After a week of holiday, its time to get to work again. During the festive season I see gold prices fluctuating, from an average of USD 870 - USD 890 an ounce to USD 820 - USD 830 an ounce. The volatility of gold prices might reflect the economic conditions we are facing at the moment. I'm not sure whether the USD 700B bailout plan was passed by the congress although it was given a passing by the US Senate Comittee. However it makes me think, how will the greatest bailout of all times will affect our lives.
1. Before the bailout was in uncertainty we see the stock market rally up a bit and the gold prices were crashing down. At the moment, it seems like the bailout is mandatory to keep their banking system alive ( as like in life support machine ).
2. After the bailout passes, the stock market crashes again and gold prices rally up as in today. The KLCI fell again below 1000 points and so all other bourses in the region.
3. We see another bailout for Fortis Bank which has been bought by BNP of France. It looks like its another casualty of the Credit Crunch.
4. Commodity prices has been falling, on signs that the biggest economy on earth which is the US is in recession. Consumer spending has been declining. Thus, brining down prices from crude oil, crude palm oil and bla bla bla bla ...
5. If the price of crude oil is declining, crude palm oil is declining, rubber is declining, will the demand for electronic product decline? and the strengthening value of USD means that our export value is decreasing because we are paid less.
6. Its look like our 2nd biggest trade partner which is Singapore is also in economic pressure and the US which as we all know are already in deep shit. It is likely the demand of our products and produce will decline soon and who knows how will it affect us.
7. For the past decade, it looks like the economic boom was fueled by cheap credits. Banks offering cheap credit to public without regarding their credit worthiness, suddenly people were flooded with money. It looks like the party is over now.
8. Some economic expert are revealing that all these US financial institution is keeping toxic financial derivative products in their books and the value are reaching as high as USD 500 trillion. So, my question is, how will USD 700B will help to cover USD 500 trillion in losses ? It looks like that USD 700B is not a bailout, it is just an attempt to delay the impending doom of financial armageddon. USD 700B is such a small number compared to USD 500 Trillion, its just the tip of an iceberg.
9. If we apply the "fractional reserve" rule. It means that the US has just flooded the market with USD 7 trillion of debts for all to enjoy. Maybe buy some shelter before the financial armageddon becomes imminent and guess what ... the American Public gets to pay the bill.
10. Economist say that the influx of those " debt " created money will create inflation. But it seems like with the declining value of commodities such as crude oil from its all time high seems like deflation to me. Or ... is it some sort of market manipulation by the " cartel " ? Whatever it is, in my opinion, if you have the capital power and political will, manipulation is a simple game to play.
11. Well, its doesnt look like our banks are going to fail unless they themselves has been fooled by those toxic derivative products. I dont see we're going to get the credit crunch treatment. But I see slower growth in the coming month. I might be wrong, but time will tell.