10 Commandments of Goofiest Fiscal Policies

As the media frenzy of Greece's debt crisis slowly unfolds, all eyes are now looking at how Germany and France will come out of this in ensuring that the Euro will remain a stable currency. There is an obvious fear of a contagion effect affecting the rest of the smaller ecomomies that make up PIIGS which to my mind is quite an acronym to give for Portugal, Ireland, Iceland and Spain. Whilst the figures of the rescue package announced are mind boggling, I have been having a hard time trying to understand why there are angers on both sides of the fence- okay I am just kidding! I can understand why the ordinary Germans are angry. After all their country will have to come out with the biggest share in the bailout and I am sure the money will come out from the taxpayers. This was reminiscent of the amount they spent unifying the two Germans. But that was different. German reunification was somewhat a national issue- to reunify of what was a single sovereign country. The current bailout was nothing of that sort. The two countries are vastly different in terms of politics, identities and are wide apart in terms of economic wealth. They maybe under a union but we all know that politically and economically countries that form the Union are still wide apart. I mean just ask the Brits on why they will never join the Euro Zone. I dont think they are ready to subsidize the poorer members when they have their own economic problems and budget deficit to sort out. I just wish David Cameron a very good luck on how he and his new coalition Government will manage to shrink UK's massive deficits.

That brings me to this issue which is closer to home. We have been brought up in a subsidized culture and If we could have the option, everything in this world should be free. But how many of us do realize this? - in the real world this can never be the case. somehow, someone has to pay for something that we get for free which in our case the Government. But Governments have to earn some money to pay for all these services and obviously tax will form the major bulk to fill up the Government’s coffers. For us, its a good thing we have oil and infact for every dollar that the Government earns 80 cents is actually coming from oil and gas. How many people do realise this? how many people realise that such resource-based income is not sustainable?

Just to give you and idea, for one, oil is not an infinite resource, they do and can run out. for second, what makes us think, with fear of climate change and rush for alternative energy and so on, oil will remain a valuable commodity? I mean just think about it- the world stopped using steam engine not because we ran out of water but we found a better and more efficient energy which was oil. Wont oil suffer the same fate once the world finds a better alternative?

Sometimes thinking the worst case scenario will make us understand the consequences easier. Herewith, I thought why dont we sit down for a moment and think of what would be the worst possible macro economic and financial policies that any Government could adopt to destroy their own countries.

1. Thou shall spend money that thou do not have.

Governments are just like you and me. If you want to go bust you can just simply spend, spend and spend. Now unless you are as big as the USA which can print money almost at will, with a huge economy to back you up and a fiat money that has a life in itself (PetroDollar, Chinese Dollar, Euro Dollar), you can forget of being extravagant without facing the consequences. Greece is a perfect example of this situation.

They need to have an income to support its public sector spending that can include paying the salaries of the public servants, the capital infrastructure spending as well as the many subsidies given. Income can come from the tax in our case the oil tax as well as profits and dividends from our investments at home and abroad. If we spend more than we earn we may have to find other sources of the income. We can either increase the tax or in the case of Greece they actually increase their public sector borrowing from the private banks through the sale of their bonds which are now rated as junk. If your government bonds are backed with some valuable security that will work out just fine. But once you have a bad record of not paying the agreed dividend as promised, you can be sure no creditor will ever buy your bonds.

2.Thou shall have a bloated civil service.

Lets face it- The public sector does not create wealth. It spends it for social programs and public sector infrastructure projects like building roads and hospitals etc. Of course you do need this program to push for your social agenda. after all, thats is why Governments exist. But if you do need to spend on this, be sure you have the money to pay for it. A better option could have been attracting private sector participation as well as foreign direct investments. 3Ps or Public Finance Initiatives or some of the ingenious business models are perfect models that can be exploited.

3. Thou shall have a deficit that hit beyond 10% of GDP
Isn't this obvious? If you earn $1 but you spend $1.40, that spells trouble. Ask Greece.

4. Thou shall have more subsidies and more subsidies

To be continued......

Hutang Sekeliling Pinggang (Debt all around your waist)

Looking at the current debt crisis facing Greece, I cant help but see that there really isn't much difference between nations and its peoples - When things go wrong, we like to lay faults on others but most often than not we are not completely faultless ourselves. Blaming others is always the most convenient excuse to avoid self examination. Blame the credit rating agencies for giving a bad image to your debt service records, blame the banks for imposing high interest rates, blame the regulators for putting up stringent borrowing regulations or rather blame the shops and the car dealers for offering attractive discounts and sales. we stop short of blaming ourselves for our own profligacy.

In Greece, the blame game has just started. Its citizens are now going out to the streets blaming the Government for the new austerity measures affecting just about everyone. Politicians are blaming the speculators and the credit rating agencies whilst its Government is now looking at the Currency Union and the IMF for a bailout. Of course Germany being the strongest and the richest member in the Union is expected to contribute to the bailout the biggest. Obviously, for the ordinary Germans they are not happy and balked at the idea of helping a very extravagant friend down south. Their Government would probably have little choice but offer a rescue package- this is part of the rules of the game. when you are in a currency union, you no longer have the independent right to manipulate your own currency. before this, Greece could probably be able to devalue its drachma or print as much. but now they couldn't. The Euro is a centralised currency and a member simply gives up that monetary sovereignty for a regional monetary union. You will have to follow certain rules. Of course as a condition of the billions of dollars bailout, Greece is now forced to adopt some austerity measures. In the good old days Greece could spend, spend and spend. It actually borrowed so much from the private banks to support its public sector spending. When the country ran into a huge deficit, -beyond the 3% cap to the GDP- imposed by the Euro Zone, Greece ability to pay its public debt became suspect and their Government bonds downgraded to become junks. Comparatively speaking the Greek’s public sector work less with better pay than the Germans. They have far better social safety nets than the wealthier compatriots up north. Their labour laws are far more pro socialist cum populist fervour than anywhere else in Europe which really is punishing individual entrepreneurship. Infact Greece ranks amongst the lowest in the Economic Freedom Index. In plain term, If you are lazy you are better off in Greece than in Germany because of its generous welfare system. But now things have changed, the richer countries in the Euro Zone are now picking up the tab for Greece’s profligacy. The big question in most Germans' mind now must be- why should we pay for the Greek's extravagance?

So the next time you are taking your credit card out for a spin, THINK of Greece before you get your card swiped. Unless you have a deep pocket or a wealthy friend to bail you out and once the debt becomes a real burden, you don’t really have anyone else to blame but yourself..remember that.

Sabaidee Pii Mai

Sibaidee Pii Mai (which means Happy Lao New Year) everyone. This is our first time celebrating Pii Mai..Much like the Songkran Festival in Thailand, just about every where in Vientiane we are seeing water fights..kids and adults alike armed to the teeth with water guns, buckets and water hoses and simply douse and shoot any passers-by they see. Traditionally they will just pour water just behind your shoulder as a way of cleansing yourself and wishing you good luck. However, things have changed especially with the young people. They sure are enjoying themselves on these annual public holidays that normally coincide with the Lao New Year. I see tourists or Falangs (Farangs in Thailand) joining the fun too. I suppose since April is the hottest month here, the people dont really mind getting soaked with water as the temperature can really go up to its 40s.

Random pics by iqah and kaka amal

I will keep my ramblings short for this post as the random photos taken by my angels will tell a thousand words.

hooray, Tiger is back!

At last after all the speculations, Tiger just announced that he will be playing at the Masters!! After his 4 month hiatus from his silly dalliance off the golf course, he will play at the Masters where he won his first Major. I am just so excited. It would be extraordinary if he would be able to cope with the media pressure that will tail his every move once he comes out of the closet and not the mention some of the rowdy spectators who would probably heckle him with the many new nick names given to him such as “cheetah woods”. Lets just hope that wont happen. booing and heckling should be best left at contact sports such as soccer or rugby but definitely not in golf. That is why its called a gentlemen’s game.

Missing his own socrates cafe

One of the most difficult things living abroad is the constant anxiety on the conditions of the loved ones you left behind. You just simply dont know when the next bad news going to beep on your sms inbox or whether the next unknown numbers that will appear on your mobile screen belongs to the unfortunate messenger who will have to break the bad tidings that you dont want to hear. Just today I got a message that one of my aunts passed away and my mum was rushed in an ambulance as her blood sugar level went dangerously low and she fainted at home. These two separate incidents just reminded me how constant anxiety is a common sine qua none if you live thousand of miles away from the place you call your real home. There are times when loneliness creep in and these are the times when your mind flies home reminiscing the good and bad memories you left behind. I have tried to avoid loneliness by filling up my time with all sort of activities with my kids and missus. Golf, the gym, swimming, horse riding, cycling, table tennis and coffee lounging with the kids are now in our regular schedule. One good thing of course, the kids are now closer with me. They will wait for me everyday after work begging me to join them in their activities which could be anything from what I listed above or to something quite silly like giving a chase to our two rabbits, mocha and alley that we set free roaming around our compound.

Of course back at home things are no different except that my circle of families is a lot bigger. I would make an effort to spend the weekend with my little siblings even though we are all now grown ups with our own families and our own set of stresses and problems.. I am the one who always feel the need to make up the lost time for I was away from them since the age of 11. So at weekends we would always make an effort to get together and either find a new hangout for dinner or just simply go to our usual hangout for a few sips of mocha latte and either do people watching or simply watch the Premier League on the big wide screen that is now commonplace in most cafes in town. We also will constantly update each other on things some of them petty like one of our little new nieces saying her first word or sometimes on a more serious stuff like the conditions of both our mum and dad. The weekend hangout would basically become our socrates cafe exchanging stories as well as our life experiences worth sharing. These are the few little things I miss. Anyway, as I am updating this post, my first angel Amal is coming to town. She will be here for two weeks for Easter. We are all thrilled. Lil bujik has been asking me when she will arrive. Missus is of course also happy as she will have her own companion.

Happy bday nizam, babah loves you soo much!

we just had one of our sons' bday party today. It wasnt exactly a grand celebration but nizam was happy that he celebrated his 8th bday this year. He was haunting us all weeks for his bday to be celebrated. He was actually born on the 24th Feb and since it was just a day after our National Day we couldn't really hold it on the day he wanted. His friends whom he invited from his school were thrilled when we told them them it was going to be a swimming party at our compound's pool. We also hired one of those huge inflatable slides just to make sure the kids would have a lot of fun things to do. unfortunately missus caught the fever bug. She wasnt feeling well all day and it looked pretty serious. She actually nearly fainted several times but stubborn as she usually is refused to see the doctor by saying she had taken her medications. She ended laying in bed all day though she managed to show herself just to say hi to some of the children's parents who came along with the kids and went back to bed soon after she learned that she nearly fainted on the floor on her way to the ladies'.

As I expected not all the children in Nizam's class came as it was just a start of the easter's school holidays and being a school for expats, most of the children would probably have gone back with their parents to their home countries or gone somewhere abroad for short term break. Despite that we had a good fun time and the children were loving it too. we all know when we were kids there would be a couple of things that we couldnt keep our selves away and water and the slides would be on top of the list. some of my adult guests too joined in the fun by hopping and jumping on the inflatable slides. Obviously I wont publish them here. I myself have always wondered how it was like sliding on those fun-looking inflatables but being expected to maintain a certain set of decorum, I had to refrain myself.