Many of us may be familiar with this widely viralled anecdote:
( It is a slow day in the small Saskatchewan town of Pumphandle, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.
No one produced anything. No one earned anything…….
However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, ladies and gentlemen, is how a Stimulus package works) – so said the anecdote.
In the above case, where the whole town settles their debts using the same $100 bill, it could actually be a reflection of the real world, and not just a joke as depicted by the anecdote.
In such a case economic services actually existed, have been rendered and need to be paid, even to the prostitute. When the debt settlements were completed, even the hotel can now afford to refund the potential guest’s deposit, even when he decided not to check in. Real economy works this way.
STIMULUS PACKAGE DURING COVID 19
The Saskatchewan anecdote does not fit into the stimulus package scenario we are facing right now.Here, the government is helping the economy to create demand for, as well as assisting capacity to produce, goods and services. If the government can afford it why not? It is necessary to stimulate a weak economy or even to restart one that has stalled.If the government can’t afford it why not borrow? However, the Government needs to ensure that the stimulus package is sufficiently effective to get Malaysians out of this bad patch of the economy. I believe by his recent remarks, the Prime Minister is PRIHATIN enough to do just that.
If a car’s wheels get stuck why not engage FWD. If the engine stops running why not fill more petrol, even by borrowing, if necessary. With that the car continues to provide services that can repay the petrol debt. Without the emergency petrol purchase, it would be difficult to imagine where the car would end up. So there is no such thing as free lunch. This is not Saskatchewan.
QUANTITATIVE EASING
Why need to borrow to finance stimulus package. Can’t the government just print the required money? After all the United States did use a different methods, including what they called quantitative easing to ride out of their last monetary crisis in 2008. Many news reporters described it as literal printing of money, but after studying the available literature, it wasn’t really so. It was more of targeted purchases of ailing assets by the central bank, besides adjusting the reserve ratio banks maintain with the central bank. The latter, which is the likely scenario during this COVID 19 crisis, would inject more fund into the banking system to increase money supply to make it easier and cheaper for the business sector to borrow.
As for the government’s part of the stimulus package, it seems it has to borrow. It can’t raise taxes in time of crisis and PETRONAS may not have fund, in this time of very low crude price, for a special injection into the government coffers.
Only a word of advise to the government.Why pay unnecessarily to government servants and pensioners? Are these not the pampered lots, having job security, pension and above all monthly paid and don’t need to work during MOC time. In fact they save money for not having to pay transport cost to work and for their children to school. Indeed, such payment is immoral at the time the country is struggling to survive. This is just a small lingering visible sign of a spendthrift Federal Government even during the current economic crisis. Perhaps PETRONAS money had been too easy and sinful too. It is high time to share it with the rightful owners.
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DAH IKHWAN
Of allegedly sinful handouts to government servants and pensioners anecdotal excuses may apply as the act was widely publicized implying generousity of the pampered lot and indirect affirmation for positive charity at home.
Where is the Al-RahmaanirRahiim god, you may ask? Well, where is god in this challenging times?
And as for Petronas’ money, how would zakat be applied being a government company. Contractual obligations are another matter, aren’t they?
Quantitative easing is a suspiciously cooking the books THaji style post Gold Standard. But what was the niat?
It is a strange semisolid sticky world when the USDollar is king, don’t you think? How would AlMasih Isa as go about setting up a barakahful economy without upsetting the moneylender?
Turning lead into gold and water into wine
Or better still bringing a dead Islam to life. What say you?