Business.view
Capital markets with a conscience
Sep 1st 2009
Social investing grows up
THE old debate about whether, or to what extent, financial markets are a force for social good has taken on a new urgency in the aftermath of last year’s market meltdown. Plunging the world into recession is, after all, as clear an example as any of anti-social behaviour. As around 800 people gather in San Francisco this week at the SOCAP09 conference, to map out the future of what they call “social capital markets”, they have the wind at their backs.
The first SOCAP conference took place in the middle of the meltdown a year ago. There was a surge of registrations in the days after the collapse of Lehman Brothers, as some people disgusted by the traditional capital markets, and others who had lost their jobs and sought a new outlet for their skills, decided that social capital markets were worth a look. The event proved long on optimism but rather short on coherence. A year on, the thinking is more rigorous—if no less idealistic—and is increasingly being put into practice.
Getty Images Social-capital futures
The idea of combining capital markets with social missions is hardly new. Some investors have long applied an “ethical screen” to their portfolios, avoiding, say, merchants of death (cigarette-makers, defence firms, etc) or companies that are especially damaging to the environment. This has provoked sceptical investors to create portfolios of “sinful” companies that sometimes outperform ethical ones.
As the ethical investors implicitly recognise through their investment choices, much of the activity of capital markets is, broadly speaking, ethical and even socially beneficial. The challenge is to raise the level even higher in areas that are ethical, and transform the capital markets so they channel less money to activities that are “socially useless”, as Lord Turner, the head of Britain’s Financial Services Authority recently put it.
It is now five years since a former American vice-president, Al Gore, teamed up with David Blood, a former Goldman Sachs executive, to launch Generation Investment Management, an investment firm. Nicknamed “Blood and Gore”, it seeks to invest in for-profit firms with strategies that are environmentally sustainable and have the potential to outperform the market. Also in 2004, Christopher Cooper-Hohn set up a structure that automatically pays a large chunk of profits and management fees from his hedge fund, the Children’s Investment Fund, to a charitable foundation for needy children—in total, around £1.5 billion ($2.4 billion) so far.
And a growing number of charitable organisations, led by the Edna McConnell Clark Foundation in New York, have been engaging in “mission-related investing”. In other words, they pursue their philanthropic missions not just by making grants but also in the way in which they manage their endowments, channelling capital to investments that support their charitable goals (in McConnell Clark’s case, by providing debt finance for low-cost housing). These organisations reckon that this approach delivers solid financial returns while achieving far more social impact than the diversified investment strategy still followed by the great majority of foundations and other institutional investors.
Since last year’s market meltdown there has been a sharp increase in interest in these kinds of approaches and several fascinating new initiatives. There has, for example, been much discussion of what exactly might be traded, and by whom, on a “social stock exchange”—a debate that is being informed by some real-world experiments in places such as Brazil and South Africa. (A good overview of the main ideas in social capital can be found in the latest issue of the Federal Reserve Bank of San Francisco’s Community Development Investment Review. This contains articles ranging from “Rethink Charity” to “Using High-Transparency Banks to Reconnect Money and Meaning”.)
Wanted: a measure of goodness
The notion of social capital markets can seem incoherent because it brings together such a diverse group of people and institutions. Yet there is a continuum that connects purely charitable capital at one extreme and for-profit capital at the other, with various trade-offs between risk, return and social impact in between. Much of the discussion at SOCAP09 is expected to focus on that continuum and to figure out, for any given social goal, which sort of social capital, or mix of different sorts of it, is most likely to succeed.
Arguably the biggest obstacle to the creation of social capital markets is the lack of a common measure of how much good has been done: there is no agreed unit of social impact that mirrors profit in the traditional capital markets. That is why the most interesting event at SOCAP09 is expected to be the unveiling on September 2nd of a new measurement system for investors who want to have a positive “triple bottom line” of social and environmental impact as well as a financial return.
The Global Impact Investing Rating System (GIIRS) is the result of collaboration between some of the leading organisations in social capital markets. It includes a set of “impact reporting and investment standards”, a much-needed attempt to develop common definitions of the main terms used in social capital markets. Until now there has been a tendency to use whatever definition allows you to tell yourself you are making the most difference. It remains to be seen how GIIRS deals with the fact that people often disagree fiercely about what constitutes social good.
Although these are still early days, “This philanthrocapitalist approach has begun to be taken seriously,” says Kevin Jones of Good Capital, a social-investment and consulting firm, and the creator of SOCAP. The amount of money in the social capital markets is still small compared with that in the traditional capital markets, albeit growing fast. Some of the bright new ideas will turn out to be turkeys. (But then so did the version of capitalism that imploded a year ago.) Hopefully, some of them will fly.
Tuesday, September 01, 2009
Friday, August 21, 2009
Monopoly and predatory pricing
I think Muslim economists should go further in establishing sound theoretical frameworks on organisational behaviour. An Islamic perspective on the folowing issue is worth investigating.
Economics focus
The unkindest cuts
Aug 20th 2009
From The Economist print edition
Discounting that promotes competition is hard to distinguish from predatory pricing
Illustration by Jac Depczyk
TWO decades before he won the Nobel prize for economics in 1991, Ronald Coase wrote an essay decrying the poor state of research in industrial organisation, the discipline in which he established his reputation. The field, he complained, was devoted to the study of monopoly and antitrust policy. That, he said, made for bad scholarship: an economist faced with a business practice that he cannot fathom, according to Mr Coase, “looks for a monopoly explanation”.
A lot has changed in the 37 years since that lament. The broader research effort for which Mr Coase called has fostered a richer understanding of how firms respond to customers and rivals. Monopoly explanations now compete with theories that see the same behaviour as helpful to consumers. That has made it harder to sort malign from benign business practices. The recent antitrust finding against Intel, a maker of computer chips, is a case in point. After a long investigation, ending in a bulky 524-page verdict, the European Union in May fined Intel €1.06 billion ($1.44 billion) for illegally using its muscle to price AMD, a rival chipmaker, out of the market. Intel rejects the charge of predatory pricing and plans a court appeal. Its lawyers have a block of theory on which to build a defence.
Click Here
Allegations of predatory pricing have a long history. The Sherman Antitrust Act of 1890, the foundation of America’s competition policy, was partly a response to complaints by small firms that larger rivals wanted to drive them out of business. Trustbusters need to be wary of such claims. Low prices are one of the fruits of competition: penalising business giants for price cuts would be perverse. But in rare circumstances, a big firm with cash in reserve may cut prices below costs in order to starve smaller rivals of revenue. The profits sacrificed in the short term can be recouped by higher prices once competitors are out of the way.
Establishing that a firm is guilty of predation is difficult. If rivals stumble or fail, that may be down to their own inefficiency or poor products, and not because they were preyed upon. Proving that a firm is pricing below its costs is tricky in practice. Even where a reliable price-cost or profit-sacrifice test is feasible, failing it need not imply sinister intent. There are often pro-competitive reasons to forgo short-term profits. Firms with a new product, or a new version of an existing one, may wish to pick a lossmaking price to defray the cost to consumers of switching, or because they expect their own costs to fall as they perfect the production process (video-game consoles are a classic example). Losses would then be a licit investment in future profits.
Predation is even trickier to uncover when goods are sold together. A firm that enjoys fat profits on one good may “bundle” it with another on which margins are lower. If the discount on the bundle is hefty enough, other firms may struggle to offer as enticing a deal. In 2001 the EU blocked a proposed tie-up between GE and Honeywell for fear that the merged firm might use bundled discounts to squeeze rival suppliers. In 2007 a committee of antitrust experts appointed by the American government proposed a test for whether bundling is predatory. First, assume the discount applies solely to the low-margin good. So if each good sells for $10 separately and $16 as a bundle, allocate the $4 discount to the more “competitive” product. Next, apply a price-cost test: if the product costs over $6 to make, the bundle is predatory.
That check seems neat but sound business practices may still fall foul of it. It may be cheaper for a firm to sell the two goods together, because of cost savings on distribution. Firms also often use bundling as a way of charging high-demand users more. Thin margins on sales of printers, for example, can be made up by bundling in more profitable toners. This kind of “metering” is an efficient way of recovering fixed costs such as research.
Another ambiguous tactic is to offer rebates to customers that reach certain sales targets. Bulk buyers generally pay lower unit prices to reflect suppliers’ economies of scale. Rebates can also help align incentives. Suppliers want retailers to promote their products, offer in-store information and keep plentiful stocks. The trouble is, retailers bear all the costs of such sales efforts but reap only some of the benefits. Rebates provide incentives for retailers to drive sales, as profits are bigger once the target is met.
The price of loyalty
The EU reckons that Intel’s use of such rebates was nefarious. It is in the nature of rebates that, just above the target threshold, the price of each additional purchase can be negative. If, say, a firm charges $1 for each sale of up to nine units, and a unit price of 80 cents (a rebate of 20%) for sales of ten items or more, the price of the tenth sale is minus $1, since nine units cost $9 and ten units costs only $8. A dominant firm like Intel can rely on a certain market share (an “assured base”, in the jargon). It could in theory set a rebate threshold above that mark, where smaller rivals may hope to mount an effective challenge but cannot match the negative marginal prices on offer to buyers.
Intel’s conduct was certainly worth investigating. Its rebates kicked in if customers gave the firm between 80% and 100% of their business. The schemes looked like a response to a competitive threat from AMD. Yet the EU’s trustbusters cannot feel too sure of themselves. Intel’s rival is still alive and kicking: AMD has not been excluded from the market (though its investment plans may have been thwarted and potential entrants deterred). Moreover, such a complex case, with a bulky ruling which is still not in the public domain, does not offer much guidance on what sort of rebate schemes might be deemed predatory.
Trustbusters have moved away from the practice that so concerned Mr Coase in the early 1970s—of being too quick to condemn big firms on the basis of crude judgments. But they are unlikely to find a robust and simple rule to put in place of the old presumption that firms with market power are always suspect.
Back to top ^^
Economics focus
The unkindest cuts
Aug 20th 2009
From The Economist print edition
Discounting that promotes competition is hard to distinguish from predatory pricing
Illustration by Jac Depczyk
TWO decades before he won the Nobel prize for economics in 1991, Ronald Coase wrote an essay decrying the poor state of research in industrial organisation, the discipline in which he established his reputation. The field, he complained, was devoted to the study of monopoly and antitrust policy. That, he said, made for bad scholarship: an economist faced with a business practice that he cannot fathom, according to Mr Coase, “looks for a monopoly explanation”.
A lot has changed in the 37 years since that lament. The broader research effort for which Mr Coase called has fostered a richer understanding of how firms respond to customers and rivals. Monopoly explanations now compete with theories that see the same behaviour as helpful to consumers. That has made it harder to sort malign from benign business practices. The recent antitrust finding against Intel, a maker of computer chips, is a case in point. After a long investigation, ending in a bulky 524-page verdict, the European Union in May fined Intel €1.06 billion ($1.44 billion) for illegally using its muscle to price AMD, a rival chipmaker, out of the market. Intel rejects the charge of predatory pricing and plans a court appeal. Its lawyers have a block of theory on which to build a defence.
Click Here
Allegations of predatory pricing have a long history. The Sherman Antitrust Act of 1890, the foundation of America’s competition policy, was partly a response to complaints by small firms that larger rivals wanted to drive them out of business. Trustbusters need to be wary of such claims. Low prices are one of the fruits of competition: penalising business giants for price cuts would be perverse. But in rare circumstances, a big firm with cash in reserve may cut prices below costs in order to starve smaller rivals of revenue. The profits sacrificed in the short term can be recouped by higher prices once competitors are out of the way.
Establishing that a firm is guilty of predation is difficult. If rivals stumble or fail, that may be down to their own inefficiency or poor products, and not because they were preyed upon. Proving that a firm is pricing below its costs is tricky in practice. Even where a reliable price-cost or profit-sacrifice test is feasible, failing it need not imply sinister intent. There are often pro-competitive reasons to forgo short-term profits. Firms with a new product, or a new version of an existing one, may wish to pick a lossmaking price to defray the cost to consumers of switching, or because they expect their own costs to fall as they perfect the production process (video-game consoles are a classic example). Losses would then be a licit investment in future profits.
Predation is even trickier to uncover when goods are sold together. A firm that enjoys fat profits on one good may “bundle” it with another on which margins are lower. If the discount on the bundle is hefty enough, other firms may struggle to offer as enticing a deal. In 2001 the EU blocked a proposed tie-up between GE and Honeywell for fear that the merged firm might use bundled discounts to squeeze rival suppliers. In 2007 a committee of antitrust experts appointed by the American government proposed a test for whether bundling is predatory. First, assume the discount applies solely to the low-margin good. So if each good sells for $10 separately and $16 as a bundle, allocate the $4 discount to the more “competitive” product. Next, apply a price-cost test: if the product costs over $6 to make, the bundle is predatory.
That check seems neat but sound business practices may still fall foul of it. It may be cheaper for a firm to sell the two goods together, because of cost savings on distribution. Firms also often use bundling as a way of charging high-demand users more. Thin margins on sales of printers, for example, can be made up by bundling in more profitable toners. This kind of “metering” is an efficient way of recovering fixed costs such as research.
Another ambiguous tactic is to offer rebates to customers that reach certain sales targets. Bulk buyers generally pay lower unit prices to reflect suppliers’ economies of scale. Rebates can also help align incentives. Suppliers want retailers to promote their products, offer in-store information and keep plentiful stocks. The trouble is, retailers bear all the costs of such sales efforts but reap only some of the benefits. Rebates provide incentives for retailers to drive sales, as profits are bigger once the target is met.
The price of loyalty
The EU reckons that Intel’s use of such rebates was nefarious. It is in the nature of rebates that, just above the target threshold, the price of each additional purchase can be negative. If, say, a firm charges $1 for each sale of up to nine units, and a unit price of 80 cents (a rebate of 20%) for sales of ten items or more, the price of the tenth sale is minus $1, since nine units cost $9 and ten units costs only $8. A dominant firm like Intel can rely on a certain market share (an “assured base”, in the jargon). It could in theory set a rebate threshold above that mark, where smaller rivals may hope to mount an effective challenge but cannot match the negative marginal prices on offer to buyers.
Intel’s conduct was certainly worth investigating. Its rebates kicked in if customers gave the firm between 80% and 100% of their business. The schemes looked like a response to a competitive threat from AMD. Yet the EU’s trustbusters cannot feel too sure of themselves. Intel’s rival is still alive and kicking: AMD has not been excluded from the market (though its investment plans may have been thwarted and potential entrants deterred). Moreover, such a complex case, with a bulky ruling which is still not in the public domain, does not offer much guidance on what sort of rebate schemes might be deemed predatory.
Trustbusters have moved away from the practice that so concerned Mr Coase in the early 1970s—of being too quick to condemn big firms on the basis of crude judgments. But they are unlikely to find a robust and simple rule to put in place of the old presumption that firms with market power are always suspect.
Back to top ^^
Wednesday, July 08, 2009
Problems of IBF
My comments here are based on the following article, taken from The Malaysian Insider on July 9, 2009.
1. From the comment given by Daud Bakar, greed does drive the growth of IBF.
2. I feel that after decades of existance, IBF fails to segregate itself from the conventional banking. People would still ask a question on what the difference between IBF and the conventional banking. If IBF is unique, this question should long been understood by the masses. Interestingly, scholars also sometimes face trouble giving a comfortable answer to the question.
3. IBF lacks the true Islamic spirit of conducting economic activities. It is driven by promoting debts, which the teaching of Islam warns of the consequences of it mismanagement. Remember that the longest verse in al-Qur'an is about debt.
4. IBF is trapped in the systemic problem of the existing modern financial system.
Scholars juggle faith and commerce as Islamic banking grows
KUALA LUMPUR, July 8 — Religion may be the bedrock of Islamic finance but influential syariah adviser Mohd Daud Bakar says the bottom line drives the industry.
“Commercial gains are very important,” said Daud, who is listed by consultants Funds@Work as among the world’s most active scholars, sitting on 22 syariah boards.
“We are not a charitable organisation. Shareholders are looking for ROE (return on equity) at the end of the day.”
As Islamic banking tries to reach wider markets, syariah scholars such as Daud are weighing more than just Islamic tenets when they rule on the validity of financial instruments, reflecting commerce’s growing role in the RM3.5 trillion industry.
The desire to win market share, the level of expertise of individual scholars and the scarcity of scholars may all shape Islamic financial rulings and the future of the sector.
Some syariah advisers say it is not always easy to balance religion and business as they grapple with modern funding techniques that sometimes challenge Islam’s basic beliefs.
Once at odds with the syariah’s ban on gambling and excessive speculation, contentious conventional practices such as hedge funds, short-selling and derivatives are slowly finding a place in Islamic finance.
Tasked with applying Islamic law and global financial practices, syariah scholars are powerful gatekeepers, whose approvals are necessary before a product can be marketed as an Islamic instrument.
There are no official figures but some practitioners say there are around 200 syariah scholars worldwide.
Some syariah advisers say the drive to grow the industry influences their decisions on whether certain products meet the syariah’s standards.
Ahmad Hidayat Buang, who advises Islamic insurer Takaful Ikhlas, says Malaysian scholars try to meet companies’ business needs, reflecting a popular view that the country is more liberal in its syariah interpretation than the Gulf.
“We see what happens, then we try to adopt the more flexible view of syariah in order that our product could be introduced,” said Hidayat.
“It’s not necessarily a question of syariah. When you decide on the matter many aspects have to be taken into consideration.”
STAR ENDORSEMENTS?
Syariah scholars are not formally accredited by a single authority so their qualifications can vary vastly, raising questions about the ability of some to understand complex financial structures, especially if they are pressed for time.
With newer financial firms, “they know that the syariah board can be very powerful so they bring in very junior scholars and give them very little information or not enough information within a very limited period of time,” said Megat Hizaini Hassan, a Kuala Lumpur-based Islamic banking lawyer.
“So these scholars may be under pressure to give approvals or certifications.”
A select group of syariah scholars are highly sought after as the bigger a scholar’s name, the greater the drawing power of the product he approves. The industry’s most influential figures can make or break markets with their decrees.
Bankers say Islamic bond issuance fell sharply last year after Sheikh Muhammad Taqi Usmani, chairman of the board of scholars at influential industry body AAOIFI, declared about 85 per cent of sukuk were un-Islamic.
Among the most active scholars are Bahrain’s Sheikh Nizam Mohammad Saleh Yacouby, who sits on 46 advisory boards, and Syria’s Abdul Sattar Kareem Abu Ghuddah, who is on 45 boards, according to Funds@Work.
This has raised concerns about whether some scholars have enough time to thoroughly vet contracts, some of which consist of reams of documents detailing complex financial instruments.
There are also concerns about the possibility of Islamic financial rulings being affected by conflicts of interest where a scholar sits on various boards.
“Syariah board conflicts of interest are part of the practice of modern economic institutions,” said Mousa Isa, a syariah adviser in Saudi Arabia. “There should be transparency.”
Other contentious issues include giving scholars incentive-based payments linked to the success of products they approve. This echoes complaints about the hefty bonuses of some Wall Street bankers which analysts say fuelled excessive speculation and helped trigger the recent credit crisis.
Ayashi Faddad, syariah adviser at Islamic Development Bank, said scholars’ fees should be approved directly by shareholders, not management, to reduce potential for conflicts of interest.
But scholars say some lines cannot be crossed. In cases where there is no room for Islam to accommodate a structure or product, Daud said “the commercial must adjust to the syariah”. — Reuters
1. From the comment given by Daud Bakar, greed does drive the growth of IBF.
2. I feel that after decades of existance, IBF fails to segregate itself from the conventional banking. People would still ask a question on what the difference between IBF and the conventional banking. If IBF is unique, this question should long been understood by the masses. Interestingly, scholars also sometimes face trouble giving a comfortable answer to the question.
3. IBF lacks the true Islamic spirit of conducting economic activities. It is driven by promoting debts, which the teaching of Islam warns of the consequences of it mismanagement. Remember that the longest verse in al-Qur'an is about debt.
4. IBF is trapped in the systemic problem of the existing modern financial system.
Scholars juggle faith and commerce as Islamic banking grows
KUALA LUMPUR, July 8 — Religion may be the bedrock of Islamic finance but influential syariah adviser Mohd Daud Bakar says the bottom line drives the industry.
“Commercial gains are very important,” said Daud, who is listed by consultants Funds@Work as among the world’s most active scholars, sitting on 22 syariah boards.
“We are not a charitable organisation. Shareholders are looking for ROE (return on equity) at the end of the day.”
As Islamic banking tries to reach wider markets, syariah scholars such as Daud are weighing more than just Islamic tenets when they rule on the validity of financial instruments, reflecting commerce’s growing role in the RM3.5 trillion industry.
The desire to win market share, the level of expertise of individual scholars and the scarcity of scholars may all shape Islamic financial rulings and the future of the sector.
Some syariah advisers say it is not always easy to balance religion and business as they grapple with modern funding techniques that sometimes challenge Islam’s basic beliefs.
Once at odds with the syariah’s ban on gambling and excessive speculation, contentious conventional practices such as hedge funds, short-selling and derivatives are slowly finding a place in Islamic finance.
Tasked with applying Islamic law and global financial practices, syariah scholars are powerful gatekeepers, whose approvals are necessary before a product can be marketed as an Islamic instrument.
There are no official figures but some practitioners say there are around 200 syariah scholars worldwide.
Some syariah advisers say the drive to grow the industry influences their decisions on whether certain products meet the syariah’s standards.
Ahmad Hidayat Buang, who advises Islamic insurer Takaful Ikhlas, says Malaysian scholars try to meet companies’ business needs, reflecting a popular view that the country is more liberal in its syariah interpretation than the Gulf.
“We see what happens, then we try to adopt the more flexible view of syariah in order that our product could be introduced,” said Hidayat.
“It’s not necessarily a question of syariah. When you decide on the matter many aspects have to be taken into consideration.”
STAR ENDORSEMENTS?
Syariah scholars are not formally accredited by a single authority so their qualifications can vary vastly, raising questions about the ability of some to understand complex financial structures, especially if they are pressed for time.
With newer financial firms, “they know that the syariah board can be very powerful so they bring in very junior scholars and give them very little information or not enough information within a very limited period of time,” said Megat Hizaini Hassan, a Kuala Lumpur-based Islamic banking lawyer.
“So these scholars may be under pressure to give approvals or certifications.”
A select group of syariah scholars are highly sought after as the bigger a scholar’s name, the greater the drawing power of the product he approves. The industry’s most influential figures can make or break markets with their decrees.
Bankers say Islamic bond issuance fell sharply last year after Sheikh Muhammad Taqi Usmani, chairman of the board of scholars at influential industry body AAOIFI, declared about 85 per cent of sukuk were un-Islamic.
Among the most active scholars are Bahrain’s Sheikh Nizam Mohammad Saleh Yacouby, who sits on 46 advisory boards, and Syria’s Abdul Sattar Kareem Abu Ghuddah, who is on 45 boards, according to Funds@Work.
This has raised concerns about whether some scholars have enough time to thoroughly vet contracts, some of which consist of reams of documents detailing complex financial instruments.
There are also concerns about the possibility of Islamic financial rulings being affected by conflicts of interest where a scholar sits on various boards.
“Syariah board conflicts of interest are part of the practice of modern economic institutions,” said Mousa Isa, a syariah adviser in Saudi Arabia. “There should be transparency.”
Other contentious issues include giving scholars incentive-based payments linked to the success of products they approve. This echoes complaints about the hefty bonuses of some Wall Street bankers which analysts say fuelled excessive speculation and helped trigger the recent credit crisis.
Ayashi Faddad, syariah adviser at Islamic Development Bank, said scholars’ fees should be approved directly by shareholders, not management, to reduce potential for conflicts of interest.
But scholars say some lines cannot be crossed. In cases where there is no room for Islam to accommodate a structure or product, Daud said “the commercial must adjust to the syariah”. — Reuters
Wednesday, July 01, 2009
Islamic finance profit margin too high – Hadi
KUALA LUMPUR, July 1 —Datuk Seri Abdul Hadi Awang (PAS-Marang) today called for a review on the implementation of the Islamic financial system in the country, saying the profit margin from loans provided under the system was too high.
He said the margin did not differ much with the conventional financial system, thus defeating the purpose of having a separate system.
Although the system was free of “riba” or interest, it was too profit-oriented, he added.
“This is not how the Islamic financial system should be operated because the basis for its implementation is to help those in need.
“In this context, the borrowers are the ones in need of help as they had to resort to borrowing. They should be assisted and not be taken advantage of,” he said when debating the Bank Negara Malaysia Bill 2009 in the Dewan Rakyat.
Abdul Hadi said the government should do something to make the country’s Islamic financial system a truly people-oriented arrangement and to counter the negative perception that it was similar to the conventional system.
He said the margin did not differ much with the conventional financial system, thus defeating the purpose of having a separate system.
Although the system was free of “riba” or interest, it was too profit-oriented, he added.
“This is not how the Islamic financial system should be operated because the basis for its implementation is to help those in need.
“In this context, the borrowers are the ones in need of help as they had to resort to borrowing. They should be assisted and not be taken advantage of,” he said when debating the Bank Negara Malaysia Bill 2009 in the Dewan Rakyat.
Abdul Hadi said the government should do something to make the country’s Islamic financial system a truly people-oriented arrangement and to counter the negative perception that it was similar to the conventional system.
Super efficiency
An-namal
[قَالَ يأَيُّهَا الْمَلأ أَيُّكُمْ يَأْتِينِى بِعَرْشِهَا قَبْلَ أَن يَأْتُونِى مُسْلِمِينَ - قَالَ عِفْرِيتٌ مِّن الْجِنِّ أَنَاْ ءَاتِيكَ بِهِ قَبْلَ أَن تَقُومَ مِن مَّقَامِكَ وَإِنِّى عَلَيْهِ لَقَوِىٌّ أَمِينٌ - قَالَ الَّذِى عِندَهُ عِلْمٌ مِّنَ الْكِتَـبِ أَنَاْ ءَاتِيكَ بِهِ قَبْلَ أَن يَرْتَدَّ إِلَيْكَ طَرْفُكَ فَلَمَّا رَءَاهُ مُسْتَقِرّاً عِندَهُ قَالَ هَـذَا مِن فَضْلِ رَبِّى لِيَبْلُوَنِى أَءَشْكُرُ أَمْ أَكْفُرُ وَمَن شَكَرَ فَإِنَّمَا يَشْكُرُ لِنَفْسِهِ وَمَن كَفَرَ فَإِنَّ رَبِّى غَنِىٌّ كَرِيمٌ ]
38. He said: "O chiefs! Which of you can bring me her throne before they come to me surrendering themselves in obedience (as Muslims)'') (39. An `Ifrit from the Jinn said: "I will bring it to you before you rise from your place. And verily, I am indeed strong and trustworthy for such work.'') (40. One with whom was knowledge of the Scripture, said: "I will bring it to you within the twinkling of an eye!'' Then when he saw it placed before him, he said: "This is by the grace of my Lord -- to test me whether I am grateful or ungrateful! And whoever is grateful, truly, his gratitude is for himself; and whoever is ungrateful, certainly my Lord is Rich, Bountiful.''
My note:
1. One way to look at these verses was from an efficiency analysis. Sulayman had great resources.
2. And see how he chose the most efficient way to accomplish the task.
[قَالَ يأَيُّهَا الْمَلأ أَيُّكُمْ يَأْتِينِى بِعَرْشِهَا قَبْلَ أَن يَأْتُونِى مُسْلِمِينَ - قَالَ عِفْرِيتٌ مِّن الْجِنِّ أَنَاْ ءَاتِيكَ بِهِ قَبْلَ أَن تَقُومَ مِن مَّقَامِكَ وَإِنِّى عَلَيْهِ لَقَوِىٌّ أَمِينٌ - قَالَ الَّذِى عِندَهُ عِلْمٌ مِّنَ الْكِتَـبِ أَنَاْ ءَاتِيكَ بِهِ قَبْلَ أَن يَرْتَدَّ إِلَيْكَ طَرْفُكَ فَلَمَّا رَءَاهُ مُسْتَقِرّاً عِندَهُ قَالَ هَـذَا مِن فَضْلِ رَبِّى لِيَبْلُوَنِى أَءَشْكُرُ أَمْ أَكْفُرُ وَمَن شَكَرَ فَإِنَّمَا يَشْكُرُ لِنَفْسِهِ وَمَن كَفَرَ فَإِنَّ رَبِّى غَنِىٌّ كَرِيمٌ ]
38. He said: "O chiefs! Which of you can bring me her throne before they come to me surrendering themselves in obedience (as Muslims)'') (39. An `Ifrit from the Jinn said: "I will bring it to you before you rise from your place. And verily, I am indeed strong and trustworthy for such work.'') (40. One with whom was knowledge of the Scripture, said: "I will bring it to you within the twinkling of an eye!'' Then when he saw it placed before him, he said: "This is by the grace of my Lord -- to test me whether I am grateful or ungrateful! And whoever is grateful, truly, his gratitude is for himself; and whoever is ungrateful, certainly my Lord is Rich, Bountiful.''
My note:
1. One way to look at these verses was from an efficiency analysis. Sulayman had great resources.
2. And see how he chose the most efficient way to accomplish the task.
Obligation of an Islamic state
Read the tafsir of the verse below (an-naml:36 & 37) and my comment after that.
The Gift and the Response of Sulayman
More than one of the scholars of Tafsir among the Salaf and others stated that she sent him a huge gift of gold, jewels, pearls and other things. It is apparent that Sulayman, peace be upon him, did not even look at what they brought at all and did not pay any attention to it, but he turned away and said, rebuking them:
[أَتُمِدُّونَنِ بِمَالٍ]
("Will you help me in wealth'') meaning, `are you trying to flatter me with wealth so that I will leave you alone with your Shirk and your kingdom'
[فَمَآ ءَاتَـنِى اللَّهُ خَيْرٌ مِّمَّآ ءَاتَـكُمْ]
(What Allah has given me is better than that which He has given you!) means, `what Allah has given to me of power, wealth and troops, is better than that which you have.'
[بَلْ أَنتُمْ بِهَدِيَّتِكُمْ تَفْرَحُونَ]
(Nay, you rejoice in your gift!) means, `you are the ones who are influenced by gifts and presents; we will accept nothing from you except Islam or the sword.' - Tafsir Ibn Kathir.
My note:
1. The requirement of jihad isclear especially when an Islamic state is established.
2. The response of Sulayman and what Prophet SAW did after he had established Madinah were two points that support the point above.
3. In fact, US did the same - accept democracy or else war.
The Gift and the Response of Sulayman
More than one of the scholars of Tafsir among the Salaf and others stated that she sent him a huge gift of gold, jewels, pearls and other things. It is apparent that Sulayman, peace be upon him, did not even look at what they brought at all and did not pay any attention to it, but he turned away and said, rebuking them:
[أَتُمِدُّونَنِ بِمَالٍ]
("Will you help me in wealth'') meaning, `are you trying to flatter me with wealth so that I will leave you alone with your Shirk and your kingdom'
[فَمَآ ءَاتَـنِى اللَّهُ خَيْرٌ مِّمَّآ ءَاتَـكُمْ]
(What Allah has given me is better than that which He has given you!) means, `what Allah has given to me of power, wealth and troops, is better than that which you have.'
[بَلْ أَنتُمْ بِهَدِيَّتِكُمْ تَفْرَحُونَ]
(Nay, you rejoice in your gift!) means, `you are the ones who are influenced by gifts and presents; we will accept nothing from you except Islam or the sword.' - Tafsir Ibn Kathir.
My note:
1. The requirement of jihad isclear especially when an Islamic state is established.
2. The response of Sulayman and what Prophet SAW did after he had established Madinah were two points that support the point above.
3. In fact, US did the same - accept democracy or else war.
Friday, April 10, 2009
Gog and Magog economic system
Gog and Magog destroy wealth and properties. How:
1. In the financial system today, money can be 'destroyed' and the destruction causes economic contraction
2. 2008 financial crisis is one example of the global scale effect of the system created by Gog and Magog.
The following are verses of al_Qur'an and the tafsir from Ibn Kathir
[وَتَرَكْنَا بَعْضَهُمْ]
(We shall leave some of them) meaning mankind, on that day, the day when the barrier will be breached and these people (Ya'juj and Ma'juj) will come out surging over mankind to destroy their wealth and property.
[وَتَرَكْنَا بَعْضَهُمْ يَوْمَئِذٍ يَمُوجُ فِى بَعْضٍ]
(We shall leave some of them to surge like waves on one another;) As-Suddi said: "That is when they emerge upon the people.'' All of this will happen before the Day of Resurrection and after the Dajjal, as we will explain when discussing the Ayat:
[حَتَّى إِذَا فُتِحَتْ يَأْجُوجُ وَمَأْجُوجُ وَهُمْ مِّن كُلِّ حَدَبٍ يَنسِلُونَ وَاقْتَرَبَ الْوَعْدُ الْحَقُّ]
(Until, when Ya'juj and Ma'juj are let loose, and they swoop down from every Hadab. And the true promise shall draw near...) [21:96-97]
1. In the financial system today, money can be 'destroyed' and the destruction causes economic contraction
2. 2008 financial crisis is one example of the global scale effect of the system created by Gog and Magog.
The following are verses of al_Qur'an and the tafsir from Ibn Kathir
[وَتَرَكْنَا بَعْضَهُمْ]
(We shall leave some of them) meaning mankind, on that day, the day when the barrier will be breached and these people (Ya'juj and Ma'juj) will come out surging over mankind to destroy their wealth and property.
[وَتَرَكْنَا بَعْضَهُمْ يَوْمَئِذٍ يَمُوجُ فِى بَعْضٍ]
(We shall leave some of them to surge like waves on one another;) As-Suddi said: "That is when they emerge upon the people.'' All of this will happen before the Day of Resurrection and after the Dajjal, as we will explain when discussing the Ayat:
[حَتَّى إِذَا فُتِحَتْ يَأْجُوجُ وَمَأْجُوجُ وَهُمْ مِّن كُلِّ حَدَبٍ يَنسِلُونَ وَاقْتَرَبَ الْوَعْدُ الْحَقُّ]
(Until, when Ya'juj and Ma'juj are let loose, and they swoop down from every Hadab. And the true promise shall draw near...) [21:96-97]
Thursday, April 02, 2009
2008 Crisis Impacts on the Rich
special report on the rich
Easier for a camel
Apr 2nd 2009
From The Economist print edition
After decades of prospering mightily, the wealthy may now be in for an extended period of austerity, says Philip Coggan (interviewed here)
Illustration by Alex Nabaun
EVEN the wealthy burghers of Monaco are feeling the pinch. At the principality’s Le Metropole shopping mall the winter sales were still in full swing in early February. Upmarket retailers such as Lacoste and Christian Lacroix felt obliged to offer 50% reductions.
The rich will get little sympathy, but they have taken a big hit from the financial crisis. After all, they own a disproportionately large share of the equity and property markets. Many of them derive their wealth directly from the financial sector, working for hedge funds, private-equity firms or investment banks. A survey by Oliver Wyman, a consultancy, estimates that the financial crisis has caused high-net-worth individuals (as the banking industry calls the rich) to lose $10 trillion, or a quarter of their wealth. The annual Forbes list found that the global number of billionaires last year fell to 793 from 1,125, and a report by Spectrem Group, a research company, saw a drop in the number of American millionaires from 9.2m to 6.7m between 2007 and 2008.
A few businessmen who borrowed money against the security of their assets have seen their fortunes almost disappear. In Russia the number of billionaire oligarchs has halved, according to Finans magazine, and the assets of the ten richest tycoons have lost two-thirds of their value. Most spectacularly, one Russian businessman who had reportedly agreed to buy a villa in the south of France for €400m is in danger of losing a €39m deposit after backing out of the deal.
To many people this come-uppance of the rich will seem to be a good thing. The extremes of wealth in “Anglo-Saxon” America and Britain had reached levels not seen since the 1920s. The gains from recent economic growth flowed disproportionately to the wealthy. According to one study by Robert Gordon of Northwestern University and Ian Dew-Becker of Harvard, the top 10% of earners received the vast majority of the benefits of the “productivity miracle” of 1996-2005. Another international study found that only Mexico and Russia had more unequal income distributions than America.
Ajay Kapur, a strategist at Mirae Asset Management, dubbed this state of affairs a “plutonomy”, an economy dominated by the spending of the rich. It was a world where the wealthy might be born in France, work in London, park their money in Switzerland and have their business headquarters in the Cayman Islands. Such people seemed to inhabit a different country from other people, which Robert Frank, a writer, called “Richistan”.
That world of the wealthy emerged from economic and political changes in the early 1970s. Fixed exchange rates were abandoned, financial systems were liberalised, trade unions were confronted and taxes were cut, all of which helped usher in the asset-price booms of the 1980s and 1990s. Some of those who played the markets with borrowed money—the founders of hedge-fund and private-equity firms—became billionaires.
A rebound in profits from the low levels of the 1970s, combined with the use of share options as incentives, allowed chief executives to make fortunes. The opening up of the Russian, Indian and Chinese economies, allied to a boom in commodity prices, created a whole new batch of emerging-market plutocrats.
The size of the accumulated wealth was stupendous. The Forbes 400 richest people in 1982 had a combined net worth of $92 billion; by 2006 they owned $1.25 trillion. To make it onto the first list in 1982, you needed a net worth of $75m; by 2006 you had to be a billionaire. A lot more of this money was self-made; inherited wealth made up over 21% of the first list and under 2% of the 2006 roster. And almost a quarter of the 2006 rich owed their fortunes to the finance sector, compared with less than a tenth back in 1982.
The rich man in his castle
It would have been easy to conclude that the tide of history was simply resuming its usual flow towards greater inequality. For much of the time since records began the normal state of affairs has been extremes of wealth, whether in the hands of aristocratic landowners or industrial entrepreneurs. The period after the second world war, labelled by economists as the “great compression”, when wage differentials narrowed and taxes went up, looked like an historical anomaly.
But now the tide is turning again, reflecting widespread resentment of the mess in which the financial sector has landed the economy. The public may have been willing to tolerate extremes of wealth and pay when the economy was producing growth and jobs, but now it has become more suspicious. Why did bankers enjoy bonuses during the boom years but leave taxpayers to foot the bill during the bust? Why should companies be allowed to dodge taxes and sack workers by shifting operations overseas?
What is happening now could mark one of those sea changes in public policy that seem to come along once in every generation. In the late 19th and early 20th century a decline in American farm incomes prompted a rise of populism and progressivism that led to attacks on corporate trusts in America under Theodore Roosevelt. In the 1930s the Depression led to the New Deal and the re-regulation of the financial sector in America, and the rise of fascism in Europe. Reaction to the economic crisis of the 1970s ushered in the Thatcher and Reagan reforms.
Governments are already trying to deal with public anger about manifestly unfair gains by capping bankers’ bonuses. The level of regulation will increase, and taxes will inevitably rise as governments struggle to contain their bulging budget deficits. As President Obama’s budget proposal showed, the rich will be tempting targets for those tax hikes.
It is also possible that globalisation may come under threat as governments seek to placate their voters by protecting local jobs and industries. Already banks are being urged to lend money to domestic rather than foreign businesses. The German and American governments are leading an attack on bank-secrecy laws in tax havens. The elite may no longer find it so easy to move itself and its capital from country to country, depending on where the returns are highest and the taxes lowest.
All this may bring a reduction in inequality, especially in the Anglo-Saxon economies where it seemed to have increased most. The big question is whether this will be short-lived, linked solely to the crisis, or turn out to be something more structural. Social safety nets are much better developed than they were in the 1930s, which may make the poor less desperate and constrain their anger at the rich. But the search for scapegoats will be on.
For the moment the pressure is being felt by businesses that service the rich. Ferretti, a top-of-the-range yacht manufacturer, has defaulted on part of its debt; creditors are set to get just 11 cents on the dollar. The decision by Saks, an exclusive retailer, to slash prices during the 2008 holiday season caused consternation among some luxury-goods groups. Sales at Tiffany’s American jewellery stores have plunged. De Beers has suspended production at one of its biggest diamond mines.
And even wealthy people who are not feeling the pinch may have become more cautious about spending ostentatiously. Net-a-Porter, an upmarket fashion website, now offers the option of having designer outfits delivered in a brown paper bag.
Fee for no service
Those who look after rich clients’ wealth are already in trouble. Surveys indicate that the better-off are highly dissatisfied with the service provided by their private banks, which failed to protect them from the market falls of the past 18 months. The fraud that caused investors who handed their money to Bernard Madoff to lose tens of billions of dollars has raised new doubts about the safety of portfolios and about the due diligence undertaken by wealth managers.
All that said, there are still plenty of rich people around. Someone was confident enough to pay $20m for a Degas bronze at an auction at Sotheby’s in February. Diners at the Hotel Metropole in Monaco are still willing to shell out €137 for a grand dish of rock lobster.
But the outlook for the rich is no longer the “glad, confident morning” that it seemed just two years ago. In a survey of high-net-worth Americans by Harrison Group in January, 78% said their sense of financial security had been undermined by the crisis; only 46% were optimistic about their own future, against 93% in 2005.
This special report will explain how disparities in wealth and income became so wide in the first place and ask whether that process will now go into reverse. And it will examine how well the rich are coping with the crisis—because that will matter for everyone else too.
Easier for a camel
Apr 2nd 2009
From The Economist print edition
After decades of prospering mightily, the wealthy may now be in for an extended period of austerity, says Philip Coggan (interviewed here)
Illustration by Alex Nabaun
EVEN the wealthy burghers of Monaco are feeling the pinch. At the principality’s Le Metropole shopping mall the winter sales were still in full swing in early February. Upmarket retailers such as Lacoste and Christian Lacroix felt obliged to offer 50% reductions.
The rich will get little sympathy, but they have taken a big hit from the financial crisis. After all, they own a disproportionately large share of the equity and property markets. Many of them derive their wealth directly from the financial sector, working for hedge funds, private-equity firms or investment banks. A survey by Oliver Wyman, a consultancy, estimates that the financial crisis has caused high-net-worth individuals (as the banking industry calls the rich) to lose $10 trillion, or a quarter of their wealth. The annual Forbes list found that the global number of billionaires last year fell to 793 from 1,125, and a report by Spectrem Group, a research company, saw a drop in the number of American millionaires from 9.2m to 6.7m between 2007 and 2008.
A few businessmen who borrowed money against the security of their assets have seen their fortunes almost disappear. In Russia the number of billionaire oligarchs has halved, according to Finans magazine, and the assets of the ten richest tycoons have lost two-thirds of their value. Most spectacularly, one Russian businessman who had reportedly agreed to buy a villa in the south of France for €400m is in danger of losing a €39m deposit after backing out of the deal.
To many people this come-uppance of the rich will seem to be a good thing. The extremes of wealth in “Anglo-Saxon” America and Britain had reached levels not seen since the 1920s. The gains from recent economic growth flowed disproportionately to the wealthy. According to one study by Robert Gordon of Northwestern University and Ian Dew-Becker of Harvard, the top 10% of earners received the vast majority of the benefits of the “productivity miracle” of 1996-2005. Another international study found that only Mexico and Russia had more unequal income distributions than America.
Ajay Kapur, a strategist at Mirae Asset Management, dubbed this state of affairs a “plutonomy”, an economy dominated by the spending of the rich. It was a world where the wealthy might be born in France, work in London, park their money in Switzerland and have their business headquarters in the Cayman Islands. Such people seemed to inhabit a different country from other people, which Robert Frank, a writer, called “Richistan”.
That world of the wealthy emerged from economic and political changes in the early 1970s. Fixed exchange rates were abandoned, financial systems were liberalised, trade unions were confronted and taxes were cut, all of which helped usher in the asset-price booms of the 1980s and 1990s. Some of those who played the markets with borrowed money—the founders of hedge-fund and private-equity firms—became billionaires.
A rebound in profits from the low levels of the 1970s, combined with the use of share options as incentives, allowed chief executives to make fortunes. The opening up of the Russian, Indian and Chinese economies, allied to a boom in commodity prices, created a whole new batch of emerging-market plutocrats.
The size of the accumulated wealth was stupendous. The Forbes 400 richest people in 1982 had a combined net worth of $92 billion; by 2006 they owned $1.25 trillion. To make it onto the first list in 1982, you needed a net worth of $75m; by 2006 you had to be a billionaire. A lot more of this money was self-made; inherited wealth made up over 21% of the first list and under 2% of the 2006 roster. And almost a quarter of the 2006 rich owed their fortunes to the finance sector, compared with less than a tenth back in 1982.
The rich man in his castle
It would have been easy to conclude that the tide of history was simply resuming its usual flow towards greater inequality. For much of the time since records began the normal state of affairs has been extremes of wealth, whether in the hands of aristocratic landowners or industrial entrepreneurs. The period after the second world war, labelled by economists as the “great compression”, when wage differentials narrowed and taxes went up, looked like an historical anomaly.
But now the tide is turning again, reflecting widespread resentment of the mess in which the financial sector has landed the economy. The public may have been willing to tolerate extremes of wealth and pay when the economy was producing growth and jobs, but now it has become more suspicious. Why did bankers enjoy bonuses during the boom years but leave taxpayers to foot the bill during the bust? Why should companies be allowed to dodge taxes and sack workers by shifting operations overseas?
What is happening now could mark one of those sea changes in public policy that seem to come along once in every generation. In the late 19th and early 20th century a decline in American farm incomes prompted a rise of populism and progressivism that led to attacks on corporate trusts in America under Theodore Roosevelt. In the 1930s the Depression led to the New Deal and the re-regulation of the financial sector in America, and the rise of fascism in Europe. Reaction to the economic crisis of the 1970s ushered in the Thatcher and Reagan reforms.
Governments are already trying to deal with public anger about manifestly unfair gains by capping bankers’ bonuses. The level of regulation will increase, and taxes will inevitably rise as governments struggle to contain their bulging budget deficits. As President Obama’s budget proposal showed, the rich will be tempting targets for those tax hikes.
It is also possible that globalisation may come under threat as governments seek to placate their voters by protecting local jobs and industries. Already banks are being urged to lend money to domestic rather than foreign businesses. The German and American governments are leading an attack on bank-secrecy laws in tax havens. The elite may no longer find it so easy to move itself and its capital from country to country, depending on where the returns are highest and the taxes lowest.
All this may bring a reduction in inequality, especially in the Anglo-Saxon economies where it seemed to have increased most. The big question is whether this will be short-lived, linked solely to the crisis, or turn out to be something more structural. Social safety nets are much better developed than they were in the 1930s, which may make the poor less desperate and constrain their anger at the rich. But the search for scapegoats will be on.
For the moment the pressure is being felt by businesses that service the rich. Ferretti, a top-of-the-range yacht manufacturer, has defaulted on part of its debt; creditors are set to get just 11 cents on the dollar. The decision by Saks, an exclusive retailer, to slash prices during the 2008 holiday season caused consternation among some luxury-goods groups. Sales at Tiffany’s American jewellery stores have plunged. De Beers has suspended production at one of its biggest diamond mines.
And even wealthy people who are not feeling the pinch may have become more cautious about spending ostentatiously. Net-a-Porter, an upmarket fashion website, now offers the option of having designer outfits delivered in a brown paper bag.
Fee for no service
Those who look after rich clients’ wealth are already in trouble. Surveys indicate that the better-off are highly dissatisfied with the service provided by their private banks, which failed to protect them from the market falls of the past 18 months. The fraud that caused investors who handed their money to Bernard Madoff to lose tens of billions of dollars has raised new doubts about the safety of portfolios and about the due diligence undertaken by wealth managers.
All that said, there are still plenty of rich people around. Someone was confident enough to pay $20m for a Degas bronze at an auction at Sotheby’s in February. Diners at the Hotel Metropole in Monaco are still willing to shell out €137 for a grand dish of rock lobster.
But the outlook for the rich is no longer the “glad, confident morning” that it seemed just two years ago. In a survey of high-net-worth Americans by Harrison Group in January, 78% said their sense of financial security had been undermined by the crisis; only 46% were optimistic about their own future, against 93% in 2005.
This special report will explain how disparities in wealth and income became so wide in the first place and ask whether that process will now go into reverse. And it will examine how well the rich are coping with the crisis—because that will matter for everyone else too.
Saturday, March 21, 2009
Episod Marah-marah Semasa Gawat
Oleh
Mohd Nahar Mohd Arshad
University of Tasmania, Australia
Apabila ekonomi merudum, ramai yang marah-marah. Marah kerana dibuang kerja, tiada bonus, kerugian perniagaan dan dikejar pemiutang adalah antara
sebab yang biasa didengar dalam keadaan ekonomi yang gawat.
Kegawatan Ekonomi 2008 membawa cerita baru dalam episod marah. Sekarang, kerajaan di negara-negara kapitalis juga marah.
Kisah termahsyur ialah marahnya Barak Obama dan Kongres Amerika dengan eksekutif AIG. Syarikata kewangan gergasi yang mendapat pakej bantuan kecemasan ini menggunakan sebahagian besar dana tersebut untuk bayaran bonus eksekutif-eksekutifnya.
Di Australia, kemarahan yang sama juga sedang melanda. Kerajaan Rudd sedang berusaha melaksanakan undang-undang yang memberikan kuasa kepada para pemegang saham bagi menghadkan pemberian bonus kepada eksekutif tertinggi syarikat.
Sebenarnya, isu bonus yang melampau kepada eksekutif syarikat (terutamanya CEO) sudah lama menjadi isu. Ledakan kemarahan dari pihak kerajaan baru sahaja tercetus.
Aktivist pemegang saham sudah lama mempersoalkan kewajaran bayaran bonus yang melampau kepada para eksekutif. Ironi bukan, apabila ketua pegawai eksekutif dijanjikan bayaran berjuta dollar sebelum memulakan tugas! Kerja belum tentu kualiti, duit sudah menggunung tinggi! Masakan apabila syarikat mengalami kerugian, si eksekutif masih mendapat bonus berganda?
Persoalan kemanusiaan juga timbul dalam isu ini. Wajarkah minoriti kecil mendapat jutaan dollar atas kemelaratan pekerja bawahan yang majoriti? Pekerja bawahan biasanya ‘terpaksa’ dibuang bagi syarikat distrukturkan semula. Tetapi, apabila ini dibuat dengan eksekutif tinggi syarikat mendapat habuan berganda, nilai kemanusiaan dalam diri eksekutif dipertikaikan.
Pembuangan pekerja membawa kepada kesan negatif sosial dan ekonomi yang lebih besar dari persepsi makro-ekonomi.
Erupsi Obama dalam contoh AIG di atas tercetus kerana eksekutif AIG yang tidak cemerlang, bersenang dengan duit cukai rakyat. Rakyat sedang merana dek ekonomi yang gawat, mengapa pula duit cukai mereka disalah guna?
Campur tangan pihak kerajaan dalam isu ‘paying terjun emas’ ini melambangkan buruknya model pengurusan syarikat dalam sistem kapitalis. Penglibatan kerajaan juga melambangkan para pemegang saham sudah hilang daya melawan kuasa eksekutif.
Sudah sampai masanya ketidakadilan ini disanggah! Struktur kontrak mudharabah dalam Islam merupakan alternatif terbaik yang boleh diguna pakai.
Fikah dalam kontrak mudharabah ini sudah lama dikupas oleh para cendikiawan Islam bagi menjaga keadilan yang sepatutnya dalam konteks hubungan agen-prinsipal yang harmoni.
Mohd Nahar Mohd Arshad
University of Tasmania, Australia
Apabila ekonomi merudum, ramai yang marah-marah. Marah kerana dibuang kerja, tiada bonus, kerugian perniagaan dan dikejar pemiutang adalah antara
sebab yang biasa didengar dalam keadaan ekonomi yang gawat.
Kegawatan Ekonomi 2008 membawa cerita baru dalam episod marah. Sekarang, kerajaan di negara-negara kapitalis juga marah.
Kisah termahsyur ialah marahnya Barak Obama dan Kongres Amerika dengan eksekutif AIG. Syarikata kewangan gergasi yang mendapat pakej bantuan kecemasan ini menggunakan sebahagian besar dana tersebut untuk bayaran bonus eksekutif-eksekutifnya.
Di Australia, kemarahan yang sama juga sedang melanda. Kerajaan Rudd sedang berusaha melaksanakan undang-undang yang memberikan kuasa kepada para pemegang saham bagi menghadkan pemberian bonus kepada eksekutif tertinggi syarikat.
Sebenarnya, isu bonus yang melampau kepada eksekutif syarikat (terutamanya CEO) sudah lama menjadi isu. Ledakan kemarahan dari pihak kerajaan baru sahaja tercetus.
Aktivist pemegang saham sudah lama mempersoalkan kewajaran bayaran bonus yang melampau kepada para eksekutif. Ironi bukan, apabila ketua pegawai eksekutif dijanjikan bayaran berjuta dollar sebelum memulakan tugas! Kerja belum tentu kualiti, duit sudah menggunung tinggi! Masakan apabila syarikat mengalami kerugian, si eksekutif masih mendapat bonus berganda?
Persoalan kemanusiaan juga timbul dalam isu ini. Wajarkah minoriti kecil mendapat jutaan dollar atas kemelaratan pekerja bawahan yang majoriti? Pekerja bawahan biasanya ‘terpaksa’ dibuang bagi syarikat distrukturkan semula. Tetapi, apabila ini dibuat dengan eksekutif tinggi syarikat mendapat habuan berganda, nilai kemanusiaan dalam diri eksekutif dipertikaikan.
Pembuangan pekerja membawa kepada kesan negatif sosial dan ekonomi yang lebih besar dari persepsi makro-ekonomi.
Erupsi Obama dalam contoh AIG di atas tercetus kerana eksekutif AIG yang tidak cemerlang, bersenang dengan duit cukai rakyat. Rakyat sedang merana dek ekonomi yang gawat, mengapa pula duit cukai mereka disalah guna?
Campur tangan pihak kerajaan dalam isu ‘paying terjun emas’ ini melambangkan buruknya model pengurusan syarikat dalam sistem kapitalis. Penglibatan kerajaan juga melambangkan para pemegang saham sudah hilang daya melawan kuasa eksekutif.
Sudah sampai masanya ketidakadilan ini disanggah! Struktur kontrak mudharabah dalam Islam merupakan alternatif terbaik yang boleh diguna pakai.
Fikah dalam kontrak mudharabah ini sudah lama dikupas oleh para cendikiawan Islam bagi menjaga keadilan yang sepatutnya dalam konteks hubungan agen-prinsipal yang harmoni.
Wednesday, March 18, 2009
Barter corporation
Souped-up swap shops
Mar 17th 2009
From Economist.com
The downturn may be good news for barter exchanges
THE current economic climate has left many companies stuck with unsold stock. They are also struggling to get credit to finance their purchases of supplies. As a result, some are turning to barter exchanges. These are a modern incarnation of a very old practice in which one trader swaps his surplus for someone else’s, sparing both the need to use their scarce cash. The International Reciprocal Trade Association (IRTA), which represents about 100 barter networks around the world, says its adherents expect their trading volumes to rise by around 15% this year.
America is by far the biggest market for such “corporate barter”. But it is apparently growing elsewhere. In 2007 BizXchange, a barter network on America’s west coast, opened a branch in Dubai. At first, business there was scarce because Middle Eastern economies were booming and there was little excess capacity. But as the slowdown goes global, more deals are emerging. BizXchange recently handled a transaction in which $10m-worth of steel from Dubai was ultimately traded for, among other things, some property in America—a business in which there is still plenty of overcapacity.
Mary Evans How they did it in olden days
Of course, the reason that developed economies generally use money to do business is that it is so hard to find suitable partners to barter with. In the case of, say, a clothing distributor with a warehouse full of unsold shirts which needs to buy computers, what are the chances of it finding a computer seller which needs a batch of shirts? For this reason, most barter exchanges operate some sort of shadow currency. A firm that sells its surplus goods or services through the exchange receives credits which it can then spend on the goods or services of any other exchange member. “We make a currency of excess capacity,” explains David Wallach, the IRTA’s president.
It is hard to tell quite how much of this quasi-currency is floating around. Many of the hundreds of exchanges that exist are privately owned and do not report any numbers. The IRTA estimates that transactions worth $10 billion were completed in America last year, with 250,000 companies taking part. The head of one large American trading network reckons that the actual number was nearer $4 billion, after eliminating double-counting.
Unlike real cash, the barter exchanges’ quasi-currencies do not have governments standing behind them. This, combined with the lack of reliable and independent information about some exchanges’ finances, can make bartering a bit of a gamble. In the past, some exchanges have collapsed, leaving participants holding worthless bits of paper. As a self-regulatory body, the IRTA sets minimum financial-reporting standards and other rules that its members must meet. A few of the bigger exchanges—such as International Monetary Systems (IMS), the biggest, which claims 18,000 members—are publicly quoted and thus subject to strict auditing and reporting standards. In general, though, the risks of using barter exchanges are greater for firms that sell physical goods, which cost money to produce, than they are for service providers, whose surplus “stock” has a low marginal cost.
A British barter exchange, Miroma, does without a quasi-currency and instead seeks to line up all sides of each deal before it goes ahead. Miroma mainly serves companies which want to run an advertising campaign but cannot afford to pay for it all in cash and happen to have some surplus stock. Miroma matches these clients with sellers of advertising space (eg, broadcasters and outdoor-poster firms) which are struggling to sell all of their slots. It also finds a third party to buy the client’s surplus stock. Since it receives the advertising slots at a heavy discount, Miroma rewards itself for the risk that some part of the deal will come unstitched and leave it with liabilities.
Click here!
Barter boosters argue that there has been much consolidation in the industry and that the biggest exchanges are very robust. But as the recession bites, more member firms may renege on their debts or fail to deliver goods. While acknowledging that some barter traders may indeed go under in these tough times, the IRTA’s Mr Wallach claims that the failure rate of firms which use barter exchanges is lower than the average for the economy as a whole. This may in part be because belonging to an exchange can be a good way for a company to network with potential new customers with whom it will go on to do deals in real currency.
If so, some firms that go in for bartering out of necessity during the current downturn may find that it continues to be worthwhile when the recovery eventually comes. However, it must be said that bartering enjoyed a similar revival of interest in previous recessions only to fizzle out once the recovery came along. Barter may have its uses at the margins but it will be hard to beat the attractions of getting paid in hard cash.
Mar 17th 2009
From Economist.com
The downturn may be good news for barter exchanges
THE current economic climate has left many companies stuck with unsold stock. They are also struggling to get credit to finance their purchases of supplies. As a result, some are turning to barter exchanges. These are a modern incarnation of a very old practice in which one trader swaps his surplus for someone else’s, sparing both the need to use their scarce cash. The International Reciprocal Trade Association (IRTA), which represents about 100 barter networks around the world, says its adherents expect their trading volumes to rise by around 15% this year.
America is by far the biggest market for such “corporate barter”. But it is apparently growing elsewhere. In 2007 BizXchange, a barter network on America’s west coast, opened a branch in Dubai. At first, business there was scarce because Middle Eastern economies were booming and there was little excess capacity. But as the slowdown goes global, more deals are emerging. BizXchange recently handled a transaction in which $10m-worth of steel from Dubai was ultimately traded for, among other things, some property in America—a business in which there is still plenty of overcapacity.
Mary Evans How they did it in olden days
Of course, the reason that developed economies generally use money to do business is that it is so hard to find suitable partners to barter with. In the case of, say, a clothing distributor with a warehouse full of unsold shirts which needs to buy computers, what are the chances of it finding a computer seller which needs a batch of shirts? For this reason, most barter exchanges operate some sort of shadow currency. A firm that sells its surplus goods or services through the exchange receives credits which it can then spend on the goods or services of any other exchange member. “We make a currency of excess capacity,” explains David Wallach, the IRTA’s president.
It is hard to tell quite how much of this quasi-currency is floating around. Many of the hundreds of exchanges that exist are privately owned and do not report any numbers. The IRTA estimates that transactions worth $10 billion were completed in America last year, with 250,000 companies taking part. The head of one large American trading network reckons that the actual number was nearer $4 billion, after eliminating double-counting.
Unlike real cash, the barter exchanges’ quasi-currencies do not have governments standing behind them. This, combined with the lack of reliable and independent information about some exchanges’ finances, can make bartering a bit of a gamble. In the past, some exchanges have collapsed, leaving participants holding worthless bits of paper. As a self-regulatory body, the IRTA sets minimum financial-reporting standards and other rules that its members must meet. A few of the bigger exchanges—such as International Monetary Systems (IMS), the biggest, which claims 18,000 members—are publicly quoted and thus subject to strict auditing and reporting standards. In general, though, the risks of using barter exchanges are greater for firms that sell physical goods, which cost money to produce, than they are for service providers, whose surplus “stock” has a low marginal cost.
A British barter exchange, Miroma, does without a quasi-currency and instead seeks to line up all sides of each deal before it goes ahead. Miroma mainly serves companies which want to run an advertising campaign but cannot afford to pay for it all in cash and happen to have some surplus stock. Miroma matches these clients with sellers of advertising space (eg, broadcasters and outdoor-poster firms) which are struggling to sell all of their slots. It also finds a third party to buy the client’s surplus stock. Since it receives the advertising slots at a heavy discount, Miroma rewards itself for the risk that some part of the deal will come unstitched and leave it with liabilities.
Click here!
Barter boosters argue that there has been much consolidation in the industry and that the biggest exchanges are very robust. But as the recession bites, more member firms may renege on their debts or fail to deliver goods. While acknowledging that some barter traders may indeed go under in these tough times, the IRTA’s Mr Wallach claims that the failure rate of firms which use barter exchanges is lower than the average for the economy as a whole. This may in part be because belonging to an exchange can be a good way for a company to network with potential new customers with whom it will go on to do deals in real currency.
If so, some firms that go in for bartering out of necessity during the current downturn may find that it continues to be worthwhile when the recovery eventually comes. However, it must be said that bartering enjoyed a similar revival of interest in previous recessions only to fizzle out once the recovery came along. Barter may have its uses at the margins but it will be hard to beat the attractions of getting paid in hard cash.
Monday, January 19, 2009
Why people donate?
Economics focus
Looking good by doing good
Jan 15th 2009
From The Economist print edition
Rewarding people for their generosity may be counterproductive
Illustration by Jac DepczykA LARGE plaque in the foyer of Boston’s Institute for Contemporary Art (ICA), a museum housed in a dramatic glass and metal building on the harbour’s edge, identifies its most generous patrons. Visitors who stop to look will notice that some donors—including two who gave the ICA over $2.5m—have chosen not to reveal their names. Such reticence is unusual: less than 1% of private gifts to charity are anonymous. Most people (including the vast majority of the ICA’s patrons) want their good deeds to be talked about. In “Richistan”, a book on America’s new rich, Robert Frank writes of the several society publications in Florida’s Palm Beach which exist largely to publicise the charity of its well-heeled residents (at least before Bernard Madoff’s alleged Ponzi scheme left some of them with little left to give).
As it turns out, the distinction between private and public generosity is helpful in understanding what motivates people to give money to charities or donate blood, acts which are costly to the doer and primarily benefit others. Such actions are widespread, and growing. The $306 billion that Americans gave to charity in 2007 was more than triple the amount donated in 1965. And though a big chunk of this comes from plutocrats like Bill Gates and Warren Buffett, whose philanthropy has attracted much attention, modest earners also give generously of their time and money. A 2001 survey found that 89% of American households gave to charity, and that 44% of adults volunteered the equivalent of 9m full-time jobs. Tax breaks explain some of the kindness of strangers. But by no means all.
Economists, who tend to think self-interest governs most actions of man, are intrigued, and have identified several reasons to explain good deeds of this kind. Tax breaks are, of course, one of the main ones, but donors are also sometimes paid directly for their pains, and the mere thought of a thank-you letter can be enough to persuade others to cough up. Some even act out of sheer altruism. But most interesting is another explanation, which is that people do good in part because it makes them look good to those whose opinions they care about. Economists call this “image motivation”.
Dan Ariely of Duke University, Anat Bracha of Tel Aviv University, and Stephan Meier of Columbia University sought, through experiments, to test the importance of image motivation, as well as to gain insights into how different motivating factors interact. Their results, which they report in a new paper*, suggest that image motivation matters a lot, at least in the laboratory. Even more intriguingly, they find evidence that monetary incentives can actually reduce charitable giving when people are driven in part by a desire to look good in others’ eyes.
The crucial thing about charity as a means of image building is, of course, that it can work only if others know about it and think positively of the charity in question. So, the academics argue, people should give more when their actions are public.
To test this, they conducted an experiment where the number of times participants clicked an awkward combination of computer keys determined how much money was donated on their behalf to the American Red Cross. Since 92% of participants thought highly of the Red Cross, giving to it could reasonably be assumed to make people look good to their peers. People were randomly assigned to either a private group, where only the participant knew the amount of the donation, or a public group, where the participant had to stand up at the end of the session and share this information with the group. Consistent with the hypothesis that image mattered, participants exerted much greater effort in the public case: the average number of clicks, at 900, was nearly double the average of 517 clicks in the private case.
However, the academics wanted to go a step further. In this, they were influenced by the theoretical model of two economists, Roland Benabou, of Princeton University, and Jean Tirole, of Toulouse University’s Institut d’Economie Industrielle, who formalised the idea that if people do good to look good, introducing monetary or other rewards into the mix might complicate matters. An observer who sees someone getting paid for donating blood, for example, would find it hard to differentiate between the donor’s intrinsic “goodness” and his greed.
Blood money
The idea that monetary incentives could be counterproductive has been around at least since 1970, when Richard Titmuss, a British social scientist, hypothesised that paying people to donate blood would reduce the amount of blood that they gave. But Mr Ariely and his colleagues demonstrate a mechanism through which such confounding effects could operate. They presumed that the addition of a monetary incentive should have much less of an impact in public (where it muddles the image signal of an action) than in private (where the image is not important). By adding a monetary reward for participants to their experiment, the academics were able to confirm their hypothesis. In private, being paid to click increased effort from 548 clicks to 740, but in public, there was next to no effect.
The trio also raise the possibility that cleverly designed rewards could actually draw out more generosity by exploiting image motivation. Suppose, for example, that rewards were used to encourage people to support a certain cause with a minimum donation. If that cause then publicised those who were generous well beyond the minimum required of them, it would show that they were not just “in it for the money”. Behavioural economics may yet provide charities with some creative new fund-raising techniques.
*”Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially”, by Messrs Ariely, Bracha and Meier. Forthcoming in American Economic Review, March 2009.
Looking good by doing good
Jan 15th 2009
From The Economist print edition
Rewarding people for their generosity may be counterproductive
Illustration by Jac DepczykA LARGE plaque in the foyer of Boston’s Institute for Contemporary Art (ICA), a museum housed in a dramatic glass and metal building on the harbour’s edge, identifies its most generous patrons. Visitors who stop to look will notice that some donors—including two who gave the ICA over $2.5m—have chosen not to reveal their names. Such reticence is unusual: less than 1% of private gifts to charity are anonymous. Most people (including the vast majority of the ICA’s patrons) want their good deeds to be talked about. In “Richistan”, a book on America’s new rich, Robert Frank writes of the several society publications in Florida’s Palm Beach which exist largely to publicise the charity of its well-heeled residents (at least before Bernard Madoff’s alleged Ponzi scheme left some of them with little left to give).
As it turns out, the distinction between private and public generosity is helpful in understanding what motivates people to give money to charities or donate blood, acts which are costly to the doer and primarily benefit others. Such actions are widespread, and growing. The $306 billion that Americans gave to charity in 2007 was more than triple the amount donated in 1965. And though a big chunk of this comes from plutocrats like Bill Gates and Warren Buffett, whose philanthropy has attracted much attention, modest earners also give generously of their time and money. A 2001 survey found that 89% of American households gave to charity, and that 44% of adults volunteered the equivalent of 9m full-time jobs. Tax breaks explain some of the kindness of strangers. But by no means all.
Economists, who tend to think self-interest governs most actions of man, are intrigued, and have identified several reasons to explain good deeds of this kind. Tax breaks are, of course, one of the main ones, but donors are also sometimes paid directly for their pains, and the mere thought of a thank-you letter can be enough to persuade others to cough up. Some even act out of sheer altruism. But most interesting is another explanation, which is that people do good in part because it makes them look good to those whose opinions they care about. Economists call this “image motivation”.
Dan Ariely of Duke University, Anat Bracha of Tel Aviv University, and Stephan Meier of Columbia University sought, through experiments, to test the importance of image motivation, as well as to gain insights into how different motivating factors interact. Their results, which they report in a new paper*, suggest that image motivation matters a lot, at least in the laboratory. Even more intriguingly, they find evidence that monetary incentives can actually reduce charitable giving when people are driven in part by a desire to look good in others’ eyes.
The crucial thing about charity as a means of image building is, of course, that it can work only if others know about it and think positively of the charity in question. So, the academics argue, people should give more when their actions are public.
To test this, they conducted an experiment where the number of times participants clicked an awkward combination of computer keys determined how much money was donated on their behalf to the American Red Cross. Since 92% of participants thought highly of the Red Cross, giving to it could reasonably be assumed to make people look good to their peers. People were randomly assigned to either a private group, where only the participant knew the amount of the donation, or a public group, where the participant had to stand up at the end of the session and share this information with the group. Consistent with the hypothesis that image mattered, participants exerted much greater effort in the public case: the average number of clicks, at 900, was nearly double the average of 517 clicks in the private case.
However, the academics wanted to go a step further. In this, they were influenced by the theoretical model of two economists, Roland Benabou, of Princeton University, and Jean Tirole, of Toulouse University’s Institut d’Economie Industrielle, who formalised the idea that if people do good to look good, introducing monetary or other rewards into the mix might complicate matters. An observer who sees someone getting paid for donating blood, for example, would find it hard to differentiate between the donor’s intrinsic “goodness” and his greed.
Blood money
The idea that monetary incentives could be counterproductive has been around at least since 1970, when Richard Titmuss, a British social scientist, hypothesised that paying people to donate blood would reduce the amount of blood that they gave. But Mr Ariely and his colleagues demonstrate a mechanism through which such confounding effects could operate. They presumed that the addition of a monetary incentive should have much less of an impact in public (where it muddles the image signal of an action) than in private (where the image is not important). By adding a monetary reward for participants to their experiment, the academics were able to confirm their hypothesis. In private, being paid to click increased effort from 548 clicks to 740, but in public, there was next to no effect.
The trio also raise the possibility that cleverly designed rewards could actually draw out more generosity by exploiting image motivation. Suppose, for example, that rewards were used to encourage people to support a certain cause with a minimum donation. If that cause then publicised those who were generous well beyond the minimum required of them, it would show that they were not just “in it for the money”. Behavioural economics may yet provide charities with some creative new fund-raising techniques.
*”Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially”, by Messrs Ariely, Bracha and Meier. Forthcoming in American Economic Review, March 2009.
Thursday, January 08, 2009
A thought on recession
The recession experienced by Prophet Yusuf a.s was caused by the drought for 7 years. May be during that time recession only happened because of natural calamities or real factors. Nowadays, mankind create the cause (i.e fragile monetary system) plus natural clamities and the real factors.
Friday, January 02, 2009
Defining depression
Economics focus
Diagnosing depression
Dec 30th 2008
From The Economist print edition
What is the difference between a recession and a depression?
THE word “depression” is popping up more often than at any time in the past 60 years, but what exactly does it mean? The popular rule of thumb for a recession is two consecutive quarters of falling GDP. America’s National Bureau of Economic Research has officially declared a recession based on a more rigorous analysis of a range of economic indicators. But there is no widely accepted definition of depression. So how severe does this current slump have to get before it warrants the “D” word?
A search on the internet suggests two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years. America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.
Click here
Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.
Emerging economies, however, have been much more depression-prone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.
The left-hand chart shows The Economist’s ranking of slumps in developed and emerging economies over the past century. It excludes those during wartime (both Germany and Japan, for example, saw output plunge by 50% or more after 1944). The depressions in Germany and France in the 1930s make it into the top 12, but not that in Britain, where GDP fell by a relatively modest 6%.
Before the 1930s all economic downturns were commonly called depressions. The term “recession” was coined later to avoid stirring up nasty memories. Even before the Great Depression, downturns were typically much deeper and longer than they are today (see right-hand chart). One reason why recessions have become milder is higher government spending. In recessions governments, unlike firms, do not slash spending and jobs, so they help to stabilise the economy; and income taxes automatically fall and unemployment benefits rise, helping to support incomes. Another reason is that in the late 19th and early 20th centuries, when countries were on the gold standard, the money supply usually shrank during recessions, exacerbating the downturn. Waves of bank failures also often made things worse.
But a recent analysis by Saul Eslake, chief economist at ANZ bank, concludes that the difference between a recession and a depression is more than simply one of size or duration. The cause of the downturn also matters. A standard recession usually follows a period of tight monetary policy, but a depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level. In the Great Depression average prices in America fell by one-quarter, and nominal GDP ended up shrinking by almost half. America’s worst recessions before the second world war were all associated with financial panics and falling prices: in both 1893-94 and 1907-08 real GDP declined by almost 10%; in 1919-21, it fell by 13%.
The economic slumps that followed the collapse of the Soviet Union and those during the Asian crisis were not really depressions, argues Mr Eslake, because inflation increased sharply. On the other hand, Japan’s experience in the late 1990s, when nominal GDP shrank for several years, may qualify. A depression, suggests Mr Eslake, does not have to be “Great” in the 1930s sense. On his definition, depressions, like recessions, can be mild or severe.
Another important implication of this distinction between a recession and a depression is that they call for different policy responses. A recession triggered by tight monetary policy can be cured by lower interest rates, but fiscal policy tends to be less effective because of the lags involved. By contrast, in a depression caused by falling asset prices, a credit crunch and deflation, conventional monetary policy is much less potent than fiscal policy.
Yes, we have no bananas
Where does that leave us today? America’s GDP may have fallen by an annualised 6% in the fourth quarter of 2008, but most economists dismiss the likelihood of a 1930s-style depression or a repeat of Japan in the 1990s, because policymakers are unlikely to repeat the mistakes of the past. In the Great Depression, the Fed let hundreds of banks fail and the money supply shrink by one-third, while the government tried to balance its budget by cutting spending and raising taxes. America’s monetary and fiscal easing this time has been more aggressive than Japan’s in the 1990s.
However, these reassurances come from many of the same economists who said that a nationwide fall in American house prices was impossible and that financial innovation had made the financial system more resilient. Hopefully, they will be right this time. But this crisis was caused by the largest asset-price and credit bubble in history—even bigger than that in Japan in the late 1980s or America in the late 1920s. Policymakers will not make the same mistakes as in the 1930s, but they may make new ones.
In 1978 Alfred Kahn, one of Jimmy Carter’s economic advisers, was chided by the president for scaring people by warning of a looming depression. Mr Kahn, in his next speech, simply replaced the offending word, saying “We’re in danger of having the worst banana in 45 years.” America’s economy once again has a distinct whiff of bananas.
Diagnosing depression
Dec 30th 2008
From The Economist print edition
What is the difference between a recession and a depression?
THE word “depression” is popping up more often than at any time in the past 60 years, but what exactly does it mean? The popular rule of thumb for a recession is two consecutive quarters of falling GDP. America’s National Bureau of Economic Research has officially declared a recession based on a more rigorous analysis of a range of economic indicators. But there is no widely accepted definition of depression. So how severe does this current slump have to get before it warrants the “D” word?
A search on the internet suggests two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years. America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.
Click here
Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.
Emerging economies, however, have been much more depression-prone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.
The left-hand chart shows The Economist’s ranking of slumps in developed and emerging economies over the past century. It excludes those during wartime (both Germany and Japan, for example, saw output plunge by 50% or more after 1944). The depressions in Germany and France in the 1930s make it into the top 12, but not that in Britain, where GDP fell by a relatively modest 6%.
Before the 1930s all economic downturns were commonly called depressions. The term “recession” was coined later to avoid stirring up nasty memories. Even before the Great Depression, downturns were typically much deeper and longer than they are today (see right-hand chart). One reason why recessions have become milder is higher government spending. In recessions governments, unlike firms, do not slash spending and jobs, so they help to stabilise the economy; and income taxes automatically fall and unemployment benefits rise, helping to support incomes. Another reason is that in the late 19th and early 20th centuries, when countries were on the gold standard, the money supply usually shrank during recessions, exacerbating the downturn. Waves of bank failures also often made things worse.
But a recent analysis by Saul Eslake, chief economist at ANZ bank, concludes that the difference between a recession and a depression is more than simply one of size or duration. The cause of the downturn also matters. A standard recession usually follows a period of tight monetary policy, but a depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level. In the Great Depression average prices in America fell by one-quarter, and nominal GDP ended up shrinking by almost half. America’s worst recessions before the second world war were all associated with financial panics and falling prices: in both 1893-94 and 1907-08 real GDP declined by almost 10%; in 1919-21, it fell by 13%.
The economic slumps that followed the collapse of the Soviet Union and those during the Asian crisis were not really depressions, argues Mr Eslake, because inflation increased sharply. On the other hand, Japan’s experience in the late 1990s, when nominal GDP shrank for several years, may qualify. A depression, suggests Mr Eslake, does not have to be “Great” in the 1930s sense. On his definition, depressions, like recessions, can be mild or severe.
Another important implication of this distinction between a recession and a depression is that they call for different policy responses. A recession triggered by tight monetary policy can be cured by lower interest rates, but fiscal policy tends to be less effective because of the lags involved. By contrast, in a depression caused by falling asset prices, a credit crunch and deflation, conventional monetary policy is much less potent than fiscal policy.
Yes, we have no bananas
Where does that leave us today? America’s GDP may have fallen by an annualised 6% in the fourth quarter of 2008, but most economists dismiss the likelihood of a 1930s-style depression or a repeat of Japan in the 1990s, because policymakers are unlikely to repeat the mistakes of the past. In the Great Depression, the Fed let hundreds of banks fail and the money supply shrink by one-third, while the government tried to balance its budget by cutting spending and raising taxes. America’s monetary and fiscal easing this time has been more aggressive than Japan’s in the 1990s.
However, these reassurances come from many of the same economists who said that a nationwide fall in American house prices was impossible and that financial innovation had made the financial system more resilient. Hopefully, they will be right this time. But this crisis was caused by the largest asset-price and credit bubble in history—even bigger than that in Japan in the late 1980s or America in the late 1920s. Policymakers will not make the same mistakes as in the 1930s, but they may make new ones.
In 1978 Alfred Kahn, one of Jimmy Carter’s economic advisers, was chided by the president for scaring people by warning of a looming depression. Mr Kahn, in his next speech, simply replaced the offending word, saying “We’re in danger of having the worst banana in 45 years.” America’s economy once again has a distinct whiff of bananas.
Friday, December 26, 2008
Skim Cepat Kaya Wall Street
Oleh
Mohd Nahar Mohd Arshad
University of Tasmania, Australia
Kisah skandal Bernard Madoff yang mengaibkan Wall Street bakal menutup tirai 2008 yang menjadi tahun Krisis Kewangan alaf baru. Banyak teladan terutama dalam hal pengurusan kewangan dapat dijadikan iktibar.
Krisis kewangan 2008 menunjukkan bahawa sistem kewangan yang berasaskan rizab berkanun, wang kertas dan riba sangat rapuh. Serapuh sistem cepat kaya ala Madoff (skim piramid), bezanya hanya kerana sistem kewangan sekarang mendapat sokongan dari pelbagai institusi yang diiktiraf undang-undang.
Menyorot apa yang berlaku di Amerika Syarikat (AS), sistem kewangan semasa begitu bermaharajalela mengambil duit semua. Kita dikenakan caj untuk membuat deposit. Juga dicaj apabila membuat pinjaman. Lebih parah, wang cukai rakyat ‘diambil’ atas nama menyelamatkan institusi kewangan apabila ia gagal.
Di samping ‘keistimewaan’ di atas, institusi kewangan juga berkuasa mencipta dan memusnahkan wang. Wang dicipta apabila pinjaman diberikan dan wang dimusnahkan apabila hutang dibayar. Di antara aktiviti mencipta dan memusnahkan wang ini, riba/faedah dicaj sebagai untung kepada institusi kewangan.
Natijahnya, wang menjadi begitu banyak dan hanya segelintir manusia yang faham dengan kaedah operasi kewangan parasit ini memilikinya. Mereka yang memiliki kekayaan ini terus berfikir untuk menjadi lebih kaya.
Oleh Kerana sistem riba/faedah menjanjikan peningkatan kekayaan berganda, tumpuan utama kegiatan kewangan lebih kepada aktiviti memberi hutang. Pelbagai produk hutang diinovasi dan ditampal dengan label baru dalam kegiatan ‘memusing’ duit yang menjana duit.
Dengan kewujudan pelbagai produk kewangan, aktiviti memusing duit oleh institusi kewangan moden menjadi bertambah kompleks. Ramai pakar kewangan mengakui bahawa mereka sudah hilang realiti dengan dunia kewangan masa kini.
Dengan dana yang membesar saban tahun, dan tekanan untuk memberikan pulangan yang memuaskan kepada pelabur, pakar-pakar kewangan ini bertemu dengan mereka yang lebih pakar, iaitu Bernard Madoff (dan konco-konconya).
Madoff yang mempunyai reputasi ‘cemerlang’ dalam hal memusing duit (secara piramid) ibarat orang mengantuk yang disorongkan bantal.
Maka bergabunglah kaedah memusing duit yang diiktiraf undang-undang ciptaan manusia dengan sistem memusing duit ala Madoff atau Pak Man Telo.
Janji Allah SWT dalam surah al-Baqarah ayat 276 bahawa riba tidak akan meningkatkan kekayaan, malah akan menyusutkannya adalah benar! Buktinya, skandal Madoff menunjukkan betapa kedua-dua aktiviti riba yang dicela Allah SWT (Al-Baqarah: 275-281) akhirnya bersekongkol dan kemudiannya rebah. Bersamanya lenyap sejumlah besar kekayaan.
Mohd Nahar Mohd Arshad
University of Tasmania, Australia
Kisah skandal Bernard Madoff yang mengaibkan Wall Street bakal menutup tirai 2008 yang menjadi tahun Krisis Kewangan alaf baru. Banyak teladan terutama dalam hal pengurusan kewangan dapat dijadikan iktibar.
Krisis kewangan 2008 menunjukkan bahawa sistem kewangan yang berasaskan rizab berkanun, wang kertas dan riba sangat rapuh. Serapuh sistem cepat kaya ala Madoff (skim piramid), bezanya hanya kerana sistem kewangan sekarang mendapat sokongan dari pelbagai institusi yang diiktiraf undang-undang.
Menyorot apa yang berlaku di Amerika Syarikat (AS), sistem kewangan semasa begitu bermaharajalela mengambil duit semua. Kita dikenakan caj untuk membuat deposit. Juga dicaj apabila membuat pinjaman. Lebih parah, wang cukai rakyat ‘diambil’ atas nama menyelamatkan institusi kewangan apabila ia gagal.
Di samping ‘keistimewaan’ di atas, institusi kewangan juga berkuasa mencipta dan memusnahkan wang. Wang dicipta apabila pinjaman diberikan dan wang dimusnahkan apabila hutang dibayar. Di antara aktiviti mencipta dan memusnahkan wang ini, riba/faedah dicaj sebagai untung kepada institusi kewangan.
Natijahnya, wang menjadi begitu banyak dan hanya segelintir manusia yang faham dengan kaedah operasi kewangan parasit ini memilikinya. Mereka yang memiliki kekayaan ini terus berfikir untuk menjadi lebih kaya.
Oleh Kerana sistem riba/faedah menjanjikan peningkatan kekayaan berganda, tumpuan utama kegiatan kewangan lebih kepada aktiviti memberi hutang. Pelbagai produk hutang diinovasi dan ditampal dengan label baru dalam kegiatan ‘memusing’ duit yang menjana duit.
Dengan kewujudan pelbagai produk kewangan, aktiviti memusing duit oleh institusi kewangan moden menjadi bertambah kompleks. Ramai pakar kewangan mengakui bahawa mereka sudah hilang realiti dengan dunia kewangan masa kini.
Dengan dana yang membesar saban tahun, dan tekanan untuk memberikan pulangan yang memuaskan kepada pelabur, pakar-pakar kewangan ini bertemu dengan mereka yang lebih pakar, iaitu Bernard Madoff (dan konco-konconya).
Madoff yang mempunyai reputasi ‘cemerlang’ dalam hal memusing duit (secara piramid) ibarat orang mengantuk yang disorongkan bantal.
Maka bergabunglah kaedah memusing duit yang diiktiraf undang-undang ciptaan manusia dengan sistem memusing duit ala Madoff atau Pak Man Telo.
Janji Allah SWT dalam surah al-Baqarah ayat 276 bahawa riba tidak akan meningkatkan kekayaan, malah akan menyusutkannya adalah benar! Buktinya, skandal Madoff menunjukkan betapa kedua-dua aktiviti riba yang dicela Allah SWT (Al-Baqarah: 275-281) akhirnya bersekongkol dan kemudiannya rebah. Bersamanya lenyap sejumlah besar kekayaan.
Monday, November 10, 2008
Punca Sebenar Penurunan Harga Minyak
Oleh Mohd. Nahar Mohd. Arshad
harga minyak telah menunjukkan peningkatan yang mencemaskan beberapa tahun kebelakangan ini. Namun, hanya dalam beberapa minggu mutakhir, minyak kini berada pada paras AS$69 dan ke bawah setong.
Melegakan? Ya! Tetapi sebenarnya penurunan harga minyak pada masa ini hanya bersifat sementara.
Hakikatnya, trend penurunan harga minyak (dan komoditi lain) ketika ini tidak menepati perkaitan antara harga minyak dan keadaan ekonomi.
Lazimnya, kedudukan harga komoditi seperti minyak dan emas adalah tinggi sejurus sebelum dan semasa krisis ekonomi. Tetapi, apa yang diamati sekarang, berlaku penurunan yang mendadak pada harga minyak dan komoditi lain tatkala krisis kewangan global sedang memuncak!
Keadaan ini menimbulkan satu prasangka yang membimbangkan di kalangan ramai pakar ekonomi. Apa sebenarnya yang terjadi?
Teori permintaan dan penawaran minyak/komoditi tidak begitu signifikan untuk menjelaskan trend semasa.
Jawapan sebenarnya berkait rapat dengan sistem mata wang kertas ketika ini.
Duit kertas boleh 'dicipta' dan 'dimusnahkan' dengan mudah. Duit dicipta apabila institusi kewangan memberi pinjaman. Duit dimusnahkan apabila kita membayar balik hutang.
Pembayaran balik hutang, pelupusan hutang dan penguncupan kredit merupakan kaedah duit kertas 'dimusnahkan'. Inilah yang berlaku di Amerika Syarikat (AS) sekarang.
Apabila duit 'dimusnahkan' bekalannya semakin berkurangan. Kurangnya bekalan duit akan menyebabkan nilai atau harga barangan di pasaran terpaksa turun.
Berikutan dolar Amerika merupakan mata wang utama dunia, maka kita perhatikan harga minyak, komoditi dan apa sahaja yang dinilai dalam dolar mengalami penurunan. Inilah punca utama kepada trend penurunan harga minyak sekarang.
Selain itu, penguncupan kredit di AS akan mengakibatkan kelembapan ekonominya. Ekonomi negara-negara lain akan turut terjejas kerana AS menjadi destinasi eksport banyak negara.
Eksport ke AS yang menurun oleh banyak negara akan membawa kepada kelembapan ekonomi dunia.
Kelembapan ekonomi bermakna penguncupan pendapatan. Ini akan mengakibatkan permintaan barangan dan perkhidmatan menurun, termasuklah minyak.
Namun, faktor ini bukanlah penjelasan utama kepada trend penurunan sekarang.
Apa yang perlu ditegaskan ialah trend penurunan komoditi sekarang bersangkutan dengan masalah sistem kewangan itu sendiri - duit kertas dan riba.
Selagi sistem mata wang tidak diubah (mata wang emas sebagai contoh), krisis ekonomi dan ketidakstabilan harga akan terus berlaku.
harga minyak telah menunjukkan peningkatan yang mencemaskan beberapa tahun kebelakangan ini. Namun, hanya dalam beberapa minggu mutakhir, minyak kini berada pada paras AS$69 dan ke bawah setong.
Melegakan? Ya! Tetapi sebenarnya penurunan harga minyak pada masa ini hanya bersifat sementara.
Hakikatnya, trend penurunan harga minyak (dan komoditi lain) ketika ini tidak menepati perkaitan antara harga minyak dan keadaan ekonomi.
Lazimnya, kedudukan harga komoditi seperti minyak dan emas adalah tinggi sejurus sebelum dan semasa krisis ekonomi. Tetapi, apa yang diamati sekarang, berlaku penurunan yang mendadak pada harga minyak dan komoditi lain tatkala krisis kewangan global sedang memuncak!
Keadaan ini menimbulkan satu prasangka yang membimbangkan di kalangan ramai pakar ekonomi. Apa sebenarnya yang terjadi?
Teori permintaan dan penawaran minyak/komoditi tidak begitu signifikan untuk menjelaskan trend semasa.
Jawapan sebenarnya berkait rapat dengan sistem mata wang kertas ketika ini.
Duit kertas boleh 'dicipta' dan 'dimusnahkan' dengan mudah. Duit dicipta apabila institusi kewangan memberi pinjaman. Duit dimusnahkan apabila kita membayar balik hutang.
Pembayaran balik hutang, pelupusan hutang dan penguncupan kredit merupakan kaedah duit kertas 'dimusnahkan'. Inilah yang berlaku di Amerika Syarikat (AS) sekarang.
Apabila duit 'dimusnahkan' bekalannya semakin berkurangan. Kurangnya bekalan duit akan menyebabkan nilai atau harga barangan di pasaran terpaksa turun.
Berikutan dolar Amerika merupakan mata wang utama dunia, maka kita perhatikan harga minyak, komoditi dan apa sahaja yang dinilai dalam dolar mengalami penurunan. Inilah punca utama kepada trend penurunan harga minyak sekarang.
Selain itu, penguncupan kredit di AS akan mengakibatkan kelembapan ekonominya. Ekonomi negara-negara lain akan turut terjejas kerana AS menjadi destinasi eksport banyak negara.
Eksport ke AS yang menurun oleh banyak negara akan membawa kepada kelembapan ekonomi dunia.
Kelembapan ekonomi bermakna penguncupan pendapatan. Ini akan mengakibatkan permintaan barangan dan perkhidmatan menurun, termasuklah minyak.
Namun, faktor ini bukanlah penjelasan utama kepada trend penurunan sekarang.
Apa yang perlu ditegaskan ialah trend penurunan komoditi sekarang bersangkutan dengan masalah sistem kewangan itu sendiri - duit kertas dan riba.
Selagi sistem mata wang tidak diubah (mata wang emas sebagai contoh), krisis ekonomi dan ketidakstabilan harga akan terus berlaku.
Thursday, November 06, 2008
WHat explains the decline in the price of oil at the moment?
The following is the answer given to me by Dr. Ahamed Kameel:
Question (Nahar): Just to get yr opinion, why the current price of oil (even commodities) is declining? I find the trend awkward and suspicious given the present global crisis. So far I haven't find satisfactory answers to explain the phenomenon.
Answer (Dr, Ahamed Kameel): Nahar, the credit crunch is effectively the destruction of fiat money. This is one absurd characteristic of fiat money...it can be destroyed, through mere accounting, particularly when people default on loans. Its like what we faced with the NPLs during the 1997 crisis.
When money gets destroyed, here dollars, the supply of it shrinks and, according to quantity theory of money, all prices particularly those priced in dollars must come down to match this shrink. This is why you notice all prices including oil, gold, commodities, homes, stock market etc are all falling.
The destruction of money is expected to bring about a global recession, triggered by a recession in the US. Accordingly the demand for oil is also expected to fall. This further contributes to the fall in the oil price.
On the other hand, the dollar exchange rate is rising because of the same reason too, i.e. the supply of dollars in forex is falling. Also note that banks are the major players in the forex market and they are getting busted. Additionally, the demand for dollars is also on the rise because many hedge funds are leaving foreign financial markets, converting back into dollars, since all are expected fall in tune with the US stock market. The demand for dollars for international trade is also still there.
Once nations absorb their losses and move on, the dollar would become a much devalued currency. A new dollar might even be introduced. Thereafter (I think by first quarter of next year) gold would start to rally again leaving dollar behind. The price of commodities would follow suit.
That's how I see it. Wallahu a'lam.
Dr Ahamed Kameel Mydin Meeran is the Dean of Institute of Islamic Banking & inanceInternational Islamic University Malaysia
Question (Nahar): Just to get yr opinion, why the current price of oil (even commodities) is declining? I find the trend awkward and suspicious given the present global crisis. So far I haven't find satisfactory answers to explain the phenomenon.
Answer (Dr, Ahamed Kameel): Nahar, the credit crunch is effectively the destruction of fiat money. This is one absurd characteristic of fiat money...it can be destroyed, through mere accounting, particularly when people default on loans. Its like what we faced with the NPLs during the 1997 crisis.
When money gets destroyed, here dollars, the supply of it shrinks and, according to quantity theory of money, all prices particularly those priced in dollars must come down to match this shrink. This is why you notice all prices including oil, gold, commodities, homes, stock market etc are all falling.
The destruction of money is expected to bring about a global recession, triggered by a recession in the US. Accordingly the demand for oil is also expected to fall. This further contributes to the fall in the oil price.
On the other hand, the dollar exchange rate is rising because of the same reason too, i.e. the supply of dollars in forex is falling. Also note that banks are the major players in the forex market and they are getting busted. Additionally, the demand for dollars is also on the rise because many hedge funds are leaving foreign financial markets, converting back into dollars, since all are expected fall in tune with the US stock market. The demand for dollars for international trade is also still there.
Once nations absorb their losses and move on, the dollar would become a much devalued currency. A new dollar might even be introduced. Thereafter (I think by first quarter of next year) gold would start to rally again leaving dollar behind. The price of commodities would follow suit.
That's how I see it. Wallahu a'lam.
Dr Ahamed Kameel Mydin Meeran is the Dean of Institute of Islamic Banking & inanceInternational Islamic University Malaysia
Friday, October 24, 2008
Krisis Kredit 2008: Apabila Melampaui Batas
Fitrah kejadian, semuanya mempunyai batasan yang telah ditentukan Pencipta. Lihatlah pada peredaran planet, bulan dan bintang, tetap pada orbit masing-masing.
Namun di kalangan manusia, ada mereka yang menganggap kebebasan adalah mutlak. Lantas, pemahaman ini menjadikan ramai yang bertindak melangkaui batas fitrah kejadian.
Krisis kredit masa kini adalah manifestasi sikap manusia yang lupa akan batasan masing-masing. Apabila ketamakan dianggap baik (greed is good), maka lahirlah kehodohan dalam kegiatan manusia mencari keuntungan duniawi.
Kini, dalam kegawatan krisis yang meruncing, institusi kewangan dipersalahkan. Akibat dari sikap tamak, institusi kewangan menjadi agen pengurup wang yang kemudian meminjamkan wang tersebut kepada mereka yang memerlukan. Hasil dari riba, mereka mendapat habuan lumayan.
Mengenakan faedah atau riba merupakan batasan utama yang tidak patut dilanggar kerana ia telah ditetapkan oleh Pencipta. Agama Islam dengan keras mengharamkan riba. Agama Kristian dan Judaism, pada asalnya begitu juga. Apabila batasan ini dinodai, malapetaka yang dijanjikan akan muncul akhirnya (rujuk al-Qur'an 2:276-279).
Kes melampaui batas yang seterusnya, wujud dalam cara sistem kewangan dikendalikan. Secara logika akal, si pemberi pinjam mestilah mempunyai jumlah wang yang lebih dari jumlah yang hendak dipinjamkan. Sebaliknya, dalam sistem kewangan sekarang, jumlah yang dipinjamkan adalah berganda-ganda melampaui deposit yang ada. Maka, sekali lagi Krisis Kredit sekali ini menjadi hukuman kepada manusia yang terus-menerus melampaui batas.
Perhatikan pula kepada isu pinjaman sub-prima yang menjadi punca kepada permasalahan sekarang. Istilah sub-prima itu sendiri membawa maksud 'di bawah kelas utama'. Ia merujuk kepada mereka yang tidak punya kemampuan untuk membayar balik pinjaman. Tetapi, mereka tetap mendapat pinjaman dari institusi kewangan!
Tanyakan persoalan ini ke dalam diri, "Jika anda tidak punya kemampuan untuk membuat bayaran balik pinjaman perumahan, adakah anda akan menerima tawaran bank untuk pinjaman tersebut?"
Sekiranya jawapan yang diberi adalah ya, anda sudah melampaui batas. Maksud di sini, melampaui batas kemampuan untuk membayar balik pinjaman. Dan sudah pasti, jika pinjaman tetap dibuat, malapetaka kewangan akan melanda diri.
Dahsyatnya tsunami kredit sekarang, ianya berlaku dalam skala yang besar. Manusia rata-rata sudah melampaui batas!
Justeru, manusia perlu kembali kepada fitrah asal kejadian. Jangan melampaui batas!
Agama Islam menyediakan satu sistem ekonomi yang begitu menyeluruh dari segi kepercayaan/ideologi, akhlak dan tingkah laku serta undang-undang perlaksanaan kehidupan. Semuanya berjalan serentak dengan harmoni dalam ruang lingkup yang tidak membatasi fitrah Ilahi.
Namun di kalangan manusia, ada mereka yang menganggap kebebasan adalah mutlak. Lantas, pemahaman ini menjadikan ramai yang bertindak melangkaui batas fitrah kejadian.
Krisis kredit masa kini adalah manifestasi sikap manusia yang lupa akan batasan masing-masing. Apabila ketamakan dianggap baik (greed is good), maka lahirlah kehodohan dalam kegiatan manusia mencari keuntungan duniawi.
Kini, dalam kegawatan krisis yang meruncing, institusi kewangan dipersalahkan. Akibat dari sikap tamak, institusi kewangan menjadi agen pengurup wang yang kemudian meminjamkan wang tersebut kepada mereka yang memerlukan. Hasil dari riba, mereka mendapat habuan lumayan.
Mengenakan faedah atau riba merupakan batasan utama yang tidak patut dilanggar kerana ia telah ditetapkan oleh Pencipta. Agama Islam dengan keras mengharamkan riba. Agama Kristian dan Judaism, pada asalnya begitu juga. Apabila batasan ini dinodai, malapetaka yang dijanjikan akan muncul akhirnya (rujuk al-Qur'an 2:276-279).
Kes melampaui batas yang seterusnya, wujud dalam cara sistem kewangan dikendalikan. Secara logika akal, si pemberi pinjam mestilah mempunyai jumlah wang yang lebih dari jumlah yang hendak dipinjamkan. Sebaliknya, dalam sistem kewangan sekarang, jumlah yang dipinjamkan adalah berganda-ganda melampaui deposit yang ada. Maka, sekali lagi Krisis Kredit sekali ini menjadi hukuman kepada manusia yang terus-menerus melampaui batas.
Perhatikan pula kepada isu pinjaman sub-prima yang menjadi punca kepada permasalahan sekarang. Istilah sub-prima itu sendiri membawa maksud 'di bawah kelas utama'. Ia merujuk kepada mereka yang tidak punya kemampuan untuk membayar balik pinjaman. Tetapi, mereka tetap mendapat pinjaman dari institusi kewangan!
Tanyakan persoalan ini ke dalam diri, "Jika anda tidak punya kemampuan untuk membuat bayaran balik pinjaman perumahan, adakah anda akan menerima tawaran bank untuk pinjaman tersebut?"
Sekiranya jawapan yang diberi adalah ya, anda sudah melampaui batas. Maksud di sini, melampaui batas kemampuan untuk membayar balik pinjaman. Dan sudah pasti, jika pinjaman tetap dibuat, malapetaka kewangan akan melanda diri.
Dahsyatnya tsunami kredit sekarang, ianya berlaku dalam skala yang besar. Manusia rata-rata sudah melampaui batas!
Justeru, manusia perlu kembali kepada fitrah asal kejadian. Jangan melampaui batas!
Agama Islam menyediakan satu sistem ekonomi yang begitu menyeluruh dari segi kepercayaan/ideologi, akhlak dan tingkah laku serta undang-undang perlaksanaan kehidupan. Semuanya berjalan serentak dengan harmoni dalam ruang lingkup yang tidak membatasi fitrah Ilahi.
Friday, October 10, 2008
Kaedah Mengatasi Krisis Kredit
Mohd Nahar Mohd Arshad
University of Tasmania, Australia
Kekayaan material tidak luas skopnya. Rumah kediaman, tanah ladang, haiwan ternak, kenderaan, wang, emas permata dan anak-pinak, itulah antara perkara-perkara yang dijelaskan di dalam surah Ali Imran ayat 14 berhubung kekayaan material.
Dalam konteks ekonomi masa kini, nilaian harta-harta yang disebutkan di atas (kecuali anak-pinak), biasanya diterjemahkan dalam bentuk kertas. Misalnya, kita mempunyai saham dan bon yang berkaitan dengan hartanah, komoditi dan sebagainya.
Krisis hutang/kewangan 2008 yang berpusat di AS menyaksikan kekayaan material yang dijana oleh ekonomi berasaskan riba, tiba-tiba lenyap begitu sahaja. Nilai hartanah di Amerika Syarikat (AS) merudum, pasaran saham merosot teruk, dan tekanan inflasi terus meningkat.
Lebih buruk lagi, situasi di atas wujud dalam keadaan hutang-piutang yang tinggi di kalangan isi rumah, syarikat-syarikat, malahan kerajaan AS sendiri.
Kebanyakan isi rumah di AS sekarang berhadapan dengan nilai bersih kekayaan yang negatif. Bayangkan; kebanyakan mereka berhutang untuk membeli rumah, saham dan keperluan harian! Malang minimpa apabila nilai rumah dan saham yang dibeli jatuh dari nilai belian.
Rumah dan saham yang dahulu dianggap sebagai satu pelaburan, kini menjadi biawak hidup yang terpaksa ditanggung. Hendak dijual, tiada pembeli yang membida. Ini berikutan sikap bank yang kini waspada memberi hutang dan sentiment pengguna yang lemah.
Untuk mengatasi masalah ini, pakar ekonomi konvensional mengesyorkan agar kegiatan memberi hutang digalakkan kembali. Ini sesuatu yang ironi!
Tetapi itulah hakikat sistem ekonomi sekarang. Ia sangat bergantung kelangsungannya dengan ‘mesin’ hutang!
Hutang ibarat oksigen dalam sistem ekonomi yang ada. Tanpa oksigen, manusia boleh mati kelemasan. Begitulah juga keadaannya dengan sistem ekonomi sekarang.
Melihat kepada krisis sekarang, satu alternatif sistem kewangan baru perlu difikirkan. Cadangan sistem mata wang emas yang pernah hangat suatu ketika dahulu wajar difikirkan semula.
Selain itu, mereka yang ditindas dengan riba dan hutang perlu dibebaskan. Al-Qur’an dengan jelas menerangkan kaedah dan jalan keluar kepada masalah hutang.
Dalam surah al-Baqarah ayat 279 dan 290, Allah berfirman: Oleh itu, kalau kamu tidak juga melakukan (perintah mengenai larangan riba itu), maka ketahuilah kamu: akan adanya peperangan dari Allah dan RasulNya, (akibatnya kamu tidak menemui selamat). dan jika kamu bertaubat, maka hak kamu (yang sebenarnya) ialah pokok asal harta kamu. ... Dan jika orang yang berhutang itu sedang mengalami kesempitan hidup, maka berilah tempoh sehingga ia lapang hidupnya dan (sebaliknya) Bahawa kamu sedekahkan hutang itu (kepadanya) adalah lebih baik untuk kamu, kalau kamu mengetahui (pahalanya yang besar yang kamu akan dapati kelak).
University of Tasmania, Australia
Kekayaan material tidak luas skopnya. Rumah kediaman, tanah ladang, haiwan ternak, kenderaan, wang, emas permata dan anak-pinak, itulah antara perkara-perkara yang dijelaskan di dalam surah Ali Imran ayat 14 berhubung kekayaan material.
Dalam konteks ekonomi masa kini, nilaian harta-harta yang disebutkan di atas (kecuali anak-pinak), biasanya diterjemahkan dalam bentuk kertas. Misalnya, kita mempunyai saham dan bon yang berkaitan dengan hartanah, komoditi dan sebagainya.
Krisis hutang/kewangan 2008 yang berpusat di AS menyaksikan kekayaan material yang dijana oleh ekonomi berasaskan riba, tiba-tiba lenyap begitu sahaja. Nilai hartanah di Amerika Syarikat (AS) merudum, pasaran saham merosot teruk, dan tekanan inflasi terus meningkat.
Lebih buruk lagi, situasi di atas wujud dalam keadaan hutang-piutang yang tinggi di kalangan isi rumah, syarikat-syarikat, malahan kerajaan AS sendiri.
Kebanyakan isi rumah di AS sekarang berhadapan dengan nilai bersih kekayaan yang negatif. Bayangkan; kebanyakan mereka berhutang untuk membeli rumah, saham dan keperluan harian! Malang minimpa apabila nilai rumah dan saham yang dibeli jatuh dari nilai belian.
Rumah dan saham yang dahulu dianggap sebagai satu pelaburan, kini menjadi biawak hidup yang terpaksa ditanggung. Hendak dijual, tiada pembeli yang membida. Ini berikutan sikap bank yang kini waspada memberi hutang dan sentiment pengguna yang lemah.
Untuk mengatasi masalah ini, pakar ekonomi konvensional mengesyorkan agar kegiatan memberi hutang digalakkan kembali. Ini sesuatu yang ironi!
Tetapi itulah hakikat sistem ekonomi sekarang. Ia sangat bergantung kelangsungannya dengan ‘mesin’ hutang!
Hutang ibarat oksigen dalam sistem ekonomi yang ada. Tanpa oksigen, manusia boleh mati kelemasan. Begitulah juga keadaannya dengan sistem ekonomi sekarang.
Melihat kepada krisis sekarang, satu alternatif sistem kewangan baru perlu difikirkan. Cadangan sistem mata wang emas yang pernah hangat suatu ketika dahulu wajar difikirkan semula.
Selain itu, mereka yang ditindas dengan riba dan hutang perlu dibebaskan. Al-Qur’an dengan jelas menerangkan kaedah dan jalan keluar kepada masalah hutang.
Dalam surah al-Baqarah ayat 279 dan 290, Allah berfirman: Oleh itu, kalau kamu tidak juga melakukan (perintah mengenai larangan riba itu), maka ketahuilah kamu: akan adanya peperangan dari Allah dan RasulNya, (akibatnya kamu tidak menemui selamat). dan jika kamu bertaubat, maka hak kamu (yang sebenarnya) ialah pokok asal harta kamu. ... Dan jika orang yang berhutang itu sedang mengalami kesempitan hidup, maka berilah tempoh sehingga ia lapang hidupnya dan (sebaliknya) Bahawa kamu sedekahkan hutang itu (kepadanya) adalah lebih baik untuk kamu, kalau kamu mengetahui (pahalanya yang besar yang kamu akan dapati kelak).
Bail out
Too many issues on bail out:
1. Who should get it?
2. How much each entitled deserve?
3. Do the govt really got the money for the bail out? May be the next time of crisis, the govt itself need the money
4. Isn't bail out is a kind of financial socialism, which to a capitalist like US, they just can't accept it.
5. After all, the bail out will not solve the real problem. If root of a tree is rotten, you can't just put some more fertilizer to heal the tree.
1. Who should get it?
2. How much each entitled deserve?
3. Do the govt really got the money for the bail out? May be the next time of crisis, the govt itself need the money
4. Isn't bail out is a kind of financial socialism, which to a capitalist like US, they just can't accept it.
5. After all, the bail out will not solve the real problem. If root of a tree is rotten, you can't just put some more fertilizer to heal the tree.
Monday, June 23, 2008
On Oil: Speculators versus OPEC
Both parties can affect the oil market in different ways. Speculators are very influential in manipulating the oil price artificially. Without real oil involves in the transactions (paper oil), speculators basically take advantage of any position in the arbitrage activities.
OPEC, on the other hand, affects the real oil market by engaging in the supply activity. It is reported that OPEC has come to its optimum production capabilities. This means OPEC will need longer period to increase oil supply.
In contrast, speculators can be very dominant in affecting price in the short run.
In order to stabilize the oil price, it is important to stop the speculative activities altogether. After all, speculation activities only benefit a few minorities at the expanse of large majority.
At the same time, the cartel power of OPEC must be put under scrutiny as the monopoly position is also unhealthy to the market.
It is not easy to evaluate which effect is more dominant than the other. Speculative activities can be very significant when speculators heavily engage in tradings. This can be seasonal as timing is a very critical factor in speculation. on the other hand, OPEC reactions usually depend on market conditions. Apart from meeting global oil demand, political pressure can be another factor that determines OPEC production. All these contribute to the dynamic of market forces.
OPEC, on the other hand, affects the real oil market by engaging in the supply activity. It is reported that OPEC has come to its optimum production capabilities. This means OPEC will need longer period to increase oil supply.
In contrast, speculators can be very dominant in affecting price in the short run.
In order to stabilize the oil price, it is important to stop the speculative activities altogether. After all, speculation activities only benefit a few minorities at the expanse of large majority.
At the same time, the cartel power of OPEC must be put under scrutiny as the monopoly position is also unhealthy to the market.
It is not easy to evaluate which effect is more dominant than the other. Speculative activities can be very significant when speculators heavily engage in tradings. This can be seasonal as timing is a very critical factor in speculation. on the other hand, OPEC reactions usually depend on market conditions. Apart from meeting global oil demand, political pressure can be another factor that determines OPEC production. All these contribute to the dynamic of market forces.
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