Berikut pandangan Dani Rodrik dalam blognya:
September 19, 2008
Where did we go wrong?
The financial crisis that has developed around subprime mortgages is so so astounding in so many different ways that, like many others I suppose, I am still having difficulty getting my mind around it. The whole thing is a big surprise for me. I would have been pretty ready to assert, as late as 6 months ago, that financial crises of this magnitude had become solely a developing-country phenomenon and that rich countries had developed the regulatory and other mechanisms that would prevent them from getting into such a mess. Yes, there would be smaller scale hiccups, such as the S&Ls or LTCM, but you certainly couldn't have a meltdown a la East Asia 1997-98 or Mexico 1994 in an economy such as the U.S.
Now we know that I would have been wrong. What is happening in the U.S. is no different from what took place in Thailand in 1997 or in Argentina in 1999, with the entire financial sector going belly-up. The only thing that remains to be seen is whether the costs to the real economy will be as high too. The rough rule of thumb for emerging markets is that banking crises are associated with an output loss of around 10% (see here for example). The best estimate we have at present is that U.S. real GDP will take a hit of something like 3.6% over the next couple of years. This is a fraction of the loss experienced in a typical emerging market crash--but of course this particular estimate may also prove to be wildly optimistic.
But here is what I would love to know. What is the single thing that, had it not happened or happened differently, would have prevented this crisis from turning into the meltdown it has? In other words, what is it that has allowed a regular credit cycle to metamorpose into a systemic crash? Here are some of the culprits we regularly see mentioned:
A bubble in the housing market
The originate-to-distribute model of mortgage lending
Lack of transparency in structured finance and mortgage-backed securities
Lack of regulation of derivatives
Poor credit-rating practices
Fannie Mae and Freddie Mac straying from their original mandates
Implicit government guarantees for Fannie and Freddie
Lack of regulation of hedge funds and private equity
Inadequate capital requirements for financial intermediaries
The too rapid or generous extension of Fed credit to non-banks
The rescue of Bear Stearns
The failure to rescue Lehman
I am sure you can add a few more to the list.
What I am asking is this: which one of these items--individually or taken in groups--was both necessary and sufficient to bring us to our current impasse, where the government has little choice but to take over all mortgage-related assets off the books of private financial institutions? If you answer "all of the above," you are not being helpful at all.
Source: http://rodrik.typepad.com/
Saturday, September 27, 2008
Friday, September 26, 2008
Malaysia's FDI
FDI outflow surpasses inflow
KUALA LUMPUR, Sept 25 - Malaysia's foreign direct investment (FDI) outflow surpassed inflow for the first time last year, with net outflow amounting to almost RM9 billion as local firms accelerated cross-border acquisitions to fulfil regional dreams.FDI outflow in 2007 surged 82 per cent to RM38 billion from 2006, according to the United Nations Conference on Trade and Development's (Unctad) World Investment Report 2008. FDI inflow was also higher, by some 39 per cent to just over RM29 billion. Since early 2000, the gap between FDI inflow and outflow has been narrowing, reaching near parity in 2006. Economists see the increase in reverse investments as a "healthy" development, given many sectors of the Malaysian economy have reached near-maturity or maturity and surplus domestic funds require an outlet.They also see regional competition as a good training ground for toughening local companies. And because most of Malaysia's reverse investments were in Asean, they believe it will put the country at the forefront of the region's plans for economic integration by 2015 under the Asean Economic Community initiative.In terms of FDI stock, the trend towards reverse investments was also reflected in a 61 per cent spike in outward stock to RM201 billion last year, from RM125 billion in 2006. In the same period, inward stock grew 42.5 per cent to RM265 billion. Inward stock refers to the value of stock acquired by foreign firms in Malaysian firms, while outward stock is the value of stock acquired by local firms in overseas companies.The Unctad report says developing nations have significant transnational companies (TNCs) and these TNCs are becoming prominent investors in other developing economies. In the top 100 infrastructure TNC list, for example, Malaysia and Singapore each boast three companies. Malaysian giants Petronas, YTL Corporation, Genting, Telekom, Sime Darby and Maxis made the list of the top 100 non-financial TNCs from developing countries, ranked by foreign assets.Economic Council of Malaysia member Zainal Aznam Yusoff attributes the sizeable increase in reverse investments to cross-border acquisitions, especially in the areas of finance and services such as telecommunications.Even so, Malaysia's fall on the Inward FDI Performance Index to 71st position last year from 67th in 2006, could be a cause for concern.Ratings Agency Malaysia chief economist Yeah Kim Leng said larger reverse investments are acceptable, but there would be a concern if domestic investments and FDI inflow declined sharply in future. - Business Times Singapore
Source: http://www.themalaysianinsider.com/index.php/business/9537-fdi-outflow-surpasses-inflow
KUALA LUMPUR, Sept 25 - Malaysia's foreign direct investment (FDI) outflow surpassed inflow for the first time last year, with net outflow amounting to almost RM9 billion as local firms accelerated cross-border acquisitions to fulfil regional dreams.FDI outflow in 2007 surged 82 per cent to RM38 billion from 2006, according to the United Nations Conference on Trade and Development's (Unctad) World Investment Report 2008. FDI inflow was also higher, by some 39 per cent to just over RM29 billion. Since early 2000, the gap between FDI inflow and outflow has been narrowing, reaching near parity in 2006. Economists see the increase in reverse investments as a "healthy" development, given many sectors of the Malaysian economy have reached near-maturity or maturity and surplus domestic funds require an outlet.They also see regional competition as a good training ground for toughening local companies. And because most of Malaysia's reverse investments were in Asean, they believe it will put the country at the forefront of the region's plans for economic integration by 2015 under the Asean Economic Community initiative.In terms of FDI stock, the trend towards reverse investments was also reflected in a 61 per cent spike in outward stock to RM201 billion last year, from RM125 billion in 2006. In the same period, inward stock grew 42.5 per cent to RM265 billion. Inward stock refers to the value of stock acquired by foreign firms in Malaysian firms, while outward stock is the value of stock acquired by local firms in overseas companies.The Unctad report says developing nations have significant transnational companies (TNCs) and these TNCs are becoming prominent investors in other developing economies. In the top 100 infrastructure TNC list, for example, Malaysia and Singapore each boast three companies. Malaysian giants Petronas, YTL Corporation, Genting, Telekom, Sime Darby and Maxis made the list of the top 100 non-financial TNCs from developing countries, ranked by foreign assets.Economic Council of Malaysia member Zainal Aznam Yusoff attributes the sizeable increase in reverse investments to cross-border acquisitions, especially in the areas of finance and services such as telecommunications.Even so, Malaysia's fall on the Inward FDI Performance Index to 71st position last year from 67th in 2006, could be a cause for concern.Ratings Agency Malaysia chief economist Yeah Kim Leng said larger reverse investments are acceptable, but there would be a concern if domestic investments and FDI inflow declined sharply in future. - Business Times Singapore
Source: http://www.themalaysianinsider.com/index.php/business/9537-fdi-outflow-surpasses-inflow
Thursday, September 25, 2008
Superior US Capitalism?
Asia ponders lessons of 'superior' US capitalism
KUALA LUMPUR, Sept 25 - A decade ago, Alan Greenspan, then the Federal Reserve chairman, declared that Asia would realise that ''market capitalism, as practised in the West, especially in the United States, is the superior model.''Asian governments never quite saw it that way. Now, policy makers in the region may feel that the collapse of Wall Street investment banks and Washington's planned US$700 billion bailout have vindicated their suspicion of freewheeling capitalism.The implications for investors in the region are enormous. Governments may slow deregulation, rush to the rescue of troubled companies or clamp down more quickly on market ructions.Greenspan made his comments about the ''superior model'' to US lawmakers to justify a bailout for the collapsing Asian economies during the crisis of 1997 and 1998. He is now accused by some economists of pursuing a lax monetary policy that helped create the bubble that led to Wall Street's implosion.Asian policy makers have not forgotten the hectoring they got from the United States and the International Monetary Fund, which dispensed cash in exchange for raising interest rates, closing banks, curtailing spending and opening markets.''At that time,'' the IMF and US officials ''behaved as if they were treating an owner of a small business just about to go bankrupt,'' said Chung Duck Koo, who was the chief South Korean negotiator with the IMF in 1997, when he was a deputy finance minister.Officials in Malaysia, which spurned both the cash and the IMF's advice by fixing the value of its currency, the ringgit, and imposing capital controls back in 1998, see Washington's rescue efforts as proof that US policy makers are adjusting their thinking.''We are now seeing the West, particularly the US, ignoring the standard IMF prescriptions and implementing the same measures that Malaysia had done during the 1997 crisis,'' said Nor Mohamed Yackop, the Malaysian Finance Minister II, who in 1998 helped impose capital controls.Ten years ago, Asia was on its knees with a financial meltdown in the region after a series of crises in Latin America that later bankrupted Russia. Despite high growth and low inflation, Asia's so-called tiger economies succumbed because of overvalued exchange rates, persistent current account deficits, speculation in financial markets and dependence on short-term sources of capital.Most countries applied the IMF's bitter medicine, and subsequently South Korea's economy shrank 7 per cent in 1998, Indonesia's contracted 13 per cent and Thailand's slumped 10.5 per cent, according to IMF data.But the region recovered quickly, amassing in the process trillions of dollars in foreign currency reserves, first as a defense against future crises and later because of windfall profits from the global commodity boom.Much of those reserves are invested in US Treasury bonds, so they are bankrolling Washington's efforts to contain the current crisis. The latest plan is to buy toxic debt estimated at US$700 billion, with the total cost of its rescue efforts estimated at as much as US$1.8 trillion.The irony is not lost on nations that took draconian steps in return for the US$35 billion the IMF initially offered in 1997 to rescue Indonesia, South Korea and Thailand, later topped up with an extra US$77 billion.Critics say the ''Washington consensus,'' a term referring to the market liberalisation pursued by the IMF and the United States, has led to the current crisis.''It was so patronising. First it was the lazy Latinos, then it was the corrupt Asians and their crony capitalists,'' said Stephany Griffith-Jones, executive director of the Initiative for Policy Dialogue at Columbia University, and a leading authority on capital flows and developing economies.''The lesson is: You need to regulate everything. Any deregulated market in developed and developing countries leads to these results,'' Griffith-Jones said.Others say, however, that the IMF-bashing goes too far and that the crises in Latin America and Asia were largely of their own making. They also argue that it is impossible to stanch the capital flows that financegrowth in many developing economies.
''No doubt capital markets have plenty of problems; often they generate these bubbles,'' said Domingo Cavallo, who was Argentina's finance minister from 1991 to 1996. ''The bubble explodes and then there is a financial crisis.''''So far, there has been no recipe for avoiding these problems,'' said Cavallo, who was the architect of the Argentine plan that fixed the dollar-peso rate at parity, a decision that crushed inflation and contributed to an increase in growth and investment.Chung, of South Korea, said that wealthy nations might tighten regulation and intervene more in markets, but that developing countries could ill afford to revert to pre-1997 policies.''In developing or underdeveloped countries, in which each government has the mission to improve overall welfare and overall income level, there is no choice for them but to continue to accept and pursue globalisation,'' he said. - International Herald Tribune
Source: http://www.themalaysianinsider.com/index.php/business/9536-asia-ponders-lessons-of-superior-us-capitalism
KUALA LUMPUR, Sept 25 - A decade ago, Alan Greenspan, then the Federal Reserve chairman, declared that Asia would realise that ''market capitalism, as practised in the West, especially in the United States, is the superior model.''Asian governments never quite saw it that way. Now, policy makers in the region may feel that the collapse of Wall Street investment banks and Washington's planned US$700 billion bailout have vindicated their suspicion of freewheeling capitalism.The implications for investors in the region are enormous. Governments may slow deregulation, rush to the rescue of troubled companies or clamp down more quickly on market ructions.Greenspan made his comments about the ''superior model'' to US lawmakers to justify a bailout for the collapsing Asian economies during the crisis of 1997 and 1998. He is now accused by some economists of pursuing a lax monetary policy that helped create the bubble that led to Wall Street's implosion.Asian policy makers have not forgotten the hectoring they got from the United States and the International Monetary Fund, which dispensed cash in exchange for raising interest rates, closing banks, curtailing spending and opening markets.''At that time,'' the IMF and US officials ''behaved as if they were treating an owner of a small business just about to go bankrupt,'' said Chung Duck Koo, who was the chief South Korean negotiator with the IMF in 1997, when he was a deputy finance minister.Officials in Malaysia, which spurned both the cash and the IMF's advice by fixing the value of its currency, the ringgit, and imposing capital controls back in 1998, see Washington's rescue efforts as proof that US policy makers are adjusting their thinking.''We are now seeing the West, particularly the US, ignoring the standard IMF prescriptions and implementing the same measures that Malaysia had done during the 1997 crisis,'' said Nor Mohamed Yackop, the Malaysian Finance Minister II, who in 1998 helped impose capital controls.Ten years ago, Asia was on its knees with a financial meltdown in the region after a series of crises in Latin America that later bankrupted Russia. Despite high growth and low inflation, Asia's so-called tiger economies succumbed because of overvalued exchange rates, persistent current account deficits, speculation in financial markets and dependence on short-term sources of capital.Most countries applied the IMF's bitter medicine, and subsequently South Korea's economy shrank 7 per cent in 1998, Indonesia's contracted 13 per cent and Thailand's slumped 10.5 per cent, according to IMF data.But the region recovered quickly, amassing in the process trillions of dollars in foreign currency reserves, first as a defense against future crises and later because of windfall profits from the global commodity boom.Much of those reserves are invested in US Treasury bonds, so they are bankrolling Washington's efforts to contain the current crisis. The latest plan is to buy toxic debt estimated at US$700 billion, with the total cost of its rescue efforts estimated at as much as US$1.8 trillion.The irony is not lost on nations that took draconian steps in return for the US$35 billion the IMF initially offered in 1997 to rescue Indonesia, South Korea and Thailand, later topped up with an extra US$77 billion.Critics say the ''Washington consensus,'' a term referring to the market liberalisation pursued by the IMF and the United States, has led to the current crisis.''It was so patronising. First it was the lazy Latinos, then it was the corrupt Asians and their crony capitalists,'' said Stephany Griffith-Jones, executive director of the Initiative for Policy Dialogue at Columbia University, and a leading authority on capital flows and developing economies.''The lesson is: You need to regulate everything. Any deregulated market in developed and developing countries leads to these results,'' Griffith-Jones said.Others say, however, that the IMF-bashing goes too far and that the crises in Latin America and Asia were largely of their own making. They also argue that it is impossible to stanch the capital flows that financegrowth in many developing economies.
''No doubt capital markets have plenty of problems; often they generate these bubbles,'' said Domingo Cavallo, who was Argentina's finance minister from 1991 to 1996. ''The bubble explodes and then there is a financial crisis.''''So far, there has been no recipe for avoiding these problems,'' said Cavallo, who was the architect of the Argentine plan that fixed the dollar-peso rate at parity, a decision that crushed inflation and contributed to an increase in growth and investment.Chung, of South Korea, said that wealthy nations might tighten regulation and intervene more in markets, but that developing countries could ill afford to revert to pre-1997 policies.''In developing or underdeveloped countries, in which each government has the mission to improve overall welfare and overall income level, there is no choice for them but to continue to accept and pursue globalisation,'' he said. - International Herald Tribune
Source: http://www.themalaysianinsider.com/index.php/business/9536-asia-ponders-lessons-of-superior-us-capitalism
Wednesday, September 24, 2008
Inikah berita gembira?
Sebelum Hari Raya Aidilfitri, dikatakan akan ada berita gembira. Inikah dia? Adakah berita ini menggembirakan majoriti rakyat Malaysia?
Petrol, diesel down 10 sen
KUALA LUMPUR, Sept 24 — The government said today it would cut retail fuel prices for the second time in two months to ease inflationary pressures ahead of the Hari Raya Aidilfitri celebrations next week.
From tomorrow, the pump prices of gasoline and diesel will be slashed by 4 percent to RM2.45 and RM2.40 ringgit a litre respectively, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
The decision follows the recent sharp drop in global crude oil prices but the government could only afford a minimal price cut because a weaker Malaysian currency has offset the impact of lower global oil prices, he said.
"The government hopes the price adjustment will help to ease the burden on the people" especially during Aidilfitri, celebrated by ethnic Malay Muslims who make up 60 percent of Malaysia's 27 million people, Abdullah said in a statement.
This is the second price cut since the government hiked gasoline prices by a stunning 41 percent and diesel by 63 percent in early June to curb a runaway subsidy bill. The move is aimed partly at curbing public frustrations over soaring inflation and will relieve pressure on the central bank from having to raise interest rates.
The ringgit is currently hovering at 3.40 to the US dollar, down from 3.25 about three months ago.
Inflation stood at 8.5 percent in August, the same level as in July, due to high transportation and food cost but it is believed to have peaked, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said today.
"I expect this to be the highest level," he told reporters, adding that inflation is expected to be "slightly lower" in September following the fuel price cut.
With the price reduction, he said the government is giving a public subsidy of 33 sen (9.7 cents) per litre on gasoline, he said.
Economists concur that Malaysia's inflation may have peaked but likely to stay above 8 percent until early 2009 given high transportation and food cost. — AP
Source: http://www.themalaysianinsider.com/index.php/malaysia/9525-petrol-diesel-down-10-sen
Petrol, diesel down 10 sen
KUALA LUMPUR, Sept 24 — The government said today it would cut retail fuel prices for the second time in two months to ease inflationary pressures ahead of the Hari Raya Aidilfitri celebrations next week.
From tomorrow, the pump prices of gasoline and diesel will be slashed by 4 percent to RM2.45 and RM2.40 ringgit a litre respectively, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.
The decision follows the recent sharp drop in global crude oil prices but the government could only afford a minimal price cut because a weaker Malaysian currency has offset the impact of lower global oil prices, he said.
"The government hopes the price adjustment will help to ease the burden on the people" especially during Aidilfitri, celebrated by ethnic Malay Muslims who make up 60 percent of Malaysia's 27 million people, Abdullah said in a statement.
This is the second price cut since the government hiked gasoline prices by a stunning 41 percent and diesel by 63 percent in early June to curb a runaway subsidy bill. The move is aimed partly at curbing public frustrations over soaring inflation and will relieve pressure on the central bank from having to raise interest rates.
The ringgit is currently hovering at 3.40 to the US dollar, down from 3.25 about three months ago.
Inflation stood at 8.5 percent in August, the same level as in July, due to high transportation and food cost but it is believed to have peaked, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad said today.
"I expect this to be the highest level," he told reporters, adding that inflation is expected to be "slightly lower" in September following the fuel price cut.
With the price reduction, he said the government is giving a public subsidy of 33 sen (9.7 cents) per litre on gasoline, he said.
Economists concur that Malaysia's inflation may have peaked but likely to stay above 8 percent until early 2009 given high transportation and food cost. — AP
Source: http://www.themalaysianinsider.com/index.php/malaysia/9525-petrol-diesel-down-10-sen
Sunday, September 21, 2008
Friday, September 12, 2008
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