Saturday, May 29, 2010

Global Sovereign Debt Crisis, Country Bankruptcy Relative Risk of Default

By: Nadeem_Walayat

All countries are on the path towards bankruptcy, to measure where a country stands along this path it is critical to look beyond official statistics that focus primarily on public sector net debt and the annual budget deficit in terms of % of GDP.

The above graph attempts to paint an accurate picture of the current relative state of the trend towards bankruptcy of the worlds major economies which takes into account public and private debt, unfunded liabilities, budget deficits, and debt denominated in foreign currencies, as well as taking into account the historic track record of the countries in dealing with past debt crisis. The results are shown as a % of the countries risk of going bankrupt where Iceland would be at 100% following its defacto debt default.

The key item missing from most commentary on this subject matter is debt and liabilities that are denominated in foreign currencies as that can mask a stealth trend towards potentially imminent bankruptcy that can suddenly blow up in the face of a countries citizens who had been previously mislead by official statistics into thinking that the debt situation was under control, much as Icelanders experienced during 2008 where one day they enjoyed one of the highest standards of living amongst westerners to next day wake up to be bankrupt and poorer in terms of purchasing power than many third world countries. The key driver for state bankruptcy and currency collapse is the amount a country owes or is liable to foreigners, as debt denominated in foreign currencies cannot be inflated away as governments can do with domestic debt so it is one of the primary driving forces for a country going bankrupt as it is unable to meet the increasing interest payments due in foreign currency as its own currency falls.

'We could go bankrupt by 2019'


2010/05/27

By Zuraimi Abdullah
news@nst.com.my
Source :http://www.nst.com.my/articles/28bust/Article


MALAYSIA will go bust by 2019 if it continues to accumulate debt at the current rate of 12 per cent a year, a minister said. To avoid the "Greek incident", Minister in the Prime Minister's Department Datuk Seri Idris Jala said the subsidies given to various sectors must be rationalised."Our debt currently amounts to RM362 billion. We don't want to end up bankrupt like Greece with a debt of E 300 billion (RM1.2 trillion).
"If we continue to borrow money at the current rate, we will go bankrupt in 2019 with a debt of RM1,158 billion," said Idris, who is also the chief executive officer of the Performance Management and Delivery Unit (Pemandu).
The government has made recommendations to increase prices of subsidised big ticket items such as fuel, gas, food and toll."The time for subsidy rationalisation is now. Otherwise, we have a time bomb on our hands," Idris remarked.He said based on the Organisation for Economic Cooperation and Development (OECD) data, Malaysia's subsidy spending as a percentage of gross domestic product (GDP) was a staggering 11 per cent between 2006 and last year. This was almost three times more than non-OECD countries like the Philippines and 55 times more than Switzerland, an OECD country."Our subsidy bill is not sustainable, especially in light of the rising budget deficit and government debt (as a percentage of GDP).

"It is higher than Indonesia at 28 per cent and getting closer to the Philippines at 62 per cent," he highlighted.Idris said studies by Bank Negara Malaysia showed that inflation should rise to four per cent from 2011 to 2013, before slowing at three per cent post-2013 under "a less subsidised" environment.
He also said 97 per cent of the subsidies are dispensed on a "blanket" basis.
"It is given to everyone regardless of income level, for example, subsidised primary, secondary and tertiary education, medical services, petrol, sugar and cooking oil, as well as welfare aid and susten ance allowance."

Sunday, May 23, 2010

Negara WIEF digesa sokong dinar emas sebagai instrumen perdagangan

21/05/2010

KUALA LUMPUR: Ahli Forum Ekonomi Islam Dunia (WIEF) diminta menyokong gesaan bekas perdana menteri Malaysia, Tun Dr Mahathir Mohamad supaya menimbang dinar emas sebagai instrumen perdagangan sesama negara ahli Pertubuhan Persidangan Islam (OIC).

Dalam membuat gesaan itu, Ketua Pegawai Eksekutif Cydinar Sdn Bhd, Mohd Zahari Osman, berkata sistem dana emas Islam membabitkan sistem pembayaran menggunakan emas.
"Ia mata wang yang disokong emas, sebaliknya suatu mekanisme defensif dan bukan sebaliknya," katanya di sini, hari ini.
Dinar yang berasal daripada perkataan Latin "Denarius", syiling emas Empayar Rom Byzantium, dan oleh itu ia berasal dari Eropah.

Pada 2001, Dr Mahathir mengilhamkan idea sistem pembayaran emas; dinar emas, bagi menjelaskan pembayaran perdagangan dua hala dan pelbagai hala antara negara, dan oleh itu menangani risiko tukaran mata wang asing.

Menerusi kaedah ini, emas digunakan sebagai medium pertukaran dan sebagai unit akaun menggantikan mata wang negara.

Harga eksport dan import disebut harga dalam unit berat emas.
Cadangan itu bertujuan mencari sistem alternatif ketika berlaku situasi ekonomi yang tidak menentu, dengan sistem konvensional terdedah kepada manipulasi dan spekulasi mata wang.

Mohd Zahari berkata, cadangan menggunakan dinar emas sebagai instrumen dagangan, wajar diterima oleh semua memandangan ia akan membawa manfaat yang luas.

Beliau berkata, ekonomi Islam pada asasnya berbeza daripada undang-undang manusia dalam memperhalusi masalah ekonomi.

"Ia adalah satu-satunya paradigma ekonomi alternatif dan bebas sepenuhnya di dunia hari ini," katanya.

Ia berasaskan kepada prinsip sumber Islam yang biasa untuk kebajikan manusia dan menawarkan set alternatif jelas mengenai parameter aktiviti ekonomi.

Beliau berkata, berbanding sistem lain, ia menawarkan alternatif menyeluruh dan lebih baik berbanding sistem yang digunakan dalam ekonomi monetari dan fiskal Barat.

"Peranan setiap satu ditentukan berpandukan sistem ekonomi Islam, yang termasuk Zakat, mengharamkan faedah, sederhana dalam penggunaan, sistem pewarisan, Hisbah, Qirad, dan pemilikan bersama sosial dan persendirian dalam pengeluaran," katanya.

Zakat adalah kaedah utama dasar fiskal kerana ia membabitkan peruntukan sumber, tahap permintaan agregat serta agihan pendapatan, dan memandangkan kepelbagaian dalam jumlah dan masa kutipan dan agihan zakat, ia mewujudkan variasi dalam pendapatan tetap dan boleh guna serta modal dalam edaran. - Bernama