Two Governors and A Rupee

How A Referendum Would Deepen Our Democracy

There are some issues that are really fundamental to our well-being and these are better addressed in a referendum. Especially when they are not discussed in manifestoes and electoral campaigns. Here are four.

1. Tax policy can break an economy and send a country to the dogs. Which is what the Sithanen flat tax has done. And that too without asking us for our permission. 

2. Currency policy. Only morons believe that competitive depreciation is Tiger stuff. Plus it matters a whole lot who call the shots at the BoM. For example in 2010 we were told that Manou was coming back. We didn't know depreciation-obsessed Basant Roi would after 2014.

3. Party lists are the equivalent of an English Premier League without red cards. We don't want them.

4. Privatisation of any part of our public utilities or other national assets. A government that wants to sell the CWA or saddle it with a management contract because it doesn't like its hotline is a good-for-nothing government.

Oxfam Warns Unjust Society Not Sustainable

The recently published report has a number of interesting stats including:

1. 1% of the world's richest are wealthier than the remaining 99%
2. 8 men are as rich as the planet's 50% poorest
3. income growth for the bottom 50% has been zero over the last three decades while the top 1% have enjoyed a corresponding increase of 300%
4. it takes 10 years for the poorest person in Vietnam to earn what the richest person there makes in a day

The report also highlights how politics may be highjacked so that rules are written in favour of the 1%. I guess a bit like the Sithanen flat tax which has caused 22,000 Mauritians to be thrown into poverty over the first five years of Shaitanomics while incomes for the bottom 10% have risen five times slower than the corresponding income for the top 10%. There's also a trillion-rupee GDP shortfall and the very dumb policy of 'competitive depreciation' which has quickly dumped us into a recession -- in USD terms -- a mere three months after the December 2014 polls.

Busy Year For The Jag!

Ten posts have been published in 2016 so far. So we returned after about a year (last time we took a pause of five years). Here's the gist of what we said.

Ramgoolam doesn't understand that FPTP, progressive taxation and spotting talent are core elements of the DNA of the Labour Party. Lutchmeenaraidoo shifts to Foreign Affairs but SAJ is in the mood for an economic miracle. Looks like voters are on track to resume one of their favourite habits.

Mauritius has far more important things to worry than Brexit. One such thing is the current Governor at the BOM. What the pound hasn't seen in 31 years we've seen here in the first 69 days of the return of Basant Roi. We showed how the Sithanen flat tax has spun public finances out of control and seriously damaged our economy. That of course provided Pravind Jugnauth with a great opportunity to bring some basic common sense back.

Mauritius is losing the battle against poverty because of the flat tax. Abysmal policy-making has transformed the economy into a machine that throws 1,000 people into poverty every three months. Little will change until policies start making sense again. The Minister of Finance fails to defuse a time bomb that is rapidly reaching a trillion rupees. Instead he presents a bland budget that will not take Mauritius anywhere we want to go. Tic tac. Tic tac.

We debunked a few myths about our excellent FPTP system. And we illustrate how wise voters are in ranking unsuccessful candidates. America can learn from our experience with trickle-down economics. The Duval Committee is like the 2014 Faugoo Committee. We formalise the concept of minimum opposition size which tweaks our excellent FPTP system in a mindful fashion to solve a couple of important problems.

Two Years of Lepep And No Miracle in Sight

As expected. They haven't taken the one decision which would have brought some sanity back: end the trickle-down economics started by Sithanen with the blessing of Ramgoolam. We're not only closing 2016 with the 6th consecutive annual growth rate under 4% -- half of the 8% promised -- and a GDP shortfall of nearly a trillion rupees but the economy was thrown into a recession in dollar terms in 2015. Indeed our economic output in USD contracted by about 10% last year from 12.5 billion to 11.3 billion. The decline was even steeper in the first quarter of 2015 which coincided with the first three months of the return of Basant Roi to the BOM. We knew the guy was obsessed with depreciation: the British Pound was worth an extra Rs23 at the end of his first stint. Now one of his recent statements seem to imply that our currency should be set at a level that allows the weakest of our exporters to break-even.

Many Lepep mams have already vire and are cursing that it's our worst government ever. Which would explain the increasingly large crowds turning out to hear Ramgoolam score some easy points. Can we blame them when a Minister -- who is probably mad that February 1st is a public holiday -- has proposed the following trade-off to us voters: food or sand? Or another one who wants to sell the CWA because he doesn't like its hotline? The trouble is that these toxic dynamics were set in motion by Ramgoolam ten years ago. And there's little he's said during the past two years that makes him a credible alternative to lead the country again.

BoM Releases nTan Report, This Time

Here it is. I hope the first one will be released too. In the name of transparency.

The Rawats Hit Back

With Laina Rawat asking the commercial division of the Supreme Court to restrain the two receivers of Bramer Bank, Andre Bonieux and Mushtaq Oosman, in a number of ways. She claims the Bank of Mauritius acted in a way which is contrary to its own statutory obligations, natural justice and basic management principles. Ms. Rawat also believes that the receivers have a conflict of interest and are therefore not in a position to carry out their duties as per the law.

On his side Basant Roi has called the revocation of Bramer Bank's license on April 2 our Lehman moment. He obviously doesn't know what he's talking about.

How Inflation Routinely Kills People

The first way is by making many people poor enough that their life expectancy falls because of degraded living conditions. Besides poor people have a lot less access to the kind of medical options that richer people have. For example because he had a Gulfstream V Steve Jobs was able to seek a liver over a much bigger distance -- wherever his plane could take him in 6 hours -- than someone without a jet.

Inflation is also a key driver of inequality. Especially that we now know that the inflation of the poor is about 3% higher than the headline number. Inequality will bring people to the streets -- like in the Arab Spring and elsewhere -- and clashes may cause loss of lives.

Of course if inflation is very high things can get very ugly. And that too on a horrendous scale. Like in 1930s Germany where hyperinflation helped put a little guy with a moustache in power. And the world eventually went to war: between 50 and 85 million people died in WWII.

No wonder then that Central Banks have been setting inflation targets for more than 25 years now -- roughly the period of time Lutchmeenaraidoo was not Finance Minister. With the blessings of their governments. As inflation is a major reason why politicians lose power. In fact we owe it to Governor Basant Roi for one of the best descriptions of inflation so far -- he likened it to radioactivity. Which makes it all the more interesting to check his inflation record. And compare it to Manou Bheenick's.

Vishnu is Lucky, Again

To be Finance Minister these days. After almost a quarter of a century. Because that's after almost 10 years of the worst economic management -- Paglanomics -- our country has seen and started by Rama Sithanen with the help of Bretton Woods Ali. And of course with the blessing of Andrew Scott and one pseudo-socialist, Navin Ramgoolam. So improving things should not be that difficult. For example increasing pensions has helped compensate the lack of reasonable progress that the weakest groups of our fellow countrypersons have registered with the toxic bean-counters. And there are many more low-hanging fruits to pick.

But monetary policy was definitely not one of them. So it was quite surprising that Manou Bheenick was asked to leave. And replaced by depreciation-obsessed Basant Roi. Who unsurprisingly since returning to the BoM less than 80 days ago has presided over a double-digit depreciation -- 12% as of today -- of our national currency against the USD. After our central bank had issued a communique on January 30 informing the nation that there would be no MPC meeting in February because Lutchmeenraidoo's budget was due March 16. Or 45 days later.

Hopefully the Minister of Finance who keeps on insisting that he will deliver a 'second miracle' understands how to assess the quality of economic policies. Computing our real GDP growth in USD for the current quarter might be quite enlightening.

Government To Destroy Biometric Database

This piece of good news was announced yesterday in the 2015-2019 Programme Speech. Along with a number of laudable intentions like

• making SC/HSC exams free;
• an SME bank which will invest Rs10 billion over the next five years;
• a minimum wage bill;
• focus on job creation for Mauritians: 15,000 will be created every year with many in the public sector;
• a football academy will be set up;
• ensuring competitive energy prices;
• setting up a vascular surgery unit to reduce the number of amputations;
• and organising referendums on crucial national issues. 

There are also some very vague promises such as 'inflation will be kept under control'. Hmm. An inflation target is a must for two reasons: one to preserve the hard-won anti-inflation capital and two to keep depreciation-happy Basant Roi on a tight leash. Government also wants to include a dose of PR in our electoral system. That's a dangerous proposition that needs extensive debate and a referendum.

Let's see how well this plan is implemented.

Basant Roi Back, Rupee Down By 3%, Already

By yesterday our currency had lost 3.28% of its value against the dollar. In the mere 18 trading days since Basant Roi has been back at the BoM. He is known to have a strong and silly depreciation bias. In fact if you had to chart the number of times he has asked for a lower value for our rupee -- when he was not in a position to sink it himself -- you would literally have to use a log scale.

I hope Mr. Lutchmeenaraidoo's idea of a "second economic miracle" doesn't involve making Mauritius increasingly insignificant in the world. And keeping local pump prices artificially higher after oil prices collapsed is kind of contradictory about making SMEs the backbone of our economy. And is oblivious to the fact that he is presenting a budget in a few weeks. Besides we've been suffering from such a disconnect for way too long. And for very wrong reasons.

All has not been bad though. Swiftly increasing pensions to Rs5,000 will surely help restore some disposable income to those who need it the most. And that cannot do our economy any harm.

Kahneman Not The First

Non-economist to win the Economics Nobel. Everybody knows that John Nash who won the prize eight years before Kahneman is a mathematician. Who doesn't remember the award-winning movie A Beautiful Mind anyway?

Nash is not the first either. This honour could very well go to Kantorovich who snatched the prize in 1975 or to Hayek who took the Nobel home a year earlier. Which confirms that you don't necessarily have to study economics to understand how the economy works. And that having a non-economist as first-deputy governor is a pretty lame excuse for not having launched the Monetary Policy Committee. When you should have.

Speaking about Economics Nobels, here are five broad categories in which the first thirty-eight ones can be grouped into. That's useful information. Just in case you might be in the mood to get one.

Basant Roi Can't Figure Out Big Rise in Foreign Debt

So he said on Radio+ a few minutes ago. He finds this the more surprising given that the banking system has been witnessing excess liquidity for some time now. Government could instead have borrowed locally. What does the FS have to say about this?.

He also mentioned that he enjoyed working as Governor with Paul Berenger in Cabinet as the latter never meddled in the affairs of the Bank of Mauritius. Give us a break!

Voting For L'Alliance Du Coeur is Voting For Rupee Depreciation

Of the systematic and unreasonable variety and that for at least a couple of reasons. The first one is that Bheenick will probably be told to leave the Central Bank. We shouldn't underestimate the benefit of having had Manou there for the past three years.

The second reason is they will probably replace him with someone like Basant Roi, Khushiram or some fellow with a strong depreciation bias. They could even have Sithanen as the new Governor because they haven't got over the way he was sidelined, have they?

A Propos De La Banque de Maurice

Bheenick a été un excellent gouverneur. Il a du en plus livrer des batailles sur plusieurs fronts: il a vaincu la spirale inflationniste que lui a léguée Basant Roi; il a résisté aux appels indécents pour déprécier notre roupie et il a tenu tête a un board hostile dont la majorité des membres ont été nommés par un ministre des finances rigolo dont la carrière politique est heureusement arrivée en bout de piste.

L’île Maurice toute entière doit une fière chandelle à Bheenick pour avoir considéré les intérêts de tout un chacun dans l’orientation de la politique monétaire du pays. Vivement qu’il continue le bon travail qu’il a commencé pour de nombreuses années encore.

Ex-Governor's Memory Playing Tricks on Him

This is the impression I got on skimming through an interview of Basant Roi that was published in a newsletter earlier this week. In it the guy who was in charge of the Bank of Mauritius for a little over eight years stated that the independence of our central bank had now been thrown out of the window.

Kind of funny to come from the person who was Governor precisely when the independence of the institution he had been entrusted with was murdered during the MCB-NPF saga before being hanged in the second half of 2006 when the rupee was allowed to freefall despite the record FDI.

And the hansard contains interesting replies that will kind of support the view that when it comes to degrading our institutions Berenger has no match. Except maybe Sithanen.

Today of course is a great day to read a few pages of The Great Crash for at least an extra reason: John Kenneth Galbraith would have turned 100.

Good Idea

I totally agree that there should be a commission of enquiry on the Bank of Mauritius. Absolutely. Rama Sithanen and Ramesh Basant Roi have to explain to us why they issued a fatwa on our rupee in the second half of 2006 and that in spite of the record FDI that the finance minister was bragging about.

It would also be a good occasion for them to tell lepep admirab what were their 'accepted range of the rate of inflation during a given period consistent with the pursuit of the price stability objective' as stipulated by the law since Sithanen started counting the beans again in July 2005.

And we can understand why MPs Bundhoo, Varma and Dayal are so insistent about all of this. Indeed, the unconstitutional DPM has created so much inflation during the past 3 years that they are already dreading the answer of their voters in 2010 to the question: 'Are you better off than you were five years ago?'.