Wednesday, July 9, 2008

Fuel Hike and Inflation

We are now facing an economic crisis as bad as the 1997 financial crisis, maybe not as dramatic as the depreciation of currency as in 1997. However, impact of the fuel rise and increase in prices in almost all essential goods, creeping inflation, political uncertainty, the US slowdown, all these will definitely affect export sector and will put the Malaysia economy under great stress. The fuel hike will definitely cause the increase in the cost of production and this will definitely eat into the profit margin of the various economic sectors, ultimately, the erosion of their profit margin. This may cause an economic contraction and this will lead to a chain effect, both up streams and down streams.

The various industries and services will definitely put expansion on hold. There may be retrenchment, hence unemployment may grow up. Creation of new jobs may come down. Under the RMK9, the yearly creation of new jobs should be 200, 000 per year. I doubt that we can achieve this figure this year. For next year, it could be anybody’s guess for what the employment rate would be, but one thing for sure is that the creation of new work will be much less. Government’s revenue will definitely be affected because corporate tax, individual tax and entertainment tax will be down. Bank will also be confronted with non-performing loans, both from corporate and household loans. Less people will be traveling; both within the country and outside the country and this will affect the whole service sector of hotels, public transportation and entertainment. One area of the service sector which I find illogical is the Ministry of Cooperative and Entrepreneur’s consistent refusal for the taxi fare and transportation fare to be readjusted to cope up with the fuel hike. While they may be provided with subsidized fuel, fuel is only one of the components involved in the public transportation system since many other factors are involved from spare parts, wages of drivers and etc. Hence, it makes no sense that they are not allowed to readjust their fare and transportation changes. Therefore, we can understand why we have dishonest and not so friendly taxi and bus drivers.

Hence, we may be facing economic slowdown, rising unemployment, inflation going up, government revenue going down and consumer confidence badly affected and I am sure street demonstration will not resolve these issues.

14 comments:

Andrew said...

Nothing can be resolved in anger. These demostrations are there precisely for that, to fan sentiments and anger. When the going gets tough, the tough needs to get going BUT in the right way. All these sensationalization does not help one bit to solve our living woes. Neither are these demostrations started with that end in mind, they are instruments for certain quarters to gain their political mileage.

People said...

hi bro,

I only know, if BN and Dorrah govt continue to be in power, the economy of our country will be getting worst!BN have been in power for 50 years! Enough is enough!
Malaysia are the exporter for crude oil, tin, rubber, palm oil & etc commodity. And also have gain from the increase price of these commodity. But why our country economy is still far behind Singapore which don't have any natural resources?
This is because of the mismanagement of the corrupted govt. And you was part of the member in the cabinet, you should not escape the blame from the public!

CT Choo said...

Dr Chua, will the MCA be prepared to consider some proposals as set out in An economic agenda to consider? I shall be happy to discuss the matter at length with you for the betterment of our country.

kah soon said...

Dr Chua,
We have learned a lot about the problem statements of our country's stress, it's now time to make the next logical move, and we need to start this timely. I'm an engineer, I'm paid to help my employer to solve problems. So I wanna share some learning to our government in solving our country's problem :
1) Describe the problem clearly and concisely and be specific (Done)
2) Define the problem by clearly descibe the gap between expected and actual result (Done)
3) Act on short term containment
4) Locate the point of cause
5) Do cause effect analysis. Ask ourselves would the absent of the cause identified completely solve the problem, if "no", we have identified the symptom, but have not yet identified the cause. So keep asking why.
6) Address the cause with long term counter measure
7) Implement system to follow up and counter measure/check

So, I urge our government to get back to work for the people, but not shouting racial slogans in the parliment meeting or fighting political power over the media. Malaysia is blessed with an abundance of natural resources as well as talents (although arguably our government choose to lose them), this country and her people deserve better live.

NEIL said...

Dr, yes it's getting very difficult each day with the price of goods raising and the our cash dwindling each passing minutes.Once again where is your MCA that you proclaim to be a so call 'peoples party'.Where is the big mouth OKT?Those that bark the loudest are now avoiding this very issue that is affecting the lives of the middle and lower income group.Since after March 8,never have MCA come up with a master plan to tackle this issue.Is it that MCA is in disarray which makes them not capable of drawing up a master plan to help the poor?If that is so then the leaders of MCA should all resign and let a new dynamic team takes over.MCA must come up with a strategic plan to tackle this highly emotional issue,or otherwise they are sure to face the music at the next election.

People said...

When I saw your Selangor MCA submit the memorandum to the Minister of Work to request the dept to reduce the toll rate, I feel like vomit!
Is the sky high of the toll price in Klang Valley and through out Malaysia just happen recently? Why now only Selangor MCA voice out? Why not 10 years ago?
All this cheap politic strategy being done just for the purpose to gain back the support from the Chinese community! No way men! We Chinese are not as naive as your MCA leader think!
It just show that MCA is just like the 'politic beggar party' under BN!

Tunku said...

This is about stagflation, rising prices but growth slows or none. In stagflationary environment the issue is not just rising prices BUT income disparity. Those with income producing assets will do much better than those with none.

The problem is BN have a poor track record of dealing with income disparity as well as inflation.

1) We have the highest GINI coefficient in South East Asia despite the fact that we have had the most aggressive 'social wealth restructuring' called the NEP for 40 years. The household income level between the races have not narrowed significantly AND we have done even more poorly that Singapore who don't believe in it.

2) On surface we may have had low inflation but if we look at currency value we will realise that our govt have had too liberal monetary policies for decades resulting in distortion in prices. Why should our non-labour & non property cost be the same as Singapore that imports everything AND per capita is 6X that of ours?

If the market is to believe, then yes we are back at 1997 level of crises relatively BUT our solution then and now was short term and created problems in the long term. What short term fix does BN have and are we still going to be addict for it to come again 10 years from now in full circle again.

No the BN track record for dealing with these problem suggest it has little to offer in terms of real solution, merely short -term addiction of spending and subsidies that we have to pay for eventually anyway.

Pearls said...

Economic Crisis - That is why we must have a strong leader.. Not just strong but clever enough to take us out of this impending doom. Afterall, we survived the 1997 financial crisis beautifully, the horrendous recession in the 80s without missing an arm or a leg.. so, we should be able to survive again IF we have a clever and bold enough leader. Please note operative word.. IF

That is why we must all work towards getting that dumb ass for a PM to bugger off. GOD!! he can't lead, he can't think, he can't even say the right things! I doubt he can lead us out of this impending doom. It is so sad for Malaysians to have such a leader.

As for your comment on taxi fare, I strongly disagree that the fare should be allowed to be readjusted at all! I take the taxi everyday, everywhere and I can tell you, the attitude of our taxi drivers are horrendous! Infact, horrendous is a very mild word to describe these taxi drivers. Of course, occassionally, I do come across very nice taxi drivers with superb attitude but these, are rare.

In the first place, it is not all about money. Realistically, nobody will ever be contented with the amount given and that is a fact. So, raising or allowing the fare to be adjusted will not solve the horrible attitude these taxi drivers have. Infact, once the "honeymoon" period is over after a fare adjustment, the same horrible attitude will come up again. There is really no end to such give and give and give and give tactic.

The only solution I see for taxi drivers and its fare is that the government nned to get serious about this matter. Meaning, do what the Singapore government do with their taxis. Crack the whip hard and get rid of those with horrible attitude. It is a situation of who need who more..since times are going to get really bad,taxi drivers will need to change their attitude if they want to hang on to their job for survival. For those recalcitrant taxi drivers, well, they can go do something else that befits their liking.. no need to brave the traffic jams, go to places they dont like, etc...

By the way, dishonesty has nothing to do with anything but one's upbringing. It is not about hard press for money or no money. That would be an insult to the poor.

Street demonstration is not meant to resolve all the issues that we are currently facing. It is meant to tell the people in charge, such as our dumb as a donkey PM to listen up! Unfortunately, again, the PM has proven the donkey in him with his statement in the press yesterday, 8th July. The current government still don't get it!! Sigh... and this is worse than a donkey.

collosos said...

How International Bankers Gained Control of America

From a Video Script Produced by Patrick S. J. Carmack

Directed by Bill Still
Royalty Production Company 1998

[QUOTE]
One month after the inauguration of Abraham Lincoln, the first shots of the American Civil War were fired at Fort Sumter, South Carolina on April 12,1861. …

Certainly slavery was a cause for the Civil War, but not the primary cause. Lincoln knew that the economy of the South depended upon slavery and so (before the Civil War) he had no intention of eliminating it. Lincoln had put it this way in his inaugural address only one month earlier:

“I have no purpose, directly or indirectly, to interfere with the institution of slavery in the states where it now exists. I believe I have no lawful right to do so, and I have no inclination to do so.”

Even after the first shots were fired at Fort Sumter, Lincoln continued to insist that the Civil War was not about the issue of slavery:

“My paramount objective is to save the Union, and it is not either to save or destroy slavery. If I could save the Union without freeing any slave, I would do it.”

So what was the Civil War all about? There were many factors at play. Northern industrialists had used protective tariffs to prevent their southern states from buying cheaper European goods. Europe retaliated by stopping cotton imports from the South. The Southern states were in a financial bind. They were forced to pay more for most of the necessities of life while their income from cotton exports plummeted. The South grew ncreasingly angry.

But there were other factors at work. … The central bankers now saw an pportunity to use the North/South divisions to split the rich new nation - t divide and conquer by war. Was this just some sort of wild conspiracy theory? Well, let’s look at what a well placed observer of the scene had to say at time.

This was Otto von Bismarck, Chancellor of Germany, the man who united the German states in 1871. A few years later, in 1876, he is quoted as saying:

“It is not to be doubted, I know of absolute certainty,” Bismarck declared, “that the division of the United States into two federations of equal power was decided long before the Civil War by the high financial powers of Europe. These bankers were afraid that the United States, if they remained as one block and were to develop as one nation, would attain economic and financial independence, which would upset the capitalist domination of Europe over the world.”

Within months after the first shots were fired at Fort Sumter, the central bankers loaned Napoleon III of France (the nephew of the Waterloo Napoleon) 210 million francs to seize Mexico and station troops along the southern border of the U.S., taking advantage of the Civil War to violate the Monroe Doctrine and return Mexico to colonial rule.

No matter what the outcome of the Civil War, it was hoped that a war-weakened America, heavily indebted to the Money Changers, would open up Central and South America once again to European colonization and domination.

At the same time, Great Britain moved 11,000 troops into Canada and positioned them along America’s northern border. The British fleet went on war alert should their quick intervention be called for.

Lincoln knew he was in a bind. He agonized over the fate of the Union. There was a lot more to it than just differences between the North and the South. That’s why his emphasis was always on “Union” and not merely the defeat of the South. But Lincoln needed money to win.

In 1861, Lincoln and his Secretary of the Treasury, Salmon P. Chase, went to New York to apply for the necessary war loans. The Money Changers, anxious to maximize their war profits, only offered loans at 24-36% interest. Lincoln said thanks, but no thanks, and returned to Washington. He sent for an old friend, Colonel Dick Taylor of Chicago, and put him onto the problem off financing the War. At one particular meeting, Lincoln asked Taylor how else to finance the war. Taylor put it this way:

“Why, Lincoln, that is easy; just get Congress to pass a bill authorizing the printing of full legal tender treasury notes… pay your soldiers with them and go ahead and win your war with them also.”

When Lincoln asked if the people of the United States would accept the notes, Taylor said:

“The people or anyone else will not have any choice in the matter, if you make them full legal tender. They will have the full sanction of the government and be just as good as any money … the stamp of full legal tender by the Government is the thing that makes money good any time, and this will always be as good as any other money inside the borders of our country. ”

So that’s exactly what Lincoln did. From 1862 to 1865, with Congressional authorization, he printed up $432,000,000 of the new bills.

In order to distinguish them from private bank notes in circulation, he had them printed with green ink on the back side. That’s why the notes were called “Greenbacks.” With this new money, Lincoln paid the troops, and bought their supplies. During the course of the war, nearly all of the 450 million dollars of Greenbacks authorized by Congress were printed at no interest to the federal government.

By now Lincoln realized who was really pulling the strings and what was at stake for the American people. … This is how he explained his monetary views:

“The Government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers… The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity… By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest. The financing of all public enterprises, and the conduct of the Treasury will become matters of practical administration. Money will cease to be master and become the servant of humanity.”

Meanwhile in Britain a truly incredible editorial in the London Times explained the Bank of England’s attitude towards Lincoln’s Greenbacks.

“If this mischievous financial policy, which has its origin in North America, shall become indurate down to a fixture, then the Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe.”

Keep in mind, by this time the European monarchs were already chained to their private central banks, hence the bankers’ concern to preserve their captive monarchs. Within four days of the passage of the law that allowed Greenbacks to be issued, bankers met in convention in Washington to discuss the situation. It was agreed that Greenbacks would surely be their ruin. Something had to be done. They devised a scheme gradually to undermine the value of the Greenbacks.

Seemingly unimportant limitations on the use of Greenbacks (printed on the green back), insisted on by the bankers, forbidding their use to pay import duties and interest on the public debt, were utilized by the banks to slap a surcharge on Greenbacks of up to 185%. This undermined the confidence of the people in Greenbacks and necessitated further concessions to the bankers to obtain more, discounted as the Greenbacks now were.

This scheme was effective - so effective that the next year, 1863, with Federal and Confederate troops beginning to mass for the decisive battle of the Civil War, and the Treasury in need of further Congressional authority at that time to issue more Greenbacks, Lincoln gave in to the pressure, which he described:

“They persist, they have argued me almost blind - I am worse off than St. Paul. He was in a strait between two. I am in a strait between twenty and they are bankers and financiers.”

Lincoln allowed the bankers to push through the National Banking Act of 1863 in exchange for their support for the urgently needed additional Greenbacks. This act created “National Banks” (hence the N.A. still in use after National banks’ names) and gave them a virtual tax-free status. The new banks also got the exclusive power to create the new form of money - National Bank Notes. Though Greenbacks continued to circulate, their quantity was limited and no more were authorized after the war.

[END QUOTE]

The ones who REALLY pull the strings in politics are the ones who pull the PURSE strings. Sharon, Bush, Blair and their ilk are merely puppets. The REAL tyrants - the Mammonites, the Plutocrats, the gazillionaires – almost always remain nameless!

Courtesy Ardeshir Mehta and togethernet

KIMHO8 said...

在這次抗油價集會里所發生的小小沖突不是什么大礙,雖然是被大作標題的炒作, 但這經驗經歷是一種啟示也是一種教訓,讓大家在將來更懂得如何去掌控。

三大民族和平和諧的參與精神,是值得我們去深思去珍惜,各種族之間的隔閡必須去突破。我和一幫的巫裔印裔同胞坐一起,大家都是非會員,可是大家都有同一個目標,要鐵定這是民主的馬來西亞!

夸大的警告報道,令大部分的平民都會感到害怕而不敢參與,負面的報道已重大的威脅了懷有正義卻存有畏懼或缺乏行動之心的平民。 那不會是一件好事,平民不該害怕政府,應該有勇氣的大膽批評糾正他們。不單單是政府對一切了如指掌是足夠的,平民納悶的情緒可能沒被他們正正的發覺。平民希望通過抗議,給予政府一些壓力,願他們能加快改進改革的步驟。

個人或群體,生活非常安逸的人民或生活非常緊迫的平民的訴求絕對不同, 所以不能相比對論。但殘障,單親,困苦無助,收入薄弱和因已失去更好教育機會而導致生活或社會問題的平民是應該被受重視的, 不然他們將會被遺棄成為被冷漠殘酷嚴重打擊的弱勢一族。 弱勢和嚴重遭到不平等待遇的憤怒,是應該能夠被理解的,國家在此要付更重大的責任。

我愛的馬來西亞,努力吧!

KIMHO8 said...

忘了說! 經過了這次的集會,我覺得我應該更愛馬來西亞,微妙之處就在這里。參與人民活動,多少也證實了大家對國家的關愛,愛是需要有勇氣的。

Lysendar said...

dear dr. Chua, i think government should focus on the economic issue rather than everyday argue on those nonsence. They have to know how to weight the situation. Can argue solve the problem? Action said louder than word! Not only the government but also all the MPs in the parliment should stop all the nonsence, and focus on the economic issue. Perhaps they should bear in mind that, who pay their salaries?

Poppercaster said...

Till to-date, I still don't understand why this Mr PM decided to hike 40-60% of fuel price when the US recession is looming, global economy slowing down and commodities price skyrocketed.

Can we wait for world economy to stabilize? What's the rush? Why can't Mr PM adjust the fuel hike in few stages since we are still net importer till 2012-2013. Yes, it is inevitable that one day the country will start importing crude oil. But at the present moment Petronas is greatly benefited from the rising fuel price. Why can't the government use Petronas profit to improve public transport system so that in 5 yrs time, the rakyat can have an option not to drive? We still have 5 yrs as net importer to prepare ourselves for the day when we start importing oil. Take this opportunity to improve public transportation, diversify from petroleum to create more employment, cut down on wastage eg the GREAT CORRIDOR PROJECTS (what for buildings after buildings and roads without human capital and income generation technology, only HOPING for foreign investment?!) etc.

Since the world economy is going down, our country economy initially was not so severely affected by the 'economy storm' as we were profited heftily from escalating price of rubber, palm oil and crude oil.

Unfortunately this Mr PM pulled the trigger to hike the fuel at one shot. 40-60% that affect the whole population of this country and certainly will slowdown the economy even more. Wonder how many countries in the world can take this kind of shock wave?

In my opinion, Mr PM made a terrible judgment to hike the fuel 40-60% at one go. Everyone caught by surprise. Tell me how many companies out there prepared for this. One silly mistake that is enough to cause tremendous slowdown, retrenchment, unemployment etc in couple months time. We will join the world going down the pit. Well they will point fingers on the oppositions for the political uncertainty of course.

But for me A Big Thank You But Not Thanks to Mr PM.

Poppercaster said...

For those who condemn the taxi drivers for poor attitude and bad service, only thing that I will like to say is please go and find out the root of the problem.

Our poor taxi drivers are suffering daily fighting for survival. Spending more than 12hr a day/7 days a week barely just to breakeven and earn a living, all the money gone to the Taxi Kings, datuks, tan sri etc. If you are in their shoes your family life of course will suffer.

Why our neighbouring countries (forget abt Singapore) just take Thailand or even Vietnam for example. Their taxis service and price/km beat us pants down. Why is it so since they don't have fuel and gas 'subsidies'?

Go ask how much the Taxi Kings make from the misery of all taxi drivers and passengers?

Please lah, have some mercy for our taxi drivers. Go and shout at the Bloody Taxi Kings!

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