the opposition comes from those without the capacity to pump more and are thus unlikely to benefit from the scheme. Saudi has the capacity and it can unilaterally do it and gain extra revenue, while helping to bring down the price of oil.

This is quite interesting. That governments do see a difference in the budget and the welfare of the people. The Middle East is in a position to try to lower the price of oil and in effect reduce some inflationary pressures from high commodity prices and hence the cost of living. If their region is in turmoil as people take to the streets, lessening retail prices may help to cool those pressures on the ground.

But this is not going to happen. Governments need a good budget to spend and they do not appear to be spending in a way that will directly benefit the people. The people can suffer and it is none of the business of the governments - so long as the governments can be elected or re-elected into power through strong party membership that takes care only of party members. The people can take to the streets and the governments are quite happy to shoot their own people - just to stay in power.

All this is interesting only if my assumptions are correct. Some may argue that the general uproar in the Middle East is a product of technology and that people are taking to the streets because they now know that can congregate in the streets at the same time. I would not confuse the means with the ends.

There could be another argument that says that people are simply fed up with the same old people in governments and they want new faces with fresh ideas, and they are making these protests with great distress to the physical body as well as the mental anguish and hence no amount of cheap prices will help to quell that unrest. This must be really tough then.

The upshot of all these is that the problem in the Middle East is something that the Middle East itself can solve, by itself. Whether it will or not depends on how cohesive the Middle East communities are among themselves, or they are simply bitter enemies among themselves to the bitter end. If they are enemies, then they are ripe for manipulation from outside the region, and there is great incentive for causing unrest especially when the control of resources is concerned.

There is a lack of intellectual leadership in solving the Middle East problem. If the Middle East is uniquely different from the West, it should strive to exert its own uniqueness and identity. If not, then, the Middle East is no different from anywhere in the world, where sectarianism seems to rule the day with the inability to see the sameness in all human beings to the chief cause of trouble. There could even be animosity among brothers. If this is the case, the problem is pure greed and the scramble for power. We just need one or two evil men (and women).

World: To Adjust or Not To Adjust

2011-05-18T13:11:00.004+08:00

The current debate on the world economic condition gives a glimpse of why economics is a very difficult subject to master. There are all the theories, which are fine in themselves because of their own internal logical consistency of varying degree of inclusiveness of factors. The main difficulty is in the diagnosis of the problem, which is subjective and based on experience and judgment. The signs are all there. The difference could be as in the judgments of Dr Watson and Sherlock Holmes (however fictional).

We are all agreed that the world (the US) has gone through a serious bout of asset inflation and the bubble has burst. The adjustment has taken place, not in asset prices but in banks whose solvency has been supported by explicit government intervention. The judgment now is that the worst is over and the world can go on with business as usual.

(a) This supporters of this policy are congratulating themselves that they have done an excellent in preventing an all-out fallout and an inevitable recession which could lead to a depression.

(b) Banks have since recovered apparently and are now back on track to be as good as they had been.

The main argument against this affirmative solution is that there has been no adjustment or that the adjustment is insufficient for real change to take place. Those who had made mistakes in the market (mainly speculators) have not been punished by the market - which the market is supposed to do in order to ensure vigilance and discipline. The same people or type of people are still in charge and playing the game. There is no lesson learnt from the recent problem. The problem will repeat itself because the policy makers are looking for solutions in market behaviours that have brought the economy into problem in the first place.

Real adjustment means structural adjustment where the structure of the market and economy will have to change. There have to be new rules and policies and new ways of doing things. Those who have lost in the market must exit and those who have been disciplined and have capital will have the opportunities to buy foreclosure assets at realistic prices so that a new foundation could be built. In this adjustment, employees will be laid off and they have to readjust also through retraining to learn new and more appropriate skills.

This adjustment is necessary in order that the new world order will be able to come to an organisational structure which will be able to provide sufficient jobs for new entrants into the economy. Whilst in the long run, it may be an observable factor that the demography defines the pace of the economic growth. But, at present, the world is undergoing a truly significant change.

In the west, the baby boomers are now in the sixties and retiring. Being baby boomers, they are the largest representation in the demography. Smaller groups (non-boomers) will have to work the extra hour or so to support the boomers in their retirement. While pensions may be defined in nominal terms, that the inability of the new cohort to produce sufficient for themselves and the retirees mean that (a) there is inflation (if pension payments are appropriate) or (b) there is unemployment among the new cohort (if the aggregate demand is low as the retired boomers reduced their consumption).

In the east, China's increased production of consumer goods has reduced per unit cost as well as increased the global participation in industrial production by workers by a significant amount - which reduces wages (first nominal and then real). This has caused the withdrawal of employment by higher-paid workers in the west. Added to this global work pool is India, in the higher value-added sector of ICT. This sharp increase in the global volume of workers means that the west (particularly the US) has resorted to solving its problem by printing money - which we had seen and still seeing. (Whether they are translating the excess liquidity into rapid loan growth now or not is moot; they had.)

Maintaining an easy money policy is politically advantageous to do. It is like giving morphine. Fiscal policy has run its limits, constrained by common sense about government debt.

I think it was Franco Modigliani who asked the question a long ago in a published paper: Should be foresake stablisation policy, when discussing the relative merits of fiscal and monetary counter-cyclical policies. This question is now moot. We are not talking about stablisation policy. The world has changed. The structure of the world economy has changed. We are now dealing with structural change.

Is it then correct that the US should counter the comparative advantage of China's labour force with a low interest rate for its industries so that its industrial workers can compete - or that has the US actually foresaken its agriculture and manufacturing industries and now focuses on the services sector in order to compete. In the services sector, adjustments could be massive and rapid with a high casualty rate, such as venture capital, stock market, financial instruments, and all kinds of financial products. (It is no surprise that massive financial crimes occur in the US, and elsewhere.) It is also no surprise that WTO pushes for the opening in the east for the services sector.

In globalisation, the problem with using the services sector for growth is that it does not necessarily has to use local workers. Local workers may not be skilled enough or they do not have local knowledge. The services sector, in order to expand, especially for financial services, it has to tap the best brains in the countries they operate. While US firms may grow, US employment may not rise commensurately in that sector. This is the same issue for all MNCs. (It is therefore questionable for Malaysian employment that Malaysian GLCs go abroad and brought back nothing.)

These services MNCs do not need zero interest rate to flourish. They need a policy where credit is easy to get. The banks with their billions of unlent excess reserves would be most happen to fund grandiose schemes by US firms that span the globe.

By not allowing local asset values to adjust downwards, there is no scope for local businesses to flourish as old local businesses could be weighed down by high debt and a long repayment period which chew up revenue and discourage recapitalisation. Those with cash has no chance to buy assets at fair value, and they end up holding financial assets. In a world where excessive wealth is looking for a safe place to park in the financial market, there is always the problem of overvalued of financial assets, as real asset value are kept up by the inability of the market to adjust downward as governments around the world stablised their respective economies with artificial means.

Adjustments of course means hardship and unemployment; but this does not mean they do not exist today when unadjusted. For fear of a flash of pain, one may have to suffer long and quiet.

As economic adjustments are increasingly politicised, it is not surprising that unemployed youth are trying the oust the old and crumbled who are holding to their asset values through long established networks in the only means available to them. Greedy people are trying to hold on to brick and mortar or pieces of paper which enough paper wealth to last them a few generations, at the expense of the new generations of the rest of society. Future values and investments are concepts that need a rethink. In the end, other young people, provided they can get a job, will have to work for the descendants of these old rich.

Economic Readjustment

2011-05-10T23:04:00.002+08:00

Those of you who have been following my thoughts here would know that I am quite happy with the recent developments in the economy, i.e., that at least there are some countries such as Malaysia which are beginning to take a stand against the American nonsense (after Japan) of printing money at zero interest rates and holding the world to ransom at gunpoint.

I hope this will lead to a structural break in the global mentality. With higher interest rates, some currencies should strengthen which is a good thing. There should be a way to reflect the weekness of the US dollar. That Malaysia is amon the few countries that go this route is commendabble.

Higher interest rates and a stronger currency may help to restrain some the inflationary pressures coming from the global commodity markets. Malaysia may suffer a bit for commodity producers and the foreign investors who are here to reap the benefits of low wages as a result of the weak ringgit. But these are labour intensive low productivity activities which we could be less dependent on. We should expect some difficulties for these activities. We should expect some difficulties for speculators of properties as well as the stock market. These difficulties are nothing but the needed adjustments for higher interest rates to reduce prices as a result of some difficulties for businesses. Without these difficulties, businesses would continue to live in a dream world of more profits from little efforts and lots of inflation.

These difficulties will be good for making businesses search for higher productivity economic activities. Hopefully, a stronger ringgit will make less unattractive ringgit wages. This may help to reduce the current brain drain and, if possible, to reverse it.

But my great consolation is that with higher interest rates, now or expected, there will be enough fear among speculators. We are now seeing a reaction by speculators in the oil and commodity markets, who think that they may need to reverse their long positions. There is crack here, and the prices of oil and commodities are seeing some selling and a lowering of commodity prices.

This last bit of development, to my mind, is absolutely crucial. The higher global interest rates may mean a weakening of global demand and thus leading to a weakening of commodities prices. If downward adjustment of commodity prices is what the world needs right now. There is a need for the world to insulate itself from America in terms of monetary policy. With lower prices or lower price increases, there is a chance to stablise world politics. When this stability is established, there may be a chance for investments and real economic growth.

Chinese Politics, Economics & Philosophy

2011-04-19T14:26:00.004+08:00

What do you do when your government does not take care of you - nay, even have policies carved in such as a way as to disadvantage you so that you do not have a chance?

You fight for an opportunity for yourself and your children.

You are not talking about fairness. You are talking about an opportunity - an opportunity to earn a living, an opportunity to work very hard, very very hard, even to the extent of having to do two or three people's work in order that you may have a chance to earn a living for yourself, taking only one of the lower or lowest of the two or three parts that you have earned.

It is only by sheer hard work, plus lots and lots of ingenuity can it be possible for a non-Bumiputra to irk out a decent living in Malaysia. By then, of course, the disparity has widened much much farther.

When the single simple opportunity in life that one is looking for just to survive does not even exist, because it is perceived that all the opportunities have been monopolised and that the wealth that has been amassed has been transformed into power of control and domination, you want regime change.

How does the minority cause a regime change of the majority in a democratic way?

By giving all its support to the opposite, the best that can be managed is 77:23.

This is the best that can be done at the moment.

But the message is clear. That the people who are unhappy can say register their dissatisfaction.

So far, the non-Bumiputra has made their stance. Now, among the Bumiputra, unfairness of unjust policies has also been taking place. If the discontent is intense, you can get a swing that can go to 40:60 (assuming half turned).

How do you prevent unfairness? Malaysia, and Sarawak, has gone way past the point of racial disparity. We are now entering the era of class inequality: the poor fighting against the rich, for survival. If the rich has gotten rich through plunder, then there is a limit to that plunder. We are reaching that limit. The whole country is down going into economic descent.

The only way forward is a conducive environment for investment, private investment. This is not the perfect solution, but this is the way that the modern world has learned to bear with. This world of private investment, will create with it the problems of worker welfare. This is the economic disparity. But at least, there is a way out by negotiating for better pay and conditions for workers.

At the moment, the problem is unemployment and rising cost of living. Dishing out cash handouts in "poverty-eradication" programmes is a short-term measure, important to prevent riots and buy time for better programmes to come in. It must be the encouragement of local private investments.

The whole nation should not be held back by one lone racist voice. We should fight racism and get the whole nation back to where it was in 1970, and start all over again. We have lost enough time. It is time to put excellence back into the nation, and take our rightful place in bright Asia.

Sarawak Politics, Economics & Philosophy

2011-04-12T09:59:00.002+08:00

Politics is about power.

The current political fight in Sarawak today is about the struggle for power. Whether it is the Barisan Nasional or Pakatan Rakyat, both are now trying to convince the voters why they should vote for them and not the other group. So, what is the difference between the politics in Sarawak, and the politics elsewhere?

Between the politics in Sarawak and those in the Peninsular, the current arrangements on both sides of the water are similar - racial political parties conveniently come together to form groups each with a multi-racial front. In Sarawak, on the BN national front, there is PBB which is supposed to represent the Bumiputra which is odd because you also get in it other Dayak groups such as PRS and SPDP which are Bumiputra as well, in addition to SUPP which is generally taken to be predominantly Chinese. On the other Pakatan front, Keadilan is supposed to be a front runner but in reality DAP is the stronger and both are Peninsular-based parties. Appended is SNAP which is taken to have a Dayak dominance.

What you are now witnessing in Sarawak today, as well as in Peninsular, is racial politics at its best. You have grievances even among the Bumiputra where, in the Peninsular, the gripe is UNMO-putra, whereas in Sarawak the culprit is the one and only and his cohorts. Both probably come straight out of a leaf of the NEP. The Chinese and everybody else then see themselves as orphans in an unloved disorganised family with a greedy and roving-eyed father. In Sarawak, the opposition talks of the dilemma of ungrateful urban Chinese juxtaposed against the poverty-stricken rural natives or indigenous people, when the reality may simply be the everyday fight for survival, against poverty or fear of not having enough. There is poverty in the urban areas as well as in the rural. Remember that when the rural people come to town, they become the urban poor. In towns, when the parents did well, the NEP makes sure that they do not have new opportunities.

It is a terrible thing when an affirmative policy such as the NEP has become a racist policy that is used to deprive the majority for the benefit of a few. It is equally unacceptable for the alternative to champion the interests of the now-deprived Bumiputra or non-Bumiputra to the exclusion of Bumiputra. It is this racism in Malaysian politics as well as in Sarawak that is objectionable to rational-minded citizens of this country. For this reason, thereby, my contention is that the current battlelines are drawn at the wrong points by the opposition; it could be the result of the early stages of development in Malaysia as well as Sarawak.

In all countries everywhere and for all people in all countries, the greatest fear is economic survival with eyes being opened wide as a result of the internet where the whole world is collapsed into a picture frame made of plasma or pixels. We know of everything we want to know, and while we marvel at technology, we fear for ourselves and our children. In such a world of great nervousness, there is a great demand for reassurances and governments around the world guarantee it by printing money and getting into massive budget deficits. With massive budget deficits come inflation, now on a global scale, which means that it hits also the poor little indigenous people or the non-indigenous people on the wrong or better side of Borneo. Their home-grown output, be it the processing of local foods or the processing of local materials into tourist items called handicraft, however much they produce and sell is inadequate for them to enjoy a piece of the advances of modern technology as the terms of trade is wrack-smacked against them, thanks no doubt to the multi-award multi-year winning central bank that we have in keeping this country economically competitive while the people deprived.

Under trying localised circumstances, there is nothing but humanity for all citizens of Malaysia, and some say Sarawak, to argue for a level playing field economically at the very least for everybody, be that somebody a Muslim or non-Muslim, Bumiputra or non-Bumiputra. It is time we do away with racism of any guise.

In Sarawak, the two oldest multi-racial parties are the SUPP and SNAP, and their full names say so: the Sarawak United Peoples' Party and the Sarawak National Party. Fill these two parties with well-educated, well-intentioned young and energetic people of all races - if they can work well in other countries and survived, they can do likewise in Sarawak. Let them fight on the economic ground: between big businesses and the welfare of the people. There is much can has to be done to re-position Sarawak which for now, in economic policy terms, is nothing but an adjunct to Peninsular-centric economic (and political) policies. There is a need to refocus on Sarawak as an wholesome and self-sustaining unit rather than merely a supplier of energy to the Peninsular either in the form of oil and gas or hydroelectric power. There must be a way to retain these natural resources for use locally.

I find the current political fight in Sarawak boring on fundamental issues, though not for want of theatrics by masters in their defined fields. But the outcome on 16 April can be devastation of one kind or another.

Capital: Control or Free Flow

2011-04-11T13:57:00.003+08:00

It was not so long ago when economic theorists argue that it was OK for people and capital to flow freely around the world, in the belief that it would be favourable for economic growth as well as economic welfare. Economic growth because these people and capital have to work hard to find the extra gain from existing resources - meaning more output and more output. Economic welfare because these people and capital owners have income or extra income and that by things getting cheaper the welfare of the average consumer is improved.

With globalisation and the ICT whereby the flow of people and capital can be made almost instantaneously, the free flow of people and capital can be likened to the unfortunate but relevant image of the tsunami where an extraneous force comes strongly into the domestic system, and leaves just as quickly but in that quick second, the end result is devastation. No matter how strong or how stable, no man-made system can withstand such violent forces.

The unleashing of the manpower of the Chinese people from the grips of authoritarian control to one of a freedom to negotiate and trade has caused an explosion in the manufacturing world where there is little room for the less than competitive. Either you are competitive or not competitive. The export of competitively priced goods by China has made the Chinese people the sloggers for the whole world, with very little for themselves except for the opportunity to work. The capital owners were happy to make that extra cash and they continue to pour capital in enterprises in China. In the meantime, the costs of raw materials rise around the world because of the unprecedented prolonged of China and this is causing the cost of living to rise around the world including China. While the standard of living of Chinese workers can be adjusted by raising their nominal wages, workers in other parts of the world whose livelihoods have been devastated because of their lack of competitiveness have no choice but to look for new political leadership blaming their day-to-day difficulties on corruption of the ruling elite.

US, which has the unique privilege of unlimited printing of its paper money, solves its problem of lack of competitiveness by printing still more money. As China and other parts of Asia as well as some parts of Europe and Africa benefit from the slog of the Chinese workers, those who have managed to obtain the cash that the US is printing choose to invest for short-term gains in those investments without them sinking one cent into a real piece of machinery. These are the short-term capital investors, the investors of portfolios on the stock market. These are the ones that cause havoc on the foreign markets when they come in and out, on the stock market when they come in and out, on the property market when they come in and out.

Economists have long thought hard and long on what to do with these short-term capital flows. Most economists, if not all, have decided against them. How to prevent these short-term capital flows from having a bad impact on the local economy. Sterilisation - how to remove these short-term flows from the banking system. Rise in the reserve ratio of banks - so that banks can create less credit out of these short-term funds. Capital controls - these are the most drastic, how not to allow them to enter the economy at all.

In some countries in the past, Peru, I think - they even try to prevent the entry of long-term borrowings by private companies because eventually they will have to repay and they will chew up their foreign reserves and hence cause a decided deterioration in their exchange rate.

In Malaysia, there was an attempt to sterilise the short-term flows in the 1990s but failed because the central bank wanted to be nice and pay depositors their market deposit rates, and its attempt to recoup from the forex market failed. The second mistake was to use those short-term funds in the stock market for long-term investments. When the funds pulled out, the capital market collapsed. The third mistake was to capital controls to stop funds from getting out of the economy. This mistake was big. It removed all confidence investors has on the government to conduct policies properly. There is nothing wrong with capital controls. If you do not want funds to come in, don't let them in in the first place. If you let funds in in the first place, you cannot trap them and prevent them from leaving. There were other mistakes as well, such as taking the currency out of international trading and not understanding the sophisticated on the forex market. The short-selling that was pushing down the ringgit had to be covered later, and when that happened, the ringgit would have recovered to near its equilibrium which was fairly high because of the fundamental surplus on the trade balance. In any case, Malaysia screwed up and we have not properly recovered since.

The many discussions on the capital flows or controls are interesting but they are by no means simple. It is a sign of the times, that things have been cheapened by their apparent plentifulness - everywhere, things are piling all around us. The only thing we do not seem to have sufficient is green environment for healthy food for us to eat.

International Monetary Troubles

2011-03-30T11:53:00.003+08:00

Meeting tomorrow on Thursday 31st March 2011 in Nanjing, when finance ministers and central bankers from the G20 will meet to discuss about all issues except the elephant in the bath tub.

The central problem today with the international monetary system is the balancing of the flow of international trade and the international flow of money. In theory, surplus demand and surplus supplies will adjust so that a balance is always established in the end. Again, this is in theory. In the real world, none of this automatic adjustment exists except possibly in the commodity markets where specific commodities are produced with much competition from substitutes and where supply and demand conditions are fairly easy to predict as they are slow to adjust. Hence, a few traders can corner the commodity markets and hold the poor of the world to ransom, and the only adjustment the poor can make is to starve themselves.

The problem with international monetary imbalance is that, like the poor, deficit countries are under the greatest pressure to adjust only because they run out of credit to spend themselves out of their problems. What do you do when a poor uncle or a poor friend, dying of old age and dwindling income generating capability ask for help - once, twice and we imagine if we allow it, ad infinitum. We answer ashamedly, "I think I have helped you enough" while planning for our next vacation abroad.

One way that an international agency can step in to help the deficit country is to give it some credit when all other conventional lenders refuse to continue to give. The IMF tries to behave like the global central bank with the authority its own currency called the SDR (special drawing right) with funds from the deposits of central banks as "customers". The SDR is constructed like an index number and then its exchange rate determined based on that basket, and translated into the needed currencies like the US dollar for actual transaction purposes. In this way, the IMF steps in to ease the temporary "financial" problems of deficit countries while programmes are put into place the solve the "real" problems.

At the same time, the surplus countries are under no pressure to adjust at all, just like the rich who will only get richer because they have found a strategic advantage to benefit from the rest of the world. That strategic advantage for China may simply be sheer hard and intelligent work for minimal pay, very much reduced consumption and still have surplus to keep. It is simply a question of lifestyle, of a way of life. The poor may not be the destitute but simply those who have sufficient and who overspend. It is still lifestyle and bad habits. Do we then discipline the hardworking and be lenient with the spendthrift. It is not exactly that the US is poor and China is super-rich. Intra-China, there is also an imbalance where the rural poor worked hard for the urban capital-rich for the enjoyment of the deficit US consumers who pay for things with computer digits.

So, what are the adjustments or what are the "real" problems. Is it an exchange rate problem? It was OK before, but now it is not OK. If a people have worked so hard and so long to enjoy a bit of luxury, do you then ask them to adjust their currency so that they will have a work harder and enjoy less. Do you not ask the deficit country people to find new ways of doing things and produce new stuff so that they may have a fighting chance with selling their wares. Or do we allow specialisation of countries where countries like China, Japan and India produces real stuff while European economies produce financial crises.

Or, do we think that surplus countries will translate all their foreign reserves into domestic currency and flush the economy with cash in the real estate and the stock market. Or, do we not think that they will use the US dollar to buy US assets in the US - which the Japanese did in the eighties.

Or, are the issues to be discussed at the G20 really more about strategic issues such as not letting the East conquers the West just like the way the West had previously conquered the East. Is it not really about fearing the huge immigrant population in the US and Europe will forsake those countries and the productive but fluid labour force will float to the most competitive countries in the world and reforce the success.

Against such fundamental issues, we will find that the G20 could just be a meeting to air some issues "of global monetary importance" and then return home to placate the population that something has been done and things will take time to happen. In the meantime, adjustment is a slow cook.

Self & Society

2011-03-29T11:41:00.002+08:00

Those of us raised on Western philosophy are very clear about the right of the individual, how an individual like ourselves, no matter how basic or poor, is still a countable entity which has the liberty to exist in the best way that we each see fit so long as we personally do not become a nuisance to anybody. This idea of the autonomy of the individual comes from the idea of the existence of the self, where we each like a light bulb can glow quietly unperturbed in the intensity that we have the energy to dispense.

The exertion of the right of the individual self does not in any way automatically leads to the conclusion that the individual is selfish. To be aware of the self is very different from the inclination to always and only look after oneself. Selfishness is that narrowness derived from the unenlightened view that to stay alive is the raison detre for living. Staying alive is nothing but a fallback position when one has nothing else better to do in life. That is why there are individuals who climb rocks and tall buildings and high mountains, and others who dive into the deep dark oceans or float in the deep dark space. There are also others who simply walk into very dangerous places in order to get a job done to save other lives. It is this right of exertion to live or die or suffer in between that defines the character of individuals who under normal circumstances may live lives that others may not even notice. Heroes are born of individual selves who could have been selfish but instead rise above the consideration of the body and dedicate that body to an act that may just for a moment make ordinary life possible for ordinary people.

We have seen before our own eyes, and experienced an era of the destruction of whole societies by a few individuals for the benefit of the few individuals in the name of progress, rapid economic growth and full employment, as well fairness and equity. We have seen how new inequalities are being created out of policies which explicitly and purportedly tries to redress imbalances and injustices and only to find the ideals slipping through the fingers of those who try to command the earth to stop moving. These selfish individuals, nursing enormous egos, try to use sweet words intersperse with threats to cajole societies to dance to their tunes and in the process redirect the flow of the social efforts into their own pockets finding excuses in the shape of building monuments to themselves. These individuals are asking individual persons to sacrifice their lives so that these leaders can add greatness to their names, at the expense of the faceless toilers. That the powerful can enjoy opulence when the masses starve is the invisible hand that is redirecting scarce resources through the inflationary phenomenon.

At the Fukushima nuclear plant, volunteers were sought and obtained in experienced workers who willingly with eyes wide open go into the inner sanctum and be blessed with the light. By this single charitable act, they have vindicated themselves from all the sins that they have committed in words, thoughts and deeds in the past, and in the process salvaged their souls. They shall suffer and so shall their families, spouse and children, but they shall have pride for the rest of their days. It is in moments like this when we can reflect and realise how we in our little excuses are nothing but petty selfish individuals bent on lying to ourselves and those who will listen to us so that we may maintain our little arrogance deep in our hearts.

The Uselessness of Predictions

2011-03-28T10:12:00.003+08:00

Whole industries have sprung up over the centuries for the mere purpose of predicting the future, from the vestal virgins of Delphi and witches of Scotland to star gazers, face/palm/foot readers, statistical manipulators, scientific safeguarders, trend discerners and inspired third-sense charlatans.

When all potential faults and problems are properly identified and resolved, everything goes on so smoothly that it is presumed that that which have been hard at work and keeping everything in tip-top condition are but irritations because of their apparent presumed self-importance which is making the incompetents extremely insecure and jealous.

There is really no reward in forecasting except when one is making plans for one's own life journey. Even then, there are those who argue that there is no need for planning and everything will end up in the best of all possible worlds, so long as we accept whatever comes. For those who have no experiences of good things coming by themselves on their own accord, without effort on one's part, this is an uneasy and possibly traumatic attempt at relaxation. In an organisation or society, the politicians will always short-change the technical people in order to exert control over the experts. Under such repressive conditions, it is likely that the technical upkeep may just be a notch below the necessary as a form of sabotage in retaliation to presumed injustice. Such perverse behaviour may even be observed in children when they underperform in order to hurt their parents. First hand, I tend to try to identify potential problems long before they surface, so that easier milder remedial actions can be applied earlier, but have more often than not been labelled as a person who sees problems where none exist (for the moment). My standard response is this: "I hope I am wrong. If I am not, you are in deep trouble."

But there are things in life that are self-evident who do not need a rocket scientist to predict and which every sensible ordinary person with some common sense will tell you will happen, as a matter of fact: (1) You will die. (2) Human beings will disappear from earth, just as dinosaurs had. (3) You make bombs, bombs kill people. (4) Nuclear plants will blow up.

For natural phenomena such as (1) and (2), there is nothing much that one can do except to accept the inevitable, although most of us will still try to stretch things at the margin just a little more (just like home renovation). You find people popping pills (me included), exercise, and resorting to all kinds of activities of some sort, wasting time in the hope of gaining some, which is nothing but the swapping of young energetic time for a longer weak and frail condition.

Man-made phenomena such as (3) and (4) are simply the foolishness of human beings, of a small group of people harming the whole of mankind just because society at large allow a few foolish people to take control over the majority just because the few claims to have the right or sheer brute force to exert that power.

Will there ever be wisdom at the top, when the foolish thinks that status and position bestow upon them wisdom which they do not possess. The jostling for power and the scrambling for titles are things that foolish people do to feel self important. Even erstwhile perfectly good individuals when they are feeling ordinary and are wise seem to have lost their wits the moment they enter halls of "monumental historical importance." When they do not deserve the position, we will find that they generally will destroy the sacredness of the place through the corruption of its integrity.

Because of the foolishness of individuals, we can only allow each individual a short period of time of time to display their foolish the moment they step into power.

Zen & The Japanese

2011-03-23T09:29:00.004+08:00

How do the simple teachings of the correct method of realigning one's psyche to the cosmos by a foreign teacher in a foreign land can so readily be accepted by the xenophobic Japanese who then made them distinctively their own? Is it because those teachings fit exactly into the Japanese shared experience of Earth and how Mother Nature can both be giving and neutral.

Zen is the end-result of the teachings of a 6th century master who went to China to correct the way for practicising Buddhism. There was much doggedness and flippancy, and the way out was flexibility and focus. That flexibility which juxtaposes prolonged silent sitting with controlled focused movement and the later gives rise to the famous Shaolin monks. The focus is made in all conscious efforts, whether it be sitting or moving, and the first trick is to understand and accept what comes without acting further to aggravate the situation, and the final trick is to understand that it is all in the mind and nothing else which could in modern science be simply called "neutral".

The big name in Chan is Huineng who was a butcher who left his poor old mother to the care of neighbours in order to work in the kitchen of the temple. Huineng demonstrated his understanding with a few lines on the wall scribbled in the middle of the night, whose handwriting the master recognised who then gave him the authority to be the next master and told to leave the temple immediately that very night so that the competitor could not kill him. From Huineng arose several schools of Chan, and it was the Linzi school which probably had had the biggest influence on the Japanese, who enunciated it as "Zen". I highlighted Linzi because it is the school which beats its disciples with a stick during meditation if the master finds the disciples to be drifting.

The Japanese make a big deal out of Zen because they are perfectionist. If they really want to be "truly unperturbed" they must make a real effort in a equal and opposite response to what must have been a terrible environment for them - the warlords, the serfdom, the fightings and wars, and servitude in addition to natural calamities such as volcanoes, earthquakes and tsunamis.

The extreme nature of Japanese stoic-ness could be a Malaysian perspective, as we tend to be soft and forgiving, not only to others but particularly to ourselves and our communities. Everything seems to be an excuse for a good giggle.

In Zen, the final lesson is this: In the face of even the most unpleasant external environment, the only response is not to respond. "Be a stone", as an ex-Japan resident used to tell me. Keep still, do not react, do not retaliate - not only in body, but also in mind and spirit and soul.

I think it was only with the deepest inability to contain his emotion when the Governor of Fukushima, Yuhei Sato, said on national television on 16th March 2011, "The worry and anger of the people of Fukushima has been pushed to the limit." This is very unZen-like, but how poignant.

The Liquidity Trap & How To Fund Spending

2011-03-16T16:08:00.003+08:00

Economic theory has advanced so much that the Keynesian-Monetarist dichotomy is blurred. Economists today can think freely about fiscal policy (with monetary implications) and monetary policy (with fiscal implications) interchangebly. In the end, spending and pumping money into the system are quite the same however you dice it. The illumination from Keynes has been to be able to accept deficit-spending as a way forward. The unfortunate thing is that Keynesian policy has reached its limits apparently, because of limits placed on government deficits by buyers of government debt. The Japanese answer to this debt limit is to bypass private debt purchasers and just ask the central bank to print.

But what I really want to discuss in this blog is Keynes' famous concept of the Liquidity Trap. This is economic psychology. The economic assumption has been that when people have money, they will either spend the money on food or buy a guitar or save it and invest it in bonds or equities or buy a house. Somehow, by putting more money into the system, people will spend or invest and somehow generate economic activity. Under normal circumstances, monetary policy works. By lowering the interest rate, people borrow more and spend and get the economy going. In the process, money is created.

The Liquidity Trap kicks in when people suddenly become fearful of the uncertain future, and they start holding onto cash. This happens they expect prices to fall - no point buying now when things can get cheaper later and get a bargain. The Liquidity Trap comes in when deflation is expected to happen or is already happening. It's like catching a falling knife. When there is a Liquidity Trap, lowering interest rates do not work to stimulate the economy and this is when governments have to spend and arrest the decline in prices.

For years, governments have been arguing for stimulus packages in order to kick start a depressed economy and get inflation going. This is jolly well and good. Now, the problem is when stimulus packages are no longer virgin policies and they have been used and abused for decades. Prices run off and people are happy making tons of money without too much hard labour except speculating on shares and properties in the comforts of a cozy office.

In the past, banks used to be responsible especially after having gone through the recession of the thirties and the inflation of the seventies. Banks were prudent and had their internal checks and balances. Most banks were owned by private individuals, with a personal stake in its fortune. By the eighties, many banks went from European/UK type to US type banking where the CEOs were and are just employees out to make a quick buck from their bonuses calculated on loan disbursed but not necessarily repaid. An untrained banker can become very rich by blindly giving out loans and targeting high loan growth. The only thing you need is a collateral and collaterals can be created everyday if you are giving out loans for properties.

When the game of rapid loan growth funding property purchases hit its limit when there are no more housebuyers, the mortgage market gets into trouble. Because deposits of the public is at stake, government stepped in to save banks and this can be done if the property market is not allowed to adjust downwards. Property prices are kept up and loans kept on the books but there is no extra cash to lend to other users like businesses. The banking system gets caught in a quagmire.

Governments print money to save banks from collapsing. There is no threat of inflation. In this case, there is a threat of deflation from property prices. It is this threat of asset deflation that is being used as a justification by central banks around the world to print more money in an effort to the save the economy.

With property asset prices being kept up, rental prices continue to be high. Housing prices remain unchanged; they may even rise as more money is being pumped into the system and banks try to show a profit with more loan growth. Those who do not own their homes still have to rent and pay high rentals. Businesses pay for high rentals of their shoplots. For the ordinary people, food prices continue to be high as the global commodity markets go crazy on biofuels and natural disasters as well as on sustained growth in China and India.

The unfortunate case of Japan today given the earthquake should give Malaysians a stark lesson in economic efficiency. It is really not a clever argument to say that economic efficiency is not important. The natural disaster requires that scarce resources of the Japan government has now got to be re-deployed into replacing what is lost rather than build more on what already exists. All additional resources will be used to recreate new towns and new villages and new facilities. But for the Japanese, all will not be lost. They will rebuilt a new system which will be far more superior from what they had lost. What they have now lost in structure will now be replaced with greater efficiency. Japan will recover, and it is the efficiency and determination of its people that they have my greatest respect as economic creatures.

Japan Earthquake & Tsunami: Does It All Matter Anymore?

2011-03-15T11:06:00.003+08:00

To watch the unfolding of an on-going tragedy in the warmth of one's home is one of the most uncomfortable senses of being that I have ever experienced, so far. The tragedy that is hitting Japan today is a sad moment.

Christchurch and the other earthquake incidents were one-off. There was the quake, and a few tremors. Or, there was the tsunami, and all was gone. But to watch the earthquake and then the tsunami and then the unsteadiness of the nuclear plants and to see crowds of people with nowhere to go, hungry, cold and lost, and then to see the plain devastation of an entire village and town where thousands used to live and are there no more, that scene in my mind is the most heart wretching.

I watched the unfolding drama with my Japanese friend and his wife. They had the nervous laughter, unable to show their sadness in front of their guests, and forever trying to play the perfect host and hostess. Their two boys and a girl are in Tokyo and in the initial hours they could not keep contact. Finally, they found one son walking home seven kilometres, the daughter squeezing in among friends in fear, and the youngest son could only responded: "What, OK!" They have a fallout with their youngest son and my friend concluded that the one consolation of this disaster is that he and his wife could at the very least have some form of communication with their son.

I said to my youngest sister who I discovered has already passed forty when we were watching the tragedy on TV that this is a tragedy only because of the insignificance of the lives of human beings. The earth is nothing but a ball of fire and the other layer has cooled to form a crust which is in a constant state of flux, like the skull. The movement is constant, but in human terms, this is what the engineers called a once in a hundred year event. Well, if a moment for the earth is a hundred years for humans, then our individual lives do not last more than one moment each, in global terms, and probably far less than in cosmic terms. We are like insects that are born in the morning and die by night fall. And what do we do in this shortness of time. We fight, we lie, we cheat, we become generally unhappy with ourselves and everybody else. How silly are we all!

So, there is no big deal to this former prime minister of our who has again distinguished himself by writing a book of lies to justify his wrongdoings, and calling everybody else names. I have find it extremely unpleasant for supposed educated young and old men and women to degrade themselves as intellectual by extreme forms of arguments when good manners should have prevailed. Instead of focusing on the subject matter, they would focus on character assassination and calling people names. Sticking labels on people is one the easiest and lowest forms of human communication and I can see now where our young people are getting their bad manners from. Economists, unfortunately, have become extremely ill-mannered ever since Keynes published The General Theory. He argued that in order to get his argument across and to break through a tough convention, he had to be rude - in his words, to "convict" his opponent. Since then, economists have acquired very bad manners in their talking and writing. I have learned this little thing from my Malay colleagues when I was working in a major bank. The executive director told me: "You might be clever, but you must make people accept you first." I am eternally gratefully to this person, who unfortunately had fallen into disgrace due to his lack of good judgement in his work. If you want to know why economists do not agree, it is because they are rude, no matter how brainy they may imagine themselves to be.

So, what about the economy? I have refrained from making any comments on the economy because I have already said what I have wanted to say about it. The global economy stands in ruin because of the reckless pumping of fiat money by the irresponsible Fed of the US. That extra money is being used to keep its economy by the propagation of war around the world. The mountain of extra printed money flooded rapidly through the financial centres around the world making arrogant stockbrokers and bankers. They lend recklessly to speculators on real estate and financial assets. The pumping of more money to prevent these asset markets from correction and downward adjustment is now being lauded as the saviour of the global economy because economists do not have any new ideas to solve this economic disaster. Any correction of the asset markets would be a political and human disaster. The global economy now swims afloat a sea of greenbacks trying to find dry land. If the stock markets are recovering, do not believe that the global economy is recovering; it is bad money looking for good avenues to surface. In the meantime, China suffers from its own success and the world suffers from the scarce resources that China has the money to buy.

We know from history that the great wars are started by massive inflation especially with respect to food so that whoever or whatever promises to put on the tables of hungry fathers and mothers and brothers and sisters, there is a revolution waiting to happen. China is not like the Middle East or the rest of the world, because China is communist and communists are supposed to live and die for the rakyat. China may yet find a narrow path out of the world of contending factions.

Inflation & System Change: No?

2011-03-01T16:51:00.002+08:00

Regimes in the Middle East change because people are fed up with the same old politicians with their same old ideas of stability and making themselves rich while the rest of the people cannot find jobs or are in jobs with steady but low pay while food prices have skyrocketed.

Of course, the chief cause of very high food prices is the natural disasters and crop failures. There is a shortfall in the supply of food and prices rise to ration the supply to those who have the purchasing power to access the food. In other words, the supply of food in the world is now distributed more among the rich and away from the poor. (The poor even with their pooled resources would have have a limited access while the rest falls on the tables of the well-to-do.)

Does it help to restrain demand growth? If slower demand growth will create less jobs or less to higher unemployment, then the poor with continue to suffer. So long as there is a shorter of food supply, the rich will bid up the prices until they get the quantity they need. By slowing demand growth, if the slowdown is marginal, its impact will be much more severe on the poor (who have no cushion) than on the rich (who do not have a cushion problem).

The only way that prices can really adjust downwards is through a severe depression whereby not only the poor will be jobless with no cash but the so-called rich will be in trouble with their cashflows and their investments. Banks will also be in trouble again. This is a shock scenario which is unwarranted. The problem is a shortage in food supply and the solution is to replant the acres lost to the floods or weather. Time is the cure.

How ironic then that it is the weather and the floods that bring about the downfall of old regimes, as if it is the straw that broke the camel's back. It is as if the almighty has decided that the old regimes have stayed too long and decided to give the poor masses a helping hand. Would there be a new regime or an old regime in a new bag.

But didn't sustained rapid growth in the money supply of the reserve currency awakened the sleeping dragon which had slept for half a century, and decided that it will not go hungry any more. Surely China is big enough to absorb all the money that Greenspan could print at high speed for a decade or so - and China grew just as fast and as long. Along the way, short-term money flowed through all the financial markets around the world, awaking stockbrokers and the real estate markets, and everybody suddenly became rich and corrupt without much effort. No, of course, the growth of asset prices are consistent with so much percentage point growth per annum, while wages among manufacturers remained low thanks to the newcomers from China. Global wages threatened to adjust downward to Chinese levels - at least this was what MNCs threatened their workers outside China while Chinese workers apparently gladly suffered in silence of their newfound economic opportunities.

So much water had flowed under the bridge. The global economic depression that promised to surface didn't happen as Bernanke cleverly staved off the threat with extra cash. All nominal values stayed about the same, except for some unfortunate real estate but temporary. The world is saved from a horrible adjustment which had been sorely needed to readjust global and local economic power. Everything stayed the same more or less, except for the food prices, housing rentals, transport charges - all the things that a poor man and his family needs everyday.

Effecting Change: System vs System

2011-02-10T09:22:00.003+08:00

When I was earning a living making forecasts, my emphasis was on forecasting turning points, not projecting straight lines. Projecting a straight line (in any form) is the dumbest thing a forecaster can do - the only judgement one can make is how straight is the straight line. One cannot really forecast a straight line; I contend we can merely project it. To me, a line will continue to be straight (or sort of) until something happens that causes it to go off its trajectory. Normally, people assume a straight projection (that life will go on as usual) until the expectation is proven to be wrong and then ask what happens. As forecasters, we have to know what are the key parameters which give rise to the existing situation, which key parameter is likely to change first and when that happens what happens next. In the mind of a forecaster, therefore, the main task is always to assess the integrity and condition of the key parameters as well as to look out for any extraneous factors that are likely to intrude into the system which will alter the whole picture. In the end, the quality of a forecast rests on judgement, based on the experience in the assigned field as well as the breadth and depth of knowledge of the world around him or her and us.

Living a good life is living a boring life, as boring as projecting a straight line. Same thing, day in and day out. Nature is boring. One can make one's life a bit more interesting with variations around the same theme. Today, I eat steak instead. The system does not change; our activities change. When the system is stable, we can dream - about how we are going to make progress in life through material acquisition so that we can show off to our friends and relatives - and we take our time trying to accomplish our vision and mission, step by each of our own slow and painful step. The system is in equilibrium, probably static equilibrium (in and around the same area more or less like some nomadic tribe in the jungle) and if lucky dynamic equilibrium with ability to accommodate population growth with sufficiency which in most societies is termed prosperity. Systemic equilibrium is crucial to happiness, no matter how much people may gripe about the ordinariness of everyday life which is really a liberty that only happy people can indulge. The English complain about the weather, and monks talk about the dreariness of mundane life.

Let us now introduce trauma, otherwise and now popularly known as change. We shake the tree vigorously and see what falls. We bonsai the branches by twisting and turning and telling people what they can and cannot do or how they should do things in order that we may create a brave new world by transfiguring the present. We imagine a better world, but we end up in the end with the same old dullness, sometimes kept interesting only by the unannounced potential threat to our soundness or mortality by some madman in power keen to stay in power forever, at whatever level of hierarchical structure that has somehow been erected all around us. In effecting change, the easiest way is to replace a lousy system with another lousy system. This is when reformers are unimaginative and uncreative. They see a lousy system, and wanting to replace it, end up giving the same lousy system except for some suggested modifications which hopefully give better results which did not quite materialise which then leads to another call for traumatic change and another sameness.

If therefore we are going to get the same system (albeit with modifications), we might as well determine what that core system is going to be and strengthen it. In most human systems, the core element is the absolute right of the individual and of all individuals, each same and equal in terms of right. The right to freely think and speak and associate and contract and exchange and indulge and believe and practice. The right to live as humans. The underlying structure of any human system must be founded on the recognition of these rights, and institutionalised. Once this core is corrupted, change will come after change. In order that the system will transition over time through the generations, this change can also be institutionalised so that not one person or a group of individuals can monopolised an entire generation. The call for change through rallies is usually a rally for generational change when an individual has been dominating an entire generation. In building in the required change and transition in the system, there will be scope for creativity in government when individuals or groups can propose newfangled ideas. In the end, however, when prosperity has been bestowed on the society, there will be fear over the protection of the people's assets and if the assets are not so fairly distributed, problems of the unemployed and the poor. The final battle in the capitalist world is always the fight between capital and labour.

Traumatic systematic changes are costly to social property or capital and they should be avoided if possible. If not, it may be the only way out. But there must always be a system to be put in place or else we will have no social cohesion.

Change: Breaking Point , Turning Point

2011-02-09T09:44:00.009+08:00

Obama brought the word "change" to current circulation. meaning "revolution". He could have been inspired by the parking vending machine which says "change is possible". How does change occur?

In general, people do not like change because change implies uncertainty. As I understand it, the whole economic apparatus that people have erected around ourselves is to reduce uncertainty and to create stability of some sort. So long as the existing apparatus is still workable, people will maintain it until there is a critical mass of sufferers of the system who then demanded that change be made of the apparatus or system or paradigm.

We can see very clearly that political change will be brought about by the masses of ordinary people when their quiet suffering and despair could no longer be tolerated, when what they see around them is unbearable daily difficulties in the face of opulence - which indicates to them somehow that it is a systematic problem, not a natural problem. Nature can of course make things worse, but in a stable system natural calamities by themselves do not call for structural breaks as they create uncertainty; if they have faith, they want the system to help them, as is the case now in Australia with politicians shedding tears for ordinary people who are suffering from the natural disasters. It is when the prevailing system is seen to have lost its integrity which means that the integrity of the system has been corrupted that ordinary people rise to demand the obvious - that the system be improved or, better still, changed. "Improvement" to a corrupted system doesn't usually bode well because it usually implies that the "second tier" will simply "move in" to take over the "first tier" as well as to take care of the "first tier" which has somewhat "gracefully" made way for the "second tier" to come up to the podium. As we know from the computer, once the system has been corrupted by viruses, and if the corruption is severe (which must be in the cases that we are talking about), then we need to reinstall a new system. Those impoverished may install the same old system which is not the wisest thing to do because it has been shown to be easily corruptible. A completely new system is required to be installed, as in the old system with new safeguards or a new system with a completely different platform or paradigm altogether so that the viruses as we know them to do be cannot penetrate. In the realm of politics, the opposition to the incumbent government is usually of the same mould except that it is the opposite. The real challenge for change is to come up with something that is completely different from the incumbent and the opposite, and in the comfort zone of human horizon, the third force is usually a synthesis of the first two (acknowledgment to Hegelian dialectics). I prefer the George Bernard Shaw vision: People see things as they are and ask Why?; I dream of things that are not and ask Why not? In this way, we truly move forward and beyond the ordinary, meaning beyond what we are used to.

As in politics, economic change can also be traumatic. In the world of economic theory that many of us grew up in, the economic change is very much Victorian - small little marginal changes (mathematically called perturbations) which do not really upset the system at all, merely to test the robustness of the system. What happens when the system is not robust? The system breaks down, and a new system has to be reconstructed from the old model or constructed completely new from scratch. That is in the world of economic theory. In the world of economic reality, what happens?

In the world of economic reality, when the economic system shows any sign of struggle such as the rattling of some parts, the political masters, being control freaks, instinctively try to and usually do takeover the economic system completely. This is usually done by a process called Emergency Rule when the system is deemed to be at the very breaking down and the Master must now be "hands on" to smooth things over. As when a non-doctor tries to cure a (severe) headache with blind prescription of panadol, likewise in economic policy, the non-economist blindly prescribes monetary expansion as the cure for all economic headaches. Central bankers in trying to please their political masters consciously try not to trigger off any economic adjustments in order the central bankers not be blamed for any consequent crisis that will be created later on. When this happens, it is a sure sign of weak leadership or technical ignorance in both the political and the economic policy arenas. As in medicine, if an illness is not cured immediately at the root (preventive medicine) while merely plastering over the obvious symptoms, we have been taught that the illness is going to become very bad and can even become life threatening. In economic policy, we know that when the root economic problems are not properly resolved, economic adjustments will be forced onto the system and explode. The 1990 Japanese Asset Bubble, the 1997 Asian Financial Crisis, the 2010 US Financial Crisis. With political repercussions. These are all adjustments of the socio-politico-economic systems that politicians have been trying to lord over around the world in the last two decades or so.

At the very least, the US economy is now undergoing some drastic adjustments - collapse of property prices and the US dollar as well as some banks commercial and investment. In this way, I believe that the US economy will manage its find its own feet after a few years and give the Chinese a good fighting in the global economy. Malaysia, in looking east and following Japan, is still caught in an asset bubble, and banks with a huge loan book to households, can only stay solvent so long as loan growth is high enough to cover up the subprime problem which must be festering. The problem with monetary policy is that you really cannot stage manage a "soft landing". You are flying at 30,000 feet and suddenly you let go of the fuel pedal; what happens. Brakes become irrelevant. Such events are studied as chaos theory or catastrophe theory. It starts with a smooth ride with a little change, and the next thing that hits is breaking point or if lucking a turning point.

With the present being an accident of the past, the Malaysian economy is now saddled with some fairly difficult problems. Now truly Malaysian, the purpose in life is to be very very rich, and for that you do not need an education. Education in fact can become a hindrance to material wealth for you really do have to go to garbage dump and shift through while the government keeps bringing in truckloads of banknotes to dump. The scavengers now employ bodyguards to mark out territories in the name of politics and justice, and the only fellows who work are those poorly paid to do the manual work. The end result of the activities must be handled to the masters of monopolies who compete among themselves to see who is the cleverest. What else get done in the economy? Houses, roads, cars.

The current government in Malaysia is in a most unenviable situation. The party is over, the cash is spent, now we are living on borrowed money. But everybody is well trained to be mercenary. Grab and run. How do you change this mindset.

In the macroeconomic front, there are a few variable to grapple with. While the ringgit will try not to fall with the US dollar - and hence heading from 3.00 to 2.70 and 2.50 - it is not that particularly strong either as can be seen from its Singapore dollar rate of 2.30 although this is an improvement from 2.40-45. A real show of strength for the ringgit is when it can go to 2.00, 1.80 and 1.50 to the Singapore dollar. I would be happy to see sterling at 4 ringgit from the current 5.

Of course, now the financial markets are in turmoil in Malaysia. Will there be an election rally. Will interest rates be raised to curb inflation. These are rumours used by currency speculators from offshore financial centres to shore up the currency and equity markets for a while. Buy on rumours, sell on news. All these will be over by May, June. The central bank can be concerned with the reserve requirement to reduce the credit multiplier from capital inflows, and banks will be incredibly silly to lend long term using short term funds as we had seen in 1997.

In the meantime, let us try to build our economic foundation of a solid education system, a court of justice, an economic system where those who work hard will get the fruit of their labour. Let us bring proper pricing back to the local system. Let us continue to teach our children that they have a bright future in Malaysia if they work very hard. This will be real change.

Malaysia In A New Paradigm

2011-02-08T09:54:00.002+08:00

I have been unashamedly enjoying myself writing this blog in the last few months by taking a long detour through my childhood experiences, the transformations I went through while being educated and still being educated by the world in which I find myself in.

As you can see by now, Malaysia is my country and this is my way of fighting for it. Race is not a matter that I can choose, and I have to accept it as it is like all the things in life that I must accept if I am not to become witless. Religion is a personal thing between me and myself and how I come to terms with myself, with the community I am in, with the environment which I have unwittingly helped to destroy and the endless everlasting universe and cosmos that I can only hold in awe in all my little eternity.

I think we have all come away from the old foggy nationalism that arose way back when our fathers were trying to drive off the old colonial power - which was nothing but an institutional structure with the ability to impose a certain set of strictures or law and order as they call it in order to derive a certain end result. It was an order of establishing a global social economic network to drive resource-scarce but value-added rich industrial machinery first in Europe then Japan and now China (it seems). Those so-called imperialistic tentacles do stretched themselves far and wide and they are now collected called globalisation.

Malaysia is nothing but a little stretch of tropical land with fertile soil and some valuable deposits in the ground. The once idyllic community was disturbed when the economic machinery was brought in with people to man them in order to produce an economic output. That little act became a way of life for the people working here. In chasing the colonial investors out, Malaysia had effectively severed its economic ties with its major trading partners, and its economy took a major dent. In looking east, we tied our fate with Japan whose economic miracle pulled up Asia including Malaysia but only for a while before Japan failed under the weight of the American attempt to "rebalance" the exchange rate to correct its poor budgetary management. Asia worked hard to create the American obesity. Having seen the rise of Asia, or rather South East Asia and the city states, China realised that there was also a way out of their economic misery.

Malaysia's economic fortunes are closely tied to these global developments. As the global economy swings, the Malaysian economy must also adjust itself in order to make itself relevant to the latest new world order. We have rested out fortunes on the minerals that we can dig up, the produce of the land we can from planting and harvesting, and we have to some extent ventured into the assembly line business. The rest are just pure services connected with banking, communications, transport and logistics, education, commerce and a host of other services that ordinary people can provide.

In restructuring society, the first attempt was to bring the Malays into the modern economic mainstream which is the world of towns and cities and plantations and factories. It is urban pressurised living which goes according to the clock and not the heavens. There is a disconnect between man and nature, and there is very much a connection between man and man through agreements and contracts and other artificial constructs in order to solve urbanised connected living such as economic risks, healthcare and other urban ills.

But the modern economic mainstream thrives on openness, on communication and trade, the creation of markets, the synthesis of old ideas into new innovations, the stimulation of waves and waves of forward movement in order to keep up with the new developments around the world.

The Old Malaysia responded by imposing strictures, a corset to cater to the chosen few and ignoring the masses. The battle for a piece of the old cake was futile as the cake eventually crumbled out of dryness and lack of care in nurturing its growth. When the economy faltered, new money was injected by oil money while Japanese investments kept some urbanites in fairly well managed state of progressive misery. Once upon a time, firm control was held over the money supply to prevent any unwarranted exuberance, otherwise called speculation. Then suddenly, the new elite in the government took over the treasury. They burst into the stock and property markets. When things didn't go their way, they took over the central bank. They took over the judgment over criminal and commercial and political justice. They took over the monopoly of the economy. They created inflation and this fueled the state of dysfunction that the economy is now suffering, when fiscal stimulus means more jobs for unskilled foreign workers and the local graduates are left with nothing much to do except to contemplate revolution, and causing so-called political tsunamis.

The New Malaysia that we are now in is a honky dory world of escalating property prices and pushing the stock market through monopolies. Nobody has to work that hard. Money flows easy as banks send everybody cash to spend now and pay latter. In this new paradigm, the Old Politics looks decidedly anachronistic. Old Politicians look and sound decidedly dinosaurial.

The New Malaysia does not talk about religion, race or nation. The New Malaysia talks about building an effective and efficient economic structure and institutions that can create flexibility and dynamism in the New Economy. A robust New Economy. The New Malaysia wants New Leadership at all levels to be able to lead, to create New Frontiers for the nation and the world. The New Malaysia is not about Old Money but New Ideas. Forget about the 30% equity. Create New Wealth and you will get your percentage. The New Malaysia requires New Collaborations between all Malaysians, and between Malaysians and Foreigners. The Old Malaysia was about the Old Malaysian Elite collaborating with the Old Foreign Elite to make use of the poor locals to make their money. The New Malaysia must explore the potential in the local economic and social environment to create a New Malaysian Economic Force to fight the rest of the world, armed with electronics and brains. The New Malaysia does not kill and destroy other Malaysians.

In the new paradigm, Malaysia must guard itself against international human trafficking, international money laundering, international crime rings, international terrorism. The much expected beauty of the new world of globalisation has also ushered in a new world of globalised undesirables. The free and rapid movement of people, capital and goods means tighter security run by well-equipped and well-trained personnel. Who says there are no jobs for graduates. The only challenges is to kick out the Old Politicians in the civil service and replace them with fresh technocrats. There is nothing much to lose. The civil service has lost so much of its credibility and intellectual rigour that things cannot really get much worse.

Social Unrest, Networking & the Economy

2011-02-01T10:42:00.004+08:00

Is social unrest a reflection of the rise of social networking on the internet, or is it a reflection of a more fundamental flaw in society that demands a paradigm change?

Social unrest is nothing more than just a bunch of people who gather in a particular geographical space and time to demonstrate for a common cause. The communication of the mind and intention could be transmitted by way of smoke, paper, buns, or electronic signals. The medium doesn't really matter. What matters is that there are a sufficient number of people who are willing to risk their lives to make their views heard. The risk is worth taking presumably because they have nothing else to lose. Why?

It is very hard to imagine that comfortable working men and women will not got to work but instead take to the street to give vent to their emotions, unless those emotions are very strong and overwhelming their senses. Such a condition arise in human beings, as well as other creatures, I believe, when they are hungry and angry.

The problem with the stomach is very real. For the lucky ones, the stomach needs to be fed three times a day. For the unlucky ones, refill once a day seems like a luxury. When the refill is not forthcoming, anxiety arises. And when there are enough number of people who share the same traumatic experience, they will act. There is nothing for them to lose: they will die soon if they choose to do nothing. They choose to act as an act of survival.

In traditional society, the distribution of food is by way of rationing. I have more and you have less, because I have political power - that power being obtained by how many men and women one can employ to do one's bidding (pursuing one's agenda) by the degree of access to food resources.

In modern times, this power to access food resources is obtained by way of money or wealth. This access is usually thought by good people to be obtained through hard work by means of diligence and wit. Unscrupulous people can obtain access to food and other resources by way of quantitative easing, among others - which is just an economic jargon for the central banks to give cash to governments in returning for a simple IOU called government bonds. That extra cash is then distributed in the form of contracts for jobs for public works - the bigger public projects are, the bigger the leakage to the elite. One sure sign of troubles for the finances of a nation and eventually the economy is the spate of new public projects which are usually undertaken on the pretext of national pride, rather than economic necessity or pure business opportunity. With more public projects, real estate prices increase and while the elite feels justified that their is an increase in asset prices and hence asset value, rentals get pushed up for pay higher returns to property speculators, and retail prices soar. As new public projects are laboured by poor under-represented foreign semi-skilled labourers, the home grown fresh graduates, the semi-skilled and unskilled become left out of the mainstream of economic development. The graduates take to the streets to talk of justice, and the uneducated take to the streets as gangs to loot.

Things can be made worse by natural disasters which suddenly and unexpectedly put a dent in the national budget. This the Chinese have long called the Mandate from Heaven.

The underlying economic disaster is served its final straw when a stone is thrown to cause a ripple across the waters.

False Dawn & Confidence Building

2011-01-27T09:26:00.003+08:00

Money and finance people, who I will unceremoniously lump as stockbrokers, imagine that the stock market is a magic indicator and a reliable precursor as to what will become of the "underlying real" economy and conventionally wisdom says that the market leads the economy by six to nine months in the olden days.

This notion is interesting for study as pure logic or pure economics or simply pure human behaviour. This is also interesting as a study of human folly.

This is fundamental economics. IF THE ECONOMY IS DOING WELL, which means that firms are hiring because there is demand and they are likely to make good profits, then naturally the stocks of these firms will enjoy higher value as the expected return is higher. There is already a hive of activities on the ground as evidenced by the increasing traffic of people and goods and vehicles, and meetings and negotiations. When this is observed, punters will quickly surmise before the accountants have audited the books that business firms will report good profits, and they buy the stocks ahead of the results. In simple English, when people expect profits to be higher in the foreseeable future, they buy stocks which resulted in an increase in the price of stocks today. Expectations about the future have an impact on events now.

This is human folly. Punters and stockbrokers (and nowadays unfortunately including politicians, central bankers, commercial bankers, merchant or investment bankers) are keen to see a sustainable rise in stock prices, ostensibly to augur well the underlying real economy but more likely to profit themselves monetarily (and momentarily) for the purpose of raising funds for their own private projects collude to induce a "rally" in the stock market by talking and raising expectations. This exercise is now being legitimised as "policy" on the rationale of "building market confidence", thereby provided a path for all lies to be justified on the basis of it being good to the general public as it builds optimism. In recent years, during dull periods in the economy, several such "rallies" have been concocted and they have come and go as quickly as bubbles (a word applied to the market for good reasons), without causing as much a dent on the underlying real economy.

Extended folly. This folly is now extended even to the sacred realm of investment. Of course, this folly was started by Mr. and later Lord Keynes who thought it morally imperative that the government should "invest" even if "digging holes in the ground and filling them up again" just to create jobs when masses of people are unemployed. There is of course between a welfare state of giving free cash and food to hungry people and undertaking a policy where everybody pretend they are working when in fact they are being paid for pointless activities. Such pointless activities in modern times have evolved by cleverly to doing shoddy work by contractors who do bad jobs on overspecified government projects. While some would argue that at least something is built, but that something can be a white elephant or, in budgetary terms, a capital expenditure that can incur an unsustainable stream of heavy operating expenditure when instead a stream of profits should have been flowing. This folly has now gone to private investments. Although the "private" part of the investment may in fact still be government or quasi-government, especially after a period of a dull economy and government overspending has caused a dwindling of the small and medium size businesses and a corresponding rise of government-sponsored monopolies that systematically crowded out the private sector in a series of raids on privately profitable businesses ostensibly for social benefit but resulted in private individual privilege. The problem with private investments, especially when we are talking about the robustness of an economy, is that if you can count the private investments, then the private investments are likely to be lumpy, one-off and probably having more of an enclave character than pervasive effect on the economy. Do not be surprised if the general public does not understand those big private investment numbers in the way that the propaganda masters would like to convince their bosses how well things should be going on the ground.

At the personal level, the folly is common. Individuals, wanting to make it big in life, try to give the impression that they are already doing well by borrowing money to dress well, entertain well, drive well and live well. Many a time, the ruse doesn't work and these individuals often find themselves in debt, and thereby resorting to lying and cheating to "avoid trouble" and end up causing misery to everyone who is unfortunately to encounter such characters.

So, what is to be done properly in real life for the economy?

The government must be unobtrusive, in the sense that it is doing good work in keeping the government machinery humming but everybody just assume that that is the way the world works (when in fact it is just another piece of machinery that needs constant maintaining and upgrading). When the people take the government for granted, then they can begin to dream to kill their boredom by cooking up some activities which will engage them and the general public. Bankers are so bored that they welcome any new ideas to try to see whether they work. This dullness and boredom come when credit expansion is slow and there is no digression into collateral-creating expansion which is self-serving and mindless. Then, bankers and ideas people have the time to sit down and dry run the proposals to make sure that they are sensible at least on paper.

In the present world of smoke and mirrors, everybody is running madly around seeing their own reflections in hazy conditions, filled with fear and uncertainty but plenty of activity. They should realise the room is empty despite the smoke and mirrors and they should sit down quietly and do some real work.

Structure, Structural Breaks & Paradigm Shift

2011-01-26T11:52:00.002+08:00

At any one time, every thing we see in life operates in a system around a structure, or more precisely in their own individual systems around their own structures which are all interconnected into a bigger or macro system which may now be stable or in a state of change for the better or for the worse.

This applies not only to the natural world, but also permeates our social world of country, community, family or person, as well as artificial constructs such as the economy, international trade, the monetary and financial system, the electronics that everything else now relies on, the source of power be it political or electrical or mental, and a whole range of systems that may or may not have a seemingly longer life than that of humans.

The issue that is most interesting to me here is how long can a given system lasts, and under what conditions will the system fail. How do we know whether the system is just going through a temporary phase of slowing down or resting or simply just closed for maintenance, or that the system has now finally broken down and that any repairs may be pointless or too costly and it is much better to modify or change it to a completely new system or structure in order that it can accommodate to new demands made on the system or new conditions that have arisen such as the rise of human consumption because half the world does not want to go hungry anymore, longer life, global warming, rising waters, and a host of other things which earnest environmentalists would now want to arrest by asking the world to stop growing.

Part of the reason for wisdom is hard to come by and un-inheritable from parent to child, is that the world does not go through endless rounds of the same through historical time. We are told that the sun is dying at a billion times slower than individual human lives and the sun could still exist when dominant life on earth now of humans may be overtaken by that of worms or some hardened back crustaceans. That wisdom can usually be summarised as foolish things that one should not try to do because it is pointless and won't change a thing in the larger scheme of things, although by natural instinct for survival one is inclined to try to do something however foolish it may in the end proved to be.

So, in the area of economic policy, we may be so inclined to save the existing system or repair the current structure, because this is the world which we are familiar with, or that without maintaining the status quo too many people will become very unhappy as their expectations will be destroyed. It is usually at this point of inflection that public opinions on any issue are most varied and intense, simply because at inflection points signs and evidences can point either way. Everything then boils down to where each stands when he or she looks at the signs, and how he or she interprets them which is unusually according to his or her life history.

It is also usually when we are looking at megatrends and megastructures that different emphasis or insights will give a different reading of the underconditions which are usually unseen, and to make an assessment as what the next step of development will be. In this matter, there is only one proof and that is the proof of reality - we just have to wait and see.

The value of a judgement - this is why people are paid most when they can say what the next stage of development is going to be, in almost any field - is therefore of paramount importance because when things actually happened, it may be, or it is, too late to act to save the day or lives. The value of that forward judgement is the futures market for insights and wisdom.

I therefore very much prefer to state my views as clearly as I can, so that I can be proven wrong clearly by reality, and let other people with their own insights and wisdom share theirs with the rest of humanity if they so choose to follow those views. The fun is in the variety, to see the kaleidoscope of views from the eyes of humans, and I am very much put off by those who, in putting forth their tiny views, insults others who hold dissimilar views.

The challenge in prediction is not to predict a straight line, but to predict the next breaking point. We want to know when the old structure breaks, and how the new structure will be formed. Philosophers call this a paradigm shift. Others call it out of the box of the old paradigm or old structure. When does autumn turns to winter.

Paradigm & Strategy in Economic Policy: China & US

2011-01-24T09:01:00.002+08:00

China and the US are operating in two different economic paradigms and are applying different strategies in achieving different economic objectives. Who will succeed? Is there a battle between the two giants?

Bear in mind that the economics is only one element in the whole array of political considerations. Being brought into the picture are issues such as human rights, freedom of speech, freedom of assembly, flow of information as well as the environment and the system of government.

But, by and large, economics remains the lunch pin of all systems - the mandate of heaven, as it were. So long as the people do not suffer and there is no blatant abuse of power by the ruling class, the general popular will leave the power brokers alone. But then what do you do when the mandate of heaven is not derived from the people but from the power elite of another nation which wants to spread its brand of organisation, and hence its idea of how things should be done.

Central to the whole balance must be that between economic prosperity and political power.

The hardest thing to do in real life is how to promote and maintain the prosperity of an economy or a nation. The European colonists had discovered that the best way was to conquer land rich in "wealth" which were metals and later fertility of soil and minerals to feed the factories of the industrial revolution at home. The Japanese attempted at conquering as well but failed and later also resorted to the control of raw materials as well as markets, with innovation in the manufacturing technology.

The US started with conquering the lands of the red indians, being a colony of the British and then a master of their own markets which then set off a string of innovations for domestic markets, before embarking on a global expansion. The Chinese were also insular and kept themselves to themselves, relying instead on ancient green innovations which had served them well for thousands of years until they were overpowered by the industrial revolution. The opening up of the economy helped to kick start their climbing of the industrial technology ladder which they paid for by exporting the sweat of their workers - which upset the prevailing global economic balance based on American sense of fair play and benevolence when the global balance had tilted in the US favour. When they could not withstand the Chinese export onslaught, instead of competing through greater technological superior (which the Americans claim they are), they sabotaged the global economy by the incessant printing of paper money to pay for their imports and to keep the US economy afloat - with inflationary pressures mitigated to some extent by cheap Chinese imports - in order that the US presidents that the chief of US federal reserve could continue to stay in power, albeit for the second term. It is this so-called monetary easing which broke the conventional economic paradigm and which the rest of the world must suffer (including Malaysia) - and which the Chinese has refused to be live with.

So much is at stake. All that the Chinese has worked for for the last twenty odd years in accumulating the foreign reserves chiefly in the US dollar is now being threatened to come to naught - and this has brought a huge realisation to the Chinese about accumulating their wealth in fiat money issued by a foreign power. Not only do they enjoy the sweat of the labour of your people, but after having enjoyed it tells you how wrong you have been in making your people labour and in accepting the useless fiat money which they give you in return. On top of that, they ask you to tighten your pants in order their trousers do not fall off.

So, China and the US are in two different paradigms. China is now on a technological ascent, which means that its output can only increase. But it must undergo a structural shift in its production matrix - away from consumer goods which it has already mastered and towards intermediate and capital goods, including defense. This will shift employment from unskilled but extremely diligent labour from remote farms to the millions of educated and trainable graduates from their universities. Wages and salaries will go up and this has to be matched by their value-add. In this way, production will be geared towards domestic consumption, as in cars, houses, consumer goods, food and entertainment. With the urban more able to spend, farm produce can fetch better prices and this will enrich farmers and keep more people in the rural areas.

The greatness of the Chinese people is their immense ability to adapt to rapidly changing conditions, no doubt helped to some extent by their greater degree of tolerance of hardship strengthened by their determination. Every single person is apparently a versatile putty which can mold itself into any configuration as dictated by the market. The Chinese people appear to be typical rational economic man envisioned by the neoclassical economic models where there is infinite flexibility and adjustment in the system to any perturbation or shock. (In this sense, there is nothing surprising that Keynes thinks his theory more general when price rigidity is coupled monetary policy impotence. Unfortunately for Keynesian policy, fiscal policy is also impotent. Are we then back to the classical model of the real economy driven by technology and productivity growth to keep the growing population happily and fully employed?)

The two paradigms that we now see China and the US economies in are therefore nothing more than the pure economic dichotomy of the real economy (China) and the nominal economy (US). The real economy is ruled by technology whereas the nominal economy is ruled by the central bank. This happened because China has managed in a matter of two decades to cannibalise the technology not only of the US but also of the world which therefore makes China the central of world technology. China may not be as clever as Bill Gates in coming up with new technology but China can be as savvy as Steve Jobs in combining existing technologies to produce everyday applications.

Strategy. Would then a monetary solution by a revaluation of the yuan against the US dollar solve the US budget deficit and unemployment problem? Unlikely. A revaluation of the yuan may in fact be good for China by forcing China to accelerate the process of domesticating its economy, and may reduce the cost of imports particularly in the luxurious food category which is likely to benefit the Europeans than the Americans. The US will continue to suffer from its inability to bootstrap the economy which may force it to exert greater pressure on China - and which it has - and it is likely that up to a point that China is going to resist that bully - and it has.

The US now has come to the limits of its policy option of bullying its major trading partners to adjust in order to solve its domestic economic problem. The problem with the US economy is that the arms industry has refused to die a natural death as a result of the end of the Cold War which has seen economic devastation in Russia, and it is inevitable that the US should also suffer a corresponding economic adjustment, probably not as intensely as Russia, but it must still suffer. Instead, the US tries to patch that vacuum created by the end of the Cold War by inciting more hot spots in the world to engage in warfare - particularly in the Middle East.

The Obama administration seems to fall away from this strategy and hence this renewal of economic dialogue with China. For Obama, this must only the first step towards solving the US economic problem, but it must not be the only step or the only strategic direction. Obama must use the Peace Dividend from the end of the Cold War to take care of the second class citizens in the US society.

In the meantime, China only needs to concentrate on how to redirect its economic growth, maintaining the vibrancy of the coastal cities and spreading the economic prosperity up the riverine towns.

Creativity, Strategy & Ignorance in Economic Policy

2011-01-20T09:00:00.002+08:00

How creative can one become in formulating economic policy? I would say, Very!

There are many layers of an economy that the policymaker can focus on. And one can simply choose one particular layer and be deliberately myopic.

Policy can be focused purely on consumption or production, the focus on one will have an impact on the other. One can become increasing adept at consuming or producing or making things. I would say that each one of us spend our entire lives perfecting the art of consumption or production. While we may think that we do all of that - work, eat, sleep - the share each component in our lives defines us, or rather our daily routine. Salary workers spend all their time working, with little time to eat or sleep. Those with cash spend all their time figuring out how to eat, and little time to sleep or do anything productive.

At a higher level, policy can be formulated to define the type of economic system that we prefer to live in or enclose ourselves in. Thanks to Adam Smith who popularise the exchange economy, there is no need for conscious charity and generosity - the world can pretend to do good when it is greedy and selfish - and in the end unfettered capitalism produces the ignoble result of global destruction.

In less enlightened societies, the focus on religious or racial characteristics - attributes which individuals can do very little about, being caught in the torrents of history - as defining policy pivots suffers the problem of being caught with results which are produced by the initial assumption made.

Strategy is therefore nothing but the self-restraint one puts on creativity.

It is the deliberate limiting of the global stage that we, like "creating" a bonsai plant, twist and turn each and every little branch and twig to produce a deformed product which we all then try to admire its twistedness.

In olden times, or rather since times immemorial, the object of dominant people is to invade and steal the fruit of other people labours - for our own benefit and at their expense. This is what we all dream of - the abhorrence of labour - and the only way that this can be done is to create a situation where the unfortunate will have to labour to the delights of others. This is in fact the real heaven that we are all secretly seeking in this dusty earth of ours.

But, alas!, how dismal. Simply for the pleasure of a handful of individuals, whole societies and communities are mobilised to dig up the earth to extract what we need for the moment and to throw away into the naked environment distilled poisons which we do not know how to use for now, and in so doing producing an environment that we all fear to be in.

The mass production of cheap and useless consumer products by the world's most populous nation demonstrated how those who slave do not have the pleasure of enjoying the fruit of their own labour. This is clearly an misguided policy.

The strategy to alter the demographics of a society by importing "young, educated and productive" new citizens in order to cure the ills of an aging society is one that is fraud with danger. The strategy is focused purely on the management of an informal whole will ignoring the condition of the individual constituents. The aging and the infirmed will remain so by the sheer force of nature, while the new, young and energetic will take over and create a sense of vibrant which the underlying layer of the aging and infirmed is unable to defend or retaliate. There is no salvation of the individual.

The degree of self-deception that policymakers can go is amazing. That household debt is now as much as half the national income and deemed to be a non-worrisome "even if it does look like a very big number" is nothing but an attempt for officials to pull wool over the eyes of the public. This is the result of banking ignorance, as they veer deep into consumer lending, unable to revive the budding corporate sector.

Creativity, Strategy & Ignorance

2011-01-11T15:35:00.002+08:00

When we try to think creatively, we can try to think in two ways: (i) modifying within an existing paradigm (such as applying different colours to the legs of a chair) or (ii) thinking in a completely new paradigm (such as sitting on the ground or anything else but a chair). There has certainly been plenty of creativity in the ways human beings (and other creatures and plants) live or adapt to the environment in which they live, and probably it is this creativity that is causing the greatest grief among people, especially if they cannot accept the fact that other people can be very happy or at least as happy as they are in living completely different ways of life. The problem is usually the tendency by the majority to impose its preference on the minority (or in some cases, for the minority to impose its preference on the majority). And such tendency is usually championed by the leader of the majority (or minority) in his or her capacity as the leader of the whole multi-varied group.

Strategy is narrower and not as free range as creativity. In strategy, there is a narrower focus of trying to win in a tussle. While creativity is freer in that it tries to explore the advantages that can be got from a situation, through cracks and nooks and corners and other exogenous and endogenous factors hitherto unrealised. Specific advantages have to be brought to bear on a specific situation with the specific objective of winning - this is the purpose of strategy.

In race relations, open minded societies see new ways of living as alternate forms of living and such creativity therefore unleashes a new horizon for life. In race relations, the application of strategy by a particular group to win other groups in the battle for power for the sole purpose of abusing that power is the crudest and the basest use of intelligence. The application of strategy on one side triggers off the use of strategies by everyone else, as each tries to gain dominance over the others. While the protagonists win or lose, all the soldiers forced to fight the sides are usually all doom to die in anonymity. Strategy is necessary in a sad world.

There is a tendency to take ignorant men or women as geniuses as if they really have thought out of the box, when in fact all that they did have been to go where angels fear to tread. A fool comes in and destroys the status quo by the force of arms or law, without realisation the full cost of the destruction. It is very easy to make great change quickly - such as by breaking a neck or chopping off people's legs. It is many times much harder to bring about change in an imperceptible manner. The world simply has too many fools as politicians.

Creativity: Monochrome vs Colour

2011-01-10T11:58:00.003+08:00

It is well known in photography that so-called artists prefer to shoot in black and white or monochrome for the simple reason that there is no colour to distract the focus of the viewer and that the focus of the subject can be brought out much better and quicker.

While we talk of black and white, there is no such a thing - there is black and white and all the shades of black and white in between. Black and white is also called monochrome to suggest that there is one colour and all the shades of it. Is that colour black or is it white? Of course, from science class we know that black is no colour and white is all colours mixed. Would monochrome then be the result of different intensity of light or whiteness? If there is different shades of whiteness, then white (which is a combination of all colours) is a truly integrated colour where there is no separation out into any of the components (primary) colours even when the whiteness is being diluted out in various shades.

It would then appear that monochrome is a truly integrated colour and that while there are shades of it, it does not discompose into its constituent colours.

In the realm of the human race, while the human race - apparently descended from a man and a woman (Daoists would generalise it into yin and yang) or from a family or from a small group of survivors of the last earthly environmental catastrophe thousands or millions of years ago - have evolved to the many shades that we now see in the faces of humanity on earth today, how then do we begin to see humanity as being the same.

I suppose that in monochrome, we would distinguish humans from non-humans. It is quite easy to say that the mountains and the rivers, the trees and the birds and the animals are non-humans - the conclusion of which unfortunately leads humans to the mindless destruction of non-human nature and the environment in the name of saving the human race.

The difficulty, even at this stage, leads us into the realm where humans are not so clever - that of ghosts and spirits and souls: are they humans or non-humans? Most mere mortals choose not to dwell on this, and it is quite clear that the only difference is the availability of a physical body - and if this is the case, then a human is being defined merely by the features of the physical body - which are most likely to be features that are most like our very own.

Hence, there is this great emotional affinity to people who look most like us or those whom we know. As features become different merely by the different sizes in relation to the rest of the body, even in monochrome, one group begin to distinguish itself from others. Layer by layer, each group finds the reasons to exclude others from their clique - so long as that group is trying to protect its environment for its own economic survival. Of course, if there are common interests to be shared or exploited, there will be an attempt to look for the commonalities from the same features that have been used to try to make distinctions before.

While we bring in colours to the pictures, while the whole picture brightens up, there will also be more distractions and more differences seen. The red begins to make itself different from the yellow and the blue, and the white tries to think it is a superior colour to the black. The common heritage of the human race or even of the living nature is easily all lost as more points of differences can be identified.

Through the eyes of a monochrome expert (Henri Cartier-Bresson or Ansel Adams), the colours are there but the black and white allow emphasis of the subject. Through the eyes of a colour expert (da Vinci, John Constable, Picasso), the colours are used to brighten up the frame but the subject still stays in focus.

In the hands of amateurs, we usually see a mixed up of the subject with the colours or lack of. There is a tendency to over-dramatise or the failure to provide a theme. In the end, we see a confused state, and everybody talking at cross-purposes.

Especially in a multi-racial society, I think is very possible to paint in monochrome and create a great theme, as well as to paint in colour to emphasis the vibrancy along the same theme.

Creativity: How New Can The New Year Be?

2011-01-05T14:06:00.002+08:00

I am feeling a bit guilty for having stayed away from the computer for so long during my year-end holidays, so the title to this post does look to be a bit challenging and probably involved.

As you may have noticed, I seldom - well, never - acknowledge any holidays or festivities as they all seem to be so the same as the last one - or, the one yesterday except probably for a bit more devotion to food and drink - or drinks and a bit of food.

My friends had, I suppose, great fun in sending me stuff like 1.1.11 as the last 10.10.10 - and my mind just does not compute - cute, yes, but what is the diff.

Since I am not a farming kind of person, the yearly cycle doesn't really matter. Whether it rains or shines - or neither - my concrete laden urban life where everything I dare to touch or do threatens to destroy the world makes me live my life guilty as hell. I now feel like the ancient ascetics who dared not walk for fear of crushing the poor insects that are invariably caught under their feet. (They probably should have dare not breathe for fear of sucking the invisibles through their nostrils - or they should have allowed their wounds to open and not heal so that some worms may thrive and life a long and healthy life.

Somehow, the new year always opens with thoughts of self-improvement - which often leads one to self denial and apply self restraint so that everything that one consumes is reduced by 5%, 10%, 20%, 50% or even 70% if things are severe enough. As in the retail line, a 70% discount is a recovery of cost of item but not of overheads which can only be covered with at best a 50% discount. Any discount less than that is still profitable.

Would such discounts then apply to the budget deficits of individuals and nations, although I have in my mind all the time thoughts about losing weight, doing exercises, improving diet and quitting the infusion of things considered by the health industry to be poison.

A slim down year across the board, however, is no good for aggregate consumption and countries round the world continue to press harder on the accelerator to send more money quantitatively through the system even though the arteries may all be clogged up with plague and other life threatening stuff such as corruption and ruptures from terrorism.

After decades of rapid growth and near full employment, a really new year should, economically, be one when a bit of magnesium sulphate would have done a marvelous job in purging the intestines but no! the grandma would still like the little helpless but plump and chubby and instead insist on force feeding the hapless balloon. A really new year should be a year of a slimming economy.

By slimming, one is really talking about bringing into more realistic propositions sectors that have already been overfed with liquidity - personal credit, personal consumption, real estate, private transportation, as well as public consumption and public mega infrastructure works.

To really break out of the box, one must push one's head through the wall and come out into a new paradigm and its new frontier.

Where can we find it?

It is right here in our brains, when we have our ideas and think that we can pursue them in order to break new grounds.

I shall now take a few minutes to lampoon the biggest culprits of the current economic mess - incompetent bankers. There is no talent in lending to those who have physical assets as collateral, preferably real estate and false hopes as in stocks and shares. Recent history has shown us there is such a thing as asset bubbles across the asset portfolio, and banks have proven themselves not to be immune to the wholesale destruction of their balance sheets by some incompetent bankers at the top drawing big salaries and huge bonuses based on imputed profits - imputed because the loans that they have disbursed have not been fully repaid. It is the great potential for a bank to become a pyramid schemes that banks have traditionally been managed prudently like Shylock the moneylender. Instead, we have Santa Clauses throwing away the public's savings to politicians, thus undermining the greatest illusion in modern society called the money system.

My view is that the only way out is for small banks to lend to small businesses and hand hold them so that they can grow big in new businesses where big businesses do not know how to go.

I have no fondness for big brands - those in similarly modern shopping malls are probably the most mind deadening design and concepts that one can possibly imagine in this hi-tech world - fueled no doubt by mass marketing so that the only thrill got from wearing something that the average consumer can recognise to be the same fake sameness - like that which also happens in the world's oldest profession.

Our banks are dull, including those who are supposed to look after them.

So what is new for the new year with a new paradigm - let a thousand ideas bloom, and let they be financed - on the basis of their ideas.

I will also spend a few minutes paying attention to cheats. I do not mind clever people and I do not mind not so clever people - they are all part of the distribution curve that nature so wisely choose to endow mankind with. However, I do mind cunning people who sell adulterated stuff in order that they could climb on top of the masses whom they lie to. To say a thing is good when it is bad; to say a thing is bad when it is good. Such adulteration is called the corruption of the nature of things and such people be weeded out from the system. Once the weeds are killed, the beautiful ones will bloom.

Creativity: Individual vs Group

2010-12-09T09:35:00.003+08:00

I have tried to show in the last post how the behaviour of a group of individuals can be very different from the behaviour of an individual.

The simple search for food becomes a problem when the group has grown so big that there is starvation at the margin, which then gives the core individuals greater fear of an impending resource scarcity that they begin to accumulate for future consumption which, in a monetised economy, becomes a folly as, instead of accumulation food sources, they accumulate tokens (otherwise called money). Of course, that folly is the result of the evolution of society - the matrix that smart people create for themselves by making use of the trusting ordinary public and in the end get caught in it themselves - where happiness has become from the consumption of food to the consumption of other unnecessaries. The growth of society then becomes dependent on the production of the unnecessaries whose depend is based not on real needs (if I don't it I will die, literally) but on bank credit and what the neighbours have. The layers of the delusion multiply. The limit to that expansion of unnecessaries is the limit of credit expansion, defined when loans default at a rate that the interest margin can cover which is very little especially in a period of near-zero interest rate. The matrix gets into a ponzi-type scheme when more new money is printed to fund old money at a rate which is in excess of the rate of expansion in activities related even to the production of the unnecessaries which may be at a rate of expansion which is unable to absorb new entrants into the labour force.

In a more equitable world, the objective is to create a society where every individual is remunerated at roughly the same rate of pay, and this is found to be a society made up of professionals - where everybody comes up with their own schedules of fees. That schedule is the rate of exchange of different services. For a more egalitarian society, there probably should be an abolition of the discrimination certain types of professions such as toilet cleaning or housekeeping or blog posting. In which case, if everybody is equally good and equally demanded, then with everybody getting the same income, it is unlikely that anybody will be able to afford to pay any other person to do a part of his or her chores without being severely handicapped financially - but then, in that world, there will be no need for that service provider to offer his or her services to his or her neigbour because he or she is not in financial want. In a truly egalitarian world where everybody gets the same income, earned or otherwise, there is no incentive to do anything for others, each will do his or her own chore, and each will eat his or her food in silence alone.

The great interaction in society, and why society evolves in the first place, is inequality - which in economics is called disequilibrium - which in physics is called the potential difference or polarity - where the attempt to achieve an impossible equilibrium (of silence and non-activity) results in incessant activity. In economics, that restless activity is called the Gross Domestic Product or GDP. In modern society, the objective of politicians is to try to increase the rate of incessant activity among the people in order to keep them occupied (for if they are idle, they will march down the streets for change which is always possible), and this is done by creating a greater disequilibrium. The tradition method of creating economic disturbances is to get the minds of individuals to come out of the tranquility of the meditation and god-aligned frame into one of great dissatisfaction so that the intensive activity of the mind leads one to come up with all sorts of weird ideas and this din is the mind is celebrated in modern society as the way to prosperity.

As in nature where the group exists to protect the individuals in the group, in human society the social fabrication through its customs and culture seek to protect the individuals by seeking their conformity. In successful societies, conformity to the social convention is paramount but that success may not be growth of happiness but the continued existence of the old group. In newer societies formed from the dishevel of modern times, usually because of war but sometimes because of famine, the coming together of peoples from different cultures sets a renaissance in the creativity of human existence where the multiple disequilibrium points allow for a great multitude of cross traffic of ideas of how to live and what to do in life, if that traffic is not stopped by bigots who police the thought process of the people. Inevitably, the first and second generations may be still want to cling to their old comfort but we can expect, if left to their own, the young will think anew their taught way of life, and forge new identities with their school friends and neighbours. With it, new levels of existence - which may be away from mechanisation and the modern sciences of despoiling the environment, but the sharing of new understanding of their heritages.

Humans, Environment & Investment

2010-12-03T08:24:00.005+08:00

I have taken several minute steps in the last few posts to put humans in proper context, and to show how the many invisible layers have been built up over the millennia as the human specie struggle for survival in this world.

I must say what a woeful lot we humans are! It is the madness of crowds, the whole colossal folk dashing here and there migrating and spread like cancer in search of its own preservation but only find itself painted in the corner. That paint is the deforested environment which becomes uninhabitable to all but sand and a few lizards.

The race out of the garden of eden into the big wide and wild world has set the rate of growth of the human population against (a) the rate of growth of agricultural output and (b) the rate of decline of the forest and wild life. Thomas Malthus was right. The size of human population on earth will be limited by agricultural output ultimately. That limit may be a long stretch away. In the meantime, there is a dynamic interaction between the two: population surge following new discovery of food production which encourages the population to overshoot food supply, adjusted by hunger and disease and famine.

Probably with such a history embedded in our genes, we find ourselves unwittingly living in perpetual fear of inadequate food. This great search for certainty in an uncertain world creates the world and society as we know it to be today. The incessant urge to save and investment in the future that is already here.

In the world of goods, to save is to set aside some portion of the current output for future consumption such as by salting or sugaring or fermentation. That preserved food can actually be eaten tomorrow when it become rainy. There is no waste. When there is overproduction in the current period, and when the preserved food is in huge surplus, the most logical response is to take a break from work, do some maintenance work, and spend the leisure drinking and dancing and telling stories - activities which are collectively called "culture." There is a constant adjustment between output and consumption and saving and investment.

If food is taken out of the forest, the most logical step is to protect and preserve the forest so that it can continue to sustain the community. But we know that a finite forest can only support a finite community because hunger and war break out. At this limit, Malthus is spot on. This means that, at the limit, there is so much preservation of the forest can do for humans. In the meantime, any limit that is felt is determined by technology and human knowledge of how to extract more from less. This can be seen as a fact, and we simply just have to accept it. But even so, the community must protect the food source from selfish greedy individuals who may have no qualms about destroy the food source thinking that he or she can stored it off somewhere purely for his or her own consumption. In nature, any other method of storage apart from leaving nature alone is foolhardy.

This problem of the short-seeing long-sighted selfish person is compounded in a world of tokens (paper or commodity money) where its special quality of not decaying physically (because it's a computer number or a piece of metal) may create the illusion that accumulation of pile of metal or paper or a larger number on a computer is the way to go into the future for generations. All things lie in the present, this accumulation of uneatable assets is being balanced against the liability of persistent destruction of the environment (by chopping down trees or digging up stuff or polluting). This is being gleefully done today by warlords with the collusion of multinational firms and global finance.

At the same time, the overproduction of goods (unsold inventory) or services (unemployed workers) is being happily ignored and misinterpreted - with the later overproduction (unemployment) probably from good agriculture or bad education is being used as a basis for further overproduction (of goods) which floods the world both in terms of huge quantity, low price and bad quality. And central banks continue to churn out the tokens.

In this world of mindless pursuit of economic growth, we are drowned in a sea of useless constructs. The rich becomes very rich and the poor becomes very poor, all within the economic system that we have immersed ourselves. We have to get out.

Creating The Economy & Money

2010-12-01T11:07:00.006+08:00

I think we have now come to a stage where things may be a bit more familiar to the reader - in that we shall be dealing with issues that are a bit more mundane.

We have now gotten out of ether and universal consciousness and into the world of form, of individual physical entities. As an individual born with a stomach and a sexual reproductive organ, our true calling is to each and to procreate. The sex part is quite intuitive and I shall not be dealing too with that because it has been very well treated by the arts. I shall instead delve into the eating part.

Stage 1. Humans and Environment

In my version of the art of war - of war between humans and non-humans - a person stands alone in this world and ask: What is my next step?

In my little garden of eden, the next human step is to stretch out the hand and it shall be provided by the fruit of the nearest tree for sustenance. But even in paradise, there is need for knowledge, for some have eaten the fruit and lived, and some have eaten the fruit and died. Distinction comes into being - between the fruit that gives life (edible fruit) and the fruit that takes away life (poison). Which this distinction, one can be creative in the identification of food. The community that succeeds in finding the best way to classify food and poison becomes the most thriving one.

At this stage, it is still possible for humans to stay put in the original state and stand naked with outstretched arms and be provided.

Stage 2. Population Growth and Food

Stage 2 is when the population grows and there is pressure on the supply of food. There will come a time when what nature provides in the vicinity is insufficient for the growing population, and the only concern of the human race is food. This is as if the human race has been cast out of the garden of eden. Food is no more a sure thing for the existing population. The option is to fight for the existing supply of food (those who fail die), or to migrate out of the community into the big wide world and hope for the best, or to be find ways of increasing the food supply from the same existing immediate environment. By the way, all these three options call for some degree of creativity - to think out of the box, meaning to think differently from the traditional way of looking at things, as well as doing things and handling things.

Creativity in fighting for food requires the acquisition of power, the art of war and the organisation of slave labour.

Creativity in out migration requires the construction of the means of transportation, communication, organisation of autonomous societies, the saving of scarce resources, the investment in useful knowledge and contraption, the art of living with different cultures.

Creativity in the production of food in existing environment involves conservation of the productivity of the environment, the consumption at necessary levels, the preservation of surplus food for the uncertain future supply or increase in members of the community.

Stage 3. Social Organisation

In moving out of the garden of eden, there is a need for organisation - which in the primary stage will involve sacrifice by members of the cooperative to do committee work and in the secondary stage a group of professional organisers who are paid out of the communual output for them to tell the community what is the best way to organise themselves.

This organisation leads into the problems of how to get that portion of the output to be paid to the non-production team. One method is to fixed the portion in quantity terms, another is to pay according to tokens the quantity of which may be fixed or not, and the number of tokens may or may not match the quantity of output available for exchange. All these issues lead to the problem of the economy concerning production, distribution, consumption and the supply of the money stock and the demand for money, as well as price of output and the interest on money should lending and borrowing be allowed. The very simple problem of organisation of human society in as non-violent way as possible leads to arms-length and informal dealing that are signaled by price (or the number of tokens).

It can be seen that the economic system can be corrupted by the pursuit of the acquisition of tokens as an end in itself (thinking that these are valuable) and if not realising that valuable necessarily means hard-to-get, some token control authority may try to ingratiate himself or herself to the political masters in the guise of trying to smooth the production of output without being blamed for any hardship that must arise with any attempt at adjustment (i.e., getting some people to work or work hard or work harder) and end up printing more tokens and distributing them to the political masters (quantitative easing) so that the political masters may suffer no inconveniences while the general public may have their consumption curtailed as a result of inflation.

Coming Into Being: Reinventing The Self & The World

2010-11-30T08:51:00.004+08:00

Reality is immense. Reality exists with or without us.

This is the utter truth which wise men through the ages have been trying to say to human beings of all ages. This reality is the perennial background of the story of mankind.

Against this ultimate reality is the narrow perception of the world according to individual human beings.

We come into being the moment we gain consciousness.

This is regardless of the view of other people of us. They may have seen us toddling around at infancy but we may remember nothing. We remember from a certain age and it is that certain age that we have our consciousness - and memory.

As we grow older, wisdom comes as layers and layers of consciousness - our realisation of the different aspects and degree of the perennial reality.

But there is a difference between the moment of consciousness/memory and the moment of our realisation of the different aspects and layers of reality.

From birth, we are conditioned by our caretakers to survive as a member of a social unit and as a specie. It is only when we come into realisation that we are each an individual that we come into our own individual being. Instead of being a pre-programmed robot, we try to re-programme individual ourselves. It is that tweaking of our in-built programme that we come into our own being, in the way of imagine ourselves to be.

As a result, we also reinvent our own world. The larger reality exist by itself irrespective of us, but the way we see the world and the way we interact with the world is defined hopefully by ourselves, but most of time by the society in which we find ourselves in.

If we disagree with our pre-conditioning, then we have know how we want to re-condition ourselves by the principles by which we want to live and by the habits which we want to cultivate. This is where all the talk about the examined life and the cultivated or cultured man/woman comes in.

In redefining our individual selves, we are in fact putting our selves together to make ourselves an individual whole. This recreation of self is necessarily ego-centric. But the existence of self does imply that one will be selfish although one is likely to be. The existence of the ego does not mean that one has to be egotistical. The sharing of self with other selves is not selfish, although it may be seen as egotistical but it is really up to the individual to know and deal with it personally and privately.

Once the self is sorted out, the rest of the job of living is simply to survive bodily with the least psychological stress. This is contentment and happiness. The self is settled and one can sit quietly and permanently like a stone, without a care in the world and most likely without a thought of any kind.

But the moment a thought enters the mind, mental activity takes place - which is likely to be concerned with the external physical world, and with the inconveniences and aesthetics of the body and with the problems of the cohesion of societies. This is where the inventions of the mundane world come in.

Being Creative, Being There

2010-11-22T14:16:00.002+08:00

It has taken me quite a bit of time to put my thoughts on this one together, because it is an extremely difficult area to treat. What do we mean to be creative?

I hold reality to be infinite, and hence incomprehensible to mankind - man or women of any kind - given the finiteness of our senses. We have difficulty already with what we can see - this is why the early Europeans made such a big deal about their "discovery" of the "new" world. The world is always there, but their discovery belated (and some would wish never). We have already made some discovery peering into the dark skies or deep into inner spaces. Some may even have claimed perception of another world, in another mind or mind-frame. So, in this sense, creating is nothing but the "discovery" of that which is already there in the first place but which our senses have not been able to reach before (to paraphrase an old beer advertisement). So, in this sense, being creative is to be there first, and return to tell the tale. (Unable to return and tell a good story sends one to the madhouse.)

Being creative, therefore, means to have seen another world or another aspect of the world and to be able to describe the "new" world in such a way that human beings can find applications to remove yet another level of uncertainty of life on earth.

For creativity, therefore, I give high marks for the "creation of the world" stories which are probably reflective of the height of human imagination, reflecting the most intense of human anguish. The myths, the religious as well as the so-called scientific, the latter being extremely hard to provide the evidence as well, or to prove or to show concrete results. All "creation" stories and theories are based on faith, religious or scientific.

The importance of stories or theories is that they provide a tentative basis for explaining why certain things happen in a certain way or not in a certain way. They help us to understand ourselves and the world around us, and life as we know it to be.

I am sure all of us are brought up on one set of stories, and by the time we die, we would probably have created our own little stories or amendments to the traditional stories for retelling to our grandchildren (by then, our children would have their own competing stories to tell). Traditions (folk, religious or historical) can have a significant influence on creativity by weighing it down, but for the imaginative, it may provide a fallback for some ways to take flights of fancy.

There are but three ways of trying to be creative. The first is to see a table with an optimal number of four legs, figure whether it can stand on three (which we know it can) or two (which we do not know). The second is to see a table and a chair and try to figure out whether there is a furniture that lies between a table and a chair (you figure it out). The third way is to "dream of things that are not and ask why not?" as per George Bernard Shaw. The third way of course is open-ended, as varied and as far as the mind can go.

If mind is the constraint, then how do we think when we want to get creative? (I believe we are back to square one as far as this post is concerned.)

There is an infinite number of layers of existence right before our eyes, our noses, our ears, our fingers, our being.

I am sure many of us have experienced all kinds of weird stuff in our dreams, and are unable to explain, recall or use, so we simply dismiss them.

It is unfortunate that the stuff which we all acknowledge to be creative are only those stuff which strikes a cord in the heart of every person (and hence comes down as stories or myths) or which could be made into useful products (and hence comes down as stories or urban legends). The genius is the person whom we salute as whom we are not.

If therefore we were to put aside the commercial aspect of life, then I would there to venture that most of us are creative in our way of living, venturing into all avenues which we are not able or unwilling to disclose to the rest of the world, our own secretive world of great intimate knowledge and great intimate feelings and emotions as we explore our own little world to our own little self. This must have been how all the great religious ones felt when they felt inspired by the divine and expressed those emotions in terms which the ordinary people even today tend to hold to ridicule.

The way to be creative therefore is to unrestrained which means also not to seek public approval which means also to be an introvert. So, by definition, the creative world is understated. The only lament that economic and industrial leaders have over creativity is over commercialisable creativity - this lament is more a reflection of greed rather than of conceit.

Be there, and there will be creativity.

Nothing, Something: The Beginning of Creativity

2010-11-11T14:28:00.003+08:00

We have now come to a stage - a state - which, to me, is probably the most exciting. This is the state of no-mind, no-nothing, the void. While it may be natural to think that after death - after the end of something - there is nothing - or could there is anything - what, to me is quite interesting and exciting is that it could be the beginning of something - which I am always inclined to think - that it could be something new.

When something disappears, it disappears from sight or any one of the senses that perceives the thing or phenomenon. It depends on our ability to see or to sense.

If we were to try to understand how things come into existence in this world, it is our own sense of perception, our own sense of detection, and, I would add, the strength of our memory to retain what we have perceived or how we perceive. I am always conscious that there are many things that are happening right in front of me but, if I do not see them, they do not exist for me. Even if I am absolutely mindful, there is still my sphere of perception at any moment and the level at which I am perceiving. There is also the rate or pace of perception - how fast I can perceive at any one time. And I have come to realise that what we perceive, in the end, depends on our mental preparedness to perceive or observe, the sharpness of our focus and the power of our concentration. Or, are we simply just "absorbing" everything into ourselves, as most of us are apt to say?

Against a blank canvass, what comes out or what comes into our minds?

I am keenly interested in this because I try to indulge in this phenomenon called creativity. People are now no more interested in "thinking" - they want thinking "outside the box." They are no more interested in creativity - they want a "new paradigm."

So, how do we go about it? It goes right back to the point I have touched on before in one of my earlier posts about how we think. If I may reposition the sequence of thinking here, we start with (1) Wonder at the world: how to understand the wonders of the world and how to explain them. Myths and stories are then created. This may be considered primitive because it is probably the oldest form of knowledge, but I won't sniff at it because, if we are to wonder at the universe and the immense greatness of the skies as the Hubble Telescope can should us and the immense intensity of the inner world that the electronic microscope can show us, we continue to be dabbling with myths and stories insofar as trying to articulate our understanding or realisation of nature to the person next to us. The String Theory or the Big Bang Theory, for example. Or, what Stephen Hawking is trying to articulate about his perception of nature. They may put old myths to the world, but they themselves may just be new myths. (2) The most arrogant are probably what I would call the "hard" scientists - the "natural" scientists - those who work with data about the natural world. Those data are "hard" only insofar as they are filtered by their measuring instruments. Sure, at that level of observation or abstraction, they can put together what they think is a coherent sequence of cause-and-effect which they called "theory." But, at a deeper or greater level (which nobody knows yet), they could be entirely mistaken - as history has shown. Of course, in the land of the blind, the one-eye jack is the king - which goes to show the importance of knowledge - to know what other people know; or the importance of wisdom - to know what you do not know, and to know what others do not know as well. (3) It is the dissatisfaction with the narrowness of logical thinking that Edward de Bono comes up with what he called Lateral Thinking as a juxtaposition to logic - to show that there is a way out of this quagmire and into the land of the free and easy by having the confidence to link what appears at first to be unconnected entities and with effort to throw away the prejudice and try to look at the essence of each individual entities and find a connection at the core or centre. (4) The No-Mind stuff then takes the mental exercise one step further into the void and see if anything would come of it, not without trying, but without the mistake of putting the hackneyed foremost in one's mind all the time and thereby blocking any new insights that may arise automatically in one's mind with the natural passage of time without any distraction from the mundane world where every little bits and pieces or elements of life may turn into a potentially disruptive spoiler of one's effort to see a new perspective or a new image of the ordinary. Remember, in absolute reality, nothing changes and everything is unchanging, by definition. It is only our mind that changes.

In my mind, it is not easy to be creative, if we want to be strict about creativity. It is easy to do the same old stuff a bit differently. It is easy to do a slight change by modification or repackaging or rebranding - it is still the same old stuff. It is very difficult and challenging to come up with something that is entirely different, for it must satisfy a new thereto untapped demand or desire or fancy of human beings. To be "out of the box", one probably has to be out of the normal ordinary mind which means that one can seek no approval from anyone, not even oneself, if you have not probably understood yourself. This is why many of us buy into new products because you say "This is exactly what I want or what I have always wanted but could not find until now."

It is my guiding principle, when I am trying to be creative, is to use myself as a benchmark as a test as to what is really needed, for if I can satisfy myself, I am sure there will be another who also needs it. I read that Stephen King wrote the horror thrillers because he likes horror thrillers and could find no good horror thrillers for his enjoyment. While market research may be great, but I think there is no greater source of truth or inspiration than the depth of one's own being.

Therefore, when I contemplate death in my earlier posts, I wasn't just thinking about the end of a life or the end of an object, but also the end of a time, the end of an era, the end of an idea, the end of a phenomenon, the end of an economy, the end of a business cycle.

In our current attempt to transform the economy, are we really in the state of a new beginning with new thinking and new ideas and new paradigms or are we still stuck in the same old rut in the same old tattered mat with the same voices crying for the same old milk while the poor maid is trying to pacify those voices by promising that many nice things are coming their way or are surely coming their way? As you can tell from my postings on those topics, I do not think that we have done more than just shuffling feet to make some noise.

I am more concerned with individuals - which means individual readers of this blog and this post - and to be helpful by providing some pointers as to how to get each one of ourselves going and moving ahead, despite the rough terrain that each and everyone of us have to traverse on our own.

I am convinced that the world does not need geniuses. The world has always been run by normal people with average skills and average exertion. But the world does need one and, if lucky, two geniuses to get it going. In the current era, we have seen the wonders done to the world by the many geniuses of Bill Gates, Paul Allen, Steve Jobs, Gordon Moore, Andy Grove, etc., who I reckon are all babies of the Hippy era. So has the current crop of babies, big and small, lived beyond the comfort of their finger-activated otherwise stationary world in front of flickering lights training their little minds to a narrow group of mental signaling traffic. Would the best that they can think of be within that lighted box, or will it be something that is earth shattering?

So, at the point of the void after death is the point of the void of a new beginning. This is the point of the greatest source of creativity, and the degree of the greatness of the creativity will be defined by the degree of the blankness and the degree of the absence of memory of the past but with the greatest attention to what is right in front of our noses.

Existence After Death, and Before

2010-11-08T14:59:00.005+08:00

I am trying to avoid the standard term - Life After Death, or Afterlife - principally because I belief that, after death, life as we know it does not or will not exist.

Life as we know it is life with the physical form for people - and even that I do not think human beings have not even accepted life in all human forms to the same.

So, I think the best that we can try to discuss is existence after death.

Wisdom dictates that we do not discuss what we do not know.

Siddhartha kept what his disciples have called the "Noble Silence" - he just won't not talk about it.

Confucius scolded his students: "You don't even what life is all about, you want to talk about life after death!"

From the scientific point of view, or rather to come to grips with possibilities in the scientific terms that we now understand: Life as we know it is life in dimensions we know - basically sensory dimensions. The blind has one dimension less. The blind and deaf has two dimensions less. The blind and deaf and dumb as three dimensions less. The blind and deaf and dumb and no-touch as four dimensions less. And so on. But there is life as we know it.

Once we die, logic tells us that there could be other dimensions - which are totally different from the dimensions that we do know. Now, this is purely speculative and we really do not know what that "existence" is even if we encounter it.

If that is the case, then we really do not care.

What do we really care in this existence?

I think there are two basic concerns in this existence - this bodily existence, and hence the concerns only deal with the survival of the physical form: nutrients to sustain the body and sex for the continued survival of the genetic proteins.

It is quite interesting to realise that life as we know it knows that each particular bodily or physical form will not survive forever (and this realisation should really knock out lot of nonsense from the activities of some human beings as they waste a huge chunk of their lives trying to prolong their lives).

At the end of the day, it is the prolonging of the survival of genetic proteins that is of interest to life-form in general. While human beings would worry about the future of the human race, in such concerns as over the environment as we know it, it probably should be realised by individual members of the human race that the human race may probably be just a blip in the long history of the existence and survival of life-form.

I have this little theory that as life-form is dwindling in the variety of its manifestations as well as its sizes. I can imagine a time when there is literally an infinite variety of life-forms, from the very big to the minuscule, and that somehow the environment has turned hostile for some or most of them, and the present environment is only good for human beings and some other life-forms. No doubt, the environment will continue to change (I won't say evolve because I do not think the changes are always marginal nor smooth) and human beings will surely disappear from this earth and this world, and all the worldly concerns we have now will also disappear and there will peace on this earth and in their world without the clamour and shenanigans of human critters. (I would like to read the stories told by germs, bacteria and parasites about how they through centuries or millennia have destroyed the evil giants called human beings - which just kept reappearing until some asteroids or other destroyed them for good.)

So, if we are just proteins and other fatty acids and molecules - just as the television or the radio or the handphone or the computer or the internet - then really the existence as we know it is nothing but an illusion caused by the accidental combination of sub-particles which happen to auto-animate and giving the impression to human beings that human beings are really alive - in the way human beings understand life to be. (I can imagine the mountains laughing at the silly human beings, and while having a smoke unwittingly created a volcanic eruption which killed some human beings nearby.)

Our problem is that we choose to see the things we want to see, within the small confines of our narrow perception, and think that the views and realisation - and illumination and enlightenment - that we have derived and obtained for ourselves are such big deals - when they really are not. They do not matter, to us nor to others.

When everything is deconstructed down to their basic components, we are nothing but little bits and pieces that come into shape - and dare I say being - as a result of movement, a shake, a vibration which gives rise to energy - which is a tautology as energy is anything that can cause a movement.

The biggest puzzle for the human mind is how that movement comes about. Who made that first move? Or should it be, how did (does?) that first movement come about?

Some sacred texts say it was a breath. Or it could easily be the release of gas.

Things come into being when conditions are right. But all kinds of things come into all kinds of being as all kinds of conditions exist.

Whether the conditions that come together are the conditions that we want is quite another matter. It is as if we have a say or control. We could be beyond our depth.

My final thought is this: As we do not know where we came from when we were born, we would not know where we would go when we die.

The truth may be that we neither came nor go.

We flicker - and we are lost to the flame.

How I Die

2010-11-03T12:06:00.003+08:00

This sounds morbid, but it really takes me to the dead end.

I have been contemplating for a while whether to get here or not. Now, I think it is necessary.

The grammar looks a bit wrong, but it is not. I don't think that the process of dying is in the future, although death is, for now.

But to die is a process that starts, to my mind, at the age of 40 years - the first indication being the loss of the elasticity of the muscle in the eye and I cannot quite see the subtitles on TV as I suffer from long sightedness - which the experts say is a sign of old age.

It takes a while for me to accept that I have started to die, although conceptually and philosophically it does make one feel heroic thinking and talking about dying.

The Tibetian Book of Living and Dying starts by saying: "To know how to live, one must know how to die."

It is a profound statement and puts life and death as two sides of a coin.

In mathematical economics, one is the prime and the other is the dual - as in: if the prime is profit maximisation, the dual is cost minimisation.

In simple English, it is: To live is to die.

This is all theory. The reality and the practical aspects of life makes things a bit hard.

How does one choose to die? How do I choose to die?

All things considered, the best way is the natural way - which translates into biology means the failure of the most vital organ, the heart.

Heart failure is very different from heart attack. Heart attack is a sudden and unexpected (in terms of timing) contraction of the heart muscle (akin to cramps) which jeopardises the circulation of the blood.

Heart failure is the failure of the heart as a muscle as a result of wear and tear over the years, just like the muscles in the eyes which gives long-sightedness; in this case, the increasing failure of the heart to pump and hence the slowing down of the circulation of the blood. Eventually, the decline of the blood circulation affects the whole body system and it shuts down. This is the natural way to die - and, in ordinary language, it is called "to die of old age."

I know a healthy old man who exercised everyday to keep his heart strong. He had a stroke of the throat, and couldn't eat properly and couldn't exercise. He sat on the wheelchair, and died three years after. Now, I know, it takes three years for a good heart to die. That is the down-side of having a strong heart - it just takes too long for the system to shut down.

The heart attack is a much more self-inflicted way of dying. One can have a heart attack by maintaining a nasty temper at every moment every day, eat plenty of fatty meat, drinks well, don't exercise (such as by having a big nice comfortable car), and be involved with tons of projects all at the same time as a sign of great busy-ness in life and a sign of doing well. Well, to live well is to die well. At the appropriate moment that one chooses, one can just fly into a temper and that's it. End of the line.

Not a bad way to go considering the alternatives. Internal organ failure is quite a nasty way to go - the liver, the kidneys, the pancreas, the prostate, the breast, the cervix. These are problematic because of the heart. If the heart fails first, nothing else matters.

Physical handicaps are tough because one has to contend with the disdain of others in society which as a result can really make an otherwise ordinary life quite uncomfortable by disqualifying the handicaps from the mainstream of society. One just can't get into the game, and therefore cannot participate in whatever everybody considers to be the good life.

Unless one is born with the physical handicap, one can become one by doing gangs that think that the way to live is to dismember each other's limbs as a normal form of everyday activity. Sometimes, they over-estimate their ability to maim and as a result kill which then gets them into trouble with the law which gives them life imprisonment which is really a slow death sentence with a full stop.

The conventional wisdom is that we die by the heart as a result of sedentary way of life and eating "good" food, by having a good degree and getting a good job that puts us in a nice air-conditioned room to sit down for eight good hours a day, except the weekend when we sit in the un-air conditioned room in our own house watching TV. Education therefore gives us an early death of younger than 80 (if 40 is the peak of bodily deterioration).

So those who are considered "poor" and "toil the land in the hot sun" gets to exercise as part of living, eat minimal, and stay slim and tough and hopefully not unhappy - unless badly advised by ambitious politicians whose only strategy to get votes and stay in power and become rich and taking from others is to convince these poor people who are doing well one their own that the grass is greener on the other side when in fact the other side is dying from obesity and internal organ failure of all sorts.

Well, of course, everybody dies and it is just a question of the style of leaving. We think we have a choice, but in the end it is Hobson's choice.

In the end, the only way to die is to die happy - by embracing whatever comes, and smile when the time for us to exit is here.

For those who are into this philosophy and thinking and the only moment is now, it means that now is the moment of life and now is only the moment of death. It's a fifty-fifty chance or, I prefer, a zero or one probability.

There is really much that we can think or do about death. Having realised it, to live. That's all. Death is a default, a fallback.

How I Live

2010-10-27T09:28:00.003+08:00

I live moment by moment.

We live as long as our next breath. This is the harsh reality. Hence:
Live like there is no tomorrow but plan like I will live forever.

Life is as meaningful as the things we are doing now. But, if this is not going to be our last moment, we have to make sure that:
(a) what we do now do not have an adverse repercussion on ourselves and those around us in the next moment; and
(b) if possible, to make sure that what we do now have a favourable impact on ourselves and those around us in the next moment.

Monks and nuns who strive towards the void would do nothing so that there is no repercussions whatsoever on themselves now or in the future. But somebody got to feed them, though.

For us lesser mortals, we have to feed ourselves and our parents and our children.

Livelihood and Living

This is why for families that are used to reliance purely upon themselves and their own efforts, they have to fully aware of the economics of life and living.

There is a cost to everything, and every thing earned must be saved. The art of life becomes one of how to get by with very little in the midst of plenty, even in the midst of our own plentifulness. This is where I think the culture of honesty, hard work, humbleness and generosity comes from - the realisation of an uncertain future.

It is therefore drummed into children like ourselves that we have to study hard (for those of us lucky enough to study) and get a job - and we right away suffer from mid-life crisis the moment we have managed to pay off our mortgage. For after spent nearly a whole life preparing and working, we find ourselves without a purpose in life.

My solution to this little problem is to integrate my working life into my life. I do not differentiate the two. After all, one of the great masters of zen said: "A day without work is a day without eating." My work is my life - the way I work is the way I live.

It is only when we differentiate life from work that there is this thing called "retirement from work" so that we can have "leisure to do our own things."

It is because of this idea of retirement that we all strive to earn and save enough for retirement and in the process go to great length (to try) to amass great wealth and in the process learn to be less honest and less hard working and more greedy and more ruthless in our dealings with our fellow human beings.

Autonomy

I try to exercise a certain degree of autonomy in my life.

Armed with an academic qualification, I am an ordinary member of the workforce who has to get a job and live a life.

There is a decision to be made about one's employer. The employer is probably one of the most important entity that is going to influence our lives, so we better get a good one.

I was oblivious to pay at first, being keen to get into the areas I was interested in. From one institution, I went to the next one - with the purpose of learning and finding out the things I was very interested when I was studying the subject. I was (and am) devoted to my subject or object of study, and I have no allegiance to persons or ideas or institutions.

In the institution, my allegiance is to the institution and not the person I was reporting to. This is important for avoiding fraud, and shows the importance of choice of organisation especially its vision and mission. If I don't agree, I leave. Even when I was working in the midst of the so-called greatest casino in the world, I was still able to hang on by a thread to the sense of integrity and autonomy that I had in myself - by being very very good in what I did so that I could be useful to our clients by giving good advice.

At the end of the day, the one thing I have left after years of working is a house, my EPF and my sense of my place in this big wide world. No big titles, no grand assets.

Courage

But autonomy requires courage. We have to get round and then stand up to the authorities that are set up to govern us. We shape our own destiny, not the authorities. If we end up being a member of one of the authorities set up to govern ourselves and others, we have to have courage to change things if things are not right.

We are all caught up in the Matrix. The Great One teaches us how to get out of The Matrix. In the meantime, the only thing we can do is to make sure that, while we are in the Matrix, we are not sleeping on the conveyor belt - we try to find our way around it and out of it.

Creativity and Resourcefulness

Necessity is the mother of invention.

At the end of the day, the whole objective of life is to solve the problems of living. (Some suggest we solve the problems of living by solving the problem of life by self-annihilation and becoming non-self.)

Life's many problems are mundane. This is where the provision of goods and services in the economy try to solve. A good product is one that solves one or several of the problems of living, at a cost to be paid with cash or debt or one's life. A good product therefore provides a service to the consumer. The consumer buys a product and pays the sky for it because he or she thinks that it is going to bring him or her heaven on earth, a dream come true, a desire satisfied. Clever but greedy producers create not a product but an addiction. This is the Matrix we are all trained to create for ourselves by the great institutions that we have erected to give structure to this society we are enclosed ourselves in.

But the truest innovation solves all problems of living at zero cost.

This is the innovation that is given free to the world, that rids the world of the addiction.

Simplicity

The simplest way to get out of the Matrix is to live simply. Depend, if possible, on nothing, not even oneself.

When we stripped ourselves of our bare necessities, we have only: (a) our work which is our life, (b) ourselves and family, and (c) our friends and community.

The only thing we worry about is our contribution to society - how we can contribute, how to make life easier, how to remove drudgery.

Process of Creativity

In trying to achieve simplicity, there is a process from learning to understanding to realisation and to actualisation.

The fastest way to do things is to imitate. This is what all creatures do. But human beings try to be creative, to do different things.

In a world where poverty is the daily grind, the quickest path out of poverty is the corruption of the integrity of an ideal system that we are trying to create. When this happens, our system collapses to the lowest form of a dog-eat-dog world.

To rise above the ground zero, we have to seek an upward process.
Knowledge: To know what we are looking at
Understanding: To understand the thing that we are looking at
Realisation: To realise what the thing we are looking at is all about
Actualisation: To assimilate that knowledge, understanding and realisation in such a way that we are able to act accordingly to that realisation, such as by doing something that is completely different from what is being done or to achieve a level of being that is beyond mere satisfaction of human desires

Sometimes, the solution to many of our problems in life is close at hand. It could be just be in our own mind.

Volition and Responsibility

I live with volition - I decide what I want to do.

This is my attempt to live my life according to my own thinking and understanding and realisation and trying to actualise that realisation in my life so that I live a life that is fully integrated with my own thinking.

Life is very complex because our thoughts are all over the place, I try to keep my life simple with minimal thoughts but deep thoughts on a few key areas. In this way, I can live a simple but meaningful life - to myself.

For the few things I do, I take direct responsibility. For the many things I do not do, I take indirect responsibility.

I have to subject my sense of being to my conscience.

The Few Things I Do And Think About

1. Reading
I read everyday to understand what life is all about. To me, the most important are the religious texts which contain the most profound wisdom and insights into the human perception of life. Second are myths which record our sub-conscious interpretation of what is going on around us. Third is history which is instructive. Fourth is literature where people from all walks of life write of their responses to their circumstances which are infinitely varied. Last are the scientific texts as many are wrong, and only a handful true. Economics is one of the most difficult subjects to understand properly.

2. Music
I listen to music to understand how people feel. We sing because we want to express our inner emotions. The most basic is the beat, the more irregular, the sadder. Harmony is a nicety enjoyed only by those with a narrow human experience.

It is too easy a trap to learn music learning to a hobby about hi-fi equipment which is more about having money to burn than about the integrity music. A large chunk of the integrity of music is in the mind.

I try to play music seriously(well, the electric guitar now) in order to find a way to express myself, and hence to understand my inner feelings. I find it all theory. Without a full understanding of the theory, I play the same old song. With some understanding, I plagiarize and play other people's song. I need to play my own music.

3. Photography
I try to take photography seriously in order to learn to look at the world as it is. An excuse to look up from my desk and my book or away from the wall. I have the picture in my mind first before I take the photography. I have to understand the mechanics first before I can configure to get what I want.

4. Beer
Beer is better than wine or hard liquor. I drink because I am happy. I drink to be out of control from reason. I drink to get away from logic. I drink to cool down. I drink because I do not take life seriously. I drink for the conversations.

5. Work
I do not work, I think. My job is to think and solve other people's problem. I do not think about my job.

Why I Live

2010-10-19T11:01:00.002+08:00

This sounds corny, but to go to my next post "How I Live" I have to do this one. And I have been postponing it.

I live because I am alive.
I live because I am not yet dead.

Truism. Tautology. Obvious fact.

All so true. So, there is nothing more to it. I shall just accept it as it is. No argument about it.

The above statements are very profound to me. They describe plain and simple truth which I have no choice but to accept.

To ask why should I be alive, why should I live - to ask this question is to invoke a sense of ego which is the source of all the troubles which we face in life.

By simply accept things as they (naturally) are, I am allowing myself to be part of the natural world of which I am but a little part.

I live incognito within this larger realm of reality.

Parents

I am or try to be a-religious, although I confess I am deeply devotional. I accept all.

When I was studying in the UK, I was approached by evangelists. I was missing home, and my instinctive reaction to their strong sell was this:

"How can I love God whom I do not know, before I love my parents who do love me."

With that, I have come to realise that I had discovered a meaningful raison detre for living.

This has become crucial to me as I struggle through the puddles of this world.

Now, with a spouse and children, the meaning in my life has spread out from the parents to the larger family, and as the old disappears, the love I have gets spread out even more and defines the way I live or rather the things I do in life and things I try to achieve or the troubles that I am now taking in the projects I am undertaking.

At the end of it, there is nothing much to shout about in life. The quieter I live, the better it is for myself and for others. I find it incredible how everyone always seems to have something to say about everything all the times (and I reckon I am also guilty of it). Something it is good to lower the noise. However, it does nobody any harm if we try to do something positive for ourselves or for others (provided we know exactly what we are doing, rather than causing more harm than good).

So long as I have something that I want to do, then I shall live. Once I have done what I have set out to do, and I have nothing more to do, then I suppose I shall quietly go away.

I therefore live because I have something to do. (I suppose this brings me to How I Live.)

How I No-Think

2010-10-11T17:18:00.002+08:00

When I learn to think, I realise that a lot of time is spent not thinking.

It is very easy to think we think when I fact we are worrying. How do we tell the difference?

When you worry, the same thoughts go round and round in an endless circle of arguments and counter-arguments with no end in sight. (Can I say Malaysians are a worried lot?)

When you think, you identify the issue or problem and define it. You apply logic to it, and out comes the conclusion. You may or may not like the conclusion - but that is the conclusion or the solution to the problem. That's it. The next thing is to act.

There is no right or wrong. There are consequences which you may or may not like.

Now, I want to elaborate a bit on the no-think or no-mind thing that I wrote in my last post.

Thinking is simple - it is logic: deduction from general principles or maxims or premises, or inference from particular cases. The trick is not to cheat by jumping a step or being too nice to oneself and not being strict.

With no-think or no-mind, I have to understand that there is such a thing as thoughts and an entirely different thing called mind. Thoughts and mind are separate, and the idea is to try to tell the difference.

In everyday life, we are so caught up by activities that our minds are in a buzz, our thoughts are all over the place and the body and mind do not coordinate.

Sit Quiet

The first thing to do is to sit down and be quiet.

This is not an easy thing to do - to sit quiet. We are used to lots of activities and we will soon realise that those activities are an attempt by us to run away from ourselves.

The idea is to keep the body still, so that the only thing that is left active are the thoughts.

The next step is to remove the thoughts. This is by far the most difficult thing to do. Thoughts come, thoughts go. All kinds of thoughts arise. Before long, you will get to thoughts which make you angry - usually thoughts which give you the idea that other people have done things which are unkind or unfair to you. You can get very angry. I did. When that happens you must quickly realise that those are only thoughts and not you. You do not believe it, but slowly you will have to come to accept that for a fact.

There is this stream of thoughts that come rushing round and round your head happily on their own, like naughty little children having fun and causing a riot. There is nothing you can do much about them. Let them run, until they are tired. Sure, they the thoughts or stream of thoughts will get tired.

But only for a fleeting moment. Then off they go again. Round and round.

The key is to catch that momentary pause in the stream of thoughts. That momentary pause is gives one the window to "nothingness of no thoughts." That gives one a glimpse of the "cloudness mind." That clear and calm mind. Mind without thoughts is a clear and spotless as a mirror in the Hubble telescope.

The task from this point on is not to focus on the thoughts, but to look for that thoughtless gap with the stream of thoughts is tired and paused and keep prolonging that gap one time after another time.

When you have mastered widening the gap, you have found your real mind.

With body still, thoughts still, there is the mind - which is still. In that pristine stillness of mind, reality is reflected for you to observe.

This is all there is to meditation, in so far as I know it. Without any superfluous connotation whatsoever.

At that stage, one can live happily.

I invoked that state of mind when I wanted to quit smoking a long long time ago. I quit instantaneously, in a world of no smoke.

Technical Aspects of Meditation - By which simple things are made complicated

Samadhi

This is a Sanskrit term for focusing the mind.

As riotous thoughts rush about, one way to cut through those thoughts is to focus the mind. (My gap method is easy and faster.)

Some will tell you to focus on something - light, flame, symbol, image.

Once you are able to focus your mind and cut out thoughts, you have already found your basic mind.

There is all there is to it.

Some people wants to put in more layers of meaning, but I think that is not necessary.

Vipassana

This is a Sanskrit term for looking to wisdom.

The idea is that after you are able to clear your thoughts and focus your mind, what do you focus on?

The instruction here is to looking for wisdom. What is wisdom? Reality. Things as they are.

So, the exercise is to observe with one eyes and one's mind things as they are, and accept them as facts.

This sounds like simple, but it is not that simple.

Our minds are clouded by preconceptions and prejudices. Most of the time, we do not see with our minds, we filter things with our preconceived ideas. We often looks for proofs of our imaginings and gross generalisations and of course we find what we look for, usually, with things that are mental.

See with a clear mind, cloudless, colourless.

That's a lifetime of practice.

There is no need to sit and meditate in a darkened room with incense and low music.

Observe as we go about living our everyday lives, and become by the things we learn about ourselves, our friends, and our surroundings.

That's the truth.

Madness

Madness comes from greed. Do not practice samadhi or vipassana if you are greedy or vengeful. It can kill you. If you are obsessed, i.e., if you can't let go of things or let things be, then you obsession may kill you. For example, you hang on to a thought and won't let go. You follow that same thought every moment. That, to me, is the definition of madness.

Everything Will Pass

This is the ultimate wisdom - everything will pass. So, things do not really matter. Or rather, nothing really matters in the end.

This realisation comes heavily on us as we grow older and then old. When energy goes, and we accept things as they are, rather than try to change things to suit us.

Conclusion

I thought that I had better elaborate a bit on the no-mind stuff just in case there are a person or two who is curious about it.

As you can see, it is not complicated - maybe tedious and involved. The literature is all over the place, usually badly written by illiterates luminaries who speak in foreign languages through their toothless gaps in the middle of a jungle.

There are other books (Western) which makes things too simple - which learns one to pamper oneself unnecessarily.

I don't think these things as I have written above are a big deal. There are just a skill that can be learned, like typing on a computer or using the iphone. The trick is not a make a big deal out of things.

I shall next write on Why I Live, and How I Live. I am inexorably going into a situation which I am reluctant to enter.

How I Think

2010-10-06T11:36:00.002+08:00

I think intuitively.

Let me explain.

Early in my life as a student, when I was learning to think, it dawned on me, in the late hours in the dead of the night, that intuition is nothing but logic operating very quickly as if instantaneously. I think it was after reading Bergson.

Deduction, Induction

Logic is nothing but a very mechanistic way of thinking. There are two major approaches. Deduction is from the general to the specific. Induction or inference is from the specific to the general.

While these two approaches to logic look fairly simple and straightforward, their proper application requires a lot of practice so that one does not fall into the trap of "gross" generalisations or pedantic "frog in the well" or "frog under the coconut shell" mentality.

The common illustration of the problem of logic is the story of the black swans. In England at a time when they were beginning to think, they saw and concluded that "All swans are white" until they discovered Australia and discovered they are wrong when they saw black swans there. The truth is seldom neat and tidy.

Logical, No Truth

But logic is never the path to truth. Logic is just a method to ensure that a view or an argument is properly constructed and laid out - so that it can be communicated clearly to other people (most often for the purpose of trying to convince others to share or take up one's view). This is a very tedious thing to do - to work out each and every little step very clearly and linearly along a line (not necessarily a straight line). In modern day example, this is nothing more than just a circuit board.

What is arrived at is not the truth, but a logical conclusion. "If you build it like this, it will end up like that." And the "that" is not the only "That" but one of many possibilities that can be done if the logical sequences are constructed differently. A different route, a different destination. (In modern day religious endeavours, different routes, same destination, hopefully.)

So, then, what is truth? How do we know truth?

My proposal to myself is to be learn to think logically first - to be stringent in my logic.

This requires absolute honesty. Polite society calls it bluntness. It is very hard to be bluntly honest in the complex world of networking today. Each person holds a conclusion that is personally meaningful to him or her. It is dangerous to shake their confidence in the truth they hold for themselves. That truth may be proven to them by the beneficial effect that position they hold has on them - even if the logic of that conclusion may be very difficult or impossible to prove - on the basis of existing tools and concepts and understanding.

Completeness of thought requires us to accept that there are conclusions that logic can prove and there are also conclusions that cannot be proved by logic. It is the logic of all possibilities: the propositions and the null propositions.

The totality of things or everything is the truth or the reality. It is the most general theory or view that is the truth of things.

It may be a fool who tries to assimilate this total view, but to me this is absolutely necessary in order to be able to understand where I am today and to accept things as they are and to be able to anticipate where things will go in future and how things will transform from moment to moment.

The nature of each and every thing determines how each will develop as time goes by, by itself. The person who has understood the nature of things knows how each thing will develop and how everything will interact with each other. Laozi calls this the Tao or the Way. Some other clever chap even says "I am the Way."

No-Mind

How I think therefore is very simple and basic. First, learn to think logically. Then after, let the thinking go by itself and think intuitively without boundaries.

The mind will expand and then assimilates all that it sees and perceives. The processing of everything simultaneously and completely requires the mind to be undirected so that it is unprejudiced - and this can be done by letting thoughts disappear. The subsequent realisation is the end-result of that alchemical processing called meditation - the highest of which is a condition called no-mind. (I am reluctant to say "zen" because it is a well-known term that is easily misunderstood.)

Discrete and Continuum

Simple thoughts are usually categorical and boxy. "He is good." "She is bad." But all generalisations are false, including this one (as someone once said).

The reality is that we have everything in each of us - it is just a matter of cultivation and emphasis. But all blankness and all possibilities will be narrowed as we exploit our opportunities and take on a specific direction or path. Statisticians call this reducing "the degree of freedom." I call it "using up one's bullets." E.g. "You have three bullets. You have fired two. What are you going to do with the last one." Or, "you have one bullet, but you have multiple objectives to achieve. How are you going to achieve them all?"

We see the wonderful variety of life on earth and we wonder who create them all. But they may just spring into existence when conditions are right for things to come into being. Furthermore, this is only what we can see. How about those we cannot see - even with a microscope - the wind we create with the move of a hand. The Great One asked, "Where is the light when the flame is gone."

There is further room for thought when we realise that even the things we can see today are only those we can see today. It does not mean that other things did not exist just because we do see them today (dinosaurs). Things we see may just be things that have come to prominence as a result of long process of historical selection or preferences.

There could be a continuum of infinite human types in the male-female combination, including unisex and non-sex and everything in between. It is just a matter of the degree of maleness or femaleness in each of us.

If we extend this perception and think of the human race, we therefore realise a commonality among ourselves the variation of which can only be due to conditioning to external factors. We are all subject to the same kinds of concerns and problems. In the end, everything boils down to the issue of survival.

It is only by being able to think in a more general form can a person reach out and touch the universe. Be at one with the universe. At this point, we follow our hearts. It is only when our hearts are pure that we know truth.

Why I Think

2010-09-30T15:05:00.003+08:00

Let me continue with my why-how series from personal experiences. (I must confess that I am extremely uncomfortable doing this series because I feel I am baring too much of my personal self in public - just like taking a shower in a communal room for the first time.)

I have done Why-How I Blog and Why-How I Work. The next logical one is Why-How I Think and Why-How I Live. (I am getting into deeper and deeper waters.)

I think because I want to be. (This is a poor parody of Descartes.)

I think because I want to be myself. Truly myself.

I think so that I know that what I think, say and do is based on my own reasoned conviction, and not as a result of some accidental historical background conditioning - and I have to add unconsciousness conditioning as opposed to some mindful self-inflicted self-inflicted conditioning when I want form good habits for myself - of which thinking and thinking right are crucial ones.

I think because I am extremely dismayed by the untoward consequences of unthinking whereby ostensibly sensible nice people can suddenly turn into scary monsters when some hidden spots are pressed and an entirely strange new being springs out - like the genii from Aladdin's lamp when rubbed the right (or wrong) way.

I think so that I can be a more stable person when dealing with myself and my loved ones and friends and strangers I meet and strangers I do not meet.

This is important so that I do not constantly surprise myself by the things I think, do and say, and I do not frightened others by them. The unpredictability can be predictable but it is better to be predictably predictable even if it removes some of the excitement out of life.

After all, I find human beings constantly searching for certainty in an uncertain world - the permanent shelter we want to to keep the elements away from us, the field and animals we keep for a constant supply of food, the priests we constantly keep by our sides in case we should quite suddenly have to depart, the cash we keep in our pockets (for transactions and speculation, according to guru Keynes), the many houses and cars and watches and cameras we have just in case we need to reach out and touch them in order to find ourselves, the friend we keep in our circles just in case we need them to do things for us, the insurance that we want when we know that there is no one human being who can vouchsafe for any one of us about what and when of the things that happen in life (most of the times to others but sometimes to us).

I think so that I can face my responsibilities squarely in the face. I can live a much more certain and boring life - by focusing on doing the same things over and over again in order to perfect my craft, the un-excitement of which requires internal resolve and determination and will and energy.

Alternatively, I can make my life as exciting as possible by running away from my parents, my spouse, my girl/boyfriends, the police, the taxman, the taximan, the bosses, the subordinates, the fellow workmates, the traffic jams, the work load, and myself.

I think so that I do not have to press down others so that I can look good.

I think so that I can realise that the world is big enough for every human being and every animal and every plant and every bacteria and every parasite.

Finally, I think so that I can face life squarely in the face. I think, therefore I welcome death as I welcome life.

I think so that I welcome whatever comes my way.

I think so that I can face facts.

I think so that I can submit to the inevitably of life and non-life.

Fighting The Keynesian Multiplier

2010-09-29T08:49:00.002+08:00

This may be a good time for me to elaborate on my little private fight against the Keynesian multiplier.

The Keynesian multiplier was a little trick which Keynes used to argue for fiscal stimulus for the purpose of generating jobs. His argument went something like this: "See, you can spend some public money and it will trigger private investments which will add up to a multiple of the original sum, if the trigger effects are allowed to work themselves out properly."

If the government spends RM100 on public works, and that amount is spent on fully on local materials and local workers, then the RM100 will go into the pockets of businessmen and workers. If they keep, out of that RM100, RM20 and spend RM80, that RM80 will generate additional income of RM80 in round two. The RM80 becomes the new income and if RM16 are saved and RM64 spent, then it creates an additional income of RM64 in round three. Etc, until infinity.

Mathematically, this is an infinite series. If the whole series is added up, it goes neatly into a formula 1/(1-c). In the economic system, that c is the propensity to consume C/Y and (1-c) is the rate of saving. If the rate of saving is 20% of income, as we assumed above, the multiplier is 5 (from 10/2).

Consultants working in Malaysia have been very happy to use a multiplier of 4 to expand the benefits of every little (or big) government spending programme.

I am only very concerned that the application of a multiplier of 3 or 4 or 5 may unduly exaggerate the benefits of budget spending.

How?

If we extract 2009 figures from Bank Negara's Annual Report 2009, we get Y=661.8 and C=435.2 in current prices. This gives a consumption rate of 65.8% or a savings rate of 34.2% and a multiplier of 2.9 (1/0.342). We can say this is about the maximum average multiplier we can apply for Malaysia.

There are other complications.

1. The calculation assumes that all the increased incomes are spent on locally produced goods and services. But leakage in Malaysia is very high because of the inability to produce world-class products which are the targets of those spending. E.g. High-spend railway line. In the example above, of the RM100 spent, RM80 could go to imports (rail engine, steel, foreign consultants, foreign workers, corruption money) and only RM20 could be spent on local goods and services. So the multiplier will be only 20% of the 2.9 or 0.6 which is less than the original amount spent (i.e., RM60 out of RM100).

2. The trigger effects may not have the chance to go to infinity. The first round is RM100 spent, and RM80 goes to imports, and RM16 consumed on local stuff. We will be lucky if the RM16 gets recycled in the local economy. If it is spent on a foreign product, then the whole of the RM16 disappears. So, the multiplier in this instance is only RM16 out of RM100 or 0.16.

It is for problems like these that our stimulus packages do not get to stimulate the economy. The whole idea of simply throwing some cash into the system and hoping that things will reboot themselves is a fantasy of policy makers who do not have a clue as to what they are doing.

And I blame the Keynesian multiplier taught in Form 6 or First Year economics to be at fault.

It is because of the impotence of the multiplier that I have been trying to fight all this while for a clarity of the programme or the economic strategy that the government is pursuing. There is a need to get the whole economic system to move in tandem in order for the movement forward to be sustainable. The government (our money) simply does have the cash to keep propping up the economy. If the baton is now given to the government-linked companies, I have to be more fearful.

We now have a strategic economic misalignment - our system with the rest of the world - and our system needs to be re-aligned. (I am tempted to pursue the analogy of re-aligning the four wheels altogether.) We have to get the economy back to the path of indigenous excellence (and I use the word "indigenous" here broadly to include all citizens, all locals) so that we can generate a good multiplier internally - so that a little home-grown investment can go a long way (and bankers do not have to worry about borrowers absconding abroad). We just have to try to plug the holes in our system.

5 Ways To Transform The Economy

2010-09-28T14:25:00.002+08:00

I think I have been make amends to my previous post by writing what I expect the transformation of the Malaysian economy to be like.

1. External Environment

We have to take cognisance of the external environment - what we expect it to be like until 2020 and how are we going to react to it.

While the United States is still the largest economy in the world, there is a now a formidable global economic force in China and some say India. Europe will remain the centre of luxury products to feed the new rich of Asia. Indonesia may see a sharp transformation of its economy if it manages to lock into China through the new and quite impressive ministerial team.

The opportunities for Malaysia will still be in commodities, with focus now on palm oil and its downstream activities. It is not clever to just be selling the palm oil - we have to go into processing, i.e., palm oil-related industries with focus on research and manufacturing. If our plantation companies are stuck merely at planting and harvesting, then we are stuck in the middle income.

Electrical and electronics I am quite apprehensive. We cannot compete on assembly. We have to go into R&D. We have to beef up our universities - and they say they cannot be KPIed.

2. Domestic Environment

The domestic environment is probably going through its third-level expectational changes. At the first level, the New Economic Policy has created gains for a small section of the Bumiputra community (as a result of piecemeal proactive measures rather than across-the-board policy) which created discontent among the large majority of the Bumiputra community and the whole of the non-Bumiputra community.

At the second level, this discontent leads to lack of confidence in the universal goodness of government policies and consequently voting by feet. Redistribution without serious reinvestment creates a lethargic domestic private sector which therefore is substituted by foreign direct investment.

At the third level, there is now the struggle to keep the New Economic Policy (argued on rights). The challenge is to find new proactive measures which are not unilateral transfers but instead investments in human and social capital so that there will be less intrusive or discouragement to the confidence of the rest of society. In fact, there is a real need to find ways that encourages both the Bumiputra community (those who have benefited and those who had not) and the non-Bumiputra community.

There is a need to spell out a bit more clearly in practical terms the meaning of things for the nation to move forward as one.

3. Research and Innovation

The managing of expectations and the building of confidence in Malaysians in the future of this nation (and not just the confidence for foreign investors to make money off Malaysia and Malaysians) is crucial for Malaysians themselvesto start investing in the future of Malaysia. This involves pouring blood, sweat and tears to projects in Malaysia, using Malaysian resources and for the needs of Malaysians. In this context, indigenous investments must mean investment by Malaysians, Bumiputra or otherwise.

Again, our investments must be in human and social capital, as well as in scientific and commercial enterprises. Malaysians must wake up to the harsh reality that there is such as thing as technical know-how which should, ultimately, be superior to the social know-who to progress - although, admittedly, social networking is vital for individual progress in society.

4. Banking and Finance and the Capital Market

In the current global environment, there are more funds than there are good investment projects. It will be not be clever to pay a high interest rate of 5% say for financial funds. It does not bode well for the nation to guarantee foreign funds a high rate of return for the basis of undertaking some speculative real estate projects at home.

Malaysia's problem is that it has thrown the baby out with the bath water when it solved its banking problem during the financial crisis in the late 1980s. By amalgamating smaller banks into banking giants, ostensibly to ensure sufficient capital support to withstand the bad loans, the solution to the problem of the ratio of non-performing loans to total loans is to expand the loan books. Loans are thought to be more safely given out by lending to (politically-connected) single big borrowers, and the creating of collateral assets (namely, real estate). I agree that there should be a narrow cap on the loans book that goes to the real estate sector.

As a result, big banks are not structured to understand and manage and have a proper relationship with small-scale entrepreneurs. In other, big banks have killed off the small enterprises by their technical incompetence in nurturing small businesses. It is far easier for fresh undergraduates to analysis proforma balance sheets and profit and loan statement, rather than to go to the ground and understanding how the businesses are doing. Much of the paper work with banks are probably unrelated to the reality in the business world.

There is no problem with the capital market, insofar as I can see. The only problem is the lack of good businesses to invest. Businesses, especially small businesses, have discovered that it is far easier to make big bucks by conning the small investors in the stock market with their bogus prospectuses than to go out there to fight in the real business world. The excess liquidity situation does not help to identify good businesses for investment, and Malaysia's lack of competitiveness in the world does not make Malaysian firms to be good vehicles for long-term investment.

Bank officers just have to be properly trained to help grow new firms through strong relationship banking with customers.

5. Rapid Adjustments

The one consequence of a big government sector in the economy is that the economic adjustments tend to be excruciating slow or none at all. No government company has failed. No big companies associated with the government has failed. There are no distress assets to be bought on the cheap by those who have been prudent and are cash rich. The economic game continued to be in the hands of the incompetent few (or many?). Companies making losses have been given a new lease of life by restructuring and the sale of assets and as a result are now completing rundown and are in no position to compete either at home or abroad. Business decisions appear to be made without contingent liabilities to the individual directors whose are recruited from retired senior government servants.

Banks should be forced to pull the rug from under the feet of companies that are not doing well or are inefficient.

Conclusion

I can go on to detail out the need for a good judiciary system to settle industrial and commercial disputes and everything else to do with the business environment in Malaysia. I think I have written enough to give an idea of what I am getting it and that I probably have a legitimate basis for being not entirely happy with the Economic Transformation Programme.

The ETP should be strategic that triggers things off in the right direction. That right direction is the keenness of private domestic investors to invest in Malaysia.

How Not To Transform The Economy

2010-09-28T11:26:00.002+08:00

I have been trying very hard not to write anything about the Economic Transformation Programme (ETP), the bare bones of which were revealed on the 22 September by the press.

It is just too easy to be cynical.

Target: To triple the Gross National Income (GNI) from RM660 billion in 2009 to RM1,700 billion by 2020 at growth of 6 per cent per annum - and I really hope they get the definition right - and create 3.3 million jobs by 2020. High income of RM46,000 per capita by 2020 from RM23,700 in 2009.

Total 131 projects worth RM670 billion proposed to 2020. 60 business opportunities to be "made available." RM115 billion to start by end-2010.

Malaysia number 1 regional hub for oil fields services, global diversity hub, revitalising the capital market, 114 km of rail lines via Mass Rapid Transit high-speed rail system to connect KL and Singapore, revitalising Klang River, and towards a duty-free haven for Malaysia for tourists.

12 National Key Economic Areas (NKEAs): (1) agriculture/palm oil, (2) oil & gas & energy, (3) electrical & electronics, (4) education, (5) wholesale & retail, (6) healthcare, (7) financial services, (8) tourism, (9) business services, (10) communications, (11) content & infrastructure, (12) Greater KL.

92% from private sector (RM1,270 billion), 8% from government (RM105.5 billion) to produce an additional GNI of RM775 billion by 2020 (presumably after taking away organic growth).

1. For one thing, this country has undergone a few significant transformations. We are therefore used to economic transformation and the only real issue I have is to see that the transform is for "good." What do I mean by that? A good transformation makes the economy more flexible than before, more capable of adjusting to external and internal challenges and, as a result, makes the economy stronger and more resilient. More resilient means the ability to take drastic corrections with the fading of the inefficient and the rising of newer and hopefully better champions of innovation and investment.

2. The Malaysian economy has turned from an export-oriented primary-commodity producing economy (under colonial rule) to (Transformation One) an inward-looking import-substituting foreign-investment-unfriendly regime (1970s resulting in a recession) and then quickly reverting back to (Transformation Two) an FDI-welcoming economy (late 1980s) followed by (Transformation Three) an explosion of supply-side infrastructure mega projects (early 1990s) which resulted in a financial crisis (inflation and bailouts) as a result of policy ignorance about the dangers of short-term capital flows followed a series of counter-cylical fiscal stimuli.

With the severe delay to a high income economy by 2020, there is now revealed in the ETP a flurry of projects to bring the economy quickly up to mark. Are we still stuck in Transformation Three?

3. This may be the place for me to say this. A lot of nonsense has been said about the importance of the services sector - 60% or 70% in advanced nations and 40% or 50% in developing nations and now the services sector can be enlarged in order to become an advanced or high-income economy.

The services sector in advanced nations are higher in proportion to the whole economy because their agriculture sector has disappeared due to high cost of production, and increasingly with the rise of China and India, so is the manufacturing sector. To survive, they have to use their wit which requires them to go in financial services (capital flows and corruption money from developing countries) and education (students from developing countries with bad education systems) and tourism (corruption money and windfall gains from the stock markets). It is foolhardy to compete head-on on these fronts with the more advanced economies which requires a fairly high degree of integrity and honesty in dealing with information.

In most economies especially developing economies, the services sector can only develop in conjunction with the agriculture and manufacturing sectors. It is therefore the most important that investments in these two sectors must be strong in order to pull along the rest of the economy. Without the real "real" sectors being developed, I am afraid that the "services" sectors that we are trying to develop will be related with crime, prostitution, drugs, financial fraud, social disintegration, and the corruption of standards.

4. With the infrastructure projects that are being laid out in the ETP, without any innovation or the adding of value to the economy, the projects are once again going to be financed by the future generations in the form of inflation which will only make their real income lower so that they will have to tighten their belts so that scarce resources which are meant for their consumption can be diverted to these projects. I am not against projects but they must be economically feasible if they cannot be financially feasible. The rush to meet unrealistic deadlines in order to "show results quickly" is not the way to go. Sometimes, a little hard time can be good for the soul and spur one to hard work.

Conclusion

A masterplan or roadmap or a project-implementation programme always smells to me a command-type militaristic economic operation. I do not know whether management consultants make good economists. The key role of a good economist is always to promote confidence and some clarity of the rules of the operating environment so that timid risk-adverse investors can be drawn out from the murky corners of their hideaways in the hope of making supernormal profits from a situation which they think no other persons have seen before. The enticement of profit from an opportunities is the trick that economists use to stimulate investments. Alas, we have to be content with a directed chess game whether the end game has probably already been decided - if they know the nature of the game that everybody is supposed to play.

I keep my fingers crossed, and wish the ETP luck for all our sakes.

A Theory of Special Interest Groups and Groupings

2010-09-20T10:08:00.009+08:00

What is race but an accident of history frozen at a particular time.

That accident is the result of a community trying to find a sustainable livelihood, given a particular environment.

A community is a group of people who find kinship on the basis of a common factor or a set of common factors which they all share and which they can all identify with - either language, or way of life, or attire, or family members, or customs, or beliefs.

It is therefore likely that in a community with has within it many varied characteristics or features or factors, there will be as many factors.

Some factors are at individual levels - family. Some are at social levels - language, customs, beliefs, attire.

Some factors operate at national levels - language, way of life.

Some factors transcend national levels - language, beliefs.

There are therefore many permutations or groups that can be established within a community, and especially within a highly rich and diversified community.

Different groups are formed for different purposes or special interests.

Different interest groups can collude with each other in other to gain power over other groups or groupings.

When an objective is achieved, the different interest groups will split up and, if they cannot dominate the situation, will then try to work with other groups as a matter of expediency in order to gain an immediate strategic advantage, before preparing for the next move.

Different basis will be used to justify their existence and to garner support from the public at large - a certain sense of justice, history, morality, environment, economics, scientific objectivity, spiritual calling - although no one factor can be considered superior to the next.

The ultimate purpose of all groups is power - political power with a view to economic power or economic power with a view to political power.

The immediate purpose of every special interest group is to prevent the other group to gain dominant power.

There is advantage in gaining dominant power - you can abuse the others for your own advantage and gain, which is sometimes also called corruption - of justice, history, morality, environment, economics, scientific objectivity, spiritual calling, depending on where you do not stand.

The fight for a race is usually championed by a foreigner who is keen to be accepted by that race as one of its members - see Kublai Khan, Kangxi, Paul, Napoleon, Hitler.

Genuine members of a race typically are comfortable with who they are - and, like all decent people, wish to consider themselves as being kind and considerate and behave kind and considerate.

But in the sphere of physical construction, there is a specific level of excellence in technical knowledge without which the construction will not be stable. This technical knowledge is the basis for the modern world that we live in today and which there can be no compromise without subsequent cost. Technical superior is lost when the best in the relevant field is not properly employed.

Change & Progress in a Demoracy

2010-09-14T14:37:00.002+08:00

I wish to write on the real essence of what we are trying to do in the modern and enlightened world when we deal with the idea of democracy.

In a nutshell, when we talk about democracy, we are really thinking about change. Why?

The truth is that we sentient human beings are often ignorant - about where we are, where others are, and where everything will be - so we must as well own up to our inherent lack of knowledge and wisdom - not matter how much we pretend to think.

The idea of democracy is a fine ideal - of freedom of speech and action when everybody is given the leeway to do or say whatever they like in order to be happy - which we should all strive to achieve but which we know we can never really get. It sounds a bit like heaven and hell - not getting quite the real stuff.

In practice, everything collapses to majority rule, which gives rise to the tyranny of the majority. On the other hand, a small elite must control the majority, which thus give rise to apartheid or totalitarianism. In either case, the outcome really depends on the wisdom and kindness of those in power who have the right to determine who should live and die, and who should be comfortable and who should not be.

In politics, the Greek democratic ideal is reduced to the Roman republicanism which as we know through history can descend further to the monarchy of Caesar. After Caesar, tyrants and chaos.

The real uniqueness of the American Constitution is the limitation of the term of the president. A fool or a wise man can do damage or good for a period of eight years to a nation, and no more. Let the next best person try his hand to do something for the nation. There is nothing like variety.

It is this struggle for change that the freedom of speech has a critical role to play in the nation - that every man and woman who thinks he or she is good enough can stand up and argue his or her case. He or her should have a different point of view of how things should be run, no matter how good or bad, so long as the majority agree to suffer by him or her.

Without the flexibility for the change of the government or the leadership of the nation, freedom of speech is nothing but a beautiful decorative flower that only looks nice and nothing more. There is nothing to talk about, in that case.

By the same token, it is only that the last or previous leaders of the nation, having had their turn to do good, should now keep quiet and let the new prevailing leader do his or her job.

I think its sheer hypocrisy and deep disrespect for old leaders to think that they know all the answers to the problems of the nation when they already have had their chance to ruin it roundly, by being misguided in their policies when they were in power.

It is a fact that this nation has already had tried its favourite policies which have had their fair share of successes and failures. We have been there, and done that. Let us move on and try something new, something different. It may not be the perfect solution, but at least there are other parts of the nation which deserves some encouragement as well, if not anything, but to see whether that sector is still there or alive.

Furthermore, the world has also changed, and if we keep getting pestered by the same old arguments by the same old people, then I don't thing that we are giving the younger generations a fair chance to engineer their own future. The demons of the older generations cannot be inherited by the younger generations.

If indeed this nation wants to transform itself, restructure its society and obliterate race from the economy, then I think the educated young of all races should be conscripted to labour for the nation through their own private and individual interests.

It is foolhardy for any leadership to think that public largesse can be bestowed on private individuals in the hope they will repay the public by huge acts of great success and great generosity. We all know that what goes from the public purse to private pockets will only stay in private pockets provided those pockets do not have holes in them.

I do not necessarily think that the proposals of the current government are perfect and faultless. We do not know. Some of us may not like some of them. The harsh reality is the nearly impossibility to obtain a consensus in public matters. There also must be efforts to scrutinise the policy proposals. But once the time for planning is over and the time for implementation comes, we should just implement them. We shall bear the consequences and move on.

There is nothing like a rigorous debate (for new ideas to do things better. The old leadership may wish to argue that he or she also has a view as a member of the public. Fair enough, then say something new.)

The Danger of Putting Politics Before Economics

2010-09-01T14:37:00.003+08:00

It is true that economics is not without its shortcomings, being the study of human behaviour in contact with each other to provide goods and services to each as each person searches for happiness in this troublesome and, sometimes, too long a life.

The difficulty of the study arises because the behaviour of human beings, individually but usually as a whole, changes as their operating environment changes which, in turn, brings on new sets of behaviour. From this perspective of dynamic change, we see a tendency for collective human behaviour, and hence the economics (and the politics), to ascend (becoming more optimistic) or descend (becoming depressive).

Malaysia is in a unique situation of having a potent mix of many colourful ethnic people in an economic cauldron with the fire underneath being gently stoked by the clever few. If the fire is gentle long enough, Malaysian will meant into a homogeneous entity, probably reluctantly. However, if someone decides to stir the pot with a stick as well, the different little bits and pieces will spin in their own little eddies round and round the pot, knocking against each other as if in violent agitation.

The New Economic Policy was a policy attempt at creating a new economy. While poverty is, rightly, a universal concern, the other concern was in regard to wealth distribution.

Poverty (or wealth creation) and wealth distribution are both social as well as economic problems. Poverty is a social problem when the family unit breaks down or when people are physically or mentally handicapped. It becomes the duty of a moral community to help the unfortunate. It can be an economic problem, through lack of (proper) education. It can be a systemic economic problem, when an economy goes into a recession or when it is not creating sufficient (good) jobs.

Wealth is distributed as a product of the peculiarities of an economic system. An economic system is created to produce wealth, either for the masses, for a select few, or for the top leader. The economic system is invented by human beings, which means of course it can be changed. Different economic systems (or models) will create different results, with regard to wealth creation and wealth distribution.

Several economic systems have been tried out in the economic history world, and they are still being tried out - including the one in Malaysia. The models go from the Garden of Eden, robbery, subjugation (enslavement and forced labour), conquest, and colonialisation. Apart from the Garden of Eden model (which is favoured by roaming natives in thick jungles), all the other traditional models are based on the labour of others for the benefit of a few.

The current more popular model that is being widely promoted by academicians and practitioners of all persuasions is the model of free enterprise based on free competition and free movement of capital and labour. This is argued on the basis that it benefits more people (than other more coercive models), as they compete with each other to provide goods and services for each other in order to survive, with the incentive to labour in the form of perceived wealth.

It is argued that people are more given to hard and harder work, which is not a chore to them, because they have a choice, a choice to do the things they want to do, or a choice to do the things they do because they have a noble goal to pursue (such as a better future for their children) - which could just be their meaning in life, their raison detre for existence. But, they may not be happy to work that hard if they feel that they are being forced (directly or indirectly) to work that hard because of an artificial quirk in the system which they have no choice to get out of.

In the design of any good economic system, the thing to watch out for is the incentive to hard work now in order to reap long-awaited much-desired fruit in the future. It may just not be wealth, but education for their children.

The hidden fire under the cauldron of life is the fear of uncertainty, the fear of failure, the fear of having to beg from others, the fear of desertion, the fear of being disrespected - that drives normal sane people to slogging their hearts out, as if to expiate some unaccounted-for sins of theirs (demons, I call them).

Remove that fear and uncertainty, you have removed the incentive to hard work.

The availability of opportunity for everyone of all abilities to climb the economic ladder is arguably the most value asset of an economic system. As more individuals climb, society improves.

When the people are demoralised and despondency sets in, society crumbles.

It may be necessary to discuss economic issues in racial terms, in order to have a clear picture of which particular groups are in trouble and why. When politics gets in to solve economic problems on racist terms, by blaming economic problems on particular groups, then the stage is set for policy to take on a more racist solution, if the rhetoric is left unchecked.

The world has seen before how nasty racism can become.

Malaysia's economic problems today may simply be that old policies did not allow it to adjust to the new world economic order, as in the case of many countries, that the old economic system is obsolete. The challenge therefore is to find new economic ideas. This is also a great time for political agitation, with no one having any answer and each blaming the other.

These are indeed dangerous times, as sentiments harden into logic in narrow minds. When logic fails to persuade, as people talk at cross-purposes, emotions may just rupture, if care is not taken.

Meritocracy & Racism: Philosophy, Politics & Economics

2010-08-26T14:55:00.003+08:00

Let me try to write something here to see whether I can be as polite as I have been made out to be.

Meritocracy is a philosophy of the conduct of human society where the view is that the betterment of the whole can be obtained from the efforts of a few who are best that are available in the nation. The purpose is to keep pushing the frontier of material progress as a basis for the spiritual enlightenment (although I will concede it is possible to push for spiritual progress as a basis for material enlightenment).

That, of course, where merits are spread among human beings of all races is a god-given reality which we have no choice but to accept. But to suggest that merits are naturally inherent in particular races of people is a gross generalisation that bears no resemblance to reality. But, in the normal teaching of young children, the exhortation is always on effort to cultivate talents inherently bestowed by god on all human beings, whatever those talents might happen to be.

It will be a sad case for society if the leaders of society predetermine what talents should be cultivated for two reasons: (a) other potentially interesting or useful talents which could save mankind will not be cultivated; and (b) the obvious talents which now seem to be useful may be a manifestation of past desires and hence the likely consequence of mass unemployment of perfectly trained graduates with no opportunities to exploit them.

Meritocracy is a philosophy which strikes a chord in the heart of every rational man and woman.

I blame the designer of the course on philosophy, politics and economics who puts the politics before the economics.

Meritocracy, in its original state, is an economic concept of social advancement, admittedly concocted during the era of the rise of science and technology and the industrial revolution. Given the problems of the world, especially of overproduction, there may be a case of less-than-the-best-of-meritocracy to lead the band in search of prosperity. Houses are now too small to contain all the TVs, refrigerators, washing machines and cars that households wish to buy.

Politics, in itself, is already a very difficult game to play, especially where the whole objective is power and wealth and the refusal to die (hence the need to build monuments).

Political power is got from the people, and the method is often through the art of lying with style and stirring up of emotions where none seem to have existed before.

It is an unfortunate result of the end of colonialism - it ended because Britain could not longer justify keeping the colonies on economic terms in view of the social responsibilities that came with the rise of the welfare state - that the new concept of nationhood was promoted and somehow given independence for.

The notion of nationhood gives rise to the idea that there is a nation, or is it a race (or some other configuration) that gets rise of the past of being subjugated by foreigners.

In the world before the British colonial rule, people of different races and races from all parts of the world were living together - all over the world. Globalisation is not a new concept - people have been mixing about for a long long time, in order to perpetuate and strengthen their genes.

That a people feel extremely uncomfortable with people of a different colour, culture or religion is feeling that can only come from fear - and this cannot be the most pleasurable way to live.

Fear is ignorance which can only be removed with knowledge and wisdom, and which can only be acquired by openness, exposure and interaction.

By preaching exclusivity, insularity, and isolation, the end result is inevitably polarisation and this is the recipe for racial strife.

There is much for everybody to learn, and each must learn from the other. If business acumen is the goal, then one must mix with people who are good at doing business. If personal peace and tranquility are the goals, then one must mix with the religious or spiritual.

The learning process must be made available to everybody so that those who are interested to better themselves can find the avenue in which focused efforts can be made. To be followed, naturally, by competition to see who is better and this can be done in a friendly manner.

Human society and culture will evolve as people struggle to survive or to find pleasure in a world with rising population and diminishing natural resources. As we struggle for ourselves, we must not forgot our neighbours whom we can help as well.

It is unfortunate for all of us if we have to fight tooth and nail with each other for survival. This means the beautiful society as we know Malaysia to be is gone.

How I Blog

2010-08-25T08:46:00.002+08:00

Very carefully.

I am writing this as a follow-up to "Why I Blog" after the "Why I Work" and "How I Work". Somehow, there is a natural logical sequence to one's train of thought, and the things one writes goes seem to have a life of their own.

It is tempting to treat each post like an anonymous shot into ether, meaning no harm whatsoever except to vent one's frustration. I think this is a very dangerous thing to do. Ether may respond in ways that one can never imagine, and by then it may well be too late - even if one were to say sorry.

The blog is not like the Hyde Park corner-type of freedom of speech one may imagine oneself to exercise. In Hyde Park, one can conceivably stand on a upturned soap box and mouth anything that comes to one's head, and then go home to sleep with the empty soap box. However, one would be very suspicious if one notices that there is a man standing behind the bushes with a tape recorder and taping your little spew - thinking, why are you doing that? In blogging, we are doing exactly the recording ourselves - and I think I should be very very careful indeed which what I am trying to say in my blog, no matter how anonymous one may pretend the blog may be. (Even in newspapers, your anonymity is not protected when a gun is held to the head of the editor.)

I make this point about care because, once in a while, a commentator would remark that my sentences are too polite.

I think one should be polite, or try to be polite. It is the only decent thing to do, to show respect to the reader, as well as the issue that one is addressing. Once that respect is gone, then there is really no point in all the effort that goes into the (thinking and) writing a piece of work.

I always associate writing with effort because Winston Churchill said, "That which is written without effort should be read without effort." The effort is in dissecting the issue in the hope of coming up with an answer to a problem.

I am not sure that I would write in hope of stirring up violence, of which we already have too much - others are doing an excellent job in that without me helping to stir the pot.

The Churchill statement also brings out another point about blogging - how much effort do we require the posts to be read. Most people associate blogs with lightness of touch and content. Even so, posts can be hard to read and understand because they are badly written (typos aside).

There is need for effort to ensure a certain flow of argument and ideas down to a natural conclusion. That comes with a bit of practice (effort).

There are issues that are naturally very involved in concept or implication and these need effort to be drawn out carefully, strand by strand. In this, effort is also required to separate the logic from the emotion or judgement, of which the latter should be reserved in order to let the readers form their own conclusions.

It is only by exercising some form of consistency in the thought process that human beings can each other of the right things to do together, as a community.

I used to lump all the difficult pieces together in order to sustain the flow. This could be difficult for readers when there are many different ideas to deal with. Nowadays, I am a bit more charitable and intersperse the "serious" stuff with "light" pieces like this one.

Some Theoretical Issues in the Malaysian Economy

2010-08-19T09:25:00.003+08:00

After my recent trips into nostalgia, it is time for me to head back to the world of harsh realities. Given recent events, I thought a theoretical perspective may be interesting, in order just to get to a different plane.

The reality is always harsh, as the jungle is always neutral. It is how each of us or a group of us traverse the difficult terrain that we get to the other side, not levelling the ground (by someone else) so that everybody can sit and fall asleep (by doing nothing), although it might be useful if someone who has gone through the journey before could signpost some of the danger points.

I have always thought, and still think, that Malaysia is very forward in its socio-economic thinking by bringing out the New Economic Policy explicitly for implementation. In any modern society, the issues of growth and distribution are the twins that always appear in any national agenda. My only unhappiness is that there has not been much discussion about how a more egalitarian society can be created in Malaysia, although there has been much discussion on this issue of social justice in modern economic and political literature. It is as if Malaysia is stuck with its foot in the mud of 1969, unable to extricate itself from the political rhetoric of the time and getting itself out and become relevant in the modern borderless world where sovereignty of all sorts is being threatened. As the global economy construct changes, the issues of growth and distribution change as well, and hence the required solutions to the problems.

Growth is often pursued in modern societies at the expense of distribution because of the very nature of this capitalistic and market-oriented economic system where incomes are not earned evenly across the social strata, where different communities consume at different rate in relation to their incomes, and as a result, savings are done also at different rates. Wealth, being created out of investments and hence out of savings, is therefore unevenly distributed, and some would say, unfairly, by going to those how know how to create it, and eluding those who desperately are in need of it.

It is now recognised that the modern economic world is built by those who are the best, the most capable, and the most brilliant - but not necessarily the most noble nor the righteous. The modern economic world is a world of output and production of goods and more importantly now of services which, could be compared to the olden days of alchemy and magic but today of the financial and derivative kinds, and not excluding the age old services of prostitution, drugs, robbery and murder. The modern economic world is therefore a mishmash of all sorts of people of able minds and bodies.

The diadvantaged are typically those who are not in the travelling band, because they cannot be - the very young, the very old, those nursing the very young and very old, the handicapped, those disturbed of minds, the unschooled and untrained and hence unable to be of service to others. Or simply those who are caught in a time warp oblivious to the shenanigans of modern economic activities. These are those whose welfare the modern society must try to look after in order that we all feel that we are doing our bit to alleviate the necessary suffering of this world.

That we feel like having to do charity is because we may, deep in our hearts, realise that the world we live in is an artificial world that we have created out of our own imaginings for our own fancy - based basically on little bits of paper certified by some authority to be legal tender, and that trading of those bits of paper are allowed. The modern world of investments is based on the confidence that bankers have on the borrowers to pay them back their money, and their collateral today is real estate but in the days of old when real estate was in its infancy trust and word and character of the borrowers. Now, the modern world grows quickly with the real estate as the right foot and the money lenders as the left foot.

The value of the real estate is defined by location, the value radiating out of the urban centre where the concentration is the greatest, as defined by the number of people or business per unit area. It is this interplay of the supply and demand forces that defines the value of the rent and the land. It is this different rate of output that determines that (sharp) differences between the value of the real estate in urban centres and the rural areas (the latter defined mostly by agricultural output, which can be intensified by plantation technology).

The battle therefore is on the rate of output and the rate of improvement in productivity. Economists know that the rate of improvement is the slowest in the primary sector, with rapid growth during the industrial revolution and the Japan-type revolution of the manufacturing engineering, and now the services sector propelled by ICT and globalisation.

It is a challenge to try to reduce the difference in productivity in the rural areas and the urban areas. But it is this reduction that will resolve the disparity in distribution in a traditionally agricultural society that is rapidly modernising. Over time, the trend could be in the form of the growing importance of urbanisation where old towns become bigger towns, and new villages become new towns. The importance of urbanisation is economic efficiency in the provision of basic amenities such as education, health, and security which are critical for uplifting livelihood of communities.

In the end, the linkage with the rest of the world will define whether Malaysia will become a successful global trading partner. In this sense, successful Malaysians will be those who are resourceful, agile and open to new ideas with an affinity to dealing with communities other than themselves.

With the focus on the livelihood of Malaysia, the correct approach to measuring the improvement in the economy is the GNI or GNP, and not GDP. When the focus is on GDP, the focus tends to concentrate on foreign investors. With GNP, the focus will the opportunities that are being offered or made available to Malaysians, whether those opportunities are at home or abroad. GNP should be an integral part of the 1Malaysia concept, for it counts Malaysians whether they may be.

There is a serious need for discussions on the Malaysian economy to focus on issues where positive policies can take place.

How I Work

2010-08-17T11:20:00.002+08:00

After having written on why I work, I will now write on how I work.

I had visions of a life in economic theory when I was studying economics as an undergraduate, but my father said, "One degree one person only. You have many brothers and sisters." I searched and found a studentship and told my father, "You only have to buy me an air ticket." He said, "This I can do." Off I went and did my Masters, but left half a year into the PhD programme. I could not imagine throwing scarce resources and my youth onto a thesis topic which would be of interest to my professor but not to me, and I could not get a professor who could supervise me on a topic which was of interest to me but not to him. Everybody was so caught up by the little pieces that they had to publish in order to keep their jobs that there was no investment being made on the fundamental theoretical issues of my interest. I had long been dissatisfied with the state of economic theory purely because it was (and is) too caught up in the mathematics at the expense of content, and also because I felt that there must be life after Keynes (in economic theory). Furthermore, I was deeply interested to know how the Malaysian economy functions and there was no better way than for me to come home and work. I became a professional student of economics, and still am.

One of the first little research projects that I did involved collecting the numbers for the money supply and GDP and various other series. As I busied myself, one of the many homegrown first-class undergraduates in the organisation came up and asked me what I was doing. My answer was "To find out the chief cause of inflation in Malaysia." She quickly replied, "It's easy. Either demand pull or cost push." I looked up, flabbergasted. I could only retort, "But, which one?"

This gives me the first clue of what I would later discover to be an underlying problem in our society, that there is no proper research and that people are quite happy spewing off conventional theories or theoretical conclusions without a clue as to whether they are relevant to the situation we are in. My greatest peeve with academic research is the mindless application of local data to particular hypotheses concocted in other countries, that there is little attempt made to see what is happening right before our very eyes at home. (At the very least, Ungku Aziz was original with his sarong index.)

For me, therefore, work is just getting paid for being a student - the wages being my studentship, so to speak. When I got my first job with that auspicious organisation, the personnel manager asked me, "Are you sure you want this job for RM750 a month?" My masters was valued the same as a local undergraduate. My answer was, "This is more money than I'd ever had." There were reasons for such undervaluation. The first thing that they were interested in was to make sure that you passed the civil service examinations on the national history, the national code, the setup of the government and a whole host of other things. Everybody, on first admission, was called an administrative officer. The degradation of an organisation starts from the degradation of its human resources. The performance of an organisation is circumscribed by the quality of the leadership.

My greatest joy in working is in the learning and discovery of the world around me and the workings of my innermost self. It is this self-discovery that keeps me going despite the harsh reality that I had to face, and still have to. It is not easy to cope in an environment when, not only does nature by itself wishes to do you in, but the society that we live in is unfriendly. But there is nobody to prevent anyone from learning and realise for oneself what life and living is all about.

The life of an economist is an extremely interesting and illuminating one. One can observe how people seal their own fate by the decisions they make about what they wish to do and not wish to do, by the distance that they wish to travel, the effort they wish to make, the amount of responsibility they take for their own actions, and the amount of fault they place on others for their own failures or rather inhibiting their successes.

The basic economic tenet is that much of modern society can flourish rapidly to the benefit of most if not all people is through the cooperation of efforts by various groups of people and if there are surpluses to exchange those surpluses in order to improve the variety that spices up all our lives. If one group has a surplus and another group does not have, then one way forward is charity; another way may be horse trading of some sort. These exchanges aside, the first rule must be that everybody works hard, according to their own ability, in order to maximise the output of the society.

In the world that we live in, we are all trying very hard to talk of the exchange model without the effort to increase the output and if possible the surplus.

My studies in the school of the real world was somehow also guided by my father who died immediately after he had achieved his goal which was to send his six children abroad to study, though not everyone came back with a qualification. It was his sense of fairness, to give everyone of his children an opportunity in life, however good or bad they might have been. But after having us the opportunity, it was up to us to make the best of our lives. This must be a fairly standard story for many Malaysian families. But my father's influence on me was a bit more profound, I would like to think. When I had to persuade him about me doing a PhD, he asked, "On what?" I was by then interested in income distribution. My answer was, "Why people are poor?" He said, "Not clever. Better to study how people become rich!"

In a certain way, therefore, my little economics study is on how wealth is created and distributed. In the current economic model that we have, my answer is education and knowledge, investment and confidence and working together, trade and exchange and trust, and opportunities for everyone so that all abled persons can maximise their output. Life is too short for each individuals to wait for the right opportunity to be given to them. When one door closes, another opens.

By improving my understanding of what is going on, which is the same as improving my performance at work, it is not very hard to find a job. There is always someone out there looking for someone who goes around with their eyes and minds open, and think.

Eventually, as a result of sabotage by bosses who refuse to recognise my efforts, I had to move to a new industry. I have learned to embrace change and movement, and not to fear getting out of my comfort zone which is other words to fly. When colleagues and bosses want to kick you out, it means that the organisation has come to a head, to a peak, and everybody thinks there is gold at the summit. This may be a good time to move. When things or the environment looks quite gloomy and there is someone out there who is hiring, jump at the job. Something is brewing and a new industry may grow. The only problem is whether one can get oneself excited and find a way to play a useful role. If one gets could in a very difficult industry which appears to clash with one's personal value, there is always a saving grace by focusing on being the best that one can be in the job and provide as good a service that one can muster in order to help the clients. It is possible to be in the eye of the hurricane and survive.

Mastering the technical details is an important step but only one step. Learning how to serve others well is a lesson that is most meaningful only to oneself. But importantly, work as a student and learn and learn. It is the knowledge born out of curiosity that is the real reward for working. The cash is only to defray the cost of fulfilling some of one's family responsibilities, like giving back what one has taken from one's parents.

Kelantan's Gold and Silver Coins

2010-08-13T09:02:00.005+08:00

For students of monetary theory, the issue of the gold and silver coins by the Kelantan Government that will be used for the payment of salary of civil servants, and are acceptable even for payments to Tabung Haji and Bank Islam Malaysia is an extremely interesting event. Will it work? Does Bank Negara Malaysia approve it?

The coins are supposed issued by a private gold trading company owned by the Kelantan Government. The website of the private company provides the exchange rate for the gold and silver coins to the ringgit paper money. 1 dinar = RM581, 1 dirham = RM13.

Presumably, the price of the coins must go according to the amount of gold and silver in the respective coins, as per the recipe of any commodity currency. That information, unfortunately, is not available in the public domain. But somebody which is quantitatively inclined (not me) may try to calculate the amount of metal in the coin based on the quoted price of the coin and the quoted price of gold and silver in the world market (hopefully, unless they use the local market prices).

But that would be the purist's view. The private company of the Kelantan Government has to pay for the minting of the coins. There is a cost to minting. I do not know whether they are deducting that (imputed) cost from the weight of the metals in the coins. If not, then they would be losing money. If yes, and if they do it incorrectly, even unwittingly, they may be accused by those who are paid those coins to have cheated.

It is, of course, a dangerous thing, according to conventional economic wisdom (as in the secular world), to allow one firm to control the trading of any commodity or product or even concept (option, for example). Is the private company acting like a gold trading company which means that it must make money even if non-profit in order to pay the salaries of the workers, or does it act like a currency board whose job is merely to ensure that there is even gold and silver coins for use in the economy. Even for the conventional currency board, there is a specific conversion of foreign reserves to the paper money. So for this gold trading private company, presumably, there will be a conversion from the paper money of the Kelantan government to the gold and silver coins. At what rate this can be done, of course, will be dictated by the prices of gold and silver in the global markets.

It is unlikely that the gold trading company can act as a central bank to the Kelantan government. For one thing, the central bank was traditionally invented to finance the government of the day; in those days, to finance war (and I suppose, in modern times, the same thing). It is unlikely that that private company can mint more gold and silver coins if it does not have the money. Of course, it can do so if it borrow paper money from the conventional banks and use that money to mint more coins.

There could be a serious shortage of the coins in the near future. It's novelty can make it into a collectors' item, which means that it may not really go into circulation. If the gold trading company, in order to not to be accused of shortchanging the users, overvalues the coins, then there is real incentive to keep the coins. If gold and silver prices are thought to be rising in future, there is also scope for speculation by hoarding. Furthermore, if there is a real shortage of coins and if the Kelantan government insists on being paid in coins, then the prices of the coins will rise even more and this will accentuate the shortage.

So, I do not think that the real central bank should worry about this gold trading company. After all, it has even problems on its hands trying to figure out the real value of the paper ringgit by making sure that the exchange rate of the ringgit is properly managed in respect to the currencies of "its major trading partners."

Since de minimis has quoted Archimedes in one of his posts, I wish in passing to mention that the Archimedes' fundamental axiom on truth. The translation I have committed to memory is this: "Given me a fix point in space, and I will move the earth for you." It applies to central banking in the fixing of the price of currency. That fix point in the world of currencies is the international reserve money which for the moment (probably not long) is the US dollar. (That was why when the US dollar tanked because its economy collapsed, the ringgit was still at the same point to the fallen hero. I am glad that some readjustment has been made to fix this out of sync exchange rate by strengthening the ringgit a bit.)

I think the issue of the gold and silver coins is very novel exercise and should be encouraged as one would encourage the issue of gold and silver wafers or bars as the marketing guys would call them.

Why I Work

2010-08-11T16:48:00.000+08:00

Again, for want of something better to write, I shall touch on why I work.

Once I interviewed a fresh graduate and I asked her why she wanted to work. She answered, "To earn a living." I was quite unhappy with her answer. Does one crawl so low? Doesn't one work for something better. I hired her because I wanted to show her what work could really be. She couldn't write a proper sentence in English, and not to mention her spelling. "Is you free?" I gave her work, real work. She struggled and cried. I ignored her. It's really up to her whether she wanted to work or not. Was she really ready to do it to earn a living. In the end, when I left the industry, she cried. She is still in the job, doing quite well, I heard.

Now, the point I wish to make is that I work to live.

Of course, we are talking about privileged positions. I was privileged to be able to go to school and not having to work to help out the family income, like both my parents who had to. I did remember one incident when I was asked by my family on a Sunday to get one of my many uncles to come along and follow my father to earn some money for doing a job. I stayed back at my grandmother to play the guitar, I think, and had a jolly good time with my younger uncles. When I returned home, my mother was furious, asked why I didn't come back and joined my father and uncle and earned some extra money. I knew we were not rich but had never thought ourselves to be poor, living in a compared low-cost council flat with seven kids and a grandfather thrown into a one bedroom and one living room (the room I lived in with my grandfather). There was always food, whatever is available, and hunger was and still is a nice ingredient when enjoying ordinary food. The only thing I dreaded about meal times was that I had to help in the buying of vegetables (never remembered meat), cooking of rice over charcoal and then gas, the chopping of shallots, the washing of dishes, and the washing of kitchen floor. I went through all these chores with the songs in my head, and when there was time, to do a few drawings. Uncle Number Four could sometimes come around with a camera he borrowed and I would use up the whole film, and he was never angry with me. But, anywhere, my mum was so crossed with me, about my lack of concern for the family wellbeing, that she threw me out of the flat, followed by my schoolbag. I was rejected until my father came back and returned me to the family. My mother was happy because he had made some extra money. Later, I learnt that she needed the money to pay for the shool fees of her younger brothers and sisters.

I was privileged to go to the UK to study. Kids who did not got abroad to study would not have a chance to go the local universities because of limited places for us. My parents decided ever since when they were married that they did not want their kids to suffer like them, for without a proper education, we would not have a good future - which my father interpreted for me to be "working in an air-conditioned office" rather than "slogging under the hot sun." Theirs was a good team, each doing their part, and keeping to their joint vision which invariably was for their children. My father always said he graduated from the university of the world. He kept his eyes and ears and mind open, with the mind always computing the permutations of the possibilities of how to make one cent grow to a dollar and then a hundred. He played no stock market, nor as they would say among the shopkeepers themselves, jazz up the proper market. They were good honest and hardworking people, keeping their expenses one notch below their incomes however low that might be,and never spending more than subsistence no matter how high a particular income might happen to be. Sweat by sweat, my father saved enough for him to be confident enough to ask me, "Son, do you want to study in England." I said, "Yes, if it is possible." He said, "Go and apply."

It was therefore a privilege for me to study. It was also a great burden, for my father told me that every cent I spend contains his sweat. How could I make my father sweat - so much? It was RM7.80 to the pound sterling. I studied under immense duress. My father wanted me to be a doctor. My grades were not good enough. I asked him what he wanted me to study. He said, "Economy" because the Mat Salleh manager from Inchcape kept saying "It's the economy" when rent payment was slow.

So, economics as the study of scarce resources and opportunity cost is not something I had to think very hard about in order to understand its full significance. You have one or two bullets, and you better hit your targets, but before that to make sure that that's what you really wanted to do. Otherwise, it is pure waste. I study economics, philosophy and computer science in my first year, and did all the advanced theoretical economics after that in order to get value for money.

Studying was not the easiest thing for me. It was really hard work, to know the meaning of every word, the meaning of every sentence, and the gist of the whole book and the purpose of the whole subject matter and how it all relates to the world we live in. I gave up studying for myself, because life is an endless cycle, of the same old stuff in new skins, and how differences from biological accidents at the skin level. Has human beings gone so shallow? I found studying easy only after I studied not for myself, that I must pass my examinations for my father not to sweat without purpose, that I must understand what is going on in this 3-dimensional illusion with time so that the noble beings, no matter how lowly, do not succumb to dispair and undue unhappiness.

I have no fear about earning a sufficient wage to feed myself and my family. My only fear is that I waste my time and energy doing mindless things which serve no purpose to anybody and sometimes not even myself. I fear being a person thinking, saying and doing things which hurt or harm oneself and others. I have no right to make the world for anyone, since it is already so tough for everyone - even for the wrongheaded and greedy and mindless, for they too suffer their own foolishness.

I work to make a contribution to the society in which I live, no matter how small the contribution may be, no matter how disturbed the society I live in may have become. I work to find meaning in life. My life is useless, I do not need it. But I will use it to serve.

Khazanah Sukuk S$1.5 billion

2010-08-04T10:09:00.004+08:00

Khazanah last night announced that it has issued its single largest sukuk issuance in Singapore to-date for S$1.5 billion, at 2.615% for the S$600 million 5-year sukuk and 3.72% for the S$900 million 10-year sukuk.

It was also the largest Singapore dollar issuance by a foreign issuer in Singapore, and the first Singapore dollar issuance out of the Malaysia International Islamic Financial Centre (MIFC) initiative.

The governor of Bank Negara Malaysia and the deputy managing director of the Monetary Authority of Singapore also congratulated themselves.

The managing director of Khazanah said: "We are very pleased that this transaction broadens further our active participation in international Islamic capital markets."

I am very worried when regulatory and so-called corporate leaders are very happy to get government-linked companies further into debt and in foreign currencies - presumably backed by the federal government and presumably to finance some highly-priced medical services in the so-called regional markets.

If Khazanah is a specialist in commercialising medical services, I shall be slightly less worried. But if Khazanah is some hot-shot financial wizard that plays with other people's money - and in this case, the taxpayers' money if its fantasy goes up in smoke - then I am very worried for all of us.

That this is the single largest sukuk to-date is worrisome for me.

Why I Blog

2010-08-02T11:13:00.005+08:00

I am doing this post because my last post is exactly a month ago and since today is the anniversary of that solitary post for the month, I thought I had better do something about my lack of effort.

I had been busy (indeed) and away (true). But the real reason is that I had nothing to say.

After my last post, I have been quite ashamed of myself for having make capital out of some poor soul who is trying to earn a living and here I was in the safety and comfort of where I am to make snide remarks. My alarm is that many people agreed and I find myself feeling that I have committed an injustice to whoever that guy is who is trying to earn a living, even if I disagree with the way the whole thing is being set up.

The other distressing thing for me is to have found out that some good soul has pasted my post in his blog thinking that it was a brilliant piece and there I found some commentator who said what crap it was just because I had just one miserable typo. That puts me off writing.

My problem is that I am quite a lazy writer. I never check what I have written. I start with the first word that comes to my head and goes right down to the last word and then press "send." I cannot bear to read what I have written. I just wanted to say something and I say it. Does one go over the words one has just spoken?

Words that sound the same get mixed up. Am I dyslexic?

I like hishamh's recent philosophical posts - which inspire this one. Mind you, I quite like the four blogs that I follow because they are clear. hishamh is a data guy who, as we now know from recent posts, is trying to avoid mixing business with pleasure. His recently declared self-inflicted code of conduct is very long and I that is why I summarised it for him by saying that he is a data guy.

de minimis has a style of writing which is intriguing as it tries to draw you into a point of view which is particularly unequivocal. And he has a far wider range of things to say than economists like us who are stuck in their own little economic boxes. I like him because his heart is in the right place.

sakmongkol AK47 takes a militaristic approach to blogging. I like him because he has important things to say to his people.

The fourth blog is not mankiw who I follow to see what is in the mind of the America academic but walla. Walla is a parasitic blogger. He does not have his own blog but he is in everybody's blog (blogs that I know of, that is). He has a view that no one blog is adequate to contain. I like him because he takes us all to a different plane.

I mention hishamh because his recent postings get me into this long and winding post about why I blog on economic policy but think like a theorist (or so I imagine).

I think economic policy has gone down the tube around the world, because economic theory has been stuck in the past and has not managed to get out of its old mouldy cupboard into the new world.

We have to begin to think away from the old structure of thought especially in economics. I spent the last thirty years working in the real world to get away from old theory. The sad thing is that many people do not know what they are doing especially in economics because they have not understood their economic theory well when they were in university.

They have the most basic elementary view of economics. The most misunderstood is the Keynesian multiplier, which seems to be the cornerstone of every wrongly formulated policy. With the multiplier, all wastingful spending the government appears to be justifiable. You do not need to go to unversity for that kind of thinking.

I blog because I want to fight the wrongful use of the Keynesian multiplier.

I do not like to quote data because I have spent too much of my life looking at data. I want to move away from the tyranny of statistics and learn to think logically with eyes fixed on the phenonomon of the real world.

How can you describe the real world without statistics? Do statistics describe the real world?

I work with models, more theoretical than econometric, because the econometric model is rigid in structure. With theory, I can begin to think - admittedly around some "stylised facts" as economists or development economists like to say.

I find economics fascinating as subject of study because it is a study of human behaviour as we go about the daily business of living and earning a living. I think this is straight out of Alfred Marshall's Principles of Economics. I think it is still the best reason for thinking as an economist.

Human beings live in fear of the unknown and the uncertain future. We create certainty through trust that is developed out of long practices and understanding as to how things are supposed to be. With trust, many things can be built because it is economically efficient without having to go back to the fundamental test all the time. Accreditation. We used to trust nature (God), machines, money and ourselves. There are many things we are calling into question as we go creative. In econometric modelling, this is called a structural shift where data (necessarily of the past) do not contain sufficient information of the future.

I blog to explore new thoughts and new ways of thinking about the world we live in. When we are deep into things, we lose sight of the perspective. That's why I take the side view.

Ekuinas: RM5 billion

2010-07-02T10:36:00.003+08:00

Ekuiti Nasional Bhd or Ekuinas is a fund set up by the Federal Government in September 2009 using taxpayers' money for the purpose of pursuing the social objective of raising the bumiputra equity and participation in business, according to chief executive officer as reported in the Star on 28 June 2010.

Ekuinas already has an initial capital of RM500 million. Under the 10MP, it will receive RM3.5 billion in three separate funds, RM1 billion in outsourced funds. In all, it will have RM5 billion to invest.

The three funds of RM3.5 billion will invest in mid-sized companies with good growth potential. Typically, these will be companies that are poised for expansion after having developed their markets. Investment sizes of RM30 million minimum.

The RM1 billion funds will be outsourced to investment managers/partners who will invest in doses of not more than RM15 million. These investment partners must put in 20% of their own funds into the investments.

Ekuinas targets an average return of 12% per annum on its investments. To invest for five year, to "simmer" for seven years if need be.

Comments

The motivation is faulty in the first place for it uses public money to pursue a narrow agenda. Will Ekuinas pay back the Federal Government plus interest for the money it is using to make investments? Or, if the investment funds then grow to say RM10 billion, Ekuinas will claim the whole RM10 billion to belong to bumiputra ownership? What if Ekuinas lose money; will the general public then be made to pay for the misadventure? Is this what cutting back on the subsidies for the general public going to generate extra funds for such a pursuit?

The whole modus operandi is nothing but plain old venture capital, or what is now called private equity. But this is not private equity, this is public equity. The whole purpose of disintermediation away from banks and into private equity is for the private sector to take more risk in new ventures to explore new products and new markets in order to obtain returns higher than normal.

This is not the first time that Malaysia experiments with venture capital, the last one was Mavcap of which we have not heard much of now.

I am weary of such funds operating. This is in addition to Khazanah and 1MDB. If they can expand the market outreach of the Malaysian economy, then one may be able to give some concessions for such blatant ideas of financial engineering. But if they are going to make foray into foreign corporates, then I see no purpose in such funds. We are giving a sizeable portion of our precious scarce financial resources to a bunch of young people who have just out of educational institutions wearing red ties and dark suits sitting on leather chairs to play legos with.

What happens to our banking system, to our private sector, to our corporate leaders - as our financial leaders have awards heap upon them while the Malaysian private sector lay in ruin. These funds jeopardise the functioning of our funding and investment systems.

McChrystal: Brilliant?

2010-07-01T09:32:00.003+08:00

I am puzzled: How can a general as brilliant as McChrystal get himself into such a trouble? Is McChrystal that brilliant?

By all accounts as reported by the media and by commentators, the problem for McChrystal seems to lie in the foul language used or in comments about current world leaders including the US President and the Vice President.

On reading the actual Rolling Stone article itself "The Runaway General", I get a different picture.

From the article, McChrystal comes across as an alert person who seems to have a disdain for authority (and hence his arrogance) but who is totally at home with the simple and ordinary people. Alert because he seems to be aware of what is going on all the time, and how things are faring at various strategic points. He therefore was not a loose cannon who bad mouth current leaders, as subsequent reports suggest.

McChrystal indeed was very careful with the words he used. The times when he was quoted using expletives was when he was commenting on situations rather than persons. In the case of his having to have dinner with the French Minister, the quote was this: "How'd I get screwed into going to this dinner?" demands Gen. Stanley McChrystal.

What the reporter Micheal Hastings did which was clever but which could have created a gross misunderstanding of McChrystal was that, in order to be able to provide anomymous quotations from the people surrounding McChrystal, he created this literally fiction called "Team McChrystal" and attributed all remarks to it. If read rapidly, it appears that McChrystal was making those remarks. Of course, those remarks who use expletives, as they were typical off-hand remarks in informal occasions.

Underneath all these remarks is the underlying argument over how the US can get out the Afganistan. The simplest solution is just to pull out. But McChrystal has argued for a so-called counterinsurgency (COIN) strategy with the purpose of first stabilising the situation in Afganistan by installing a credible government and a stable society so that a military pullout will not create a civil war.

The problem, according to the article, is that COIN seems to be a very different strategy to execute because (a) it calls for a surge in ground troops in order to maintain order and the US has sent in 30,000 more troops, (b) it calls for military restraint in that US soldiers are told not to fire at most times and this has led to a rise in US troop deaths, and (c) by pouring in financial aids, the strategy is fueling corruption and discrediting the incumbent government in the eyes of the Afgan civilians.

But if Obama has already bought the COIN strategy, then replacing may not change the strategy - unless the new general comes out with a new strategy for a US pullout from Afganistan.

McChrystal could be brilliant. If he realises that the strategy he has sold to Obama does not really now work, then the Rolling Stone article with its consequence (now known) may just be a smart way for him to get out of a very difficult place. This McChrystal has achieved.

10th Malaysia Plan, 2011-2015

2010-06-11T10:03:00.003+08:00

The 10MP begins next year with the intention of charting the course of the economy as well as the social well-being of the citizens of Malaysia in the next five years.

The three key targets are an economic growth of 6% per annum in real terms, a reduction from 5.3% to 3% in the fiscal deficit and, as a result, a need to ensure that private investments will have to grow at 12.8% or RM115 billion annually.

The key to the economic success of Malaysia in the next five years, or anytime, is private investments. If private investments are not forthcoming, economic growth will fall below 6% per annum. In the 9MP, the average growth was 4.2% per annum. So equally, if we do not watch out, the economy could manage just to grow at 2-3% per annum which will be about the rate of growth of the population.

The rest on social development has to do with the distribution of government funds. The point I wish to make here is that while most people think that better growth will lead to better distribution (studies show otherwise), the situation we have here in Malaysia is that distribution may be affecting growth especially private investments.

In my mind, it is jolly well and good to have a nicely prepared plan. But the implementation must be done fairly and demonstrating social justice. Otherwise, the risk is to lose the support of the public.

The best of luck to Malaysia!

Subsidies & Inefficiency

2010-06-10T11:15:00.004+08:00

The latest official clarification paints the following picture:

1. Direct subsidies RM18.6 billion in 2009, indirect subsidies RM55.4 billion.

For the latter, there are two types:

(a) "...contract obligations, financial supports and rebates, assistance to MOF Inc companies...."

These are clearly part of the government's attempt at taking so-called "strategic stake" in various parts of the economy and may not have been that commercially feasible so that the government has to pump in lots of money to keep things up. This is the portion that needs cleaning up. Otherwise, you have incompetents running around acting like big corporate leaders when they are still wet behind their ears.

(b) "...cost-based financial assistance including emoluments for education and health."

This is part of social welfare as well as important KRAs which are fundamental to the shape of our future society. Without this, all education and healthcare will be at full cost.

Even here, there is a case for ascertaining how much of the "costs" or "subsidies" goes into paying for exorbitant capital cost of construction, and how much to real high value-added services from experts which are being enjoyed by the general public and therefore leading an improvement to the over general well being of society who, at the end of the day, are paying for those services through their taxes.

2. The country's national debt was RM234 billion, I presume last year, and this is purely the external debt of both public and private sectors. The government debt stands at RM362 billion, I presume on the latest count at some time this year, is made up of domestic debt (96%) and foreign debt (4%).

From above, the foreign debt of the government is estimated at RM14 billion which therefore means that the private sector foreign debt is RM220 billion. There should be no mystery as to the size of the foreign debt of the private sector as it captures all the GLCs as well, as a result of the earlier attempts at privatisation to solve the government deficit problem.

The government's financial situation today is a product of creative public finance policy in the past. When the public debt balance was cleaned up through privatisation which triggered a huge round of public spending unfortunately funded through short-term capital funds which on exit were then taken over by the national debt such as MOF Inc and shining entities as GLCs. These are all creative accounting exercises.

The economics is that the economy has lost its engine of growth which must always be private investments and which are now being replaced by public deficit spending.

It is probably high time that the government downsizes itself, and cut its operational and development expenditures by returning the bulk of the economy to the private sector and staying out of business. If not, we could be running an economy where the cream is harvested by the elite paid for by the general public in the generations to come through deflation and depreciation as their purchasing power diminishes over time.

Malaysia may not go the path of Greece but it could go the path of Latin American countries such as Argentina and Brazil. Fortunately for them, of years gone past, as these LA countries appear to be recovering.

The thing to do for Malaysia may not be to cut directly the subsidies per se but to strenghten governance and efficiency and to streamline our economic strategic position so that the need for subsidies is reduced resulting in a more transparent and efficient economic system.

To discuss what to do with subsidies in the context sugar, flour and cooking oil is to be pedantic.

Licence to Kill

2010-06-09T09:45:00.002+08:00

This is a classic case of an inept government policy.

When it is discovered there was a shortage of price-controlled items such as sugar, flour and cooking oil in some Malaysian towns, the Ministry of Domestic Trade, Co-operatives and Consumerism, in its infinite wisdom, decrees that all shops selling these price-controlled items should have an annual RM10 licence with immediate effect (1 June) or postponed (1 July), failing which:

(a) The shops are not allowed to sell - which will heighten the problem of access to these price-controlled items for the general public, or

(b) The shops will be selling the price-controlled items illegally - so the logical reaction of the association of shopkeepers is not to bother with the licence nor the selling (no hassle, small loss).

Many other possible causes.

(1) The shortage is caused by foreigners buying in Malaysian border towns. Administrative problem of restricting the purchase by foreigners.

(2) The shortage is caused by smuggling. Then the border police must work.

(3) The shortage is caused by smaller dispatches by factories. Talk to the factories. (The factories say they are not the problem.)

(4) The shortage is caused by customers stocking up. Could be caused by visibility of lower stock in shops. One-off abnormal demand triggering panic buying.

(5) The shortage is caused by shopkeepers stocking up (hoarding). Why? Again, fear of possible shortage.

As we can see from the above, the last thing the government should do is for the ministry to impose a licence on shopkeepers - unless, of course, the ministry wants to disallow foreign shopkeepers from selling smuggled Malaysian-subsidised price-controlled essential goods. Akin to asking thieves to legalise their operations (oops, the sports betting inept).

According to textbooks on war economies or totalitarian regimes, the most crucual aspect of price controls is the physical management of supply to demand. Demand is always there for "essentials" regardless of price. The supply lacks motivation because of fixed but small margin.

Yes, taking the lid of the price is the answer - in the long run - but producers are already circumventing the price control by value-addition to the products and making them non-essential or luxury.

So the price controls should be serving a very small section of society but the most politically potent because of their undeserved relative poverty.

Subsidies, Investments & GLCs

2010-06-08T12:06:00.003+08:00

I suppose the main issues have already been raised in my preceding post, but I cannot help myself from going at this subsidy thing again because there are many worrisome things about the way the subject matter has been raised and is being dealt with by the government and the government men.

1. The first worrisome thing for me is that the subsidy issue could be dealt with in isolated. One argument is that the subsidy, if maintained, will grow over time. Obviously. If the population grows and the economy grows and if the value of money falls. This happens because the subsidy is a percentage of the economy. How, is it not a wilful misrepresentation of statistics to quote a figure projected over time and presents the absolute number as a ballooning number. I am not necessarily in favour of subsidies, but I would like the facts about them to be present properly.

2. The second worrisome thing is that the justification for the removal of subsidies, apart from (1) above, is not clear either. If it so that the government can spend on other projects or is it to reduce the deficit. If the deficit is the issue, subsidies and other projects may have to be cut. And, by definition, going for a reduced budget deficit as per the GDP without any improvement to the investment climate, is a policy move that will definitely induce a recession in the local economy.

3. The third worrisome thing is investment. We should discard this old Keynesian thought (not necessarily Keynes') that even wasteful government projects will trigger off renewed growth in the economy through the multiplier effect. Recent local economic history has disproved this hypothesis. Given the leakages in the economy, and even the GLCs are now going abroad to investment, the income multiplier of any government expenditure is likely to be less than the sum spent on projects. There should be a clear cut strategy to encourage local private investments, the most important element of which is confidence of the people in the consistency of government policies.

My optimism is that the government has taken some positive leads especially in the NKRAs re corruption and education. The biggest challenge is the NEM which must be about the encouragement of local private investments. There is a serious need to review the mandate of the GLCs which seem not be building the productive capacity of the economy; GLCs are presenting crowding out local private investments through their monopolies, hallowing out the economy by investing abroad and concentrating on obtaining financial returns to financial capital. We need real economists in charge of GLCs.

Subsidies, Deficit & Competitiveness

2010-05-26T08:28:00.002+08:00

The current talk is that the money from subsidies can be used for development spending. This thinking is flawed.

The original intention of the subsidies in Malaysia was to contain consumer inflation.

When it was argued that government policies were expansionary, such as through reckless government spending on mega projects and when the money supply was growing at 20 to 30 per cent per annum, and therefore leading to inflation, the political wisdom of the day was simply to control consumer prices. Once held in check, everyone was happy. The consumers were happy and the elite of the day made hay while the sun shone.

Now, the problem is a blossoming of the amount spent on subsidies of all kinds across the board in the economy, and the amount spent on all kinds of government projects. There is now a problem in the economic system that we have inherited.

The natural instinct is to remove the subsidies. My immediate response is "Learn from Suharto" who had to resign when the people revolted at the subsidy removal insisted by the IMF.

If the purpose of removing the subsidies is to fund the deficit spending of the government, then my answer is not to do it. If the government spending is supposed to be good for the people, the subsidies are good for the common people.

The only valid reason for removing the subsidies is to enhance the competitiveness of the economy. This means that no sector of the economy is given undue advantage with the benefit of government money. In this case, the biggest subsidy is in the motor car industry where the duties on imported cars are so exhorbitant so as to drastically reduce the purchasing power of the common people. By removing the import tariff on imported cars, the transport system in Malaysia may improve dramatically. There will be no poorly made cars on the road. But there will also be a loss of revenue to the government.

The removal of food subsidies, as I have said above, is a dicey thing to do. Sure there will be an increase in retail food prices, but one off. It will reduce the quantity consumed but for a while. If the food items are produced locally, production may be stimulated and the competition reduce the price eventually. If the food items are imported, there is a need to remove the import quota so that competition will reduce the price eventually as well. On the whole, a good thing to do but gradually.

In removing subsidies to remove distortions in the economy and enhance competitiveness, the ultimate trick is to provide a level playing field with minimal or no monopolistic elements (no tariff, no quota) so that our best may compete with the best in the world.

The concept of competitiveness is derived from the concept of individual freedom and individual hard work, and against the concept of toll collection and rent seeking. Only that there should be rules so that all have equal access to opportunities in the economy and out.

Malaysia-Singapore Deal

2010-05-25T08:40:00.002+08:00

Malaysia and Singapore moved foward on its Points of Agreement with "enhanced features" to the 1990 draft. The POA to be finalised in a month's time.

Malaysia to move its KTMB railway station from Tanjong Pagar to Woodlands by 1 July 2011, together with the CIQ.

Six parcels of KTMB land to be jointly developed by a company to be called M-S Pte Ltd and set up by 31 December 2010 between Khazanah Nasional Berhad (60%) and Temasek Holdings Limited (40%). One each at Tanjong Pagar, Kranji and Woodlands and three at Bukit Timah. The developed land could be swapped for land in Marina South and Ophir Rochor.

A rapid transit system could be developed between Tanjung Puteri in Johor Bahru and Singapore by 2018.

Malaysia and Singapore to consider reduction of toll rates at the Second Link.

There could be a Think Link in the distant future.

Singapore will hand over the Skudai waterworks to Malaysia fre of charge and in good working order on 1 July 2011 after the expiration of the 50-year agreement of 1961.

Other deals at the Malaysia Singapore retreat.

Kahzanah and Temasek to set up a 50-50 joint venture to develop a 202.3 hectare township in Iskandar Malaysia to be launched within a year.

An integration of Johor with Singapore.

Goh Keng Swee

2010-05-17T09:01:00.003+08:00

Dr Goh Keng Swee died last Friday morning at the age of 91 after a long illness.

Dr Goh was the person behind the Singapore economic miracle, while Lee Kwan Yew helms the politics.

With a PhD from the London School of Economics, Dr Goh was able to present his thinking on economic development in a very clear and simple way. Using the simplest of economic growth models, he told students of Singapore University one day that you needed to save in order to invest.

If your savings are too low, then you need to invite foreign savings.

In order to attract investment, you must built the necessary infrastructure: port, education, national security, social security, public housing, public transport. Dr Goh practically created the present institutional establishments that have stand Singapore in good stead till today.

Singapore's excellence, not doubt, comes fundamentally from the training of its young people in the armed forces during national service as well as the use of advanced technology in national security.

In addition to the retention of English as the medium of education, despite Malay being the national language of Singapore, the national service forges the spirit of Singapore children into responsible men and women with the resolve to do their best.

In public transport and public housing, Dr Goh's objective was to build an environment that is conducive to pleasant living and working. Singapore city, being a concrete jungle as a result of its built-up density, still manages to exude a greenish impression the first you arrive in the city.

Dr Goh was also responsible for building the zoo, the bird park, sentosa, the Singapore Symphony. While most would think that he had a cultural and arty bend, I see these projects also as economic projects which will also attract visitors to Singapore, in addition to providing the needed natural retreat for tired city dwellers.

I heard he was a good drinker, and I reckon this could be an important constituent in contributing to the greatness of a brillant thinker and action man.

Innovation, Investment & Indigenousness

2010-05-12T15:27:00.004+08:00

Most of the time, many big words together can mean a very simple thing - encourage our sons and daughters to think for themselves and put their own ideas to work, and hopefully make some money out of their efforts but importantly that their efforts be of services to society and themselves.

Innovation

Do our children think for themselves? They do learn from the internet but not from schools. From schools, they learn the worst examples of sloth and cheating and lying from teachers, the role models they see and have to face everyday. There are good teachers but there are bad teachers, but the average impact is unfortunately not strongly positive. It is probably by a combination of resolved communual determination of parents and the community of elders that we currently have some form of defence against the infestation of rigidity and lack of effort in formal education institutions.

However, I won't argue that there is no space for creativity. Children nowadays have plenty of room for creativity in the classrooms thanks to the constant absence of teachers during teaching periods and the boredom and dullness that they manage to induce in their students. Creativity is the easiest form of escape for bored students to think out of the classroom and into the world of fantasy - and I am not at all surprised that the first career choice of my daughter is to be cartoonist or comic artist - how can I discourage her from a path that she has been talking during most of her formative years. (This is not to suggest that she failed her examinations; she got excellent grades, thanks to the superb tuition teachers that she had.)

So if a minister or an ex-minister wants to talk about home-grown investments, I think we have to fix the educational system by doing an overhaul on the quality and qualifications of the teachers, as well as their pay and the school curriculum - which means fixing the Ministry of Education. We have to put forward-looking and non-insular officials at the top.

Investment

Investment is not only about brick and mortar - this is the first lesson for all ministers, especially finance ministers and the people who are in charge of the dispensing of monies from the public purse.

Investment is about putting real time and money in a project in which real human efforts are applied. A lot of time, a lot of money is put in, but the actual effort is that of a foreign worker because the local worker involved does not have to put in effort (after he or she has taken a lot of the project money for his or her own pocket) or that the aforementioned local worker is so poorly trained as to be incompetent or so lazy as to be useless or so well taken care of by the system that social benefits can accrue to him or her by sheer display of non-effort.

Local investment is not about the government pouring in billions into the economy or selected pockets of the economy. Why? Our government has already done that for many years involving many billions, and all that we have to show is some good projects and some bad projects but lots of inflation until the inflation hits not just the ordinary folks who go straight into poverty land but also the not-so-ordinary folks who can only make money by importing and employing the real destitutes of our neighbours near and far. In this way, we can pretend to have local investments by spending local tax money and local savings to create jobs for poor foreign workers and make good profits for local project proponents who then quickly reinvest their profits from the local investments into foreign consumer-type products chiefly real estate.

Our government has done this before by giving billions of money to so-called local investment projects and creating local billionaires who then think that they are too big to be in Little Malaysia.

Indigenousness

What is indigenousness when the government encourages the cannibalisation of the assets of one part of the local community with the view of using public money obtained through decree in the form of taxation to transfer those same assets to another part of the local community.

In economics, this is called transfer payment where a monetary transaction is made without any accompanying flow of goods or services the other way.

The immediate effect of such an effort is the flow of cash out of the system and putting downward pressues on the local currency. This impact happens because the action itself shows to the selling party that all their past efforts in saving their money and looking for ideas to preserve and enhance their capital is worthless because there is this big brother called the government who is supposed to protect them also as a government is no more doing that and that the earnest money they have paid in the form of tax is now being used to bring about their demise. This being clear, then the only logical thing is to negotiate price and get the hell out of here, therby driving out perfectly good indigenous investments. This is killing the goose that lays the olden egg, because there is an implicit rejection of the goose for some strange reason.

The only correct definition of indigenousness, in an economic context, is any person who is putting all that he or she has into the land that he or she is standing on and residing in. It is only through life-long sacrifices and devotion that the society is improved in terms of the ordinary provisions that the local communities can enjoy and through continuous efforts that the incomes of the communities can improve consistently. A person should be considered indigenous by his or her service to the nation, not by any other exterior characteristics.

Australia's Innovative Resource Tax

2010-05-03T15:31:00.003+08:00

Australia's proposed resource tax is a real innovation in public finance. It allows the rest of society to share the boom from the export of natural resources, rather than allowing the wealth generated to be concentrated in the hands of those who are in the mining industry.

AWSJ, 2 May 2010: "From July 1, 2012, resource companies such as BHP Billiton Ltd. and Rio Tinto Ltd. will be liable for a 40% tax on profits made from the exploitation of nonrenewable resources. Combined with company taxes and after allowing for extraction costs and recouping capital investment, companies will pay a statutory rate of around 58%. Currently, mining companies are taxed on their production, through royalties of between 2% and 10% imposed by state governments. Those royalties will remain, but companies will be refunded those payments by the federal government."

The extra revenue will be used to cut corporate taxes to a more globally competitive level and offer more-generous tax concessions for smaller companies. The mandatory pension-fund contribution will be raised to 12% of workers' salaries in stages, from 9% now.

Many natural resources are non-renewable and the resource tax will impose an extra cost and slow down their usage.

At the same time, the increase in mineral exports raises domestic inflationary pressures and there is a need for some form of a compensation to those not in the mining or resource industry for the higher cost of living.

This resource tax is interesting now that China is unloading its US dollar reserves onto developing countries with natural resources, and there should be a wider spread of the liquid to the society at large.

The use of the resource tax should be compensatory for higher prices rather than a windfall gain, as the latter could trigger the much to be avoided Dutch disease.

Innovation & Mediocrity

2010-05-03T09:59:00.002+08:00

Since we are talking innovation, I cannot help but be a bit polemical.

We all have this grand idea about innovation - the genius, the special case, the one that nobody else has. In this world of the mass media, mass marketing and mass production, what uniqueness and orignality are we talking about?

My favourite example is education, because most of us (I presume) have children and we spend too much time and resources worrying about them. We imagine we want them to be geniuses, but in reality, in our heart of hearts, we only want them to be average, to be mediocre, to be the same as everybody else - except only to be the first in line. That could just be the best of mediocrity. I do not imagine decent parents to want their beloved children to be eccentric, to be in a sphere of existence where nobody understand him or her. We want our children to be in the mainstream, if possible, in the upperstream.

In true originally and innovation, it must be out of this world and not be understood by the present and maybe by the future after considerable time, by human standard, say 100 years or two. This is where all the grand sages make their marks.

In day to day living, we are merely contented with marginal improvement because we cannot handle drastic changes without trauma. We want one foot in our comfort zone and the other testing the water. This is called risk management.

Most of us want to live a long and boring life, fearing dead and taxes. We want things to be the same as before, if possible, slightly better but not too much.

Innovation, Intellectual Property & Politics

2010-04-29T17:32:00.002+08:00

Politicians do not know innovation or how innovation comes about. They know how to take ideas from others without permission and without giving due credit. Their love for power is so strong that they will stop at nothing to get ahead, even at the expense of their own integrity.

Innovation comes from thinking out of the box and pursuing fringe ideas until that which is not known becomes explanable and repeatable.

Innovation comes from years of devoting oneself to a way of thinking that takes out out of the mainstream and into the realm where ordinary people do not or cannot understand you - so that you can show to your own satisfaction that indeed you are different and in fact significantly different so that you may be considered unique in the world of ordinariness or to use an oft misunderstood word, mediocrity.

The tao man treasures mediocrity but the zen man thrives on nothingness.

It is the man of the world who immerses himself in a world full of modifications in order to be different, nay, delibrately creating differences where none exists in order that claims of uniqueness can be exerted.

It is therefore odd that people with no inventiveness of mind tend to enforce differences which do not exist in order that they can extract from others the fruit of their creativity and innovativeness in order just to stay alive and relevant in order to capitalise those the claims of uniqueness in the commercial market place.

But genuine uniqueness and creativity emanates from the heart and soul of people who choose not to waste their precious time engaging in trivial but slowly and carefully, dot by dot, line by line, chart out new territorities of the mind in ideas which can take the world by storm. Innovation is the product of the blood and sweat and to steal them and not giving due credit is therefore a despicable act.

Most people would not wish to hurt themselves, even if they could think, in order that they do not put themselves in situations where they could not forgive the traversity done on them and destroy their lives.

When the environment is not right for innovation, there will be no innovation. Innovation will go where the environment is conducive for ownership rights of innovation to be kept.

All efforts are innovation, not matter how small those differences may be. Someone who works is more innovative than someone who does not work. Someone who works better is more innovative than someone who works disgruntedly. Etc.

It is therefore unlikely that politicians are the right people to talk about innovation or encourage it, because they do not know what they talk about. Politicians do not talk innovatively; they merely dilute the substance of the things they say.

I would like to leave innovation to the ingenuity of private individuals, while the system gives the people the right to the fruit of their own labour.

People, Power & Politics

2010-04-28T17:32:00.002+08:00

The people have power collectively as a society. The power of the people is that they can all together what they want their society to be like.

In Malaysia today, the people want a fair society where everybody has equal opportunity to economic wellbeing. Nobody should be prevented from access to the mainstream economy. Many obstacles exist but the last one should be health and education - and these the government should work hard to remove. The last thing that you want a government to do is to create artificial barriers imposed forever.

Politics come in when a handful of people want to monopolise the power franchised by the people meant for the collective good. The focus of the political system should be the collective good, not the perpectuation of the power of the elite.

It is clear in the recent by-election that there is a group of people who value the system more dearly than the specific ad hoc short-term economic benefits that have been offered them. These people have the courage to sacrific their immediate economic benefits in order to fight for the long-term improvement of a system that will be beneficial not for themselves but for their children.

That was a close fight between the power of wisdom and the power of money. Very enlightening.

Entrepreneurs, Bankers & Policies

2010-04-26T16:24:00.002+08:00

If pandering to foreign investors is not the best path to high income in an economy, then it is necessary to woo local investors. Who are they?

Local savers and investors are the true patriots of the nation, for they are the people who sink their toes into the soil, dig deep and are willing to do and die on this soil. They are the true sons and daughters of the soil, for they make this land a place where they will live and die.

The true patriots are those who work very hard, despite even extremely conditions, following the basic rule of economic survival of not consuming at one go all that one has at the moment. With the little that they have saved, they hope to graduate from the drudgery of earning wages based on their subservience to become masters of their own little capital, from which they hope to earn a multiple from.

How fast that little capital spin and grow depends on their astuteness in knowing what the market needs, what the market is likely to need in the immediate future and in understanding the dynamics of the market supply and demand situation.

Those who read the market properly succeed; and those who don't, fail.

Successes and failures are both part of the dynamics of a growing economy that yearns to earn high income.

Protecting failures breeds insolence, while protecting successes breeds arrogance.

How the nation can break out of its little coconut shell depends on the courage of those with money to support those with foresights and ideas backed by technical skills.

In traditional societies without a modern banking system, the funding is undertaken by snake heads, gangsters and Ah Longs who go sideways into funding enterprises that cater to the base needs of unenlightened human beings like themselves.

In a modern society with a modern banking system, funding is controlled by bankers. In the not too distance past, bankers cultivated good relationships with their clients on a professional basis, qua bankers. Today, people who work in financial institutions are not real bankers for they merely handle money in the abstract sense, paying close to their gods of the stockmarket, and moving money in terms of the balance sheets and their income statements. They do not undertand the underlying dynamics of money and the economy, except in lending (a) where there is supposed to be no risk (ie real estate) or (b) where the rate of return is the high (ie financial products). The real business of producing goods and services to the neighbourhood has become too boring a lending proposition.

The tendency for bankers to mass process their loan applications is caused by the change in central banking thinking from keeping the creation of fiat money on an even keel to one where new money is used to cover up the failures of old money. That big money funds big multinationals should not be a surprising phenomenon, for the strategy is global economic domination. There is no wonder that bankers surrender their lending policies to the corporate strategies of the multinationals, and there is no wonder that the global economy today is dictation by foreign direct investments - as the rich of every emerging economy in Asia and Eastern Europe invest abroad in search of higher and higher returns.

This broad sweep of the global economic and financial landscapes shows the difficulty in formulating good local investment policies where emphasis is place on local personal knowledge and global market intelligence. Good policies must encourage the dissemination of accurate information and impartial news for local investors to make good decisions in an increasingly challenging world. All efforts must go out to lay an even ground for all economic players so that they can concentrate on winning the economic game at the global level. We have to begin to work together as a national team with the government laying down simple clear policies, the bankers keeping track of the economics with their customers, and the entrepreneurs sweating it out to pay the banks and feed their families.

Do the key players of the economy know what they are doing? Or are they merely repeating what's in the news?

High Income vs High-Income Economy

2010-04-22T09:17:00.003+08:00

If we think as a layman, high income is more cash.

Implicitly, this means that the income of an individual is high. That individual is also assumed to be an employee. For an employee to earn a high income, he must have the requisite education and technical skills as well as soft skills in dealing and working with people and even playing office politics well.

In exceptional cases, which are probably rampant in a certain type of environment, it is even possible for individuals without the requisite education and technical skills to earn very high incomes compared with the incomes of highly trained individuals simply by just playing politics, though I would also add stealing ideas from the technically trained. In such a case, the environment degenerates to stagnation (and wallows itself in the so-called "middle-income trap") as the technical workers become demotivated and refused to come up with new and better ideas, and the ideas thieves in order to keep themselves in afloat in their own pool will resort to lies and half-truths as well as mouthing motherhood statements and advertising themselves ceaselessly of their half-baked ideas. This is a mud pool which will suck everybody in contact with it in.

When we think of ways of generating high income for individuals, we think of the educational system as well as the type of investments that are being encouraged in the economy. By definition, investments from low-tech industries generate low-income jobs and investments from high-tech industries high-income jobs. When promoting investment, the job is simply to switch the emphasis from low-tech to high-tech industries. This is no sharp thinking, although it is techically correct.

But when we think about how to create a high-income economy, it is an entirely different thinking process from that of an individual. Afterall, an economy is a system that is dynamic and alive and will either grow or shrink depending on whether certain parameters (such as with regard to optimism) are higher or lower than others (such as the propensity to consume and not invest).

It is not enough just to promote massive foreign investments in order to achieve the target of a high-income economy. While it will create high-income jobs if certain types of investments are encouraged, the problem is the acute dependency on foreign investments which are nothing but foreign savings looking for lucrative environments to make huge profits to pay high dividends to their investors many of which would be houshold savings. In a high saving economy with clever managers of money and investments, it is possible to generate a high-income economy where people living comfortably at home in their own natural environment enjoying life with their families and friends because they save and invest well.

They leave the dirty work to the young strong and educated people of third world countries which ideally should be in the lower middle income, for the children of poor third world are not ideal places for growth of profits. The lower middle income countries do nothing but spend their time talking to foreign investors (and not their own domestic investors), and educate their children to be inward and traditional with a smattering of English in order for them to get by in receiving instructions from their supervisors (when they are given no opportunity to wantonly disobey).

The lowering of the educational standard, or rather the systematic removal of the courage to think aloud and share new ideas, no matter how strange, and at the same time able to conduct decent conversations that do not necesssarily be on topics fashionable in the media at that time, is a sad destruction of the growing environment that is a real obstacle to the growth of a high-income economy. High income does not come from copying and stealing; it comes from original thoughts and ideas.

A high-income economy therefore is not created by investments in high-tech industries where government officials collude with multinationals to use their productive generation purely for the purpose of making profits.

A high-income economy is the product of national economic system that encourages the constant destruction of the old and the constant creation of the new as an essential element of the dynamics of a healthy growing environment which what counts the most is the creation of the new frontier of a growing and living entity. It is this building of the new frontier that is, in boring economic terms, called investment and this investment must intrinsically be undertaking by the citizens of that national economy in order that the growth be of a character that is in line with the spirit of the people. To accomplish this, the people must work hard to learn how to think clearly, discern the old from the new, communicate and share, and collaborate and produce new frontiers, save resources for the future, and keep reinventing themselves.

Then we can see a new dawn.

1Malaysia in Washington

2010-04-13T08:57:00.002+08:00

Why would Malaysia promote its national unity in Washington?

I have always thought promoting 1Malaysia in our home ground is fine, even if it is called the Faces of 1Malaysia, although I would even argue that having to promote it means that we do not have it in the first place.

I fear the great monotony ravaging our nation. It seems that the only idea or concept that best describe our nation today is 1Malaysia - whether it is a wish, an idea or a reality. We have no way of distinguishing one from the other.

Somebody should be doing some real work if this country is going to go anywhere at all. It will be sad that the signal for a good economy is some stirring in the stock market.

NEM: Subsidies & FTZs

2010-04-08T09:59:00.003+08:00

How do subsidies and free trade zones fit into the New Economic Model that we are trying to create for the new Malaysian economy?

In the NEM, what we are trying to do is to create an efficient economy.

Efficiency

But efficiency is NOT a natural state of affairs for an economy. Efficiency is an ideal cooked up by the Enlightenment European gentlemen of the eighteenth century. It is an ideal which I share as an economist.

In other words, efficiency is an ideal that we have to work at in order to ensure its existence. Otherwise, we are likely to find the economy crumbling into chaos and anarchy. Which means free market and free enterprise are not necessarily the path to the economic prosperity that we all dream of - but they may create a world where some would be more equal than others.

Subsidies

Subsidies enter into the economic picture when the world is seen to be unfair to a section of society, usually the poor.

Bear in mind that the poor are the result of the prevailing economic system, and the poor are relative in terms to the rich - except for the absolute poor who are those who have not been able to gain membership into the economic mainstream that the system has evolved into, and which usually means the uneducated, the incapacitated, the single mothers burdened with young children, as well as the very young and the very old.

The social safety net that everybody talks about now should be about the absolute poor.

The huge 40% of society who are considered poor in Malaysia today are directly the result of the economic system that we have - and which could be the consequence of the inefficiency that has arisen from the deliberate attempts by policy to distort the economy in favour of a few based on claims to rights rather than efforts to add to the national output so that all could have more, so long that the output is not hoarded.

When there is a great dichotomy in society - when the parents are illiterate and the children highly educated - there will be great disparity in income and subsequently in wealth as the income is saved and invested. There will be no dichotomy when the economic foundations of society are more even, and when there is a lesser distance between the very top and the very bottom.

When the economic disparity is huge, there is a tendency for politicians to give subsidy in order to pacify the poor majority. This makes the poor less angry but it does not provide them the means to equalise themselves with the rest of the world.

This is why the policy thinking today is to go away from financial assitance to technical assistance. While providing temporary financial assistance to tide over the difficult transition period, there should be injection of technical skills for the poor to lift themselves up by the bootstrap out of poverty. Technical skills can be injected through institutional re-arrangement where every one has an opportunity to enter the training and education stream at all stages.

Removing subsidies in the economy is therefore a policy call that can only be justified at a high-level economic conceptual level. As I have said, efficiency is an ideal I share.

But the reality of removing subsidies is fraud with political difficulties, as entire governments have been brought down by it, as they hit the poor who form the majority of the voting power. The government has been circumspect in this respect in the recent Malaysian case.

Industry-wise, the national car project has been costly and I have discussed this in an earlier post. The costs are the import duty that consumers have to pay as well as the need to push some many new cars on the road which inevitably create traffic congestion and increases the cost of travelling. The resources put into the national car project could have been better used in developing a good public transport system not only in the capital city but through the nation. Instead of a good railway system, for example, we have got a good trunk road.

So instead of a second trunk road, we should now have an improved or a better second railway system.

FTZs

Would we then go the other extreme and say we do not impose import duties and other taxes on all goods manufactured in the country?

If the collection of taxes greatly hinders economic efficiency, then the FTZ for the whole nation would be a good idea.

But taxes have their purpose in providing the means for the richer portion of society through its government to provide some equalisation to the disadvantaged section of society.

If the FTZ is the only means by which industries can become efficient, then the economic system must really be in an aweful state. The FTZ is an argument used for the purpose of competing with neighbours who are using the FTZ as a major weapon for attracting foreign investments when none could be hoped for from within.

The economic system is like the human body. If the body is healthy, it functions without sound. If there is too much noise coming from the system, there will be attempts to apply external band aids to reduce the noise, most likely without healing the internal injuries. We would just be waiting for the system to break down.

The economic system improves and grow healthy with exercise of its people in terms of acquring skills, earning a living, saving and investing and helping their neighbours. The job of policy and politicians is to provide the open space for the exercise to take place, while policing to ensure that there is no mugging that will spring on the hapless workers. Clearing the ground and providing some apparatus to improve the exercise routine may be interesting, but the exercise gets better only when natural obstacles do occur.

NEM, NKRAs, SRIs: Putting Them All Together

2010-04-07T14:58:00.007+08:00

I have a strange feeling that we are doing everything but nothing may get done.

Why? There is a lot of visioning and missioning going on. But somebody has to stoop down to scoop up the dirt for the path to be clean.

Let me explain myself. (I am still trying to make sense of the NEM: Part 1.)

1. The new administration starts with a Big Bang - on slogan.

1Malaysia: People First, Performance Now.

What this is presumed to mean is that we should all put aside our petty differences and get on with doing some real work. 1Malaysia could be a rallying call to the rakyat to get out of own individual sectarianism and start thinking of ourselves and each other as Malaysians. In other words, let's move to a higher level of distinction for ourselves.

It is also a rallying call to all the races to live in harmony by respecting each other to right to a means of livelihood and economic opportunities so that by each of us putting in our efforts and working hard, we all together contribute to the improvement of our economy. Hence, performance now so that each of us will benefit from our own efforts and the efforts of each other as a result of synergy, momentum and economies of scale for example.

People First, Performance Now can also be a rallying for the civil service so that each and every public servant will work hard and smart in the interest of the people by helping them to solve their day to day problems in earning a living because of the many laws they have to comply, and through new and improved systems to create create efficiency and new opportunities.

1Malaysia is an ideal we all Malaysians should strive for so that we can always think of all Malaysian citizens as one people.

1Malaysia is an ideal now because it is a wish we have but a reality which we do not have.

In other words, there should be an attempt by us to change the way we have been thinking about ourselves and our fellow Malaysian citizens - because the way we have been thinking is not good enough, below our high new ideal.

There is a group who are happy with the old way of thinking, and there is a group who will be happy with the new way of thinking.

Each camp will argue its case in order to persuade more people from the other side to join them. It all boils down to economics and politics: who has the power to ensure that they are the main beneficiary of the position they are fighting for. The thinking is likely to be on the way the economy should be managed.

The slogan therefore operates like an overall label for the regime.

2. The next thing for the government to day is to do something big and significant that will redefine the key parameters for the Malaysian society and economy. What are the major parameters?

They are called the 6 National Key Result Areas (NKRAs): Reduce crime rate, Fight corruption, Improve education, Help the Poor, Improve infra in rural areas, and Improve public transport.

These 6 NKRAs are indeed big and significant because if we are think back to what our comments are on the NEM, we find that we keep falling back to the NKRAs.

So, the NKRAs contain most of the major solutions to the problems that are inflicting society as well as the economy - crime, corruption and education.

The NKRAs deal with issues that affect our national social and moral fabric, as well as our national social and economic infrastructure.

In fact, the NKRAs should be sufficient for the NEM and be dubbed the Great National Transformation Programme. Instead, it is being diminished as the GTP - The Government Transformation Plan.

But, seriously, if we can do the 6 NKRAs well, we should not have to worry too much about the NEM. But no, the NEM has to come into being.

3. The New Economic Model is supposed to be an economic model like no other economic model because it is supposed to be entirely new - if I know my English.

So the NEM is supposed to be this great Economic Transformation Plan (ETP) which is equal in stature to the NKRAs' GTP.

How is the NEM supposed to transform the Malaysian economy? There are 8 Strategic Reform Initiatives (SRIs):

(1) Re-energising the private sector
(2) Developing quality workforce and reducing dependency on foreign labour (NKRA3)
(3) Creating a competitive local economy (SRI1)
(4) Strengthening the public sector (NKRA2)
(5) Transparent and market-friendly affirmative action (NKRA2 & NKRA4 & NKRA5)
(6) Building the knowledge-based infrastructure (NKRA3)
(7) Enhancing the sources of growth (SRI1)
(8) Ensuring sustainability of growth (SRI1).

which can, as shown above, be reduce to just one simple objective: To re-energise, fire-up the private sector by creating a competitive environment for it, by encouraging the exploration of new ways of doing business (innovation) and by sustaining growth by paying more attention to the natural environment.

SRI5 is dicey, as the argument is that affirmation policy is good but there should be no rent which can presumably be created through corruption and collusion. Some may even want to add crime.

4. The "fourth pillar of the national transformation" according to the NEM: Part 1 is the 10MP which should contain details of economic programme for 2011-2015.

*
I think the NEM should just focus on narrow economic issues regarding investments - how to stimulate local investments. While the business institutional framework may be improved by streamlining rules and regulations, there should be greater cooperationa nd coordination by the NEAC with Pemandu to fine-tune the NKRAs to improve on the overall national social and economic framework that defines the general character of the nation.

The greatest piece of announcement in the PM's Keynote Address may be the corporatisation of MIDA which actually tries to address the issue of investments. If MIDA is going to be worthy of its new name of Investment Development (and not just Industrial Development), then there may be a case for NEAC with the NEM to be nested under MITI in order to work closely with MIDA to get investments going.

The real action of the government for transformation should then be given to Pemandu to drive government policies and spending in the right directions along the lines of the NKRAs.

The purpose of the 10MP then may just be for the government to announce the extent to which it is broke, so that there should be greater need for the general public to take care of itself. Hence, efficiency and private investments.

NEM: The Real Issue

2010-04-02T11:04:00.002+08:00

How do we get ourselves out of the current economic quagmire?

The real issue is clear: Rights and privileges have been equated with monopolies and rent collecting - and this has led to an uncompetitive economy, exactly as propounded by the textbooks.

The change we require is simple: Reduce monopolies and distortions, and encourage multiple players in order to promote competition.

But the major counter argument is this: Why do we need a more competitive economy? With monopolies and economic distortions, we have managed to obtain for ourselves a fairly good standard of living. We are happy with things as they are and we should continue with the status quo.

The problem with this argument is that is that it is predicated on the proposition that there are some people who are willing to work very hard because they will get no government support as they are not indigenous and therefore they must fend for themselves. Thanks to their circumstance, they are forced to get out of the hole they find themselves in.

As these old slaves leave their hole, other unskilled immigrants will have to come in to take over their labours. Our economy therefore gets stuck in the agriculture that we have been fortunate to have inherited from the British colonials as a strategic position in the global economy.

The major hinderance to change in this country is the anachronistic poltical system that propagates sectarianism. There should be an overhaul of our political system. The alternative front based on justice and religion is also a tough alternative for the people to choose.

I hope that the political line could one day be drawn between the liberals and the conservatives - those that want globalisation and those that want a bit more of local control.

But no sectarianism, please. We are Malaysians!

Sometimes, I wonder whether our national problems are really a problem of the positions we take, or are they a reflection of our inability to communicate properly among ourselves, as a result of stereotyping and fear and suspicion. For everybody claims to be reasonable - which I would like to think they are and see things through their eyes.

NEM: NEAC Presentation at InvestMalaysia 2010

2010-03-31T22:50:00.006+08:00

Went to the morning sesssion and came away with mixed feelings.

The NEAC presentation was about 10 slides based on the report NEM Part 1: Strategic Policy Directions.

The whole thing has been incredibly boring because it has got everybody talking about what's wrong with the Malaysian economy - and the whole agenda is making the whole nation with interested foreigners to bicker about our economic afflictions.

It would not be difficult to gather the data and details to support various arguments - especially by a well-paid team of young and enthusiastic graduates - and I would even imagine that NEM Part 1 would make a good read in this regard and probably be therapeutic for those reading it.

The tendency of everybody in the session - and even my tendency now - is to try to identify what are the real problems with this economy - but at one point or another, what needs to be said has already been said and probably a hundred times over.

This whole NEM has become a national nightmare.

The common phrase we now hear about the NEM is - the devil is in the details of the implementation. The other one is this - change we must but it may not be easy.

I choose to differ.

I think the most crucial aspect is to identify the core issues and to make core changes to policy and everything else will follow.

If we are going to get ourselves stuck in another rigid (and rigged) - though modified - system, then I think we are going to be no better than before.

The PM gave several guiding principles yesterday. I wish to give some of mine now on the NEM.

1. We should build a flexible and dynamic economic system with basic rules, and not a rigid system based on a new set of rules. There should be dynamism for investors and savers.

2. The key agencies should be answerable to the general public in some way on a regular business basis. We should call up BNM, MOF, MITI. MOE, MOT to explain what is happening on the ground. To my mind, the greatest misjudgement in policy is on the exchange rate which plays a key role in restraining Malaysia from getting out of the middle income. (But there are groups who are happy with us being in the middle trap because they are personally enjoying a good life while cracks and strains are appearing in the rest of the economy.)

3. There are some stale mindsets staying in senior officials. When asked what about the SMEs in the NEM, Amirsham - to the best of his ability - said, "I thought the role of the SMEs is clear - to support the big companies." This is a layman's view. What a shame, Amir! My view is that SMEs stay small and medium sized because they failed to grow to be big international firms, and this could be due to market constraints such as being hampered to serve just local MNCs or GLCs. We should be building a national route for local firms to compete in the global markets.

4. This brings me to the point about the state of the local economy. We have been so dependent on government spending to get the economy to grow since 1990, thanks to the greatness of our previous economic architect, that almost every corporation of any measure in Malaysia looks to the government for some form of business. And the argument now is that since we do not have the cash anymore, we should look to private investments. If the "private" sector is government-dependent, then tenders for government projects become a major issue. To focus therefore on the government tender system is therefore to miss the point.

5. A point is made that middle income economy depends on semi-skilled labour and graduates, and a high income economy depends on masters and PhDs. This takes time. The immediate solution is to grant PRs to foreign skilled professionals as well as double citizenship to Malaysians or ex-Malaysians already abroad.

6. The list can go on. But to create a great list to fix the national economic system is a telling indiction of the government system - that the ministers and the civil servants that we have now are a hopeless lot. They have to be told exactly what they have to do in order to do their jobs well. The so-called detailed Roadmap that is to be in NEM Part 2 a further proof of this paralysis in the public sector. I can be sure that the Roadmap will be extremely detailed and will take years to implement. To blindly implement a detailed Roadmap is to create yet another rigid system, albeit a better one. I think we are not getting out of the box.

7. Being stuck inside the box is a real problem. One of the slides this morning made the point that if our real GDP grows by 6.5% pa for the next 10 years, we must hit US$17,700 per head by 2020 which allows us to sneak in at the bottom of the high-income economy. I would interprete that income to be the top end of the middle-income economy, and if this is even trying, then we could as well slide down the pole to the bottom of the middle income, and below - if we fail to become flexible and dynamic as a society and economy.

8. If our administrative system is already efficient and functioning properly, the NEM is supposed to take a strategic role. We only have to provide one or two or even a handful of specific directions - such as market economy, transparent government, independent courts, poverty eradication - these should be sufficient to get the ball rolling for the system to change. No, instead, we are stuck arguing the details.

NEM: PM's Keynote Address at InvestMalaysia 2010

2010-03-30T11:06:00.002+08:00

I was supposed to attend but didn't make it due to short notice, but managed to catch it live on TV just now.

First impressions:

1. The coverage ranges from poverty eradication, price distortions, middle-income trap, social safety net to high-income goal, political will, change, innovation, Bumiputra policy, investments, EPF, institutional change (MIDA) listed companies, GLCs, divestments, and property development. It is too comprehensive to be focused.

2. I feel at times that the first part of the speech was drafted by an analyst, which is a bit impersonal, while the latter part is a bit more gutsy and more categoric.

3. I feel that poverty cannot simply be eradicated by just raising the income level of the poorest section of society to solve the poverty problem. Poverty is inherent in the capitalistic system that we are in, and therefore needs a system to over-ride the system defect. A higher-income economy does not necessarily mean that will be no poverty. Widening the social safety net is one, but it must be seen as a systemic issue about helping those unable to participate in the mainstream.

3. The real juxtoposition is between change/high-income policy and the Bumiputra policy. There is so much psychological baggage from the latter that it is going to distort the thinking on economic policy. I suppose it is this politics that is hard to shake off. The Bumiputra policy has graduated out of the poverty discussion and is now concerned about rights in taking a cut in the pie. The PM talks about being more transparent in the tender process for Bumiputra where the definition of Bumiputra is now more inclusive of other Bumiputra. It is as lapis a cake as you can get, without the cream or core or investors of the economy.

4. EPF is to divest into foreign markets to make way for foreign investors to come to the Malaysia stock market. It is as silly an idea as you can get. I blame the advisers. I thought the original intention of having an EPF is to fund local development in order to accelerate the growth of the local economy. If you put an accountant in charge of the EPF, you are going to get a non-economic strategy.

5. The change/corporation of MIDA into the Malaysian Investment Development Authority is a step forward in removing the excessive power from the MOF who deals with all things strategically and financially important for the local economy. The trend should continue to remove more authority from the MOF, in lieu of the MOF authority not removed from the PM. (Would this mean that the MIDA CEO will now be half an MOF?)

6. When a PM talks about economic policy, he should just focus on policy. The moment he gets into specific cases, such as the divestments by GLCS and the nature of the divesments, I think we are zoomed back into the same old matrix.

I could have gotten some of the points off, so let's see what the reports say and see if I need to correct myself later.

NEM: Pandering To Short-Term Investors

2010-03-25T09:09:00.005+08:00

Stockbrokers and fund managers, no matter how they style themselves, are short-term investors based on long-term views. Investors with short-term views are called speculators.

I do not understand why the Prime Minister of Malaysia has to go to Hong Kong to talk to stockbrokers and fund managers about the New Economic Model for Malaysia. It is none of their business.

The rightful audience for the NEM are the local people, the citizens of Malaysia, who must be convinced that the NEM is the best thing that can happen to Malaysia and Malaysians such that the NEM will create the greatest confidence and pride that the people of Malaysia can have in their own country - so much so that they will sink in all that they have - the wealth their parents left them (if any), the wealth they have made in Malaysia, the wealth they have made abroad, their current savings, and their current efforts - and build on what we have new structures and systems that will improve social and economic life in Malaysia.

The last thing you want to do with the NEM is to convince short-term investors and speculators in Hong Kong that Malaysia is the place for you to take a quick punt - of at most nine months - by ordering that government agencies cut down on their holdings of listed companies so that these foreigners can do that punt.

I think the Prime Minister is being ill-advised in this case to pander to these opportunist investors. What we want in Malaysia are proper investors who will sink in their capital into machinery and work to produce output to serve the world.

In this world of excessive liquidity, liquidity is not the problem for the economy. It is the lack of good ideas for real investment in Malaysia that is hampering Malaysia from getting out of the middle-income trap into a high-income economy. It is the unwillingness to do the hard work of building a business that is the problem.

If you then mix in politics along racial ground, then you really are caught in a mental trap that is dragging down the economic strength and resolution.

Unemployability Or Social Change

2010-03-24T09:04:00.003+08:00

I have been distracted by this idea of the "unemployability" of a whole new generation of children around the world, even in the developed world.

If the problem of "unemployability" is limited to a small society like Malaysia, then there is a need for the education system to change. But if the problem is spread across several societies, then it would seem that there is a need for change or that there will have to a change (by policy or otherwise) in the way society will function and look like in the years to come.

I am reminded that the IT revolution of today was and still is helmed by a few hippies of the sixties who seemed to have dropped out of the system and went on their own path. Steve Jobs, Bill Gates. The focus is not on their not having completed their education, but they saw different things.

"Unemployablity" can be elaborated in several ways. The first impression is that these young people who have passed through the educational system are "useless" - being "unfit for job vacancies that are currently available." Precisely. If only these young people would come up with ideas based on things they know how to do or wish to do.

Young IT savvy people who spent their formative years interacting with an illuminated piece of glass are typically shy and ungregarious. They are totally unfit for the incessant talking and cajoling required of the modern sales people who are now called business development executives or whatnots. There is stress in present industries because of overproduction and overconsumption of hackneyed products - which define the jobs that are typically available to young people who may feel they would rather be involved in other lines of "business."

The world is today caught in probably one of the most significant structural changes where the focus of the global economic power is slowly but surely shifting to the east - and not without must protest from the west. We should therefore expect societies around the world to change and transform and take on an entirely different shape. What that shape wil be will depend on the currently "unemployable" young people - who being unemployed will have to then employ themselves by doing whatever they can do.

I think the young people do not need new things. Their parents have already cluttered the whole house. Their parents have already bought more houses than any one family however extended will need. Their parents have enough big cars to drive around empty. I think the young people will do simple things which they really want to do and live a fulfilling life. At this, the GDP that measures quantities produced will have to fall sharply. The young people could save the world from being dug out wholesale to make things which the world do not want. The young people could eat simply and healthly - and they do not need to have a glib tongue to earn money and pile up on the material stuff.

Am I right or will I be right? I do not know. It doesn't matter. What matters is the way to get out of the box that we find ourselves in, without doing violence to the box.

Schools Are Churning Out The Unemployable

2010-02-25T14:13:00.003+08:00

This is a familiar subject for many of us in Malaysia, and imagine how delighted I was when I came across this article in a foreign newspaper - of all places, the UK Times.

The thought that sprung to my mind was that - aha, now, this does not look like a typical Malaysian problem. Could it then be a problem of the times - and in particular, recession times?

When times are good, employers do not mind hiring anybody so long as that body will turn up for work - to answer phone calls, letters or emails.

When times are bad, employers argue about quality and price. As do everybody else.

I think that the only difference that we have among ourselves or between us is the scope for us to suffer errors and be allowed to live another day. At the end of the day, when times get tough, the only way out is to work hard and not die.

***
http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article7034975.ece

Schools are churning out the unemployable
Harriet Sergeant

The latest unemployment figures are a shocker. Eight million adults are “economically inactive”. That means one in five people of working age does not have a job. A new and expanding group, poignantly described as “discouraged” workers, have even given up looking.

They are right to be discouraged but wrong that there is no work. A report out on Friday points out that a fifth of firms and a quarter of employers in the state sector are still hiring — despite the recession. Except they are taking on migrant workers — not our home-grown “discouraged” variety.

The managing director of a medium-sized IT company explained why. High-flyers — Oxford and Cambridge graduates — are still as good as any in the world. His problems come when he tries to recruit middle management. Last year he interviewed 52 graduates — all educated in state schools. On paper they looked “brilliant students”. Each had three As at A-level and a 2:1 degree. He shook his head. “There’s a big difference between people passing exams and being ready for work.”

This was obvious even before the interview began. Of the 52 applicants, half arrived late. Only three of the 52 walked up to the managing director, looked him in the eye, shook his hand and said, “Good morning.” The rest “just ambled in”. When he asked them to solve a problem, only 12 had come equipped with a notebook and pencil.

The three who had greeted him proved the strongest candidates and he hired them. Within a year they were out because of their “lackadaisical” attitude. They did not turn up on time; for the first six months a manager had to check all their emails for spelling and grammar; they did not know how to learn. It was the first time they had ever been asked to learn on their own. Their ability to “engage in business” was “incredibly” disappointing and “at 5.30 on the dot they left the office”.

This year the managing director has joined the 20% of companies recruiting overseas. “We are an English company but we have no English staff. It’s just too much trouble,” he said.

It is the same story with employers at every level in the UK. Sir Terry Leahy, the chief executive of Tesco, put it bluntly. Too many children have been leaving school after 11 or 13 years of compulsory education “without the basic skills to get on in life and hold down a job”. He said 5m adults were functionally illiterate and 17m could not add up properly. “On-the-job training” cannot act as a “bandage or sticking plaster” for “the failure of our education system”.

A CBI survey revealed that literacy and numeracy were not the only problems. More than 50% of employers complained that young people were inarticulate, unable to communicate concisely, interpret written instructions or perform simple mental calculations.

This goes a long way to explain why, of the 1.7m jobs created since 1997, 81% have gone to foreign workers. The Department for Work and Pensions (DWP) agrees with Leahy. UK citizens are on the dole because of “issues around basic employability skills, incentives and motivation”. It is a pity it has not passed that insight on to the Department for Children, Schools and Families.

The DWP has made it clear: work is where the inflated claims for our state education finally hit the buffers. At every stage we have a system in which the expediency of politicians and the ideology of the educational establishment take precedence over the interests of pupils.

We have children who can barely read and write scoring high marks in their Sats because it makes the school, and therefore politicians, look good. We have exam boards competing to offer the lowest pass mark because it allows heads to fulfil their GCSE targets. We have pupils pushed into easy subjects at A-level — which excludes them from applying to a top university — because it benefits the school. And we have universities that offer a 2:1 degree, as the IT company director put it, to “anyone who bothers to sit down and take the exam”.

On top of that is the attitude of the staff themselves. I was visiting schools to discover why so many black Caribbean and white working-class boys were failing. One reason soon became obvious. Their teachers, middle class themselves, failed to pass on those very values that had allowed them to progress in life.

They viewed inculcating attributes such as lucidity, spelling, grammar, punctuality and manners as “patronising”. They feared anything that smacked of the didactic. “I am not a teacher. I am a facilitator,” said one teacher primly. The head of another school insisted she was a “head learner” rather than a headmistress.

Joseph P Parkes is clear who he is and it is definitely not a head learner. Father Parkes is the president of Cristo Rey, a Catholic coeducational school in East Harlem, New York. His mainly black and Puerto Rican pupils come from single-parent homes; many have fathers in prison. But he is determined that no one is going to turn them down for a job.

His school operates an ingenious work-share scheme with some of New York’s most prestigious companies and charities. Once a week pupils put on their identity cards, go down to Wall Street and enter another world — of law firms and investment banks.

From the age of 14 they join a team of five pupils each performing clerical work one day a week. They know their salary pays “a big chunk” of their education. As one young man said: “They treat me like an adult.” Parkes explained: “It encourages them to take school seriously.”

How seriously I saw for myself when Parkes addressed morning assembly. We stood in rows, teachers patrolling on either side, straightening a shoulder here, checking a tie there. The talk was entitled First Impressions. “Now what kind of first impression have you made on our visitor from the UK here?” asked Parkes. “Have you shaken Miss Sergeant by the hand and looked her in the eye?” he demanded. Seventy pairs of eyes immediately engaged me. “Have you greeted her?” “Good morning,” they all chanted enthusiastically.

He held up a sheaf of papers, printouts of emails. The previous day, he had set them the task of applying for a job interview on the internet. First, had they researched the company? He summoned one boy to the front, who listed his company’s interests fluently. Parkes nodded approval, then turned back to us. Now then, how many had tracked down the right address for the email? Who was dispatching their precious job application to the man in the post room? Everyone laughed.

No detail seemed too small for Parkes. Had they spelt names correctly? He waved the papers accusingly. Some of the students had addressed their emails to him: “You were not following directions. You have got to learn to follow directions.” He selected three or four sheets. “And some of you have an email address that is inappropriate for a job application. Put yourself in the company’s shoes. Are you really going to give an interview to JosetheNiceGuy, FastandFurious@Hotmail” — the boy next to me blushed — “or Cristo Rey Hottie?” The pupils erupted. Finally, the head demanded: “What happens when you are not proactive?” “You are being a procrastinator,” they shouted back.

Parkes knows that his school is the only chance these young people have. Education has to make up for their background and the lack of those values that ensure success. He knows they are totally dependent on him for their future. If employers like the managing director are to recruit in England again, it is a lesson that our state schools will have to learn.

Noah's Ark In A World Of Excess Liquidity

2010-02-23T15:24:00.004+08:00

The global fact today is excess liquidity. The excess liquidity was created by Greenspan over nearly two decades of unrestrained monetary exuberance, justified somewhat by the need to lubricate the IT revolution, and which has resulted in the following:

1. The rise of China as a global economic power fed first by the battle for cheap exports to the US and second by the flight of investment cash to the brave new Chinese market. This is probably the single biggest consequence of the Greenspan monetary mismanagement.

2. Underneath the China rise is the relentless search for better returns by investment bankers in markets around the world, which resulted in the flooding of every equity market of any substance with the flow and ebb of investment capital which accentuates the fluctuations in the forex and equity markets. There is now the IMF rethink that probably capital restraint is not a bad think - and I think it should better be directed at the money market rather than in the capital market.

3. With any excessive monetary creation is always the problem of inflation - and there are many analysts who would like to think that, given the quantity of money supply and the output level, inflation is not excessive. In the initial stages, when the excessive money is sloshing in the equity market and then, when that dies, and the cash goes into the property market, triggered by hapless bankers seeking to earn supernormal bonuses, the inflation in real estate is "bearable" and some would even say "desirable." Less so in Malaysia than the US where the property bubble burst after the bubble burst in Malaysia and our neighbours and that was after the Japan bubble burst not that long ago.

4. By the rescue of financial institutions, the US is doing what we less beings had done with ours. Whether that act is justified or not is a subject for debate - at least in the academic world of monetary and banking theory. The rescue of banks by central banks is a necessary evil in this articial monetary world of fiat money we have unfortunately created for ourselves - clever, yes, as well as illusionary. But don't let us think there is no appreciable consequence. The key effect is that asset prices are now artificially held up above equilibrium levels that time becomes the only solution as income struggles to rise to justify the high asset prices. Struggles because the asset-rich elite now do not have to work, and the poor workers on low pay in stagnant economies have to live in cramp conditions to give the asset-rich their rental income that they live on.

5. But the ultimate consequence of the excess liquidity in the world is the rise of China which unleashes a world new world of consequence, when a third of the world which used to be hungry is now not so destitute. With the frenzy of consumption (and investment), there is a significant and noticeable shift in the global aggregate demand curve to the right and hence a global rise in prices across all markets - except for the finished Chinese products. Nobody should think that the excess liquidity created by Greenspan had no impact on global inflation.

Noah's Ark

If there is excess liquidity, where is Noah's Ark to save us all?

The excess liquidity remains because the central banks have all plunged the holes with their bank rescues and so we are now all trapped in a world of ample worthless cash. Unplugging the holes does not appear to be a practical option.

The larger world now seems caught in a stalemate. The only way out for most countries seems to be a pray that somehow investors would be inspired with new innovative ideas to start a new round of investment projects - creating products that will entice the people of the world to consume and hence stimulating more economic activities.

In economies where confidence is at the lowest, the interest rate for savings would be the lowest because politicians, in their desperate bid to save their political careers, are very willing to punish the small savers in order to applease the big investors. This policy may work to opposite effects - as small savers, i.e., the many voters - will be unhappy over the erosion of true traditional values of hard work and saving, while the big investors will take the cheap funds and invest where the market exists.

In more confident economies, of which there is probably only one in the world at present, i.e., China, the policy action is exactly the opposite - instilling monetary discipline, raise interest and generally trying to slowdown the growth of the bubble. China is the only country in the world where the people are hungry and the environment is conducive for people to work hard to pull themselves up by their bootstraps. China is probably the Noah's Ark, if any one should be looking for one to climb onboard.

What's In A Word: Dictionary vs Translation

2010-01-20T08:50:00.002+08:00

What a difference a word makes!

It was Dr. Samuel Johnson's dictionary - which he wrote singlehandedly, bar a few scrawny Scottish helpers, over a period of nine years - which laid the foundation of the English dictionaries that we have today.

Johnson's was not the first English dictionary, and earlier dictionaries were unsatisfactory because they tried to define what a word means, and not how a word has been used or is being used today. An unsatisfactory dictionary tries to fossilise a word in its historical usage, whereas a proper dictionary should try to demonstrate how a word is being used today - which may be very different from the way it was used before.

For me, the one word that has changed drastically in usage is this lovely simple word "gay." I like this word a lot. It tells of a condition in a person that is light and happy, not quite exuberant or just contented. Today, the word "gay" has a heavy sexual connotation.

Johnson's dictionary was significant because it tried to give example of how a word had been used or was being used. Words which had been used before was quite easy for him to discover, by borrowing books from friends and marking them so that his clerks could copy out. Words which were being used could be found out from current publications, and if he could not find one example, he simply gave his own version of the word. The most famous example was the word "Oats: a grain which in England is generally given to horses, but in Scotland supports the people"

The greatness of Johnson's dictionary is to present for posterity the right to use words in the way as we so choose, which then make words living words rather than dead words, as opposed to giving the right over the usage of words to grammaritarians and some external linguistic authority.

So, if one were to do translation, how would one translate. Does one merely refer to the dictionary on the meaning of the word (as one would think of the nature of a poor dictionary) or does one try to understand how the word has been used or is being used and how it now can be used.

At the end of the day, the meaning of a word can be discovered only within the context that it is being used. The word does not define the context; but the context, the word.

It is only by opening words out for variations that we encourage creativity and innovation in the way we think. We can create new words for new ideas but we usually find that what we think is new is not really that new and that it could be the same old thing that now has taken a more modern facade.

If we are not allowed to think freely and express ourselves freely, then we may not be using words to master our thoughts; instead, we may find our thoughts being enslaved by words.

The way we use words betray our hidden innermost feelings about ourselves and how we see life.

Economic Relativity: Stocks & Exchange Rates

2010-01-13T14:37:00.007+08:00

So much for the stock market to play the role of risk-taking in order to create a market for the trading of stocks in according to the expectations by investors of their future earnings. The stock market takes risks which ordinary men and women including entrepreneurs with their high sense of business would not even touch with a ten-foot pole. This is, in essence, the idea behind the establishment of the stock market in each country around the world - to help boost actual investments by real investors in order to provide an orderly basis for growth in an economy.

Now, the Malaysian stock market called Bursa Malaysia has its chief executive officer expressing dismay by the low 12% participation by the young 20-29 age group in Malaysia in "investing" in the stock market. He calls for a better business model by the stock market to attract the young.

As a parent, I am appalled by such irresponsible thinking on the part of the manager of a major market in the Malaysian economy. I would not advise my young children to think of investing in the stock market as the way forward in their career in living.

The current dismal state of the Malaysian economy is due to the overwhelming success of the stock market in enticing the best talents and the most precious of our resources into something of a zero-sum game akin to the casino. We have lost the woods for the trees. We have turned the means to investment into the only avenue for investment.

The thinking of the stock market does not jive with that of an economist. In the stock market, inflation of asset value is seen as an investment opportunity, whereas an economist will try to avoid introducing inflationary pressures into the system so that there will not be a huge wedge between monetary values and real values.

Unfortunately, today, expansionary monetary policy is seen not to be inflationary because the increase in monetary values is considered to be stable without much escalation. In economics, a constant rate of increase in monetary values is inflation and an increase in the inflation rate is an escalation of monetary values - both of which are only possible by a constant expansion of the money supply, most often inititated by external flow and later justified by the steady and rapid expansion of loans by banks.

The only fear in this twisted thinking is deflation, the decline in monetary values, because of the difficulty of stopping the price decline - as would be the case of inflation. It is therefore conventional wisdom in economics that we do not try to stroke inflation because we have to suffer deflation later.

But after having encouraged inflation (which we all are quite happy about it, especially those with physical assets), policy makers and politicians now do not allow deflation to occur. There is no downward adjustment to correct for any overshooting of prices in a market run-up in stocks or real estate.

(There is probably universal agreement on such a tacit no-deflation zone because everybody has inflated, the the deflation-ridden economy will be the worst-hit re Japan for the last twenty years.)

Be that as it may, we must recognised that monetary values around the world are all inflated, thanks to the easy money policy - easy because it makes life easy for politicians and those who have made it and do not wish to lose what they have easily gotten.

In economics, we know that the only other relative value that has to adjust downwards to be in some some eqivalence with real values (read: productivity growth and newly invested industries) is the exchange rate.

The policy issue around the world today is the correct adjustments and realignment of the exchange rates which are reflective of the underlying economic fundamentals, in an enviroment when everybody has to adjust downwards.

This policy decision boils down to choosing a scapegoat - the one currency that must appreciate when everybody must depreciate or be seen to have depreciated, in a world of economic relativity.