Beware of an economy in deficit ......

The other day, Lim Kit Siang, critisized Najib about the potentially burgeoning deficit for year 2010. In 2009, the deficit had been 7.9 % of GDP, higher than in 2008 (4.8 % of GDP), and the previous years. In the first 2 month period of 2010, the deficit points to 7.1 % of GDP. He was concerned that Najib might not be able to bring down the deficit to 5.6 % of GDP as he swore he would. More likely, the deficit might indeed go much higher.

For one, I am wary of the deficit. Remember what happens to the economies of countries such as Greece, Iceland, Ireland when their deficits exceed 10 % of their GDPs. The first casualty is the fall in the value of their currencies. Britain, with a deficit of 12.6 % of GDP, saw its GBP down by about 30 % while Greece, with a deficit of 12.7 % of its GDP, caused the Euro to fall by 20 %. As for Iceland, with a deficit of 15.7 % of its GDP, its currency, the Icelandic Krona, had become slightly better than useless. Spain, with its deficit approaching the 10 %, might have the same problem.

First of all, what is a country's deficit. It simply means that the country's revenue is less than its expenditure. The country spends more than it earns. In order to make ends meet, the country has to borrow the difference. One way of resolving the problem is to increase the revenue by earning more from exports of goods and services. But this is not easily achievable particularly when the country's currency value depreciates and it gets less dollars say for the same volume of goods and services that it exports. It's a catch-22 situation.

Another way is by cutting down the expenditure to match the revenue. But this is a painful method. Imagine a country has to cut down the expenses of, say, its military and administrative operations. It's certainly painful and definitely unpopular and may result in an election defeat of the incumbent party in government.

I definitely would not like to see Malaysia struggling with a deficit year on year for the next 5 years for surely this would mean a depreciating Ringgit, as if it has not depreciated already.

My name is Django ...

Whose idea was it to dub Rosmah Mansor as the First Lady. In my book, the First Lady is the wife of the Supreme Commander of the nation. In this case, it's the Agong's wife. Did Rosmah insist that whenever her name appear in the news that she should be referred to in the media as the first lady and not Puan Sri Najib or did the title come out of media spin.

I used to know that Tun Razak's wife was referred to as Toh Puan Raha, Mahathir's wife as Puan Sri Siti Hasmah, and so on. There was no mention of them being referred as the first ladies. Yet now, this Rosmah Mansor seemed to enjoy being referred to as the first lady, in the style of the first lady of USA which is the President's wife.

Why, the other day, even Nurul Izzah, an opposition MP, in her rebuttal to Rosmah's Permata project in Hulu Selangor referred the latter as the first lady.