Monday, October 20, 2008
Wednesday, October 15, 2008
But unlike the last two relatively short recessions, this one could be much longer and more severe, potentially bringing with it anxiety and job losses not seen in many years.
“In thinking about recessions, people will naturally think back to the last couple” in the early 1990s and in 2001, said Paul Ashworth, senior US economist at Capital Economics in Toronto. “What they should be looking back at is further.”
That requires dredging up memories of the economic slides in the 1970s, when an Arab oil embargo starved the nation of energy, and the early 1980s, when unemployment and inflation soared.
The last recession — coinciding with the collapse of the tech stock bubble and the terrorist attacks of 2001 — lasted just eight months. It was known more for the slow “jobless” recovery that followed than for the depth of the downturn.
Many economists agree that the nation won’t be so fortunate this time.
“I don’t think we can escape damage to the real economy,” former Federal Reserve Chairman Paul Volcker said this week in Singapore. “I think we almost inevitably face a considerable recession.”
The Fed’s current chairman, Ben Bernanke, delivered a more measured, but similarly grave assessment to economists, saying the recent financial turmoil “may well lengthen the period of weak economic performance and further increase the risks to growth.”
The signs of stress are starting to show: The US has lost 760,000 jobs since late last year, and retail sales in September plunged 1.2 per cent, the largest drop in three years.
Every recession is driven by its own dynamic and psychology. The current slump started with the collapse in the housing market and got worse with sharp restrictions on credit that pressured consumer spending and businesses.
That is a different environment from 1973, when an oil crisis was the culprit, squeezing US businesses and consumers. In the early 1980s, raging inflation and high interest rates took their toll.
Both periods saw millions of Americans out of work. In 1975, the unemployment rate peaked at 9 per cent. In 1982, it jumped to 10.8 per cent.
Most economists forecast a sharp increase in the number of people who lose their jobs. But they do not see it leading to unemployment on the scale of either the 1970s or 1980s.
The jobless rate is currently at 6.1 per cent, and many economists expect it to rise to about 7 per cent early next year — a level the country has not seen since 1993. Some analysts believe the unemployment rate could eventually climb close to 8 per cent, which hasn’t happened since 1984.
But this recession could begin to feel like those of the past not just because of lost jobs, but because of fear about the future.
In the 1980s, as the nation struggled with inflation and a transition from a manufacturing economy to one based on services, Americans had “a huge amount of uncertainty and anxiety that lingered on for a long period of time,” said Bart Van Ark, chief economist for The Conference Board.
“That element I find comparable to what we’re seeing today, but some of the underlying dynamics are very, very different.”
In 1973, the US economy had been growing for three years and unemployment had dropped to well below 5 per cent.
Then, on Oct 6, Egyptian and Syrian forces launched surprise attacks on Israeli-held territory while Jews were observing Yom Kippur. Arab members of OPEC soon cut off shipments of oil to the US and other countries that supported Israel.
Oil prices rose sharply and forced rationing of tight supplies. Drivers lined up at filling stations on odd or even days depending on the number on their license plates. Some stations ran out of gas.
A recession is typically defined as a period in which the economy shrinks for two quarters in a row. In the 2001 recession, the quarters weren’t even consecutive.
But in the 1970s, the recession stretched on for a year and a half. Nearly 2.2 million people lost their jobs. By the end of 1974, the Dow Jones industrial average had lost more than 40 per cent of its value. At the same time, the nation was focused on the Watergate scandal and the vacuum left by President Richard Nixon’s resignation in August 1974.
The economy began to recover in spring of the next year. But inflation, which had eased as the oil embargo was lifted, spiked again. By 1980, prices were rising at an annual rate of 13.5 per cent.
Anxious about a hostage crisis in Iran and President Jimmy Carter’s administration inability to tame inflation, Americans elected Ronald Reagan president. But it wasn’t at all clear how his plan to increase defense spending would cure the economy’s ills.
Volcker, appointed by Carter to lead the Fed in 1979, took on inflation by sharply raising interest rates. It worked, but made life even more difficult for consumers at a time when the nation was doubtful about its economic future.
“That was the feeling at that time: hopelessness, in terms of how do we get out of this situation,” said Anthony Campagna, author of “The Economy in the Reagan Years.”
The next recession did not come until 1990, as preparations for the Gulf War drove up the price of oil. But the 1.6 million jobs lost was much less severe than in the previous downturn, and this one lasted for just eight months.
When it recovered, the economy staged its longest expansion on record — 10 years of growth. The next recession, in early 2001, was similarly short-lived. The number of people out of work rose sharply, but compared with some past recessions, unemployment rate was relatively mild.
The fact that the last two recessions were so short, the damage relatively limited and the preceding good times so long has helped many people forget the pain of a more severe economic slump.
“We’ve become a little spoiled, actually,” said Todd Knoop, a professor at Iowa’s Cornell College and author of “Modern Financial Macroeconomics: Panics, Crashes and Crises.”
That could make this recession feel particularly intense.
Said Jay Bryson, global economist at Wachovia Corp.: “I think no matter how you measure it, this coming recession will be worse than the last one.” - AP
Sunday, October 12, 2008
From right: Datuk Patrick Lim with PM Datuk Seri Abdullah Badawi and ex Penang Chief Minister Tan Sri Koh Tsu Khoon looking at the model of Penang Global City Centre
More expected to leave as Najib erects his own inner circle of power
KUALA LUMPUR, Oct 13 — Two businessmen close to Prime Minister Datuk Seri Abdullah Ahmad Badawi are quitting their positions, as an expected exodus of his inner circle begins.
The two men — New Straits Times Press (NSTP) deputy chairman Datuk Kalimullah Hassan and Equine Capital chairman Patrick Lim — have been attacked in the past by former premier Tun Dr Mahathir Mohamad, for allegedly benefiting from Abdullah's reign.
News of their resignations from their respective companies comes just days after Abdullah's announcement that he intended to step down as Premier in March.
With Deputy Prime Minister Datuk Seri Najib Razak set to take over the premiership in five months' time, the circle around him is expected to rise, political observers and bloggers say.
Kalimullah is also group executive chairman of ECM Libra Investment Bank, which has made headlines with major deals in the past few years.
But he is better known as the controversial editor-in-chief of the mainstream New Straits Times newspaper, and has been accused by Dr Mahathir of being a key "spin doctor" for Abdullah.
Dr Mahathir, who appointed Abdullah as his successor in 2003, has in recent years become his most bitter critic.
The former premier blames Kalimullah for allegedly blacking out his comments not only in the NST, but also in other mainstream media.
In a column in the NST on Friday, Kalimullah defended Abdullah's short reign and harshly attacked critics such as Dr Mahathir.
"One thing Najib will not have to worry about is a predecessor breathing down his neck, slandering him, his Cabinet, his party colleagues, his family, aides and friends. Because, for all his weaknesses, Abdullah is a decent, religious man," Kalimullah said in the column.
He joined NSTP in 2003 as group editor-in-chief before relinquishing the position in 2006 to become deputy chairman.
He tendered his resignation from the board on Sept 3, and it will take effect from Dec 31, online media TheEdgeDaily.com reported on Thursday.
As for Lim, his links with Abdullah were thought to be so close that Dr Mahathir had cynically referred to the businessman as "Patrick Badawi".
His resignation was officially announced to the Malaysian stock exchange in a statement on Friday. Among projects linked to him is the multimillion-dollar Monsoon Cup sailing regatta held annually in Terengganu. The event has drawn criticism for its ostentatious show of wealth before poor coastal villagers.
Lim was dealt a severe blow in August when a planned RM25 billion project in Penang was dropped. The Penang Global City Centre was nixed after opposition parties took over the state in the March general election.
There are widespread expectations that other top changes will occur soon in Umno-linked companies. These could include the Media Prima group, which controls the NST as well as several television networks, including TV3.
A former senior editor of a local daily said: "They will leave because they know where they stand." — The Straits Times
Wednesday, October 8, 2008
He said: "Ask them if they have forced me out." A few shook their heads but Malaysia's fifth prime minister is not leaving office in March 2009 because he wants to. He is leaving because he has to.
There are still a few months to go but the epitaph will not be kind.
"He was weak, he was reluctant to do things which he should've done," says Chandra Muzaffar, a political analyst and academic.
After promising so much in 2004 when he secured a record victory at the polls, Dr Muzaffar believes Abdullah Badawi squandered a mandate for reform because he could not deliver.
"There is, I think, a personality factor at play - the reluctance on his part to antagonise people, to do things which a reform-minded prime minister will have to," he says.
The man who is almost certain to succeed him has been groomed for the job from the day he was born.
The man who is almost certain to succeed him has been groomed for the job from the day he was born. Najib Razak is the son of Malaysia's second prime minister. He has been in parliament since his early 20s.
"People expect him to be tougher," opposition leader Anwar Ibrahim told the BBC.
"The government under Najib will be ruthless."
He believes that little will change come next year when the handover takes place.
"Nothing is resolved, he is surrendering to a person who is badly tarnished," he told me.
That is a reference to sensational claims that the deputy prime minister was involved in the murder of a woman.
Najib Razak has strongly denied the allegation.
One of his closest advisors is on trial for the killing.
In an interview with the BBC last August, he did admit that there had been questions about his reputation but said: "I think I have cleared my name... my conscience is clear."
There are those who see this British-educated economist as the insider who can bring about change.
"Najib knows that if Umno [the United Malays National Organisation] and the Barisan Nasional [National Front] don't change, in the short term, they will be in deep trouble," says political analyst Dr Muzaffar.
But he believes that he will not promise a raft of radical reform, like the changes Abdullah Badawi promised for the judiciary and the corruption agency, adding:
"What impels him to bring about change is not so much a commitment to reform as a commitment to power."
The reason Abdullah Badawi is going is because he came close to losing power.
In Malaysia's 51-year history that has never happened.
The same side has been in charge from Day One.
The country had continued its impressive economic growth under his watch.
But divisions which have haunted this multi-racial and multi-religious nation at times bubbled to the surface once more.
When his second general election as leader came around earlier this year, the people punished him.
Malaysia's minority Chinese and Indians deserted the government in droves. The prime minister was humiliated. The Barisan Nasional won but with a much reduced majority. Support for the opposition swelled to unprecedented levels.
In the days and weeks after the result, Abdullah Badawi faced down his critics.
Then came the first sign of mounting dissent in the ranks.
He agreed to hand over to his number two in 2010. That failed to allay the fears of those who thought the government was doomed unless it changed leader and direction.
So after months of in-fighting he is going, much earlier than he said he planned to go.
"In all my years of service, I've always been guided by my conscience - I've always placed the interests of the nation above all," Abdullah Badawi said as he announced his decision.
"It is with this in mind that I announce I will not be standing... in the coming party elections."
He said he was going to ensure unity.
End of the road
Unity is a crucial theme in Malaysia. This is a country of different races, different religions, with people of vastly differing wealth. For 51 years it has remained mostly stable and peaceful, but fundamental problems remain.
The increasing role of Islam, the religion of the Malay majority, worries the country's 35% non-Muslims.
A decades-old economic policy which gives preferential treatment to Malays still causes bitterness and anger. Malays can jump the queue for university places, government jobs and housing.
Abdullah Badawi's reign will stretch to almost six years by the time he steps down but he may be remembered most for events in the final months.
With an invigorated opposition threatening to take power, the prime minister and his government resorted to desperate acts.
An opposition member of parliament, a journalist and a prominent blogger were arrested and detained under strict security laws. They were deemed a threat to national security.
Anwar Ibrahim is facing a trail for sodomy, an accusation many believe is fabricated and politically motivated.
Malaysia is at a "historic crossroads" the prime minister said as he announced his departure.
"We must reform and mature," he added.
Now that responsibility will fall to someone else. The era of the man known affectionately as Pak Lah, meaning Uncle, is almost over.
Sunday, October 5, 2008
In front of Souk Madinet at Jumeriah , Dubai.