Quis Custodiet Ipsos Custodes

I’ve always had mixed feelings about criticising news report and editorials. On the one hand, I realise that it could take away the focus of this blog from the purpose I intended for it, which is to cover developments in the Malaysian economy. I ‘m also fairly sure that such posts could make me come off as petty (I plead not guilty) or intellectually arrogant (maybe guilty as charged).

Against that, there’s the role of the press in reporting and commenting on national policies (which has an impact on political accountability), and its role as opinion leaders. If there are mistakes in this arena, whether by omission or commission, then there is some value in pointing those out even if I don’t have the reach that they have.

Of course, whether you consider a particular viewpoint a “mistake” really depends on one’s point of view and educational background.

I think I’ll continue to have ambivalent feelings about this issue, but will proceed nonetheless.

BTW, if it seems I pick on The Star too much, it’s because out of the major English dailies I find that, right or wrong, they actually do have something to say about the economy. The News Straits Times appears to be interested only in human interest stories and sports. Ok, that was exaggeration, but justified exaggeration IMHO.

To round up some the articles that caught my interest this weekend:

1. Managing Editor P Gunasegaram thinks marketing Bursa Malaysia is putting the cart before the horse, and we should put our economic house in order first. For once, I fully agree with him.
2. Raymond Roy Tiruchelvam asks to consider purchasing power parity when comparing incomes in other countries, if you’re considering immigrating. I only ask that you don’t try using it for comparing the level of exchange rates unless you want another scathing editorial on this blog! BTW, instead of using the Big Mac Index (what, again?), I would use the World Bank’s International Comparison Program, or the Penn World Tables. Either would give a better multi-product idea of the differences in the price levels.
3. Angie Ng talks about normalising the costs of borrowing and investing in property. But she makes the odd statement that, “Normalising the interest rates by allowing it to be decided by actual market forces of demand and supply is certainly more healthy.”  Sorry to break this to you Ms Ng, but whether BNM sets the OPR at 0% or 10%, interest rates are market determined. All the OPR does is set a 50bp band to the overnight rate, everything else is determined by the demand and supply of money. Of course with the OPR target, BNM has its hand on the scales so to speak in terms of the money supply, but demand is entirely free to vary. There’s also in the article the meme that low nominal rates disadvantage deposit savers, which is not necessarily true – it’s real rates that matter, and those generally rise during a downturn unless the central bank cuts the nominal rate. Had to point that out, sorry.
4. Jagdev Singh Sidhu rounds up opinions from various research houses on the strength of the economy given the great numbers we’ve seen the past couple of months. The consensus is that the recovery is credible, but we should see better evidence on its sustainability in the second half of the year. It was pointed out by a few analysts that exports and industrial production are off their peaks of 2008. Way to go guys! But if you consider 2008 as a bubble year (which I do), then the recovery is over – we’re now back to the growth phase, and growth sustainability is a much harder question to answer. Again everyone seems hooked on analysing growth statistics (even if they note the base effect), and most are not bothering about the actual levels. And no one noted that poor capital goods imports are a direct result of the excess capacity that already existed before the recession started. Don’t look for high capital goods imports this year, it just ain’t coming. Nor will the lack of it say anything at all about manufacturers’ plans, intentions or prospects.