The world financial crisis is very real and it will hit us too
Posted by: Foong in Current Events, Money IssuesIt is worrying that amidst all these political shenanigans, the world financial crisis have been pushed to the background and it is good that this letter in Malaysiakini brought it up. The impending global recession was ignored and from the looks of it, many Malaysian politicians are pretending that it is not happening and that Malaysia will be practically untouched by it.
Er, yeah. Sure. US is suffering the financial crisis and going into recession while Malaysia will weather it all. Talk about delusional idiots. Seems like they are just too busy quibbling over their own positions in their political parties than tackling this very real problem that will affect every single Malaysian except those politicos with millions stashed away somewhere.
Just look at how delusional some people are or is it just plain stupidity?
Meanwhile, Abdullah said Malaysia could withstand the impact of the financial turmoil sweeping across the US, Europe and already reaching parts of Asia, including Singapore - which has already declared a state of recession.
Abdullah also pledged to keep the ringgit on its current managed float regime, adding that the country could ward off economic contagion with its political stability and strong economic fundamentals.
So, the financial crisis is affecting US, Europe and even Singapore but Malaysia will not be affected at all? Who the heck is he kidding? What, he thinks we are all three-year-old kids? He thinks we don’t have brains to think, eyes to see and ears to hear?
What strong economic fundamentals is he talking about? As it is the inflation rate of this country is increasing and costs of living are skyrocketing. The income of the people are not getting any higher and it is just a matter of time before smaller companies suffer and start to close down. This means retrenchment and unemployment.
And what is the government doing about it?
Nothing. Zilch. Nada. They are too busy squabbling over unimportant things like party elections and arresting people under the ISA and Sedition Act. So, how will the world financial crisis affect us? According to JT:
How will this affect us? Some say not significantly, since our exports to US is only 16% of total exports. Our reserves exceed US$119 billion. Our banking system has only 2.5% non-performing loans and remains liquid. We have foreign direct investments, never mind if the net is negative.
That’s self-denial! We will be affected severely and that, too, in the next 9-10 months. Why? Deny as we will, we are an open economy and our exports to the US, Japan, China and Europe will trend downwards – why do they need our products in a recession?
Our reserves will fall with trade deficits, capital outflows, and the ever persistent negative services account. Banks will ‘slow down’ credits, businesses will face lower turnover, and the job market becomes tighter.
See? Need I say more? So, why are they hoodwinking us or are they really that delusional or daft? For once, Anwar Ibrahim has seen reason and stopped talking about taking over the government which could further shake the economy. For all we know, he is probably planning something in the sly but is keeping mum and will spring a surprise on us all when the time is right.
Pressed on the question of whether he would table a no-confidence motion against Abdullah, Anwar answered: “For now, our focus is on the economy.”
Rightly so. The world financial crisis is very, very real and we will feel the effects one way or another, so, brace yourselves now and don’t hope too much on any intelligent contingency plan from the current government. When you don’t have anyone with intelligence there, you should not expect any intelligent decisions from them.
Although the shares are up yesterday (according to this article in Malaysiakini), don’t expect that it will continue nor even think that it will reflect the market conditions of days to come. Brace yourselves.
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There a man who had three girlfriends, but he didn’t know which one to marry. So he decided to give each one $5000 and see how each of them spends it.
The first one goes out and gets a total make over with the money. She gets new clothes, a new hairdo, manicure, pedicure, the works, and tells the investor, “I spent the money so I could look pretty for you because I love you so much.”
The second one went out and bought new golf clubs, a CD player, a television, and a stereo and gives them to the man. She says, “I bought these gifts for you with the money because I love you so much.”
The third one takes the $5000 and invests it in the stock market, doubles her investment, returns the $5000 to the man and reinvests the rest. She says, “I am investing the rest of the money for our future because I love you so much.”
The man thought long and hard about how each of the women spent the money, and then decided.
QUESTION: Who did the man marry?
ANSWER: The one with the biggest breasts
I wonder who calculated that Malaysia got US$119 billion in foreign reserves. This number means absolutely NOTHING.
The number we should be looking at is the size of Malaysia’s sovereign funds. And this number is ZERO. Let me explain.
A country is just like your home. You have income and expenditure and savings. The country’s income is mainly made up of the tax revenue it collects, expenditure is what the Government spends and if income is greater than expenditure than it is sais the country has a surplus budget. The surplus is like a kind of savings and the Government invest and this investment is generally known as the country’s sovereign funds.
If the country’s expenditure is greater than it’s income, then we have a deficit budget. The deficit is funded by borrowings and this is known as the National debt.
Malaysia has had a deficit budget for the last 20 years. It has no savings and a great big National Debt. So, in times of crisis where is the Government going to find the funds to stimulate the economy??
In the past, Dr M had done this in 3 ways.
1.) Get Petronas to fund some major projects eg the Petronas Towers.
2.) Pinch some money from EPF e.g. get EPF to buy the Bumiputra bank. Who else would buy a bank that is insolvent. Most of it’s loans are under performing because it simply lend to people who cannot afford to repay.
3.) Borrow more money. Diam was famous to go overseas to borrow fro Japan & the UK and pocket hundreds of millions as commission. He is the only Finance Minister in the world to retire a multi billionaire.
Now, back to the question of the US$119 billion in foreign reserves. This is mainly the result of two things.
a.) Foreign currency coming in as foreign investment i.e. IBM decides to invest US$100 million in Malaysia and bring that money, that increases the country’s foreign reserve by US$100 million but this is NOT money the Government can spend. It does not belong to the Government.
b.) Malaysia exports more than it imports, thus we have a positive balance of payment and this increases our foreign reserves.
Now, you tell me what the size of our foreign reserves has to do with the price of eggs? How is that relevant to the current financial crisis. All this means is when Malaysia has to send money overseas it does not have to buy US dollars and see an outflow of our ringgit.
And our idiot Finance Minister is barking up the wrong tree. There is no need to peg our currency he says. Our currency remains strong he tells us. And indeed this is true.
But isn’t better to have a weak currency when we forecast a drop in our exports because of a recession in our major trading partners economy? A weaker ringgit will see our exports become cheaper to our overseas customers and will help boost our exports and production.
A weaker currency will also make it less desirable and more expensive for foreign owned companies to spend money home to help out their oversea parents.
Australia has allowed their dollar to free fall up to 25% to contain any outflow of it’s foreign reserves. They also have zero National debt and over one hundred billion invested in sovereign funds and yet they are worried and measures have been taken to avoid a recession, Yet Malaysia is doing nothing except bullshit it’s people that everything is rosy and she will be ok. Yeah, right, Malaysia is so smart.
Cash and gold
You make your stay
The contingency plan
Staying alive on the ground
Financial crisis and depression
The economic evils when one forgets
Greed and corruption wiring in
And you think of the financial experts
They don’t see it coming, do they?
The South of the border
Under technical recession
About 300,000 Malaysians will be affected
By next year the result will flow in
Here in sleeping land
Cinderella partying after midnight
Forget about economic woes
Thinking less of the suffering millions
The political fools gunning for positions
Forgetting about the economic woes hitting the country
The leaders of these parties never see beyond its shores
The eyes full of glittering shine
The power and wealth
Millionaires don’t worry
Living in luxury enjoying the scenes
When others will face the economic woes
Worrying about tomorrow; they keep cash and gold
The fools we elected this government
Never issue true statements
Economic fundamentals are sound
The cost of living under control on the ground
Ask the housewives and the salaried workers
They tell you “Go to hell!”
Ahmad and Ah Seng meet in Seng’s office
A ‘Business must be good’
AS ‘You mean in Malalysia?’
A ‘Where else? PM says so’
AS ‘Listening to the sleeping guru
You better take your money
Invest in GRO….’
A ‘So good ah? I have to worry ah?’
AS ‘You want business. You reinvent it
See many people depressed. Need to get away
They want to feel good pretending business as usual’
A ‘Ada jalan ah?
AS ‘UMNO election is in full swing. Time to try your luck
Malaysia everything can. They don’t talk about economics.
They talk kok politics. So you can invest. Sure get kow kow one’
Wanna know something interesting, Foong?
The world financial market is very very mood based. Of course its still fundamentally based, but moods nonetheless affect the market. And all the doom and gloom articles like this one, drops public mood even further.
So, if the markets drop because of the doom and gloom moods, here’s a food for thought: wouldn’t your article be part of the cause?
Chewxys last blog post..Trying to Get into Honours Year
engineer: since when does the Malaysian government ever act smartly / intelligently?
caravanserai: aptly said!
Chewxy: When the weather is stormy, not talking about it will not stop it from being stormy. Painting rosy pictures of the economic situation will not make our currency stronger, increase our country’s sovereign funds, reduce our National Debt, stop the global recession…so get real. Economics is more than what people say or write about it. The government has been painting a rosy picture of the state of our economy all this while but I don’t see it helping any as our currency continues to weaken and inflation continues to rise.
Chewxys, …. Fundamentals are normally based on historic facts. One looks at the past and try to formulate some basic rules or fundamentals.
The future is usually guided by expectations. How we react today is determined partly by what happened in the past and our expectations for the future.
So, what you say about the gloom and doom in this article is the author’s expectations about what is going to happen next and the author may well be right.
Remember, we drive the car looking out the front windscreen, not looking at the rear view mirror and saying “fundamentally the road behind us is straight and therefore the road in front should also be straight and forget any expectations that the road ahead may indeed be full of curves and bends.