The Yanks And The Peg

Hantu Laut

Former Prime Minister Mahathir Mohammad dropped a hint that due to uncertainty in the world markets and rising costs of doing business in the domestic market the government should bring back the ringgit peg or otherwise known as fixed exchange rate.

The government should take heed and seriously consider this proposal in light of the high inflation and economic instability due to volatility in the world markets.

With the huge financial crisis in the US financial system requiring massive bailout, Malaysia's economy may not be spared the contagion of a US recession.

The financial crisis at Lehman Brothers,AIG and others financial malaise in the U.S can throw the US economy into serious trouble and hit the shores of other countries in matter of months.

The US government is now 80% equity holder of AIG through the bailout of US$85 billion to keep the company afloat.This is the first time in its history the US government had taken majority equity and management control of a private sector corporation.

In an even bigger mess is the sub-prime mortgage sector that put Freddie Mac and Fannie Mae into serious financial trouble.These two companies do business of factoring mortgages from banks and other financial institutions and currently hold guarantee of US$5.4 trillion of mortgages.In the past, US Government bailouts were only in the form of loan guarantee without any equity participation or involvement in management.

The US have copied our ISA to detain and imprison so-called terrorists without trail. Now they are copying Malaysian-styled bailouts.

In 1980 the US Congress approved a loan guarantee of US$1.5 billion to save Chrysler from bankruptcy which amount was considered big at that time.Chrysler paid back the loan few years ahead of time and the government actually made US$313 million profit in stock options.

Why peg? Pegging can take out certain uncertainties in the economy and bring some degree of stability.It can give a stable atmosphere to foreign investors.With a peg investors can know what their investment value is, and therefore will not have to worry about daily fluctuations. A pegged currency can also help to lower inflation rates and generate demand, which results from greater confidence in the stability of the currency.

A pegged currency can also have its bad side.It can be difficult to maintain a peg in the long run.This fixed regime can often lead to severe financial crisis.If the government in its effort to maintain high value of the currency can no longer meet demands to convert the local currency into foreign currency at the pegged rate than the currency can become overvalued.There will be loss of confidence and investors may panic and there can be flight of capitals when investors converted the local currency into foreign currency before the currency is devalued against the peg.Such scenario can deplete the country's foreign reserve.

Such flight of capital can also happen in a floating regime which opposition leader Anwar Ibrahim claimed is happening to Malaysia due to mismanagement of the economy.It can be a bit of both, the unstable economy and political instability.

Pegging is often associated with countries that have unsophisticated capital markets and weak regulating institution.

In the 1997 Asian financial crisis Malaysia took an unprecedented and bold step to peg the ringgit while Thailand, in similar crisis, allowed the bhat to float.By the end of 1997 the bhat had lost 50% of its value.

In the 1997 crisis Mahathir much to the chagrin of former Finance Minister Anwar Ibrahim who wanted to adopt IMF sponsored bailout and financial reforms took an unconventional and bold step. He pegged the ringgit to put a stop to speculative currency trading and stabilise the currency.The properly managed peg helped Malaysia to recover faster than expected.

It goes to show that not only Mahathir was a better politician and need not shout his head off to be heard, he has shown that he was also a better finance minister and better economist than Anwar Ibrahim, who had been more than willing to accept the spoon-fed proposal from IMF.

The government of PM Abdullah Badawi should not completely ignore the advice of the former prime minister.The nation needs speedy reforms to create confidence in the economy.

PM Wanted Yong Arrested

Hantu Laut

The Borneo Post's headline today reported that SAPP Deputy President Raymond Tan dropped a bombshell by revealing that PM Abdullah Badawi wanted Yong Teck Lee arrested by the ACA but he pleaded to the PM not to take this unpopular decision.

Raymond said he may have differences with Yong but will do anything to defend him if the government decided to arrest him.

Although I have written articles not in Yong's favour I don't agree with this kind of intimidation and coercion tactics used by the government.Not right.This is a democracy, you just don't arrest people because they don't agree with you or wanted to throw you out as a leader.The ACA should be used only for its intended purpose not as a weapon to coerce those who oppose you.

This kind of tactic will only anger the people even more against the BN government.

Note: At the time of this posting Borneo Post Online was not accessible for me to do a link.

He Who Cares For Sabah

Hantu Laut

What triggered off SAPP President Yong Teck Lee decision to pull out of the Barisan Nasional(BN) coalition?

SAPP Deputy President Raymond Tan revealed that Yong was unhappy when no additional seats were given to the party in the last general elections. Using the failure of the Federal government to look after the interests of the state were just poor excuses made up by the greed of one man.

Yong had been eyeing the Sandakan and Kota Kinabalu parliamentary seats for a long time of which he wanted the Kota Kinabalu Parliamentary seat for himself. He declared he would contest the seat in the 8th March General Elections thinking the PM would accede to his demand.

Those are seats that belong to other component parties that he wanted the Prime Minister to give to him.If his supporters and those who are blinded for their support of him and Anwar believe in his lies that he is fighting for the interests of Sabah and Sabahans no amount of explanation would suffice to change their mind how unreasonable the man is.Taking from what was revealed by Raymond Tan it is without any doubt he is pushing a self-serving agenda.

SAPP have 2 parliamentary and 4 state seats.The Sandakan Parliamentary seat belong to LDP which Yong's SAPP have been trying to grab since the 2004 General Elections that brought him and former LDP President Chong Kah Kiat at loggerheads. Chong accused him of sabotage in the 2004 Elections when LDP lost the seat to an independent.He was again alleged of having done the same in the last elections.

You can bet your bottom dollar SAPP would never have left the BN if Pakatan Rakyat didn't do well in the last elections and Anwar's promises of taking over the government and the premiership and if Yong didn't see Pak Lah as being weak and can be taken advantage of. You can again bet your bottom dollar that Yong and SAPP would still be in the BN contented with what they have and to hell with Sabah and Sabahans.

Anwar Ibrahim has promised to increase the oil royalty, give greater autonomy and a dozen or so other promises including the return of Labuan to Sabah to entice defections from BN lawmakers.He failed to deliver his boastful promise on 16th Sept, to takeover the premiership and the government.He has now come up with a new trick, he wanted Parliament to re-convene just for him to shout injustice and hope some broken-hearted MPs from BN would unconsciously spur of the moment reaction sympathise with him and cross the floor to give him support.

Can he be trusted to make good his promises for Sabah if he succeded ?

When time is rough for the BN it seems only Yong cares for Sabah and Sabahans.

Somebody should ask Yong what good has he done for Sabah when he was Chief Minister. Did he make noise about the illegal immigrants problem?Did he goad the prime minister then to act or he would pull out of the BN?

Who accompanied him to Hong Kong to see Anwar Ibrahim ?

Also read: REVEALED: 'Secret offers' to woo BN MPs

Would You Believe It ?

Let's hope this kind of atrocious fatwa is not festering in the mind of our ulamaks.

Arabs denounce cleric's fatwa on 'immoral' TV

By DONNA ABU-NASR, Associated Press Writer 1 hour, 45 minutes ago

RIYADH, Saudi Arabia - Arabs across the ideological spectrum, from secular-minded liberals to Muslim hard-liners, are denouncing a top Saudi cleric's edict that it was permissible to kill the owners of satellite TV stations that show "immoral" content.

Many expressed worry the recent comments by Sheik Saleh al-Lihedan — chief of the kingdom's highest tribunal, the Supreme Judiciary Council — would fuel terrorism, encouraging attacks on station employees and owners.

The edict, or fatwa, has also focused the spotlight on Saudi Arabia's legal system because of al-Lihedan's senior position in the judiciary. The system is run by Islamic cleric-judges, many of them hard-liners, and has increasingly been criticized by some Saudis because of the wide discretion judges have in punishing criminals and the perception that many judges are out of touch with the realities of the world.

Even conservative clerics who agree that Arab satellite networks show too many "indecent" programs said al-Lihedan had gone too far.

"Our religion prevents Muslims from watching films that provide seduction, obscenity and vulgarity," said Sheik Hazim Awad, an Iraqi cleric, who, like al-Lihedan, is Sunni Muslim.

But "the real Muslim can just cancel (subscriptions to) these channels," he said.

Many conservatives frown on the Arab world's numerous satellite networks for airing music videos — often with scantily clad women singers — or Western movies and TV shows like "Sex and the City," from which nude scenes are sometimes but not always cut.

Obscenity isn't the only thing that disturbs some. On Tuesday, another Saudi cleric, Sheik Mohammed Munajjid, said the cartoon character Mickey Mouse should be killed. Munajjid said in an interview with a religious Web site that under Islamic law, rats and mice are considered "repulsive" and as "soldiers of Satan." Read more.......