G20 and The New World Order

G20 and The New World Order

This week the G20 will sit down in London for its meeting which will affect our lives and direction of the world economy. We are basically at an economic crossroads, why?

The Ditching

1. China and Russia are campaigning to ditch the US Dollar for another super currency which is more stable and they would like gold to be in the basket. The uncertainty of the US Dollar has been the major factor for this move after the US opts for quantitative easing in order to lower down interest rates to stimulate its dying economy.

2. The Chinese government is ditching the US Dollar to reduce its exposure to the US Dollar since it carries a significant risk factor.

3. When major government such as the US, UK and Germany has conducted fail bond sales. It shows that investors are losing faith in such bonds. Thus it is why the US and the UK government have resorted to printing money.

4. The act of printing money or also known as quantitative easing carries a high risk of creating hyperinflation due to the devaluation of the currency.

Inflation VS Deflation

5. Up to date, we have seen the weakening of the pound while the US Dollar is still maintaining its value which many says it is due to deleveraging.

6. Even though many economists are crying deflation, people in the main street are experiencing price hikes on food and essential goods.

7. The price of real estate is incredibly high in the US due to the cheap credit that the Fed has allowed. Thus it sparks a housing mania funded by cheap credit. Therefore the price o does not represent the real value of the property. I believe the call on deflation is just an excuse to allow the inflating of the currency.

False Claims

8. The US has claimed that the past few years their economy is growing at a good pace and we must note that consumer expenditure is also accounted inside the GDP calculation. However, when the crisis broke, we already knew that all this consumer expenditure is due to cheap credit and it is false. It does not reflect the productivity of the US. Besides its false GDP, US has a big trade deficit with all other countries especially China. China has been using its trade deficit to buy US Treasury Bonds. This shows that the US cannot pay its debtors.


The Stimulus and the Collapse

9. With the new stimulus package which has been announce not so long ago. I wonder where they got the money. If they failed to sell those bonds, who are funding them?

10. From what I have written earlier, it is concrete evidence that the US has no longer had the economic power. When they opt for quantitative easing, it is evident that most of their previous plan has failed, and quantitative easing is their last option or Nuclear Option.

11. Before the Nuclear Option start to show its effects, it is essential for all to ditch the US Dollar before its value drops and rendered useless … maybe it still has a use … as a toilet paper.

12. I fear that this economic downturn will spark a new era which will lead to world war 3. A war to secure limited resources.

Uncertainty and The New World Order

13. In this time of uncertainty, we will see that people will become jobless, hunger will reign, and people will do anything to feed themselves. This will lead to restlessness and lead to fascism. This terrible uncertainty will create anarchy and government will be turned over due to their failure to control the situation.

14. This uncertainty will be a great opportunity to extend the notion of a New World Order where the world is dictated by a single government and use the same currency and economic structure.

15. They will plunder everything from you and your nation

Good commentaries

To all my dear readers, I would like you all to listen to the Financial Sense Newshour, which is a good online radio show. It covers a broad perspective in various economic sectors.

Best Regards

Khairul

The Malaysian Economic Front

The End of Dollar Hegemony ?

On the April, 02 2009, the G20 summit will be organized. I think, this summit will draw the line on the direction of the US Dollar. More and more country members are trying to ditch the US Dollar such as the US Dollar ( China calls for full-scale financial system overhaul ). Some has called for the formation of a new currency or using the IMF's SDR ( Special Drawing Reserve ) as a new currency since the value of the currency is calculated based on a basket of currency. Such move will reduce the reliance on US Dollars heavily thus reducing the value of the US Dollar.

This move has been initiated since the US Federal Reserve and it Treasury has resorted to quantitative easing in order to stimulate the dying US economy. Besides the US, other countries has also start to resort to quantitative easing such as UK and Switzerland. SNB has taken such measures to prevent their currency from rising in order to make swiss exports to be competitive in the world market. The US and UK has resort to such move due to failure on bond auction. Therefore, their respective central bank has resort to bought those bonds.

wait and see ............

To Americans : You Just Have Been Robbed !

Dear fellow Americans, you just have been robbed by the greatest scam ever to took place on earth. Treasure Secretary Timothy Geithner just paid those big fat cat of Wall Street trillions of dollars just for taking your country into the new depression. Things are not just going to get better now, its gonna get even worse. By bailing the major banks, buying toxic assets at rediculous price and they will charge you all for all the follies these banks made. They are not the ones suffering, its the average joe is the ones who suffer, the ones who toiled day and night and finding themselves had to pay it back in taxes. What the fuck is that ! They're gonna print money out of the presses and reduce your currency into merely toilet papers. Are you gonna work for them if they gonna pay you toilet papers ? To hell .... you can use it to wipe your asses. It is time for a revolution in the US, the government is working for those who paid them fat cash and sponsors during the election. America has become a police state. All the Al Qaeda bullshit is just merely stories they sell just to justify their moves and to misdirect the public from the real issue is. I'm not anti America but i think you just got scammed big time into paying taxes to pay a perpetual debt which is only going bigger and bigger by the day.

Inflation & Deflation

These few days, something is boggling in my mind. Inflation or deflation ? From what I understand is inflation means inflating the money supply, when money supply is expanded, it decreases the value of money and the result is the price of things seems to be increasing. However, people are shouting its deflation since they are seeing that prices of things are going down. Lets analyze this situation :

1. You go the market to buy groceries and you found out that the price of vegies and poultry product seems to be higher. So is that inflation ? how will it affect you ? of course it will make feel unhappy since groceries are necessities in life.
   
2. You went to a fashion house at this time and you found that the price of designer cloths and wears are decreasing. Is that deflation ? the price of those things might be lower but you still can live happily without those items.

So when people scream " deflation" since designer cloth, SUV's and luxury items are decreasing, how bad can that be. Those items are expensive anyway and people can still live without them. People only buy them when they have the money. However things like groceries, vegies and poultry are necessities, if you live in the middle of a city, you cant afford to grow your own and you will be dependent on the farmers in the countryside. If these things are going to be priced higher, people will start to feel uneasy.

So ... what are you experiencing right now ? inflation or deflation ? is it threatening your lifestyle ? by now i think you already know what to think when the government is shoving information into your skull !

Quantitative Easing ( Money Printing )

On the 18th of March, the US Federal Reserve Chairman, Ben Bernanke annouced that the Federal Reserve has made plans to purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities. These measure are also known as quantitative easing.

What the US Federal Reserve is similar to what the Bank of England (BOE) is doing. For those who are not familiar with these terms, they are basically printing money just to meet payment demands. By doing so, they are basically devaluing the US Dollar.

Due to the US Federal Reserve actions, investors has become wary and striking fears on the credibility of the US Dollar and its treasuries as a safe haven. Since the announcement, the US Dollar has started to depreciate.

Investors might flee from the US Dollar to other types of assets such as precious metals in order to preserve their wealth. The announcement has triggered the price of gold back to the USD 940 to USD 960 range since gold has been know to be a safe haven.

DOLLAR CRISIS IN THE MAKING

Please follow to the link , interesting read http://www.atimes.com/atimes/China_Business/KC17Cb02.html

The fallacy of " Economic Growth Engine "

1. In the light of the this economic recession. We start to see that letting the US to be a growth engine for the world economy is a very bad idea. When the engine stops moving, we are not moving anywhere.
   
2. Since the Bretton Woods agreement, the US dollar has been treated as if it was gold itself since it is promised that the US dollar could be redeemed in gold. However the gold standard has been put to death after the some nations started to redeem their dollar reserves with gold, which has caused the US stockpile of gold to decline. Since then the US dollar has been a fiat currency.
3. What gave the US dollar its value is its acceptance as a reserve currency and the use of the US dollar in the international trade. Without this special status, the US dollar is merely just a piece of toilet paper which can be used to wipe your ass.
4. Countries like Russia has already started to question the viability of the US dollar as reserve and its usage in international trade.
   
5. Warping back to the current economic crisis, we have seen that the US government has decided to stimulate its economy by throwing money at the problem. Trillion of dollars has been pledged in attempt to keep their economy alive. Where does this trillion of dollars come from ? They are planning to get all this money by issuing treasury bonds.
6. China has started to question the viability of these treasury bonds and financial instruments. After all these years, China has bought billions of US Treasury Bonds. By buying bonds, they are providing more money for the US to spend on its goods. However, looking into the current economic situation, and the new US protective economic measures. The policy doesn't seems to be in the favor of the Chinese.
7. If the Chinese is buying US treasury bonds, and the US government failed to revive their economy. I believe that the Chinese will stop buying US Treasury Bonds. If this ever occurs, it means that the US government will not be able to generate enough funds to revive their economy. The US government will have to sought to " Quantitative Easing " or in other words, printing money as if it is printing the daily newspapers.
   
8. The result of of quantitative easing is the devaluation of the currency. As the US dollar loses its value, those who holds US dollar will also suffer the losses. How about all those US dollar reserves in most central banks ? I think you can figure it out.
9. We have to take note that, fiat money is not true wealth. The value of the US dollar depends on the economic situation. By printing money, it is evident that the US dollar has lose its credibility as a reserve currency. Even though at the moment, we see that the value of the US dollar is exceptionally high due to mass deleveraging in the world economy. I believe that the US dollar is going to crash down in the long run. When the pledged fund is monetized we will see that the market is flooded with US dollars.
10. I am sure most of us still remembered what happened to the Zimbabwean Dollar. Can you get the picture ?
    

My Opinion on the RM 60B Stimulus Plan

Last week, the government has finally unveiled its RM 60 Billion stimulus plan which is supposed to help to revive the economy by initiating force spending by the government to pick up on slacks by the public. The mini budget presented was for a duration of 2 years which is 2009 and 2010. After gone through some reading in the newspapers, I think that what has been presented was merely a rough estimate of the plan. There is no in depth details on how it is going to spend.

I think it will be too harsh to comment or criticize anything on the stimulus plan since I do not know the specific details on how the stimulus funds will be disbursed. What we should really take note is, the stimulus plan is basically a plan to ease the people's burden in this deteriorating economy since the stimulus plan is not the absolute answer to our economic problem. It is known that, Malaysian export has started to decline, therefore it is important for the government to take measures to provide alternative solutions from the problems which is going to arise soon.

We must consider that government spending will never be able to restore or create demands to match for the demand of our goods before the economic downturn occurs.s. Due to the lower exports, our manufacturing sector will contract and capacity will be cut down to a sustainable levels Therefore plans must be laid to absorb retrenched workers from the affected sector.

The stimulus package must be able to grease the local economy. The velocity of money must be increased so that everyone in the economy will feel the effect of the stimulus. By doing so, the public will no be threatened by unemployment or any adverse affect of the economic downturn.

It does not necessarily means that things will get to normal anytime soon. We all need to spend, but we need to spend below our means and not lavishly. This is important in order to maintain sustainability. Creating a boom in our economy will not solve our economic problem. We need to know that if there is a boom in our economy, the bust will come afterward.

We need to ensure that the wheels of our local economy is well greased .We need to learn from this downturn that demands for our products may shoot up or decline and we must take measures if demand for our product falters.

my hope is :

1. I hope that the stimulus plan will be able to meet it targets.
2. I hope within this 2 years, Malaysia will be able to realign its economy from an export driven economy to a more sustainable type of economy. We could not rely on other people or nations to be an engine of growth. This is what happens when we are too reliant on other people or nations to buy our products.Once the demand falters, we're treading on water. We can see how Singapore is doing at the moment, their economy is contracting. Luckily they're are a very rich country.
   
3. If the global economic situation is not improving, I don't really know what is going to happen. However if we manage to create a sustainable economy based on local demand which is not forced. I think we will have a good chance of surviving this economic downturn.
4. BE PRUDENT !!
   

The New RM 60 B Stimulus Package

I will try to write my views on the new RM 60B Stimulus Package soon

Discussing on the Stimulus Package

The Malaysian Economy

1. As most of us already knew, the economy is all about supply and demand of goods and services. Less demands, the price will fall and vice versa.
2. The next step that we should analyze is where does this demand and our goods comes from. Why is this important ? It is because that by analyzing the source and cause of demand, we can project on the sustainability of the demand. From sustainability, it is possible to make an intelligent assumption to produce certain types of goods or services.
3. Consider this story :

   Once, there was a man who owns a small coffee shop in a village. One day, a fun fair had opened just nearby his coffee shop. Since the opening of the funfair, his business prosper since the visitors of the fun fair would come and visit his coffee shop afterward. Due to strong demand, the owner decided to take a loan to enlarge his small coffee shop and hire more workers to serve his customers. After months passed, people got tired of the funfair and less people are visiting the fair, thus affecting the coffee shop owner business. Soon the fun fair packed up their tents and move to another village. The coffee shop owner was left alone with his recently upgraded coffee shop and extra pair of hands and his dedicated customer.

4. Referring to story above, I would like to say that what is happening to our economy resembles to what the coffee shop owner. We have set up many factories churning out electronic products to cater the needs for people in the US, Europe, Japan and other countries. However as their demand weakened, we are suffering from overcapacity. Some people might argue that the demand was genuine and sustainable. But in my point of view, if those people was purchasing the goods that we produce by using money they did not have aka. credit. How was the demand can be deemed sustainable. All those people we're acquiring goods we have produced through credit. All those unsustainable demand was created due to cheap credit due to low interest rate policies. In the current situation, we could see that interest rate is nearly zero and people are finding it hard to make payment. It means that demand will collapse sooner or later. What I meant was, demand will drop to a natural level at what it was supposed to be and not due to the cheap credit.
5. In the case of the current economic crisis, I think it is evident that the demand created was due to cheap credit.
6. In order to make all our factories back in business, it is important to restore demand. However, in the current situation, I doubt that demand will come back at its "original" level. The Malaysian market is not big enough to consume all those things our factories can churn out.
   
7. Therefore, I think is impossible to restore demand in the short term. What we will see is, demand will fall down to a sustainable level. Thus, layoffs of factory workers and sectors affected will be unavoidable.
8. In my humble opinion is that we should embrace this recession and get back to the drawing board and plan on how we could get all these people back into the job market. We need to create new jobs from sectors unaffected or mildly affected. By doing this, we could ensure that people could stay employed and they will be able to make their loans and mortgage.
   
9. If those people are left without work, it will continue to affect our economy systemically until the economy is halted to a standstill.
   

Where is This Heading

Where is This Heading

1. If we see the newspapers nowadays, we start to see grim news everyday. It has been bad news for the past few weeks. The problem is, it is only now that we have started to see the bad news. The news of the impending global financial meltdown has been circling around for a longer period than that.
2. Shipping industries has started to suffer due to less shipping of Malaysian exported goods or shipping in of foreign imported goods. There will be more layoff in the industry soon and unemployment numbers will begin to rise.
3. Next in line is the manufacturing sector, electrical and electronics to be precise. Electronic products has been a major Malaysian export. 30% of the Malaysian export is consist of electronic products. It is exported to the US, UK, Europe, Japan, China and etc. If the sector is in distress we can see more factories will be shut down and more people will be in an unemployed state.
4. The process will continue on and on and it will affect other sectors as well. All these jobless people due to massive layoffs will be unable to pay their loans and mortgage. Thus increasing NPL's. Banks will start to suffer and we'd better pray that all those bank can stand the stress test. With bad loans in their books and lesser lending, their income will start to deteriorate. More banks will have to restructure, cut more jobs to reduce cost of operations.
5. More commentaries later on hahaha ..............................