Thursday, September 25, 2008
Pegging
By Dr. Mahathir Mohamad at September 25, 2008
1. I am not in the business of advising the Government. When I mentioned the advisability of pegging the Ringgit, it was in answer to a question posed by a reporter. If the Government noticed the report I would feel flattered.
2. Pegging currencies is not as easy as it sounds. The whole thing must be studied very carefully. Even getting agreement by a select panel is not easy. A decision made on the spur of the moment that pegging is not possible cannot really reflect the assessment made together with experts in consultation.
3. Pegging need not be always with the US Dollar. But the fact that the US Dollar is currently not stable is no reason why the idea should be summarily dismissed.
4. There can be other options. Other more stable currencies can be used or a basket of currencies may be used to reduce extreme volatility.
5. The US Dollar is backed by nothing, not even reserves in foreign currencies and gold which other countries hold in order to back their own currencies. The US is a bankrupt nation which means it is not in a position to provide foreign currency backing for its money.
6. The gold in Fort Knox has been depleted long ago and the pegging to gold of a certain amount as agreed to at the Bretton Woods has been done away with by President Nixon. No more gold standards. Yet the US Dollar still commands a certain value in the market. It is still being used for trade payments. This in fact gives the US Dollar a certain value even though the value, in exchange rate terms may change.
7. If the US Dollar is not used in international trading, it will have no value at all. This will of course hurt a lot of countries including Malaysia which carry substantial sums of US Dollar as reserves. Countries like China, Saudi Arabia and tiny Singapore would want to support trade payments made in US Dollar. They do not want their huge reserves of US Dollar to become worthless.
8. What we see here is the importance of international trade payments in sustaining the value of a currency.
9. Long, long ago I suggested the use of a special currency for trade. The currency should be equal in value to a fixed amount of gold. It should not be used domestically as each country would have its own currency pegged to the special trading currency.
10. The price of gold may go up and down but we know that the price of gold today is more than, say, 30 years ago. If we keep gold long enough we will eventually see it appreciating. It is not as volatile as currency notes.
11. So gold is an ideal standard for a trade currency. Effectively we would be going back to the Gold Standard, both for the trading currency and the domestic currency. For the domestic currency the rate against gold can change in keeping with inflation.
12. It was suggested that we call this trading currency the "dinar". Transactions would of course not be in solid gold dinars but with equivalent papers. It is not practical to carry around so much gold dinars but this will not be necessary if a country's export to another country and its import from that country is fairly balanced and only the difference need to be paid.
13. I am not an expert in this area but we can get experts to study whether pegging or the gold dinar are feasible. I would not dismiss the eficacy of these so easily.
14. Perhaps I can make a ridiculous suggestion. Why not make all Malaysian trade payments in Malaysian Ringgit?
15. We are a big trading nation. We export more than 200 billion Ringgit worth of raw material and manufactured goods and we import slightly less than that. Traders cannot just ignore us or boycott us. They need our exports and they need to sell their products to us.
16. All we need to do is to demand payment in Malaysian Ringgit for our exports. We can require payment for our imports in Ringgit according to the current value in an international trading currency or gold.
17. If we do this there will be a constant demand for Ringgit and this will keep the value of the Ringgit at a certain level which we can fix, taking into consideration factors which influence its value.
18. This may sound like a ridiculous suggestion. But not being a trained economist or financier I can allow myself the privilege of unorthodox thinking.
1. I am not in the business of advising the Government. When I mentioned the advisability of pegging the Ringgit, it was in answer to a question posed by a reporter. If the Government noticed the report I would feel flattered.
2. Pegging currencies is not as easy as it sounds. The whole thing must be studied very carefully. Even getting agreement by a select panel is not easy. A decision made on the spur of the moment that pegging is not possible cannot really reflect the assessment made together with experts in consultation.
3. Pegging need not be always with the US Dollar. But the fact that the US Dollar is currently not stable is no reason why the idea should be summarily dismissed.
4. There can be other options. Other more stable currencies can be used or a basket of currencies may be used to reduce extreme volatility.
5. The US Dollar is backed by nothing, not even reserves in foreign currencies and gold which other countries hold in order to back their own currencies. The US is a bankrupt nation which means it is not in a position to provide foreign currency backing for its money.
6. The gold in Fort Knox has been depleted long ago and the pegging to gold of a certain amount as agreed to at the Bretton Woods has been done away with by President Nixon. No more gold standards. Yet the US Dollar still commands a certain value in the market. It is still being used for trade payments. This in fact gives the US Dollar a certain value even though the value, in exchange rate terms may change.
7. If the US Dollar is not used in international trading, it will have no value at all. This will of course hurt a lot of countries including Malaysia which carry substantial sums of US Dollar as reserves. Countries like China, Saudi Arabia and tiny Singapore would want to support trade payments made in US Dollar. They do not want their huge reserves of US Dollar to become worthless.
8. What we see here is the importance of international trade payments in sustaining the value of a currency.
9. Long, long ago I suggested the use of a special currency for trade. The currency should be equal in value to a fixed amount of gold. It should not be used domestically as each country would have its own currency pegged to the special trading currency.
10. The price of gold may go up and down but we know that the price of gold today is more than, say, 30 years ago. If we keep gold long enough we will eventually see it appreciating. It is not as volatile as currency notes.
11. So gold is an ideal standard for a trade currency. Effectively we would be going back to the Gold Standard, both for the trading currency and the domestic currency. For the domestic currency the rate against gold can change in keeping with inflation.
12. It was suggested that we call this trading currency the "dinar". Transactions would of course not be in solid gold dinars but with equivalent papers. It is not practical to carry around so much gold dinars but this will not be necessary if a country's export to another country and its import from that country is fairly balanced and only the difference need to be paid.
13. I am not an expert in this area but we can get experts to study whether pegging or the gold dinar are feasible. I would not dismiss the eficacy of these so easily.
14. Perhaps I can make a ridiculous suggestion. Why not make all Malaysian trade payments in Malaysian Ringgit?
15. We are a big trading nation. We export more than 200 billion Ringgit worth of raw material and manufactured goods and we import slightly less than that. Traders cannot just ignore us or boycott us. They need our exports and they need to sell their products to us.
16. All we need to do is to demand payment in Malaysian Ringgit for our exports. We can require payment for our imports in Ringgit according to the current value in an international trading currency or gold.
17. If we do this there will be a constant demand for Ringgit and this will keep the value of the Ringgit at a certain level which we can fix, taking into consideration factors which influence its value.
18. This may sound like a ridiculous suggestion. But not being a trained economist or financier I can allow myself the privilege of unorthodox thinking.
A STUDY IN SPINNING
By Dr. Mahathir Mohamad at September 17, 20081. Spinning is a method of making thread from cotton wool. But today, spinning has an entirely different meaning.
2. I was told about the spin doctors used by Tony Blair very soon after he became Prime Minister. I did not know what spin doctors do. And so I rejected the suggestion that I should employ spin doctors for press relations.
3. Now we all know all about spin doctors, the chief of whom is Kalimullah. He decides how to spin any report on Abdullah. Reporters often apologise to me because their reports on what I said at press conferences are quite different from what they wrote. But they claim they have no say on what appears in print from their reports.
4. Spinning is the art of making all reports, especially the bad ones, look good for the subject concerned and vice versa. Even the picture can be spun by choosing the ones that will make the subject appear masterly and talking down to his companion. In the case of the Prime Minister the pictures chosen would show him to be dominant in relation to whoever he is talking to, other Prime Ministers, or even Presidents. Never mind if he is junior to his partner but well chosen pictures will make out that he is more senior. Don't publish a picture of him falling asleep or with a vacant look in his eyes.
5. Readers would be taken in by the spin. If on the other hand, the subject is not liked by the spin doctors, then publish his picture scowling or cringing before whoever was talking to him.
6. Spinning may include misreporting, or excluding certain parts or twisting the sentences to convey another meaning.
7. Once I was asked about the reduction in petroleum price. I said "It is good for the people. We should have more by-elections (the Permatang Pauh by-election was on at that time), then the Government would reduce the price of petrol some more".
8. What appeared in the press was "Dr Mahathir says the reduction in the price of petrol is good for the people".
9. I cannot say I did not say it. But the newspaper publisher, by omitting the rest of my statement made it sound as if I was praising the Government for reducing oil price.
10. Sometimes the spinners do not coordinate with each other. The result is to make their reports negate each other.
11. On 15th September, The Star reported with the headline "Muhyiddin wrong to seek PM's resignation". The report stated that Dato Seri Rais Yatim, Foreign Minister said that UMNO Vice President Tan Sri Muhyiddin Yassin should not have asked the PM to step down as Malaysia practised democracy.
12. According to the report Rais said, "In a democratic country such action should not take place because we need to respect each other's views".
13. The next sentence seemed a bit confused as Rais was reported to have said (sic) urged Abdullah to act against Muhyiddin who had said that Abdullah should rethink his transition plan to step down by 2010 as the time frame was too long.
14. "If the PM thinks the minister (Muhyiddin) is not qualified or clashing with him and that action should be taken against him, then he should do it", he (Rais) said.
15. For a Foreign Minister I thought this stand taken by him is odd, to say the least. Only recently, Blair the war criminal, PM of Britain was forced by Gordon Brown to resign, which he did. And Britain is an older democracy than Malaysia.
16. Then I read the Utusan Malaysia. I was startled by this paper's report on Rais under the heading "Tidak wajar gesa Muhyiddin letak jawatan - Rais" (Not right to urge Muhyiddin to resign - Rais).
17. It reports Rais, member of the Supreme Council of UMNO as saying "finger pointing at other people and demanding the individual concerned to step down should not be done."
18. Rais then said "Jadi tidak wajar anggota Kabinet lain menggesa rakannya supaya berhenti atau diambil tindakan. Itu satu gesaan yang tidak harus dilayan atau dilaksanakan kerana kuasa itu hanya ada pada Perdana Menteri." (Thus it is not right for other members of the Cabinet to urge his colleague to step down or for action to be taken (against him). That is a demand that should not be entertained or implemented because the power rests only with the Prime Minister).
19. Clearly the two reports are about the same incident but the difference is remarkable. One chastises Muhyiddin and the other defends Muhyiddin.
20. Which report is right? I am inclined to think The Star has spun the report so as to look bad for Muhyiddin. Why the spin? Is it because of a desire to please the powers that be? It does seem likely because today everyone seems anxious to please Dato Seri Abdullah. Or is it because the reporter did not understand what Rais was saying? I wonder.
21. The Utusan report seems to be more in keeping with the attitude of Rais. He had always been outspoken and never hesitates to criticise even Government action, or Dato Seri Abdullah himself. Anyway, I hope the Utusan report is the more correct one.
22. In my time the papers did self-censor themselves. But they did not spin. Now spinning is blatant.
23. The bloggers have attracted a huge number of supporters with Rocky Bru having more than six million hits. The popularity of the blogs is obvious. It must be because people no longer believe or even read certain papers nor watch the Government controlled TV stations.
Tuesday, September 16, 2008
RACIALISM
By Dr. Mahathir Mohamad at September 16, 2008
1. When the Barisan Nasional did very badly in the last general election many observers inside and outside the country claimed that the Malaysian people of all races have rejected race-based politics.
2. The remarkable increase in the opposition Members of Parliament is said to be due to their representing the alternative to the race-based politics of the BN. How they can ignore the entirely Malay PAS and the overwhelmingly Chinese DAP I do not know. These are race based parties.
3. If indeed the people as a whole reject race-based parties as represented by the component parties of the BN, then they would reject PAS and DAP. And we should see an improvement in race relations.
4. But is there any improvement in race relations?
5. I may be wrong and certainly the leader of the Government will say I am wrong, but what I see today is more extreme racialism raising its ugly head.
6. The latest is the case of Dato Ahmad Ismail.
7. The furore caused by him, a minor figure in UMNO, is out of proportion to the issue itself. But because of poor handling by the UMNO big guns it has become an issue that can split asunder the BN itself.
8. Now we have the MCA and Gerakan threatening to leave the BN.
9. We can appreciate the need of the Chinese parties to regain support of the Chinese by showing their strong stand against UMNO. But the only result of this would be the antagonism of the Malays against the Chinese. If this goes on, if the Gerakan and MCA leaves BN because of what Ahmad Ismail said, then who gains? Obviously the opposition Pakatan would gain. The choice for Gerakan and MCA is either to join the opposition or to degenerate into insignificant parties which can never aspire to win enough seats to form a Government. The end result will be victory for the opposition.
10. Do we really think the opposition with parties like PAS, an entirely Malay party with its Islamic State vision and DAP with its predominantly Chinese base and secular politics can form a good Government? The Pakatan is not a properly constructed coalition like the BN. It is just a collection of disparate parties which come together in order to win elections by not contesting against each other.
11. I know that PAS and the DAP are not happy with Johnny-come-lately Keadilan and its leader Anwar Ibrahim. They don't want to be subservient to Keadilan or to have Anwar as their Prime Minister. They don't want Keadilan playing the role of UMNO in the Pakatan.
12. The result will be chaos for this country. There would be racial tension which may turn ugly.
13. What I notice is the unwillingness of the disenchanted Chinese parties in the BN to name the real culprit. Privately the Chinese, like the Malays would condemn the leadership of Dato Seri Abdullah Ahmad Badawi. But no one would openly say so. Instead as we can see UMNO is made the scapegoat.
14. Making UMNO the scapegoat is not going to improve race relations or improve the quality of the BN Government. Unless and until Dato Seri Abdullah is removed nothing that the Chinese parties and UMNO can do will help improve race relations or resuscitate the BN or improve the Government of the country.
15. I had said that instead of Dato Seri Najib apologising, UMNO should discipline Ahmad. His apology and its rejection by Gerakan simply angered the Malays. At the same time I don't think support for Gerakan and MCA would increase.
16. The BN leader should have called the parties concerned and persuade them not to use the race card. But the leader was too scared to face Ahmad Ismail one-to-one. Instead he resorted to the Internal Security Act (ISA) to prove that he is impartial. Now not only the Malays but the Chinese too will become more angry.
17. In my last article I have tried to reduce the anti-BN feeling. To me it is still a great coalition, still the best instituton in the multi-racial Malaysian politics.
18. The problem is incompetent leadership. You don't sink the ship because the captain is not handling it properly. You remove the captain.
19. I know the Chinese papers are calling me racist. I can deny it but they would not accept my denial. But good race relations in Malaysia is a must. Fighting between UMNO, MCA and Gerakan will only result in racial animosity and split BN. No one in the BN will gain.
20. UMNO, MCA and Gerakan leaders should try to heal the rift and help revive the BN.
21. However I must admit that this will be quite impossible if Abdullah still leads the BN and the Government. It is time that UMNO, MCA and Gerakan join together and force the resignation of Abdullah. Then and then only would we be able to revive the BN and perhaps restructure it. If not race relations will go from bad to worse and the whole country will suffer.
Monday, September 15, 2008
Putrajaya
By Dr. Mahathir Mohamad at September 15, 2008
PUTRAJAYA
1. Putrajaya, dedicated to Tunku Abdul Rahman Putra is a city built on a greenfield site.
2. It has attracted a lot of visitors, both local and foreign. Many countries have studied the development of Putrajaya when they are planning their new administrative capital.
3. Malaysians are divided in their opinions of this artificially developed city. Some think it is a mega project which costs too much. Some seem to like it.
4. I was still Prime Minister when work on Putrajaya began. I saw the completion of the Prime Minister's complex, the mosque and a part of the buildings lining the boulevard (not to be called boulevard now).
4. I was still Prime Minister when work on Putrajaya began. I saw the completion of the Prime Minister's complex, the mosque and a part of the buildings lining the boulevard (not to be called boulevard now).
5. I had noticed that the impressive boulevard was to be lined with Government buildings. I had spoken to (the late) Tan Sri Azizan Zainal Abidin, then Chairman of Petronas, the agency chosen to build Putrajaya, remarking the boulevard has only imposing Government Ministries lining it. 6. In America the cities all have central business districts where all the major corporations have their impressive office buildings. In the daytime the area is crowded with business people, office workers etc. Big American cars dropped and picked up the Executives along the main street.
7. The area is usually beautifully landscaped with fountains and monuments dotting the area.
8. However at night the place becomes deserted as all the office workers and businessmen go home. Quietness descends on the area with only an occasional taxi driving through. The fast food restaurants are shut.
9. It is dangerous to venture into the area at night as you may be coshed and robbed.
10. Remembering this I wanted to have the Putrajaya boulevard full of people at night. If you have only Government Offices and Ministries, the place would be deserted at night.
11. Unfortunately the planners want the place to have imposing Government buildings. The businesses should be tucked away somewhere.
12. As I drive through the boulevard at night I am enchanted with the number of lights lining it and the side roads. But there is no life as all the great Ministries are shut up tight, although they are beautifully floodlighted.
13. There are no shops at all, not even a coffee house. Those who have visited gay Paris will remember the brightness and the throngs of people strolling along or sipping drinks at roadside tables in front of brightly lit restaurants. The famous Lido would be crowded with people going to see the shows. Busloads of tourists would throng the bright side streets or sit at café tables watching people going by. The scene is very animated.
14. Famous restaurants and some fast food outlets as well as other shops lined the side roads parallel to the boulevard. Traffic flowed to and fro, unimpeded along the tree lined central boulevard.
15. I can understand why Paris is called the City of Light.
16. Putrajaya has lights almost as bright as those in Paris. But there are almost nobody strolling along the boulevard. It reminds me of the business districts in American cities.17.
I have talked to several people about the importance of having shops and theatres along the boulevard to give life to this beautiful city. But nothing has happened. I believe a big glass-fronted building has been built to house business corporations. It too would be closed at night. 18. More offices are being built but no shops, no restaurants or coffee houses and certainly no places of entertainment of any kind.
19. One of the effects of this rigid confinement to Government buildings on the boulevard is to make Putrajaya a Malay city. Ninety five percent of the people living in Government built flats are Malay Government workers. Although the Government built flats are available to non-Government servants, there are hardly any buyers for them. Certainly there are no Chinese or Indian.
20. I admit being guilty of setting up Putrajaya as the administrative capital. It is very well planned. But it is dull.
21. Not being in the Government, I cannot influence anything anymore. But I hope the powers that be will read this snippet on Putrajaya.
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