Wednesday, February 6, 2013

News Flash: KL To Suffer Recession Next Week

Hafiz Noor Shams manages to send up the entire economics profession and tells us not to take ourselves so seriously (excerpt):

Chinese New Year to cause a recession in Kuala Lumpur

With the Chinese New Year being just around the corner, many are expected to leave Kuala Lumpur behind to visit families and relatives leaving outside of the city for a week or so. Many of those living or working in the city have left the city.

With the Chinese forming more than 40% of the population of Kuala Lumpur, and possibly with others who may just take the opportunity to travel out, the city is poised to suffer from a massive demand and supply shocks. Without any intervention from the relevant authority, the economy of Kuala Lumpur is expected to go into a recession this week and the next…

The insider jokes are absolutely priceless.

Since we’re on the subject, you might also enjoy this tongue-in-cheek discussion of the impact of dragons on macroeconomic policy.


  1. Maybe he could have done it by the individual economist (rather than school of thought)

    Malthusian - e.g. food consumption will spike during the holidays and we will all die a horrible death in a generation (or two? or three?)

    Pigouvian - tax does who should be producing but aren't, since they represent a negative externality

    Ricardian - it doesn't quite matter whether people go on holiday (or not? I'm not that sure)

  2. Dont know whether you are just putting up a show or earning your living. The money is in oil my friend, billions of it in Petronas! RM300 billion capex for certain UMNO Presidents families, Ananda Krishnan Armada etc.. if you dont put a stop to it.

    Billions in disel subsidies freely given at petrol stations. UMNO dont want to use vouchers, why because their MCA cronies are buying them for other purposes.

    If you are interested in money, there is no need to write incomprehensible and inconsequential things about economics. They are just things after the facts.

    How about people trafficking, bringing hundreds of poor indians into mamak shop? How about subsidies that, subsidies these?

    The real thing that put money in your pocket is political power, passing laws like "privatisation" that put money in your cronies or sons' , menantus, brothers, wives' pockets.

    Europeans theories are just bullshit, for their own consumption so there is no need for Asians to repeat them as if they are the gospel truth. Europeans theories are a set of belief themselves just for molifying the dumb masses with BLR which they fixed themselves haha. BLR...banking systems fixed by guys in the backroom...muahaha the europeans are corrupt themselves.

    Stealing from the money system through banks is a game in the US and europe and now Malaysia. A bunch of conmen put there historically with their hands in the till.

    At the end of the day its what you produce with your hands that matter.

    1. @Just a game of con,

      It would help a great deal if you were a bit more coherent - and informed.

      My father worked for Petronas for 25 years, so there's not much there that I haven't learned about over the years.

      Second, if you've actually read through my blog, you'll find that I've advocated at one time or another implementing capital gains taxes, abolishing subsidies on oil & gas and sugar (and taxing them instead), backing the minimum wage policy as well as other policies designed to reduce wealth and income inequality (e.g. bringing back estate and inheritance taxes, increase corporate and income tax rates), and expanding universal education to pre-school level (also important in addressing inequality).

      All of this BTW comes from, as you put it, "bullshit" Western theory.

      Third, Europe (or to be more precise, London) does not use a BLR. What you're thinking of is LIBOR. The biggest losers in the LIBOR scandal aren't at the retail level where LIBOR is rarely used to price loans or deposits, but corporates depositing in the interbank market and whose debt is mainly priced based on that market.

      Fourth, people who actually make things with their hands, i.e the manufacturing sector, typically comprise less than 10% of the labour force. In Malaysia's case, it's about 8%.

    2. Thanks for taking the trouble to explain things. The Libor fixing affects trillion of loans all over the world. It has been called (by a writer anyway) as the crime of the century! Pls google.

      LIBOR is used by most national banks including BNM or Singapore. BNM used this to set OPR which is used by malaysian banks to set their BLR.

      BNM has stopped local banks from using ABS rates from Singapore as they are also just made up figures. SIBOR, LIBOR can we trust these same bankers.

      Every loan used LIBOR indirectly even student loans and housing loans.

      The sad things we thought these mat sallehs are trustworthy or at least know what they are doing. Obviously not.

      On your good suggestions on reducing inequality why is not being done. You are not alone. It is just common sense and fair play which every good politicians claim to subscribe publicly.

      The answer in all probability, is somebody is conning some one or the power maybe actually be held by gangsters or triad who control the actual national policy remotely.

    3. I don't know where you got your info from, but much of it is wrong.

      Singapore for instance does not officially set interest rates, as MAS uses the exchange rate as its primary policy tool. Interest rates in Singapore are purely market determined.

      In Malaysia's case, anchoring on LIBOR would imply that we have a fixed exchange rate with the British Pound, which hasn't been true since 1972, and further implies that the Bank of England determines global monetary policy, which hasn't been true in over a century.

      You might want to read this post to understand how interest rate targeting actually works.

      The Bank of England targets LIBOR as their main policy instrument. What that means is that LIBOR can only vary within about a 50 basis point band around the target rate, though in practice this usually means less than half that range before the central bank intervenes via open market operations.

      One basis point is 1/100 of a percent. So what we're actually talking about here is a granularity in interest rate pricing that retail customers will never actually see. The only ones who will care and will notice are other banks and their wholesale customers, particularly those in the Eurodollar market. Any impact (which will be minimal) on retail loans and deposits will be confined to the UK and to any countries that have fixed their currencies to the Pound.

      With respect to inequality, many of the measures required will not be popular. Who would want to pay more for gas? Who would want to pay more in taxes? They may be the right things to do, but they these aren't vote-winning strategies. I'll damn well keep talking about them though.