About Jamari

Singapore Correspondent of Focus Malaysia, a business weekly.

The Economics of Oil in the Last Hour

By Jamari Mohtar

July 8, 2018


Someone brought to my attention an article from an investment advisory newsletter, the Palm Beach Daily, with a heading of The Third “Oil Shock” Is Coming, dated July 1.

It was written by Nick Giambruno, the Editor of Crisis Investing, another newsletter that has a sharing arrangement with the Palm Beach Daily, analogous to the shared, distributed network of the blockchain.

I read it with trepidation because I could see its relation to the prophecies of the Last Hour in Islamic Eschatology.

However, the article at first didn’t grab my immediate attention until a few days later due to four reasons:

  • Time consuming research

Writing a comment piece about oil and gas (O&G) requires the knowledge of some technical “mumbo jumbo” jargons that will consume a lot of my time in research in order to “laymanise” these jargons so that readers of my blog can follow and understand what I’m talking about and where I’m coming from.

To do this, I must have an excellent understanding of these jargons first before I can laymanise them, for otherwise, I would be confusing my readers with my confused article, arising from my confused mind due to the lack of a robust research.

Fortunately, Giambruno wrote in an easy manner, free from jargons although he did not define what oil shock means other than implicitly assuming it has to do only with a hefty escalation of oil prices.

The 2014’s plummeting of oil prices can also be considered as an oil shock if a steep dive in price is included in the definition.

  • Boring topic

O&G is a boring topic although oil and gas are important lubricants of life and the economy, not to mention your car too. But I have a strong feeling even after I have laymanised these technical stuff for the benefit of the lay readers, the subject will still remain boring to most species of humankind.

The exception are those unsung heroes and heroines in the O&G sector who work very hard to “lubricate” our life such that we can enjoy the smoothness, roundness, conveniences, comforts and luxuries of modern living, for otherwise we would still remain a modern caveman like Mr Flintstone driving a Flintstone-branded car.

  • Blockchain Technology (DLT)

My inclination now is more in writing on the more exciting development in the field of disruptive blockchain technology otherwise known as distributed ledger technology (DLT) that will enhance innovation, and how to manage the concomitant challenges DLT will definitely cause in displacing people and resources en masse, once the innovation that it has unleashed become mainstream one day, which according to experts will slowly, gradually and surely take place in the next three to five years.

Some experts are already talking about the potent combination of frontier technologies like the blockchain, artificial intelligence (AI), augmented reality (AR) and the Internet of Things (IoT) that will massively disrupt in the very near future existing technologies by changing the whole landscape of the way we do things today in the most positive, productive, cost-effective and efficient manner.

What an exercise in contradiction – disruptive, yet positive and productive.

These seem to have made other disruptive frontier technologies that had made their appearance relatively much earlier such as 3-D Printing, unmanned sector like drones, and automation rather obsolete before they can even settled comfortably as mainstream technologies, unless they reinvent themselves by combining with at least one of the four technologies above by capitalising on interoperability – the ability of the core component of these technologies to “talk” to each other.

More on this in my future post, in sya Allah.

Already, the emergence of cryptocurrencies and blockchain technology have created two nascent disciplines called Tokenomics and Cryptonomics that have been ignored by the majority of universities worldwide because they are clueless on what blockchain in essence is all about.

Worse is their misconception that blockchain is nothing more than merely hypes concerning the hated, volatile and “fraudulent” cryptocurrencies (read Bitcoin), which dare to replace fiat monies as legal tender, exempt themselves from regulation, and give themselves the unilateral privilege of anonymity (all misconceptions of course!).

The exceptions are very few such as the Said Business School of the Oxford University, which had just organised a short course on the Oxford Blockchain Strategy Programme for professionals, entrepreneurs, founders of start-up companies and regulators from all over the world in February to June.

  • Aggressive selling

The biasness against financial advisory newsletters in general which I suffer, from time to time, because of their aggressive stance in selling their investment ideas and strategies for a hefty subscription rate by lauding how correct and accurate their recommendations were in making tonnes of money for you, had you only followed their recommendations.

At the same time, they tend to keep a low profile on the subject of their bold, specific predictions / recommendations that had gone off the mark, which may have burnt the pocket of their subscribers who followed their investment advice.

But if you try hard enough, you may find some gems in these financial advisory sector such as the Florida-based Palm Beach Daily, and the Crisis Investing newsletters which would precede their recommendations / predictions with solid research and excellent analysis of the geo-political and socio-economic happenings that occur behind the scenes as a backdrop for their investment recommendations and predictions.

Gist of the article

The year 1973 saw Israel at war with Egypt and Syria – the Yom Kippur War. In reaction to US support for Israel, the Organization of the Petroleum Exporting Countries (OPEC) placed an oil embargo on the US and several other countries, and cut oil production.

The result – the first oil shock, which saw oil prices quadrupling from US$3 per barrel to US$12.

The second oil shock in 1980 featured the Iraq-Iran War, which arose in the aftermath of the 1979 Iranian Revolution – one of the bloodiest conflicts of the past 50 years.

The result – oil prices went up more than double because Iraq and Iran were (and still are) two of the biggest oil exporters in the world. No surprise then that the war rocked global energy markets.

There was also another, less dramatic price spike in the early 1990s after the invasion of Kuwait by Iraq, triggering the first Gulf War where oil prices shot up over 70%.

Since then, there was talk of a third oil shock but it never materialised. Never materialised because obviously when Nick Giambruno talked about oil shock, he is limiting it to just a spiking of oil prices, and in this context he is right.

Giambruno’s scenario of a third oil shock, which he predicts will be “even worse than” the previous ones is hinged on the Middle East where wars there are often catastrophic for global oil supplies.

Two geopolitical camps exist there: the US and its allies, like Israel and Saudi Arabia on the one side; and Russia and its allies, like Iran and Syria on the other.

The most significant military conflict on the geopolitical chessboard today is the bloody conflict in Syria that is entering its seventh year.

While on the one side, the US through its proxies, has been trying to overthrow Syria’s leader Bashar al-Assad, Russia and Iran, on the other side of the divide, have massively fortified the Assad regime who is still firmly in charge.

Since the demise of Saddam Hussain, the regional balance of power is favouring Iran. The US, Israel and Saudi Arabia find that unacceptable. According to Giambruno, at this point, war is the only thing that could reverse the trend. Of course, that does not mean he is cheering for war.

The first salvo in the current geopolitical chessboard opens with Israel’s recent move in launching its biggest military strike on Syria since the 1973 Yom Kippur War. This attack, and other recent ones, killed dozens of Syrian and Iranian soldiers.

On this basis alone, many people think the focal point of the Middle East’s next regional war will move to Iran, and with these Israel’s attacks, they also think that the war has already started.

There have been numerous, unambiguous signs that the US has Iran in its radars.

To begin with, President Donald Trump has recently filled up major vacancies in his Administration with war hawks. In April, he made John Bolton his National Security Advisor and Mike Pompeo his Secretary of State. Both have been eager to bomb Iran for years.

In early May, Rudy Giuliani, one of Trump’s lawyers and a long-time political ally, announced that Trump is “committed to regime change” in Iran.

A few days later, President Trump pulled out of the 2015 Iran nuclear deal. He also re-imposed economic sanctions on Iran.

A war between Iran and Israel (and its US-led allies) would wreak havoc on the oil market. That’s because Iran holds a very powerful card, as it could effectively shut down the Strait of Hormuz, the narrow channel connecting the Persian Gulf to global markets. It is the only sea route from the Persian Gulf to the open ocean.

That translates into roughly 35% of the world’s oil traded by sea. With nearly US$2 billion worth of oil passing through the Strait of Hormuz every day, it’s the most critical oil choke point in the world.

In the event of an all-out war, Iran would quickly shut down the Strait of Hormuz. It has made this blatantly clear.

Credible studies have shown that – in a best-case scenario for the US Navy – Iran could seal off the Strait with sea mines and asymmetrical warfare techniques for at least a month before the US could reopen it. The Pentagon itself has admitted as much.

If and when a war with Iran happens—even if there’s only a whiff of it happening—investors should expect the third and most dramatic oil shock, says Giambruno.

Connecting the dots

Based on authentic Ahadith, there are many prophecies on the signs of the impending Last Hour before this cataclysmic event itself happens. Analysing these Ahadith, Muslim scholars have classified them into minor and major signs.

The thinking behind this analysis is the Last Hour will not come until all the major signs have made their appearance, and in turn, the major signs will not come until all the minor signs have made their debut.

Analysis (a form of ijtihad) is required because the nature of prophecies is such that they are not precise or exact in details, for otherwise they would no longer be a prophecy. Hence, the Ahadith on the events preceding the Last Hour are, more often than not, allegorical (mutasyabihah) with respect to details and chronology.

Muslim scholars are in agreement on there being about 60 to 100 minor signs of the Last Hour before the emergence of the major signs, and they believe that all the minor signs have made their appearances.

The Hadith narrated by Imam Muslim below captures the essence of the 10 major signs of the Last Hour.

Allah’s Messenger (may peace be upon him, s.a.w) came to us all of a sudden as we were (busy in a discussion). He said: What do you discuss about? They (the Companions) said. We are discussing about the Last Hour. Thereupon he said: It will not come until you see ten signs before and (in this connection) he made a mention of the (1) smoke, (2) Dajjal, (3) the beast, (4) the rising of the sun from the west, (5) the descent of Jesus son of Mary (Allah be pleased with him, alaihi salam), (6) the Gog and Magog, and land-slidings in three places, (7) one in the east, (8) one in the west and (9) one in Arabia at the end of which (10) fire would burn forth from the Yemen, and would drive people to the place of their assembly.

But there are a few portents of the Last Hour mentioned in some Ahadith that could neither be classified as minor nor major signs. These include the coming of the Great War (Malhama) and the coming of Imam Mahadi contemporaneously with the coming of the Dajjal and the descent of Prophet Jesus son of Mary (as).

For lack of a better term, I would call these the intermediate signs that bridge the gap between the minor and major signs.

Let’s analyse another Hadith of Imam Muslim:

Allah’s Messenger (s.a.w) said, “The Hour will not be established (1) till two big groups fight each other whereupon there will be a great number of casualties on both sides and they will be following one and the same religious doctrine, (2) till about thirty Dajjals (liars) appear, and each one of them will claim that he is Allah’s Messengers, (3) till the religious knowledge is taken away (by the death of religious scholars) (4) earthquakes will increase in number (5) time will pass quickly, (6) afflictions will appear, (7) Al-Harj, (i.e., killing) will increase, (8) till wealth will be in abundance – so abundant that a wealthy person will worry lest nobody should accept his Zakat, and whenever he will present it to someone, that person (to whom it will be offered) will say, ‘I am not in need of it, (9) till the people compete with one another in constructing high buildings, (10) till a man when passing by a grave of someone will say, ‘Would that I were in his place (11) and till the sun rises from the West. So when the sun will rise and the people will see it (rising from the West) they will all believe (embrace Islam) but that will be the time when: (As Allah said,) ‘No good will it do to a soul to believe then, if it believed not before, nor earned good (by deeds of righteousness) through its Faith’ (6.158). And the Hour will be established while (12) two men spreading a garment in front of them but they will not be able to sell it, nor fold it up; and the Hour will be established when (13) a man has milked his she-camel and has taken away the milk but he will not be able to drink it; and the Hour will be established before (14) a man repairing a tank (for his livestock) is able to water (his animals) in it; and the Hour will be established (15) when a person has raised a morsel (of food) to his mouth but will not be able to eat it.”

In the above Hadith, Events 1-11 are all portents preceding the Last Hour (keyword: The Hour will not be established) while Events 12-15 are portents occurring just before the Trumpet is blown by Angel Israfil (keyword: The Hour will be established).

Since in this article, my purpose is to connect the dots between oil and the Last Hour, Event 1 fits the bill. In this regard, the coming third oil shock predicted by Giambruno arising from the unhappiness of US, Israel and Saudi Arabia over the issue of the regional balance of power favouring Iran, can be seen as the lead-up to the coming Great War (Malhama), just as the war in Syria is the lead-up too.

It does not take rocket science to read the US strategy in this regard. The stalemate in the war in Syria has forced Trump to go for a two-pronged strategy – on the offensive with Iran and seeking “détente” with North Korea.

With these two “nuclear-capable” nations being taken care of through this two-pronged strategy, the US can then singularly focused its attention on Syria by taking on Assad and the Russians in Syria.

Some Muslims scholars opine that the 1980 Iran-Iraq war is already a fulfillment on this prophecy of Event 1. This is incorrect. It’s actually a fulfillment of another prophecy (another intermediate sign):

Abu Huraira reported Allah’s Messenger (s.a.w) as saying: The Last Hour would not come before the Euphrates uncovers a mountain of gold, for which people would fight. Ninety-nine out of each one hundred would die but every man amongst them would say that perhaps he would be the one who would be saved (and thus possess this gold).Muslim

Abdullah b. Harith b. Naufal reported: I was standing along with Ubayy b. Kaab and he said: The opinions of the people differ in regard to the achievement of worldly ends. I said: Yes, of course. Thereupon he said: I heard Allah’s Messenger (s.a.w) as saying: The Euphrates would soon uncover a mountain of gold and when the people would hear of it they would flock towards it but the people who would possess that (treasure) (would say): If we allow these persons to take out of it they would take away the whole of it. So they would fight and ninety-nine out of one hundred would be killed. – Muslim

The idea of gold underneath a river (Euphrates) is an allegory of black gold i.e. oil. The above Hadith can also be considered as a precursor to the Malhama just like the current war in Syria, and the impending attack on Iran by the US as predicted by Giambruno.

Also note that in Event 1, two big groups were mentioned, whereas in the River Euphrates prophecy, there was no mention of big groups, which means the combatants were limited to just the two warring sides which was the case in the Iran-Iraq war.

Also mentioned in Event 1 is the fact that the combatants will be of the same religious doctrines. The Syrian crisis initially started with just two groups – the Assad government and the Syrian Mujahidins (both of the same religious faith). Later, the devilish ISIS joined the fray (still of the same faith).

In a matter of a few years, this tripartite war became a bigger group with the participation of US, Russia, Israel, Iran and Saudi Arabia in the war. Sources say US Special Forces and Russian elite paratroopers are already on the grounds in Syria, taking part in the war.

US, Russia and Israel can be considered as of the same “doctrine”, as they subscribe to the ideology of secularism – a doctrine which is either against or neutral to religion having an active say in the public domain of life.

The old Soviet Union is an example of the former (against religion) while the US, Israel and Russia (the successor of the Soviet Union), are examples of the latter (neutral to religion).

Based on some Ahadith, the venue of the Malhama is however, not in Syria or Iran but in another country.

Stay tune on this in my future post!


GE14: A resounding victory is expected for BN under Najib

By Jamari Mohtar

May 8, 2018

We have come to the final lap of the 14thGeneral Election (GE 14) with just a day left before Polling Day.

On March 28, which is a month before Nomination Day, I have written that the question is no longer whether the ruling coalition Barisan Nasional (BN) will triumph in GE 14. BN will definitely win! The issue then was whether BN would be able to regain its two-thirds majority.

I had also predicted then BN is set to regain its two-thirds majority with the proviso that one week in politics is such a long time that anything goes, as far as outcome of a GE is concerned.

But with one more day left before Polling Day, the die is somewhat more or less cast already, as obviously a day to the countdown, things are shaping up a bit more compared to a hazy fuzzy notion when the countdown is about a week or more to go.

So, which party will be the winner?

A majority of political analysts and observers have now joined the bandwagon of forecasters predicting BN will win. For more details on this, see:






So far, none has predicted a BN victory with a two-thirds majority. Most see it as a current norm for a government with a simple majority, as seen today in many countries with a parliamentary democracy.

But is the attainment of a two-thirds victory for BN really out of the question? I don’t think so. Here’s why I think there is more than a 60% chance for BN regaining its two-thirds majority.

Sabah and Sarawak

In GE13, out of the 133 seats won by BN, a third of it was contributed by BN’s fixed deposit states – Sabah and Sarawak.

This time around, the two East Malaysia’s states can be expected to contribute more seats to BN for the simple reason of Prime Minister Datuk Seri Najib Abdul Razak’s frequent and tireless visits to the two states during the lead-up to GE14 and even during campaigning itself.

This is opposed to a nil visit by the major leaders of the Opposition, especially Pakatan Harapan’s supremo Tun Mahathir.

If time and again, Sabah and Sarawak have been proven to be the fixed deposit states of BN during election time, contributing to BN’s success at the polls, it makes more sense for the Opposition to campaign there as often as they can.

Instead, they were so peninsular-centric in their campaign strategy that it seems they have forgotten Sabah and Sarawak are parts of Malaysia. They have forgotten the painful lesson that they would have won GE13 if not for the role of Sabah and Sarawak as BN’s fixed deposit states.

But for the sake of argument, even if Tun Mahathir were to campaign in Sabah and Sarawak, it will not amount to very much, firstly because of his gaffe in describing Sarawakians as a bunch of lazy, greedy and slow people.

This is proof of at 93, his mental capacity has degenerated to the extent that he can’t tell the difference between the strategic value of when to open his mouth and when to keep it shut in the lead-up to GE14.

Secondly, Tun Mahathir’s missing in action (MIA) in Sabah and Sarawak is yet another proof that at 93, he just doesn’t have the stamina to criss-cross the whole of Malaysia to try his luck at becoming the so-called 7thPrime Minister of Malaysia, simply because his ageing body wouldn’t allow him to do that.

In the case of Sabah, the Opposition is banking on Datuk Shafie Apdal’s Warisan Party. But being new, the party has no track record. Shafie’s track record is all about when he was in Umno, serving as one of its Vice Presidents.

It’s difficult to see him carrying Sabah, as he is strongest only in his home base in Semporna (not the kretek Sampoerna) because of the fractious nature of the Opposition there. Moreover, he is also embroiled in the politics of hate – his grudges against the Chief Minister of Sabah, Datuk Musa Aman is legendary among Umno politicians.

Advantages of incumbency

In a parliamentary democracy like Malaysia, BN as the incumbent ruling coalition, is afforded with many advantages which among other things include the advantage of calling an early election (surprise advantage), the advantage of re-drawing electoral boundaries and the advantage of being still the government while campaigning is on.

These are provided for in the constitution – a universal phenomenon everywhere in the world in a parliamentary democracy. No opposition party anywhere in the world has ever sought to rescind these constitutional provisions on winning an election for the first time. Apparently, it too wants to enjoy these constitutional advantages on assuming power!

Redress or remedies for any perceived or real abuses of the implementation of these constitutional provisions can always be sought through the court.

Moreover, in a first-past-the-post system like Malaysia, Singapore, Britain and many other commonwealth countries, winning the popular votes is meaningless if you don’t win enough seats. But it doesn’t mean that with all these advantages of the incumbent, it is impossible for the Opposition to win the election.

Japan’s Opposition had proven this to be possible, when it put an end to a 54-year almost continuous winning streak of the ruling Liberal Democratic Party (LDP) in 2009, when the opposition Democratic Party (DP) won a crushing election victory.

Japan’s DP managed to do this with sheer hard work over the years whose result can only be realised many years later and not just in 10 years or less, as wished by the Malaysian opposition which tried to win with a lazy and populist short-cut via “an orgy of fake news and doctored photos”, as mentioned by blogger Raja Petra Kamarudin (See http://www.malaysia-today.net/2018/05/05/daps-red-bean-armys-orgy-of-fakes-news-and-doctored-photos/)

Taking over Mahathir’s liability

The most fatal flaw in the Opposition strategy is when it decided to make Mahathir the top dog of Pakatan Harapan and also made him their PM designate.

In all elections after Mahathir has retired, especially in GEs12 and 13, he remained a liability to Umno and BN despite being just an Umno member, and not a candidate.

All the dark episodes of his 22 year rule such as the Lallang Ops, the detention of Nik Adli Nik Aziz under the ISA in what can be seen as a politics of hate just to spite the then MB of Kelantan for bringing the state under PAS in 1990, and the BNM Forex Scandal, Umno and BN has had to defend his record.

In 2016, he did a big favour to Umno and BN when he voluntarily sacked himself from Umno, formed a new party and mutually embraced his former political foe Lim Kit Siang of the DAP by politically sleeping with the enemy.

Since then, the liability for his 22 years of misrule was taken off from Umno and BN shoulders and transferred to PH, putting the Opposition at a severe disadvantage. 

Opposition in disarray

When the vulgar-mouth DAP leader Nga Kor Ming was to be introduced as a candidate for Teluk Intan as a ministerial material candidate by Lim Guan Eng, Mahathir was supposed to be present at that event to give a boost to the candidacy by getting the Malay voters there to support Kor Ming.

But at the eleventh hour, Mahathir was unable to be present because he was not feeling well and instead sent his video recording of his speech.

Since a physical appearance is very much different from a video appearance in term of impact, Kor Ming must have been feeling slighted since he has made a sacrifice to move from a Chinese majority area of Taiping to the mixed constituency of Teluk Intan in order to be a giant killer by killing the political career of Gerakan Chief, Mah Siew Keong.

Perhaps in what can be seen as a tit-for-tat for Mahathir’s absence, Kor Ming in one of his ceramahs explained Mahathir’s chairmanship of PH as a case of using the old man to rally the Malays in bringing down Najib and once this is achived, DAP would henceforth assume power in Malaysia for the first time because by then Mahathir would be dead (he used the crude word of “mampos” to describe Mahathir’s death).

The Malays would surely feel appalled at his choice of words that he would soon lose the Malay votes in Telok Intan. PKR President, Datuk Wan Azizah, realising this, has made a scathing remark against Kor Ming, which resulted in an apology from the latter.

This is just one example of the opposition in disarray. The much talked about rivalry between Wan Azizah and PKR’s Deputy President Azmin Ali on the one hand, and the rivalry between PKR’s Rafizi Ramli and Azmin on the other hand is another example of an opposition in disarray.

And just as the campaigning entered its last lap, we heard about the resignation of PKR Penang Youth Chief Asrol Sani Abdul Razak, along with 70 others over disappointment with the way issues have been handled in the state over the years.

And in Kubang Pasu (Mahathir’s bastion while he was PM), almost 440 PPBM members led by its division deputy information chief Ab Manaff Kechik, quit the party, citing their disappointment with Mahathir, whom they described as having “gone overboard” in his political approach.

More serious is the expose of Amran Ahmad, 41, an assistant producer for DAP’s official online television channel UbahTV, who said his party will distribute tens of thousands of materials containing slander against BN and PM Najib.

Amran, who is a former special officer to DAP secretary-general and Penang Chief Minister Guan Eng, also said the “malicious” propaganda material would be disseminated in stages until polling day.

There is more than meets the eyes to this expose when Lim Kit Siang responded with a no comment to reporters when asked about it at an event in Gelang Patah.

There is actually no dearth of stories to highlight the Opposition in disarray so the above suffice for this article.

The myth of a Malay Tsunami

In the beginning, you have the Chinese Tsunami in GE13 supporting the DAP-led Opposition in their quest for power. But sadly, they only won the meaningless popular votes without winning enough seats making them the loser.

Soon after, the Opposition becomes very excited with the myth of a Malay Tsunami in GE14.

When it was pointed out to them how can there be a Malay Tsunami when PAS is no longer a part of Pakatan Harapan, their answer was the confidence they have in PAN and later PBBM through Mahathir to deliver the Malay Tsunami.

Come Nomination Day, it was put to them that if the Malay Tsunami exists, why then is DAP still putting a majority of its candidates in Chinese majority areas, and not in Malay majority constituencies.

Soon the DAP realises that in their excitement with the myth of a Malay Tsunami, they have made the mistake of taking for granted that the Chinese Tsunami will be with them when sentiments are seen to have changed marginally in favour of MCA and Gerakan who are working very hard as underdogs to wrestle back their seats which was won by DAP in GE13.

One reason for this change in sentiment is the way the Opposition has ruled Penang and Selangor for the past 10 years with the Penang “Tunnel Vision” scandal and the Ijok Land scandal happening under their watch.

On top of this, Lim Guan Eng will go down in Malaysian history as the only election candidate carrying the title of the accused. Of course we cannot call him a thief yet until the outcome of his case is known after GE14, unlike his father and Mahathir who liberally use the word “thief” on Najib when Najib isn’t an accused or even a suspect in Malaysia’s court or the court of several countries that are investigating the 1MDB saga.

So now they are in a bind because not only is the Malay Tsunami a myth but their Chinese Tsunami reality is also going to crumble.

And Mahathir now no longer talks about the Malay Tsunami. On Day 9 of campaigning, he introduced another mythical concept, the Rakyat Tsunami, while at the same time, enlisting some dinosaurs of a bygone age to help him engineered a Rakyat Tsunami.

These are all a sign of desperados, because the rakyat will be again with BN assuming power.

Black Swan or Green Swan?

In the field of Strategic Foresight, the black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.

The term is based on an ancient saying that presumed black swans did not exist – a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild.

The theory was developed by Nassim Nicholas Taleb to explain:

  • The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
  • The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
  • The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event’s massive role in historical affairs.

The Opposition would like to believe that the Black Swan of GE 14 is the hard to predict Malay Tsunami.

I would advise them to take into consideration too the Black Swan of GE14 could be the hard to predict “Green Swan” when the party which does not have any desire to be the government and is merely contented to be the kingmaker, finds itself as the KING!!!

GE14: And the winner is …

By Jamari Mohtar

March 28, 2018

At this juncture, when announcement on the date of the 14th General Elections (GE14) is just a few weeks or months away, the pertinent question is no longer whether the ruling coalition Barisan Nasional (BN) will win. Rather, the issue now is whether BN will regain its two-thirds majority.

After losing the two-thirds majority in the previous two GEs, BN looks set to regain its two-thirds majority in GE14.

One indication of this is when we see the vehemence in which some foreign media revived the stale issue of 1MDB by casting aspersions on Prime Minister Datuk Seri Najib Razak in their news report. Obviously they wouldn’t have done this if they expect BN to win with a razor-thin majority or better still, losing.

Since 2016 when former premier Tun Mahathir Mohamed left Umno and then formed a new party to fight Najib, Malaysians have been in an election mode, waiting for the mother of all elections to take place.

The tempo was raised several notches high when the Election Commission (EC) announced on March 9 its submission to Najib the final report on the delineation of electoral boundaries for parliamentary and state constituencies.

Soon after this announcement, which marked the first event to take place before an election can be called, three foreign media – the Australian, Economist and MSNBC – had fired their first salvo by spewing their venoms at Najib in what can be seen as an attempt to influence the outcome of GE 14, which must be called by August.

Between this first event and the announcement of Nomination Day and Polling Day by the EC, three more events would have to take place before election can be held. It would be very interesting to see whether the foreign media will create some pre-election ruckus at these three events. These events are:

  • Acceptance of the recommendations of the EC report by Najib in its entirety or with further inputs from him. A media statement on this need not be issued. If issued, it would be interesting then to watch whether there would be any further salvos from the foreign media.
  • The third event signalling election is nearer still would be when Najib tables the EC report to Parliament for debate and passage. The report does not require a two-thirds majority. As a simple majority would suffice, passage could be expected to be a smooth-sailing affair. The report, which is already in the hands of the Speaker of the Dewan Rakyat, is expected to be tabled in Parliament this week. Again, it would be interesting to watch whether there will be interference from the foreign media.
  • The fourth event would cause decibels to rise further when the Malaysian King, the Yang di-Pertuan Agong announces the dissolution of Parliament on the advice of the Prime Minister. By then it doesn’t matter whether the foreign media will interfere or not because the fury of the foreign media will be more than equally matched by the full fury of the government and the ruling BN election machineries.

Actually quite earlier on, many political watchers and analysts had already predicted on the inevitability of a Barisan’s victory. The only party, which is forecasting on an Opposition’s victory, is of course, the Opposition itself.

But as the adage goes, one week in politics is such a long time and between now and Polling Day, anything could happen to derail this predicted victory of BN. So it is of the utmost importance that BN does not get complacent, a point stressed repeatedly by its leaders.

Here are some factors that will clinch a Barisan’s two-third majority victory.

A newfound unity in the ruling coalition

Unity is the most critical and crucial factor, which is the clincher for a landslide victory. As one ustaz (religious teacher) told the writer: “Unity is paramount. You can have a solid candidate with good pedigree and credentials, solid manifesto and superior financial resources but without unity, everything will go down the drain.

“History has shown many instances of how a small group of people poorly equipped with weapons and without the proper training in battle but enormously equipped with the cohesive spirit of unity and solidarity coupled with a strong faith in victory, can defeat a huge and better equipped army, many times its size.”

Never before in so many years in the history of Umno is there such a solid unity and solidarity between its leaders and the rank and file on the one hand, and among its leaders and among its rank and file, on the other hand.

And this is achieved due to the political brinkmanship of Najib in disgorging the elements of disunity in Umno in the form of the 3Ms – Mahathir, Muhyiddin and Mukhriz.

When Najib sacked Datuk Mukhriz Mahathir as the Menteri Besar of Kedah in early 2016, on hindsight, this was a double whammy strategy as it led to Mukhriz’s father, Mahathir, to voluntarily sack himself from Umno.

Absent the main source of disunity in the party, Najib then went about to patiently and gradually build first, a strong and united Umno, and then an equally strong and united BN.

At every opportunity during party events, together with his deputy in Umno and BN – Datuk Zahid Hamidi – Najib impressed on the rank and file the danger of infighting within the party and coalition.

One classic example of Umno’s disunity in the past that is being oft repeated as lesson to learn at these party events was the costly defeat at the federal constituency of Sepang in Selangor during GE13.

The incumbent MP then who was heading the Umno division of Sepang became so power crazy that he engineered the removal of his division rivals, some of whom were sitting legislators of the Selangor State Assembly, such that they were not chosen as candidates at the state level for GE13.

Out of anger and spite, two of his rivals sabotaged Umno by contesting as Independents against him, giving rise to a comical situation in which the sole Opposition candidate from PAS was faced with three Umno candidates in a four-cornered fight.

Umno, as expected, not only lost the federal seat of Sepang, but also three state seats under that constituency, and the Opposition for the first time managed to win both the federal and state seats in Sepang, denting the hope of Umno to make a comeback in Selangor then.

Going forward to GE14, this will be a painful lesson that Selangor Umno will take to heart in its determination not to repeat the fiasco, as can be seen in the constant reminder of Najib and Zahid to all Umno members on the need to fight in battle array as if they were a solid cemented structure against the Opposition.

This newfound unity can also be seen in the component parties of BN. You don’t see public squabbles among members of the MCA or MIC, unlike in the past. This is not to say that squabbles did not exist but they were done behind closed doors, and were resolved very quickly, unlike the Opposition.

Whereas MCA and Gerakan used to squabble among themselves in BN in the past, there is now a concerted effort to move together in unison in exposing the hollowness of the Penang DAP and Selangor PKR state governments’ self touted Competency, Accountability and Transparency (CAT) policy.

The Penang “Tunnel Vision” scandal and the Selangor Ijok Land scandal which were whistle-blown by the combined efforts of MCA, Gerakan and Umno, had laid bare the mockery of this CAT policy such that it has earned the epithet of a “sissy and pussy meow” policy among some commentators in the social media.

Fighting fake news with an appeal to facts

In this era of post-truth world where truth is no longer determined by facts but by what those with the loudest voice say in the social media, BN is at a disadvantage, even though this loudest voice may originate from empty vessels.

This is because since the 1990s, mastery of social media belonged to the Opposition and at each GE then, they were able to make a dent on the votes garnered by BN, first by capturing Terengganu for the first time in 1999, and then Penang, Kedah, Selangor and Perak in 2008.

This time round BN has a full functioning and well-run Strategic Communications team led by Minister Datuk Abdul Rahman Dahlan and Datuk Eric See-To.

The brain behind this team is Eric. Working independently with bloggers such as Lim Sian See and Raja Petra Kamarudin, their postings in their Facebook pages are well visited and shared by netizens such that they are causing the Opposition a run for their money.

A simple but powerful strategy employed by them in their social media strategy is to confront any allegations or fake news of the Opposition with an appeal to the facts.

When the Opposition raised questions on national debt, for instance, with the ulterior motive of reviving the stale 1MDB issue by selective use of statistics, Eric and Lim used facts to show:

  • It’s the ability to pay that matters, as all nations have national debts;
  • Percentage of the budget used to service debt and interest was worst during the Mahathir’s era – more than 30% vis-à-vis the current 12% during the Najib administration;
  • Percentage of debt to GDP was worst during the Mahathir’s era at more than 100% of GDP compared to Najib’s self imposed limit of not more than 55% (currently 50.7%); and
  • An admirable foreign reserve of about US$104 billion under Najib compared to a pittance of about US$20 billion under Mahathir.

In this regard, Najib has set a good precedent by being social media savvy in using the messaging app Telegram to disseminate what he and his administration had done, are and will be doing for the rakyat. To the best of my knowledge no politician has ever done this via Telegram including the social media savvy Donald Trump.

It’s the economy, stupid!

Time and again polls have shown that the performance of the economy is a big factor in winning election. Bill Clinton used it effectively with the mantra “It’s the Economy, Stupid!” against George HW Bush and went on to win the 1992 election.

When you have continuous quarterly economic growth that beats analysts’ expectation, when you have record-breaking FDI commitments – much to the envy of other countries – from a country whose economy is the second largest in the world, and when you manage to get a scoop in getting a global iconic entrepreneur or expert with a global brand name to advise you, and when all these are acknowledged by supra-national organisations like IMF, WTO and World Economic Forum, these are the indications showing the scale is already tipped in favour of the incumbent having a solid chance of a landslide win in GE 14.

Because this shows the swan song since 2015 of Oppositionists like Mahathir and Lim Kit Siang that Malaysia is on the brink of bankruptcy is humbug and fake news. It also shows the fundamentals of the economy are basically sound, despite the challenging global economic climate or whatever problems. Also it’s a testament that the economics-trained Najib runs the economy much better than the medical-trained Mahathir.

Finally, will reviving the issue of 1MDB put a spanner in the excellent works of BN to regain a two-third majority? I don’t think so because the issue was put to the test in 2016 in two by-elections at Sungai Besar and Kuala Kangsar.

BN especially Najib was at his most vulnerable then and the two constituencies affected were marginal ones in that the majority gained by BN in GE13 was razor-thin. But the people in these two constituencies despite the loud beatings of the drums on 1MDB by Mahathir and Kit Siang returned BN with a bigger majority.

Reviving the 1MDB issue again in GE14 is akin to reviving a failed strategy on the part of the Opposition. If one keeps on using repeatedly a failed strategy, and yet expecting a different outcome, isn’t that the definition of insanity?


Jamari Mohtar is a veteran journalist who used to live and work in Singapore. He has more than 20 years of experience in the media including stints as the Singapore Correspondent for Focus Malaysia, a Malaysia-based business weekly, and Roving Correspondent of Singapore’s Channel NewsAsia.  

Economic bubble or bubble gum?

By Jamari Mohtar

Across the Straits

Focus Malaysia | March 3, 2018

In late January, the price of Bitcoin, along with other cryptocurrencies, went into a tailspin. The value of Bitcoin fell more than 60% in early February – from its lofty high of about US$ 20,000 (RM78,341) in December to below US$8,000. The global mainstream media had a field day, and here are some samples of their headlines then:

“Bitcoin biggest bubble in history, says economist who predicted 2008 crash” – The Guardian, Feb 2.

“Bitcoin and other cryptocurrencies tank” – CNN, February 5.

“Here’s How Hard Bitcoin and Other Cryptocurrencies Are Crashing Right Now” – Time.com, Feb 6.

“ROUBINI: ‘The Mother Of All Bubbles And Biggest Bubble in Human History Comes Down Crashing'” – Business Insider, Feb 2.

Can you visualise the projected image of gloating gleefully in these headlines at the fate that befell cryptos, along with the fate of those deemed stupid and idiotic enough to ever engage in investing and trading in bitcoin?

If you think I’m too sensitive, then let’s see what happened in the past each time the prices of bitcoin and other cryptos nosedived:

“So, That’s the End of Bitcoin Then” – Forbes, June 20, 2011.

“Bitcoin Is Headed to the ‘Ash Heap’” – USA Today, January 16, 2015.

“The Death of Bitcoin” – The Daily Reckoning, May 5, 2017.

Attempted Murder

As reckoned by one expert, Bitcoin has been declared dead at least 171 times since 2011.

Newsletter writers, journalists, and academics have called it a “Ponzi scheme.” Even JPMorgan CEO Jamie Dimon – whose bank has been fined billions for financial abuse – calls Bitcoin a fraud whose value is “probably zero.”

These are nothing more than attempts to assassinate Bitcoin, which failed miserably because not only does it survive but becomes stronger after each attempted murder!

Guess who got to be featured in most of these hysterical articles?

The folks, especially the Nobel Laureate-type economic professors who seem possessed by the demon of the “fear of bubble syndrome”.

It’s in their body and soul such that they sometimes sounds rather incoherent.

Take for instance, Nobel Laureate and Yale University Sterling Professor of Economics Robert Shiller who was quoted in Fortune magazine on December 21, as saying: “It seems like the dotcom bubble all over again, or the housing bubble all over again.”

This prompted a rejoinder from the managing editor of CoinDesk who’s also a former editor-in-chief of American Banker, Marc Hochstein, who asked: “So: dotcom or housing? Pick one, professor. Because there’s a meaningful difference.

“Debt bubbles, like the one that overheated the US housing market in the 2000s and ultimately sparked a global financial crisis, leave behind encumbrances.

“Tech bubbles, like the 1990s internet mania, leave behind infrastructure.”

Or take the case of Nobel Laureate and professor of economics and international business at New York University, Nouriel Roubini.

Dubbed Dr Doom and credited with predicting the 2008 financial crisis, Roubini said a sharp fall in the value of bitcoin on February 2 was the latest proof that the cryptocurrency was the biggest bubble in history and destined for a crash “all the way down to zero”.

In the same manner that Marc Hochstein asked Shiller, I would also like to ask Roubini, “So: a one-day drop in value in Feb 2 of 12% or a two-month drop in value in Feb 2 of 61%? Pick one, professor.

“Because whether it’s a 12% or 61% fall, do you know professor that Bitcoin had already crashed 94% from June to November 2011 – from US$32 to US$2?

“Or that it crashed again at 85% in November 2013 to January 2015 from US$1,166 to US$170?”

And yet the “all the way down to zero” wish of Roubini seems to be something like striving for the goal of a receding or elusive end.

In other words, as you think your prediction is right, past events have already proven you wrong and you are not even aware that this is so.

And yet in another case, Nobel Laurete and Charles R. Walgreen Distinguished Service Professor of Behavioural Science and Economics at the University of Chicago, Richard Thaler, recently said “after taking a close look at the markets, cryptocurrencies are what “most looks like a bubble” and “the market that to me most looks like a bubble is that of Bitcoin and its sisters.”

But despite his analytical prowess, Thaler remains clueless in his inability to analyse when the bubble might burst.

The Nobel Laureates are just like your admirable tip-top surgeons in their younger heydays who, as they aged, failed to keep up-to-date with the latest state-of-the-art development in surgery.

Thus, they become a menace as their outmoded surgical techniques and outlook on surgery may cost the life of the patients who are under their knives.

If the Nobel Laureates had not remained content in being cocooned in their ivory-tower mindset, then they would have realised that the volatility in the price of Bitcoin is no big deal because here are the facts since 2011:

  • Crashed 94% in June to November of 2011 from US$32 to US$2;
  • Fell 43% in June 2012 from US$7 to US$4;
  • Crashed 80% in April 2013 from US$266 to US$54;
  • Crashed 85% in November 2013 to January 2015 from US$1,166 to US$170;
  • Fell 40% in September last year from US$5,000 to US$2,972; and
  • Crashed 61% in January from US$19,206 to US$7,500.

Bubble Gum

By the middle of February, when Bitcoin fell below US$6,000, it looked dead set that these Nobel Laureates finally got it because it looked so realistic then that the crypto will go all the way down to zero.

But just a day after this precipitous fall, Bitcoin shot up from below US$6,000 to US$8,000 plus just in a single day.

As I began to write this article in the wee hours of Feb 18, bitcoin was trading at just over US$9,700, based on data from Coingecko.com.

About four hours later, and by the time I had written more than 50%, Bitcoin traded at just over US$11,000.

And finally when I had completed the first draft of this article some two hours later, Bitcoin was trading at US$10,549.04.

And yes, by the time this article is published, if the price of bitcoin were to go down the drain, the Nobel Laureates will have the last laugh, right?

Wrong! I will be the one who will have the last laugh because in all of my articles I have never for once said that cryptos are not in a bubble or the crypto bubble will never go bust.

All I said is that it is a pain in the neck for anyone to repeat ad nauseam that they are in a bubble because anyone with a modicum of intelligence knows it is.

The difference with the Nobel Laureates is that they believe a bubble must necessarily be a negative economic phenomenon.

But the hard facts have proven time and again that a bubble can span for so many years without any discernible damage to the economy until it burst.

Hasn’t the term soft landing ever occur to them? When the property market in Singapore overheated some years ago due to asset price bubble, the city-state introduced several rounds of cooling measures to either postpone the bursting of the bubble or avoid a hard landing when the bubble burst.

With a brilliant mind and perhaps a good funding in hand, the Nobel Laureates could contribute immensely to mankind if they embark on a research to better the science of forecasting the probability of when exactly a bubble will burst (within a statistically acceptable margin of errors of course!) instead of wasting time pronouncing crypto is a bubble.

As for me, I view crypto bubble like a piece of bubble gum.

When it burst, it does not metaphorically explode right in my face to cause more than bodily harm.

Rather, it just literally sticks to my face – an inconvenience, no doubt, but the sort I can easily manage and come to term with!


Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

A sordid tale of love and hate

By Jamari Mohtar

Across the Straits

Focus Malaysia | Feb 3, 2018

Screen Shot 2018-02-02 at 2.47.18 AM

On January 15, the head of the Monetary Authority of Singapore (MAS) expressed the hope that the technologies underpinning cryptocurrencies such as blockchain would not be undermined by an eventual crash in the virtual currency. “I do hope when the fever has gone away when the crash has happened, it will not undermine the much deeper, and more meaningful technology associated with digital currencies and blockchain,” said MAS’ managing director, Ravi Menon, at a UBS Wealth Insights event in Singapore.

That statement of Menon has kept me thinking hard on the relationship between cryptos and the underlying technology behind their creation, the blockchain.

While some business leaders, bankers and regulators talked in a schizophrenic manner as if the two (cryptos and blockchain) are unrelated in the sense of professing their deep love for blockchain and, at the same time, their equally deep disdain for cryptos, regulators like Menon and his counterpart in Britain, Mark Carney, are very much aware of the obvious relationship between the two.

How can you condemn cryptos like bitcoin as a fraud and at the same time, absolve the blockchain technology behind their “fraudulent” creation as a blessing, like what Jamie Dimon of JPMorgan did way back in September? By the way, last I heard he has repented. Good of him to repent!

Work in progress

What many seem not to realise in their love affair with distributed blockchain ledger technology (DLT) is that it can’t, as yet, prove as a disruptive technology that will change positively and productively the way we do things now, as it is still a nascent technology.

You can’t even quote any of its use-cases being translated in the realm of reality now, as they are all works in progress.

But it is sufficient for me that the technology is promising when many Fortune 500 companies are beta-testing its use-cases in various aspects of life such as finance, trade and registry.

MAS and the Bank of England (BoE) are involved in extensive research on DLT because they see the systems and technologies underlying cryptos, as an “active area of interest”.

Addressing British parliamentarians, Carney said work undertaken by the BoE’s financial technology accelerator shows the potential value of DLT on a systemic level.

“You get those benefits by stopping at a level much higher than the retail level. You don’t end up with those financial stability risks, you get financial stability benefits. And you save huge amounts of computational energy intensity.”

Despite this, both the BoE and MAS are not in a hurry to embrace the new technology. Speaking for BoE, Carney said: “We’re also disciplined. If we’re going to apply something to the core of the system, it’s going to need to meet five sigma quality rating.”

Sigma rating – the highest being six sigma – refers to a set of techniques and tools for process improvement in the quality of output by identifying and removing the causes of defects and minimising variability in manufacturing and business processes.

Introduced by engineer Bill Smith of Motorola in 1986, Jack Welch made it central to his business strategy at General Electric in 1995.

Using a set of quality management methods – mainly empirical, statistical methods – sigma rating creates a special infrastructure of people within the organisation who are experts in these methods by following a defined sequence of steps with specific value targets. These include reducing process cycle time, pollution and costs, and increasing customer satisfaction and profits.

But Carney also issued a disclaimer on his views on a fast-evolving blockchain technology when he said: “What I say on this topic today will be outdated six months from now because things are moving so rapidly.”

Herein lies what many fail to grasp: Because the use-cases for DLT are evolving at a fast pace and haven’t even had the chance yet to emerge as disruptive applications in the real world, the stage is set for the volatility of cryptos in general especially bitcoin, the most famous cryptos of them all.

This accounts for the speculative nature of crypto trading but do you blame cryptos alone for this speculation? The hypes surrounding blockchain technology especially about its disruptive use-cases, which hasn’t emerged in the realm of reality yet, and due to its decentralised and public nature in the known domain, had fuelled the speculation on the value of the digital tokens supporting the blockchain.

This speculation – excessive or not – will abate once the “alleged” disruptive nature behind the use cases of DLT technology become real – as in being applied in the real world.

So where does this schizophrenic logic lie in loving blockchain and hating cryptos in this sordid love-hate affair? It reminded me of the love-hate affair between Malaysia and Singapore under former premier Tun Mahathir Mohamed, which the current premier, Datuk Seri Najib Razak, has decided to consign it to the dustbin of history.

Fundamental of Blockchain

Digital tokens especially cryptos represent a consensus mechanism. They are the means by which the public participates in public blockchain protocols.

If the blockchain protocol becomes valuable due to its promising potential applications in real life, then the digital tokens, through which one participates in it, accrue value.

In this sense, one can view cryptos as having intrinsic value by virtue of being backed both by technology and the use-cases the technology will make possible once the beta testing stage proceeds smoothly.

If the outcome of the beta testing proves to be a failure, then the cryptos that are being supported by the technology will go down in value.

Network effect

The other element fuelling the speculative nature of cryptos is the network effect, defined as a phenomenon where bigger numbers of participants improves the value of a product or service.

The internet is a good example of the network effect. Initially, there were few users of the internet, and it was of relatively little value to anyone outside of the military and a few research scientists.

As more users gained access to the internet, adding more content, information, and services, there were more and more websites to visit and more people to communicate with. The internet became extremely valuable to its users.

Some experts view bitcoin as a social network and that 94% of bitcoin’s price move is explained by Metcalfe’s Law that says the value of a network is the square of the number of its users. It’s an equation that shows as more people join a network, the more valuable the network becomes.

Valued in the billions

Network effect is why Google, Facebook, and Alibaba are worth US$689 bil, US$500 bil, and US$450 bil, respectively. When a network becomes valuable, it attracts even more users.

Ether’s rise to fame (and volatility of course!) is driven by the network effect of the Etherium Protocol, which features a smart contract. To use the Etherium Protocol to write and execute a smart contract, participants in the transaction must have an ether stake in that protocol.

More smart contract-based blockchains have emerged now, with different cryptos such as Cardano, Neo and Cindicator, breaking the Etherium Protocol “monopoly” on smart contract.

Hence, those networks that are best designed for executing smart contracts will get more popular. And the more popular the network, the greater the rise in the value of the network’s cryptos.

However, there are vested interests which realise their businesses or position will become obsolete once the use cases of blockchain technology emerge in the real world.

Negative spin

And these are the vested interests that had, have and will always spin a negative take on cryptos ala divide and rule by hailing blockchain technology as a game changer and pouring scorn on cryptos and crypto trading, when the two are actually very much related and move together in unison.

Their negative spinning on cryptocurrencies is the cause for all the crypto fears to be born – the fears of the FOMO, FOLO and FOB.

To recap FOMO stands for Fear of Missing Out, FOLO is Fear of Losing Out and FOB is Fear of Bubbles.

Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

Crypto stabilisation policy

Screen Shot 2018-01-19 at 5.17.20 PM


By Jamari Mohtar

Across the Straits

Focus Malaysia | Jan 19, 2018

We have seen in the crypto mania of last year, the emergence of FOMOs who were folks that have a fear of missing out on the cryptocurrency boom. In turn, the FOLOs are those fund managers and editors of investment advisory newsletters who have a fear of losing out on clients and subscribers to the crypto cheer-and-boom fund managers and newsletters.

Meanwhile, the FOBs are folks who have a fear of bubble syndrome. I have touched on the first group of FOBs – the Nobel Laureate economic professors and the second rate economic professors without a Nobel Laureate.

The other group of FOBs that I will elaborate on now is the regulatory authorities. They are concerned that the FOMOs and FOLOs will get buried under a mountain of debris of non-existent metallic cryptos, should they continue with their speculative investment in the digital tokens.

Among the notable exception (not a FOB) is the head of Bank of England, Mark Carney who told British parliamentarians that bitcoin’s meteoric price gains do not pose a threat to global financial stability.

Although Carney said the upward trajectory in bitcoin’s price is “significant” and more like an “equity-type risk”, he nevertheless does not view bitcoin as a “financial stability issue”.

Another exception is the Monetary Authority of Singapore (MAS) whose cautionary statement issued on Dec 19 did not have a single word of ‘bubble”.

MAS is just concerned with four areas of crypto investment:

  • The probability of a high occurrence of fraud in an unregulated area of the economy, absent the regulatory safeguards for the investors;
  • The spectre of an unprecedented rise in money laundering and terrorism financing;
  • The real possibility of hacking; and
  • The uncertain outcome of excessive speculation.

These are valid concerns because they may result in the crypto investors losing everything, as emphasised by MAS. Put it differently, MAS wants crypto investors to be “mature” enough to take ownership of the risks in their crypto investment and not to blame regulators when their investment goes awry.

Although the concern of the regulatory FOB folks is genuine, yet they seem to be clueless on the consequences of their refrain not to invest in cryptos becoming a self-fulfilling prophecy.

When the majority of all crypto investors listen to them and simply give up on investing in cryptos, the outcome could give rise to a spectre of the global economy being caught in a deep recession.

This could happen because massive fiat monies end up being locked up in computer networks in the form of cryptos because investors simply do not care about withdrawing their cryptos to fiat monies in obedience to the refrain of the regulatory FOBs.

Crypto policy, here I come …

Taking a leaf from both monetary and fiscal policies where they are being utilised by policywonks to fine-tune the economy for stabilisation, allocation, distribution and growth objectives, a crypto policy can be devised as an additional tool to fine-tune the economy.

We know from standard macro-economic textbooks, during a recession, an expansionary approach can stimulate the economy by increasing the money supply and/or decreasing interest rate, and lowering the tax rate and/or upping targeted government expenditures on infrastructure development and social spending.

An example of the former is the spending to develop the East Coast Rail Line, while the latter could include cash benefits and direct in-kind provision of goods and services that are targeted at low-income households, the elderly, disabled, sick, unemployed, or young persons such as BR1M.

An expansionary crypto policy could also be devised as an additional tool of fine-tuning the economy via suspending the deposit service of crypto exchanges and allowing their withdrawal service.

When deposit service is suspended, it means money, which is already in short supply during a recession would not be reduced further by being sucked inside the computer network of cryptocurrencies. Allowing withdrawal service implies money supply receives the needed boost when investors withdraw their cryptos for fiat monies.

The effect on the economy will be the same as increasing the money supply, which in turn could boost consumption and investment that will help to steer the economy away from a recessionary spell.

Once the economy has recovered, the continuation of expansionary policies will result in the overheating of the economy, causing inflation to rear its ugly head in the form of asset price bubble.

In this case, a contractionary approach will help the economy to cool off via contractionary monetary and fiscal policies when money supply is reduced and/or interest rate is increased, and tax rate is raised and/or government expenditures is reduced.

Again, a crypto policy can be handy but this time, a contractionary one to help cool off the economy by allowing deposit service of crypto exchanges to operate to suck in the excess money supply, while their withdrawal service is suspended so that the overheated economy won’t be flooded with monies.

Of course, textbook recipes are simplified model made under a ceteris paribus (everything else remain constant) assumption and often did not take into account the trade-offs in term of the four objectives mentioned earlier.

So the policymakers will have to use their brainpower to decide on a mix of all policies to be implemented to help in the recovery of an ailing economy suffering from either a recession or inflationary pressures.

Official appointment of crypto exchanges

Malaysia is in the very best position to implement the crypto policy above, judging from the statement made by Second Finance Minister, Datuk Seri Johari Abdul Ghani who on Jan 2, announced “plans to recognise regulated digital currency exchanges (DCEs)” by appointing them officially as a recognised DCE.

“The appointments will only be done with the proper cryptocurrencies regulation in place,” he said.

Although the regulation will model the measures taken by regulators in Australia and China recently, Malaysia is one step ahead because none of these countries have ever talked about the official appointment of DCEs by the authorities.


Jamari Mohtar is a veteran journalist who used to live and work in Singapore. Comments: editor@focusmalaysia.my

Riba in the Forex Market

By Jamari Mohtar

Jan 16, 2018


IT WAS some 35 years ago that I learnt in detail about Riba (usury) as an economics undergraduate at the International Islamic University Malaysia.

One particular course, Fiqh For Economist, had me riveted on the juristic discussion on Riba, while the course on the Evolution of Western Economic Thoughts gave me, among other things, a good grounding on the various theories justifying the existence of interest in the economy.

Some of the takeaways from these two courses that are still etched on my mind are:

  • Riba and interest are both prohibited in Islam because both pertain to the receipt of, or payment for, something that involves an unjustified countervalue;
  • Usury (excessive amount of interest) is riba, but riba does not necessarily mean usury. There is no English equivalent to the Arabic word, “riba”;
  • The absence of interest in an Islamic economy doesn’t mean that capital (as in one of the factors of production in an economy) is free. The rate of return becomes the pricing mechanism that allocates the efficient use of capital;
  • While interest is an institutional reality, rather than an economic necessity, rate of return is both an economic necessity and an institutional reality;
  • As borrowing-lending relationship is an exchange process that does not create surplus value, as opposed to a production process that creates one, the payment or receipt of interest in a borrowing-lending relationship is unjustified.
  • Trading is also an exchange process, but unlike the exchange process of borrowing and lending, trading creates surplus value because what is being traded (exchanged) consists of either intermediate goods or finished goods that have undergone a production process. Moreover, there is then the value-added process to market and sell the goods. Thus, seeking profit via trading is permissible.
  • In order to make borrowing-lending relationship permissible in Islam, one could either demand just the principal amount at the end of the relationship, or one could convert the relationship into a trade through an equity relationship via partnership (syirkah) or joint venture (mudarabah), or through other instruments of Islamic financing that are also equitable such as murabahah (cost plus mark-up), ijarah (leasing), wakalah (agency), etc.; and
  • Riba can be present in both loan and trading transactions.

Contradictory classifications

To refresh my mind on the topic of riba, and keep up with the recent development on the issue, I did some research on riba and found two contradictory classifications of riba.

The first classification in simple schematic diagram is shown below:

class1The diagram below is the second classification:

class2The two diagrams above show glaring contradictions in that the neat division of riba into interest in loan (anNasiah) and interest in trade (alFadl) in the first diagram is rendered chaotic by the second diagram when both anNasiah and alFadl come under alBuyu (interest in trade).

So the big question – is anNasiah an interest levied on loan or trade? After all these years of Islamic banking and finance experience, I’m surprised that no one attempts to reconcile this contradiction.

Let’s get to the crux of the matter.

Riba anNasiah

Going by the primary sources of Islam, the classical jurists are unanimous in saying that anNasiah is the riba mentioned in the Quran, while alFadl is mentioned in the Ahadith.

That is why anNasiah is also known as the Riba of the Quran or Riba alJahiliyyah because the Quran refers to anNasiah as the riba practised during the Jahiliyyan period (Age of Ignorance before the advent of Islam). So, Riba alQuran and Riba alJahiliyyah and for that matter, Riba alQardh and Riba adDuyun are all synonyms of Riba anNasiah.

Why then do you sub-divide anNasiah into all these synonyms as a sub-classification when they are all the same thing, as seen in the first diagram or sub-classifying adDuyun into alQardh and alJahiliyyah, as in the second diagram? It is superfluous to have a sub-classification on the basis of synonyms because there is really no different among them to justify a sub-classification.

It makes more sense to sub-classify anNasiah into just Riba alJali (obvious interest) and Riba alMubashir (direct interest) in the first diagram. In alJali, “obvious” is a new element in the synonymity, while in alMubashir, “direct” is the new element.

Riba alFadl

 The above riba is mentioned in the Ahadith of the Prophet (peace be upon him). As such, Riba asSunnah or Riba alBuyu’ are synonyms of alFadl that do not justify a sub-division, simply because they are all the same thing.

Riba alGhayr (indirect interest) and Riba alKhafi (hidden interest) are sub-division in the first diagram that is acceptable because the new elements of synonymity are “indirect” in the former and “hidden” in the latter.

Excess in countervalue

I had a problem grasping the concept of a countervalue during my varsity days but the concept is actually very simple to understand.

When you buy a 2kg sugar from your grocer costing say RM 5, you hand him a 5-ringgit note (the medium of exchange) that you have to part away with, and in return you get a just countervalue, which is the 2kg sugar.

Similarly when someone lends you RM5, he had to part away with his 5-ringgit note but at a time mutually agreed by both, you’ll return him the 5-ringgit which is a just countervalue for the lender. If the countervalue becomes more than RM5 at the agreed time of settlement, this is an unjust countervalue because the excess amount cannot be justified.

The element of interest on excess countervalue is both present in interest in loan and interest in trade. So strictly speaking, sub-classifying riba on the basis of excess in countervalue for trade, which gives the impression that such element is not present for loan is not that accurate as depicted in the first diagram.

Similarly, to say that delayed-payment interest is present in interest in loan as in the first diagram is also not accurate as delayed-payment interest can also be present in interest in trade.

The only sensible thing in the first diagram is its neat division of riba into interest in loan and interest in trade.

The second diagram too has a neat division like the first diagram i.e. Riba adDuyyun (interest in loan) and Riba alBuyu’ (interest in trade) but it becomes problematic when it puts Riba anNasiah as interest in trade while the first diagram puts anNasiah as interest in loan, leading to the contradiction I mentioned earlier.

I also notice in my research that the division of riba into anNasi’ah and alFadl is the approach favoured generally by the professional Islamic bankers and Muslim economists, while the sub-division of Riba alBuyu’ (interest in trade) into anNasi’ah and alFadl is generally favoured by the fuqaha (jurists).

And both are sitting together in Syariah supervisory board of Islamic financial institutions. I just hope that they can reconcile this glaring contradiction.

Foreign Exchange Market

As a matter of general principle, since trading in a forex market is a worldly affair that has nothing to do with rites of worship (ibadah khusus), it is permissible to trade there unless there is a nash (primary evidence) from the Quran and Sunnah expressly stipulating that trading in a forex market is forbidden.

There is no such nash in forbidding the trading simply because the forex market and all the sophisticated techniques of trading in it are a modern invention.

“Thou knowest best thine own worldly affair”, says a Hadith of Prophet Muhammad (pbuh). (Soheh Muslim)

Let’s now dissect the various transactions in a forex market.

First, you have margin trading, which is basically your financial broker advancing you some monies for you to trade in the forex market.

This is a loan transaction where it is not permissible in Islam if the repayment involves interest (Riba anNasi’ah). But this does not negate the permissibility of trading in a forex market because margin trading is not an integral component of the forex market. You can do away with margin trading. If you don’t have enough money to trade in the forex market, then don’t trade there.

Next, the trading of currencies itself in a forex market.

In my term paper while taking a course on International Finance in my final year at the IIUM, I proposed that trading in the forex market involves Riba alFadl. I have lost the term paper but from what I can recall here was my argument.

Riba al-Fadl, which is interest in trading, occurs when you exchange goods of the same genre, as seen in the Hadith below:

From Abu Said al-Khudri: The Prophet (pbuh), said: “Do not sell gold for gold except when it is like for like, and do not increase one over the other; do not sell silver for silver except when it is like for like, and do not increase one over the other; and do not sell what is away [from among these] for what is ready.” (Soheh Muslim)

In that term paper, I argued that it doesn’t make sense for one to engage in barter trading involving the exchange of say, 8kg of gold for 8kg of gold. Might as well, you don’t trade. So why is the Prophet (pbuh) advocating such a trade?

Then comes the following Hadith:

From Abu Sa’id: “Bilal brought to the Prophet, peace be on him, some barni [good quality] dates whereupon the Prophet asked him where these were from. Bilal replied, “I had some inferior dates which I exchanged for these – two sas (quantities) for a sa.” The Prophet said, “Oh no, this is exactly riba. Do not do so, but when you wish to buy, sell the inferior dates against something [cash] and then buy the better dates with the price you receive.” (Soheh Muslim)

In the above Hadith, which is a case of trading goods of the same genre (dates versus dates) but with different quality, it is still riba alfadl if the amount traded is not equal, but the Prophet (pbuh) taught us how to avoid riba alfadl by advocating the use of a medium of exchange (monies).

What this implies for the forex market is, since the trading of currencies falls under trading of goods (or entities) of the same genre i.e. currency versus currency, Riba alFadl is obviously present.

If one wants to argue that the trading in the forex market is that of trading same genre entities with different quality in the sense that the Ringgit is obviously of a different quality from the US Dollars, then it is still Riba alFadl if the trading is done on the basis of a different price, as in 1RM is equal to USD0.253 as my currency conversion app shows.

As it does not make sense to trade on the basis of 1RM is equal to USD1 unless economic and political developments in Malaysia comes to a stage where there is parity between the Ringgit and the US Dollar, it simply means trading in a forex market involves Riba alFadl.

Unless; one sells the ringgit for some medium of exchange (?), and with that medium of exchange (?), one then buys the USD. This is taking the cue from the Hadith about trading of dates of different quality.

I pose a question mark in bracket because in the case of trading goods of the same genre with different quality, the medium of exchange is money (currency).

But in the case of trading a pair of currencies with different quality, the pertinent question to be asked is what is the medium of exchange for currencies? To make it more enigmatic, the question can be rephrased as: what is the medium of exchange for mediums of exchange?

I remember vividly ending my term paper with the following challenge: Until and unless Muslim economists and the fuqahas can create or devise a medium of exchange for currencies, then I’m afraid trading in the forex market will always involve Riba alFadl.

Before I end, I would like to make two additional remarks:

The first is using a medium of exchange is just one condition to avoid Riba alFadl in a transaction involving same genre entities with different quality. The Hadith below specifies another condition – it must be hand to hand i.e. a spot transaction as opposed to a delayed payment or credit transaction:

Ubaida b. al-Simit (Allah be pleased with him) reported Allah’s Messenger (pbuh) as saying: “Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand.” (Soheh Bukhari).

The second remark, which I also included in my term paper, is the genuine disadvantage for traders and businessmen involved in international trade who are faced with a risk exposure to movement of currencies on a daily basis such that they need to engage in the forex market for hedging and arbitraging purposes, otherwise their business will be ruined.

In such a case, there is a maslaha (public interest) principle for allowing them to hedge or arbitrage in the forex market under the Islamic principle of darurah (dire need).

The same goes for the government, which needs to hedge/arbitrage against risk exposure of currency movements that will disadvantage the country. As pointed out by Second Minister of Finance Johari Abdul Ghani, this is not the same as gambling in the forex market.

Wallahu musta’an.