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Jake Van Der Kamp

'Councillors are understood to have failed to agree on the new system for fear it might lead to increases now inflation has returned.'

SCMP

November 10

TIME FOR ANOTHER dose of that 'totally speculative and groundless' commentary on the new formula for establishing bus fares, the only sort of commentary available to us while our government keeps the formula behind those closed doors that our chief executive claims to have foresworn.

It is an interesting notion that our executive councillors have come up with - the new formula is apparently not appropriate because it may result in raising bus fares, which could produce higher inflation.

If this is the way their thinking runs I have the complete answer to inflation for them. All they need do is rule that never again may anyone raise prices for anything at all. Hey presto, zero inflation into eternity. A random collection of old men will have proved false all of the world's previous thinking on monetary economics.

But let us play with the numbers a little. Let us say that in September 2003 we permitted a  5 per cent increase in bus fares and then did it again in September last year. In September this year, however, we said that 10 per cent is enough and allowed no more. What would the result have been in our inflation rate?

The first chart gives you your answer. The red line represents the reported year over percentage increase in the consumer price index and the blue line what it would have been with these hypothetical bus fare increases.

As reported, inflation in August was 1.31 per cent. With these bus fare increases it would have been 1.42 per cent. The difference is as slight as it is because bus fares have only a 1.94 per cent weighting in the CPI.

But now look at the very right side of the chart. In September this year inflation on both counts would have converged again and been an identical 1.63 per cent. The effect of past bus fare increases would be entirely gone. A one-off increase in any component of the CPI has an impact for only one year when inflation is measured on a year-over-year basis, as we do it.

I now leave this to the Executive Council to puzzle out. Who knows? It may also be a process that lasts into eternity.

'Assistant director [Food and Environmental Hygiene] Thomas Chung Wai-hung told another RTHK programme the public was not immediately notified because the quantity of malachite green in the tainted sample would not affect consumers' health. The brands were not named out of legal considerations, he said.'

SCMP

November 10

TWO QUESTIONS FOR YOU, Mr Chung. There are trace elements of harmful substances in almost everything we eat and if there was really so little of this particular proven carcinogen in these cans of imported fish as not to affect the health of those who eat it, why bother telling grocers to take it off the shelves?

Second question. If this is perhaps not really the case and there is good reason for concern, might there also be legal considerations for you in not naming these brands?

You may have avoided lawsuits from the producer, importer or retailer by not naming them but you open the way to legal action by consumers alleging negligence on the part of your department. It is worth bearing in mind, don't you think?

AND, TALKING OF things that do not quite make sense, here is another that has me scratching my head.

You know how the theory has it that share prices on our stock market must now go down because interest rates in the United States are on their way up, which means our own interest rates will go up. As everyone knows, lower interest rates mean higher share prices and higher interest rates mean lower share prices.

I now refer you to the second chart on the relative movement of US interest rates and the Hang Seng Index since the beginning of this century. Funny thing, isn't it? This chart seems to say that when US interest rates go down, the Hang Seng Index also goes down and when US interest rates go up, the Hang Seng Index goes up along with them. Hmm ... what was that theory again?



Common sense taken for a ride by closed-door bus fare debate