Financial Crisis vs Malaysia Crisis vs MT Crisis

I have taken a long leave from blogging not due to health or busy schedule or anything. It’s just that I was in no mood writing about what is going on in the world. I chose to be an observant and do more thinking than talking or writing. I took two steps back; go to the highest building so that I would be able to view the world better.

I have to admit that my priority has changed a bit. Politics to me now is secondary, though still very important, but top of the list is world affair. What is happening in Malaysia right now is a comedy theatre in a little house while the whole city is burning down. The fire will come eventually, so you have a choice either continue watching this comedy or prepare yourself with fire extinguisher, blanket, water and medicine so that when the heat become unbearable, you can still save yourself.

The current world financial crisis is something that we never experience before, at least not in my lifetime. During the last Asian Financial Crisis, it was limited to Asia and the rest of the world was OK. Still, it took more than 5 years for everything to stabilize..not back to normal though because whenever there is a crisis, there will be winner and loser and the wealth will be redistributed. After the Asian Crisis, the biggest winner was of course Singapore who took the opportunity to attract all the cash into its financial system and bough government assets especially in Indonesia at firesale prices.. This time around it’s still too early to guess..A big bank like Leman Brothers which was valued at $30 billion were sold for $200 million in matter of weeks…so the mystery is…where did that 29.8 billion disappeared into..

This crisis was caused by pure human greed..the banks especially the investment banks in their desire for profit..bought toxic loans..repackaged it and sold it to investors, who happened to be also the speculator from the hedge fund..collaborated with rating agency to give a good rating..so then the toxic can be sold to conventional banks where average Joe like you and me save our money….They then use the proceed to prop up the equity value and once it cannot be propped up…they go and buy commodities like oil,steel, wheat, corn, coffee etc..
This naturally pushes the living cost through the roof..so the people who took the toxic loan, especially in the US can no longer repay their loan..which resulted the investment no longer can pay the return on the repackaged loan which was mostly toxic but given the good rating by rating agency..The chain reaction continues to the conventional banks who invested our money there and since these cannot be allowed to fail, we are seeing Government scrambling to print money to bail them out..using again our hard earned money while the CEO of those investment bank quit with a cool US$400 million severance package..My God I know the world is never a fair place, but this a sheer absurdity..in ancient time, those CEO would have been burnt alive by peasants..

And the worst is yet to come…corporate earning will be eroded, and again those overpaid CEOs will take the easy out by laying off staff, so we will have lots of people with no job, which means less people spending or more people spending less…whichever way retail will be down and hypermarkets, airlines, hotels, laundry shop, restaurants and wherever people spend their money will be hit hard.

Basically, our money today will be worth less than it was 5-6 years ago, unless you have stacked gold in your store room, but even gold price is falling down. There is no safe investment anymore simply because there is no money available. Banks and people are hoarding cash, and it will worsen things because it will simply stall economic growth.
It will take sometime for banks to give out loans and people to start spending again..but how long nobody can answer that..

For Malaysia, we can expect the following to happen:

Order from US and China to decrease, so lots of factories might have to close and hundreds of thousands people to be made jobless both in Malaysia and Singapore..Remember manufacturing sector employ 30% of our workforce and contribute to nearly half of our exports.
As prices of commodity fall, so does government revenue. Currently half of govt budget are from oil and gas revenue. Petroleum, Palm oil, rubber and other contribute another half of our export.
Forget the FDI. Its time to curb the FDI outflow as well as labor remittance, which is 10 bill monthly.
Lots of Properties will be unsold or worse still, auctioned as people no longer can serve the loan. Car sales will be down, again affecting govt revenue

In a nutshell, Govt will have less money, more people with no job and big civil service to maintain..The first casualty will be of course the so called mega projects and all those corridors.. Then we can expect the national coffer like EPF to be used to prop up the equity market and also to give lifeline to pet companies, depending on who will be in power then..There’s no way govt can reduce the civil service pay or the whole country will be standstill. One last resort the government may have to take if everything failed is by devaluing our ringgit, so you will earn more ringgit (artificially) but at the same time stop the tide of money flowing out as it will be more expensive to go abroad.

These are just my opinion. There is no right or wrong answer right now..My advise is to prepare yourself with enough cash at hand (both ringgit and USD, gold if necessary), and also expect to lower your expectation of things, reduce on all those branded things, expensive cars, luxury items and anything you think will only help the rich getting richer..Yes..that’s the right attitude during time like this..Let’s help each other people like us and forget those filthy rich. They are the root of the problem anyway..


OK a bit Malaysia politics…

I hope Najib will become PM soon..good for UMNO and good for Malaysia. He may not be perfect but let’s give him chance to prove himself..There’s a GE13 in 4 years time to punish him if he does not perform.. Hope Anwar will grow up and play his role more constructively..

As for my favorite Tamil Hero..let him have a good time in Kamunting while his MT junkies rambled like a headless chicken..good for him..good for country..

Peace.


Anis Ahmad
Doha
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