Naughty Naughty

This comment piece in Emirates 24 7 caught my eye today.

Let us see this power of compounding – simply by saving Dh2,000 per month and investing it at a return of 12 per cent per annum you will achieve a millionaire status in 15 years, with about Dh1,009,152 in the bank. Is 15 years too long to save become a millionaire. The average home loan is for 15 years. So, if we are willing to go in debt for 15 years, why not save for 15 years. It’s all a state of mind. In the aforesaid example, if you break up the Dh1 million, you will realise that the cash outflow from your side has been only Dh360,000 (Dh2000 x 180 months) and the balance Dh649,152 represents the compounded interest over the 15-year period, which is roughly over 1.80 times your investment.

If this sounds too good to be true, that’s because it is. Not only has he plucked an inflated interest rate out of the air*, he also singularly fails to mention inflation and distinguish between nominal and real interest rates.  For example, while nominal interest rates may have been around the 12% level in the UK for most of the 1980s, real interest rates have not exceeded 10% in the last 30 years and have generally hovered around or below the 5% level since 1991.** For a financial ‘expert’ to completely disregard this and present such a Panglossian scenario is a pretty poor show really.

* – The UK base rate for example, has not been anywhere near 12% since the early 1990s.

** – Have real interest rates ever exceeded 10% in the UK? Would be interested to find out if anyone has any knowledge of this.

There’s a joke to be made here somewhere…

Do you think this all came about because of an unfortunately ambiguous job ad? There is a world of difference between a position as a missionary and …

Our long nightmare of bread anarchy is finally at an end.

I love the odd little pieces of local ‘news’ that you find in the Gulf News. Sometimes the stories are innately ridiculous and hilarious, but in many cases the articles are so incredibly and earnestly mundane that they become amusing despite themselves. The following is  a classic of the genre:

Bread gets standardised

UAE issues new laws and specifications for this staple food

Abu Dhabi: Emirates Authority for Standardisation and Metrology (EASM) has made it compulsory for bakeries and supermarkets to abide by the UAE’s new standard specifications for bread from October 29.

“The new standards supplied by EASM are in light of many problems faced by the monitoring authorities and the evident inconsistency in the normal production of bread in terms of pricing, quality, use of ingredients, transportation, and packaging,” said Engineer Mohammad Saleh Badri, acting director general of the authority, in a statement on Monday. “The regulations are applicable to all forms of bread, such as toast, brown, Afghani, Lebanese and Samoon.”

Badri said: “All control bodies and the Ministry of Economy have been contacted … to take all necessary procedures to implement the new standards.”

I for one am glad that I will no longer purchase bread at Spinneys only to later realise that I had accidentally purchased one of their cement loaves.

Conversation with RERA

RERA: Good morning. How can I help?

Me: Good morning. I have recently rented out my property in Dubai and I understand that I am supposed to register my lease with RERA. How do I go about this?

(Waits for unclear and confused explanation of utterly byzantine and highly inefficient process involving at least 3 separate passport copies.)

RERA: You need to go the website http://www.ejari.ae and select ‘new user sign-up’ and then ‘landlord registration’. Then just fill in the form and upload the documents.

Me (Pleased at how straightforward this sounds): Excellent.

RERA (continuing): You will then receive a reference number …

Me (impressed by the surprising efficiency of the process): OK

RERA: which you will need to bring to the Lands Department Office in Deira …

Me (wondering why you would set up an online registration process when you have to go in person anyway): Oh.

RERA: … where you will then be registered for a one day course that costs Dh 500 …

Me: I’m sorry?

RERA: …  where you will learn how to use our online system and register fully online.

Me (after a classic Dubai sigh that expresses frustration, resignation and exasperation in equal measure): Do I really need to take a one day course to learn how to use this system?

RERA (enthusiastically): Yes. After that you will be able to register all of your lease contracts that way online.

Me (while reflecting on the fleeting nature of life): I only have one property. I only need to register one lease.

RERA: (Silence)

Me: What is the benefit to me of registering this lease?

RERA: We are trying to regulate the market. Before there were many problems. Landlords were putting up the rent all the time and setting their own terms & conditions. Tenants were breaking their leases. We are trying to put systems in place.

Me (taking a deep breath and trying not to launch into a rant about inefficient regulation, rent control, market forces and contractual enforcement): What is the benefit to me of registering this lease?

RERA: You have to register the lease. If there is a dispute of any kind, the lease must be registered if you need any intervention from the government or RERA.

Me (long pause, followed by the realisation that I am not going to get anywhere in this conversation):  Thank you for your help. Good bye.

RERA (sunnily): Thank you for calling. Have a nice day.

Politician roundly condemned for telling it like it is…

Liam Fox, the new British Defence Secretary, is apparently under fire for describing Afghanistan as a “broken 13th-century country”. Sounds pretty accurate to me, but apparently this has “provoked fury from the Afghan Government and media with officials calling the claims racist”.

According to senior Afghan officials, Dr Fox’s characterisation of the country was raised at a meeting with President Karzai on Saturday. The President expressed his deep displeasure at the remarks, they said.

It gets better.

A senior Afghan government source said: “His view appears to be that Afghanistan has not changed since the 13th century and it implies that Afghanistan is a tribal and medieval society.

“Despite the sacrifices of British soldiers and the massive support of the British Government we do not feel that there is a mutual respect. His remarks show a lack of trust.”

One can debate precisely what it means to be a “broken 13th-century country” but let’s see if Mr. Fox has any grounds for his outrageous claims. Perhaps a quick comparison of respective gdp-per-capita will be a useful indicator in this regard. I couldn’t find data on the 13th century, but according to this source, Western European GDP per capita in 1350 was $662. According to the World Bank, the current figure for Afghanistan is $366. One can obviously quibble about the accuracy of historical GDP estimates, but another factor to consider is that the Afghanistan figure is actually inflated by the sheer volume of international aid that has been flowing into the country since 2001, when the GDP-per-capita figure was only $ 101. It is actually estimated that “almost a third of Afghanistan’s GDP is based on aid disbursements“:

“Our achievements in health, education and other sectors are so fragile that without donors’ constant financing everything will fall like dominos,” said Shukria Barakzai, a member of parliament.

“Take drug money and foreign aid away and you would find Afghanistan collapsing in extreme destitution,” said Saihoon of Kabul University.

Unfortunately it seems that if Mr. Fox does deserve criticism for his comments, it is more likely to be for doing disservice to the 13th century rather than Afghanistan.

Does someone at The National have an odd sense of humour?

There’s something oddly amusing about using the term ‘appendix’ rather than ‘circular’ or ‘document’ in this context.

The Ministry of Health has given the go-ahead for organ transplants from deceased donors to be performed in the UAE. (…)

This week Dr Hanif Hassan, the Minister of Health, signed off on an appendix which provides all the necessary definitions and outlines the rules governing the practice.

The National Organ Transplant Committee released the appendix on Sunday. It will come into effect when it is published in the UAE’s Official Gazette.

Strewth

A nice illustration in the Guardian comments section of why it is so hard to cut regulation and/or public spending:

MrAWG

20 May 2010, 1:09PM

Some good ideas but vague to the point of meaningless. No real talk on taxation or when to cut and run from Afghanistan. The problem is they don’t seem to see the human consequences of their ideas. Take HIPs – 10,000 relied wholly or in part on HIPs for income. What are they going to do now? I agree that HIPs were a bad idea but just announcing that you are cancelling them …?

This is soft-headed bleeding-heart stupidity at its finest. Even though he acknowledges that the policy is a “bad idea”, apparently we can’t cancel them because people rely on them for their income: this is not a sensible guiding principle.

It is easy to use regulation to create jobs: the problem is that there are hidden costs and effects that destroy other jobs or make others worse off. If the government creates a rule tomorrow that anyone over 5 foot 10 has to be painted blue from head to toe, there may well be enhanced career prospects in the paint industry and the new government department created to monitor and enforce the policy. This does not negate the fact that the regulation is daft, unnecessary and draws resources from more productive to less productive areas of the economy. There are hidden costs to such regulations that have to be considered.

It is the height of folly to persist with a bad law or regulation purely because some people may rely on it for their income. Ultimately such laws reduce the overall productivity of the economy and general well-being of the populace. To take an extreme example, there were many in the antebellum United States who relied on the legal institution of slavery for their income; however, this did not stop the laws in question from being utterly wrong.

During the recent discussions regarding deficit reduction and public spending, I have noted this strange knee-jerk reaction among many on the left to anything that even hints at reducing jobs*, regardless of whether those jobs are productive, sustainable or inimical to overall job creation and economic growth.

The fault does not lie with those removing the regulation in this case but with the morons who introduced it and persisted with it in the face of reality.

Gráinne Gilmore summarises the HIPs farce as follows:

The whole debacle shows that the only thing worse than politicians not doing anything to resolve problems is politicians trying to fix problems that don’t exist.

However, given the general ability of politicians to remedy problems by creating worse ones, I would remove the word ‘not’ from her summation.

(* – Apart from those categories of jobs that guardianistas find morally repugnant e.g. investment bankers, pole dancers etc.)