Rising tides of currencies globally cause inflation, money worthless!

A PACKET of nasi lemak (rice cooked in coconut milk) with a fried egg costs around RM2 nowadays. I remember getting a similar packet (and in bigger portion) at RM1 ten years ago. It is a 100% price appreciation in ten years! My friends and I were jokingly saying that nasi lemak would be a good investment tool if it can be kept for ten years.

However, all of us know that nasi lemak is best served when it is fresh. It can never be kept for long despite its potential for value appreciation. In fact, its value will drop to zero as soon as it turns stale. And interestingly, the same situation applies to the money we hold today. Our currency can be as “perishable” as nasi lemak in this global money printing era if money is not produced for the right purpose and use in the right way and the right time.

The global economies have been embarking on expansionary monetary policies since the financial crisis broke out in 2008. Central banks around the world are printing money to support their economies and increase exports, with the United States as the primary instigator.

The Mighty Dollar

Since 2008, the Fed initiated several rounds of measure termed “Quantitative Easing”, which is literally known as an act of money printing. The Fed's balance sheet was about US$700bil (RM2.1 trillion) when the global financial crisis began; now it has more than tripled. With several countries' central banks including the European Central bank, the Bank of Japan and the Bank of England taking similar expansionary measures and encouraging lending, more than US$10 trillion (RM30.3 trillion) has been poured into the global economy since the crisis began.

While the global central banks have become addicted to open-ended easing and competed to weaken their currencies to boost economies, the impact of these measures to the global economy is not quantifiable or realised yet. However, basic economic theory tells us that when there is too much money chasing limited goods in the market, it will eventually spark inflation.

When money is created out of thin air, there is no fundamental support to the new money pumped into the economies. More money supply would only be good if the productivity is going up or in the other sense, when more products and value-added services are created. In the absence of good productivity, more and more money would not make people richer. Instead, it would only decrease the purchasing value of the printed notes.

Let's imagine a more simplified situation. For example, we used to purchase an apple for RM1. If the money supply doubled but the amount of apples available in the market remains, one apple will now costs us RM2 instead of RM1. Now, our money has halved its original value. If the central banks of the key economies keep flooding the global markets by printing more money, the scenario can only lead to the worst, i.e. hyperinflation.

This occurred in Germany after the First World War. Hyperinflation happened as the Weimar government printed banknotes in great quantities to pay for its war reparation. The value of the German banknote then fell since it was not supported in equal or greater terms by the country's production.

Flood of money

The sudden flood of money followed by a massive workers' strike, drove prices out of control. A loaf of bread which cost 250 marks in January 1923 jumped to 200 billion marks in November 1923. People collected wages with suitcases. Thieves would rather steal the suitcase instead of the money, and it was cheaper to light fire with money than with newspaper. The German currency was practically worthless during the hyperinflation period.

That scenario may seem incredible in today's context. Nevertheless, we should not downplay the severity of a global inflation should the current synchronised money printing push the economies of major countries to burst like a balloon in sequence.

When this scenario happens, people with savings and fixed income will likely be the hardest hit. To withstand the tide of inflation, the best defence is to invest in assets such as publicly traded shares, metal commodities like gold and silver and properties that can hedge against inflation.

Investing in any assets require in-depth research before embarking on one. Commodities and stock markets are liquid assets that can be bought and sold with relative ease, while properties are favoured as long-term investment.

With Malaysia's current economic and population growth, added with its still comparatively low property prices in the region, our primary and secondary market properties are good investment assets for investors to gain from the continuous capital appreciation that this industry is enjoying.

With the above as a backdrop, are property prices really going up globally?

Using the nasi lemak analogy, if we were to buy a RM100,000 medium-cost apartment 10 years ago, it would be equivalent to 100,000 packets of nasi lemak. Assuming it has doubled in price today, it would still be the equivalent of 100,000 packets of nasi lemak at RM2 today. It would seem to me that the true value of properties hasn't gone up, but that global currencies have just gotten cheaper.

FOOD FOR THOUGHT
By DATUK ALAN TONG

FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development.

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We need competent leaders!

Competent leader vital for Information, Communications and Culture Ministry 

The candidate should be someone well rounded, well experienced, not too old or too young

FOR some time now, there has been talk on whether culture is a good fit for the Information, Communications and Culture Ministry (MICC). Some believe culture would be better off parked under the Tourism Ministry.

Culture and tourism, to them, are lines out of the same song not quite jiving with communications or information.

Then, there is talk of some areas of duplication between MICC and the Science, Technology and Innovation Ministry (Mosti). Both should merge as there are common areas, it has been said.

These ministries aside, some folk have been lobbying that a new ministry, the Information, Communications and Technology (ICT) Ministry, be set up with the MICC being done away with.

All this talk has resurfaced now that Prime Minister Datuk Seri Najib Razak, fresh off his election win, is busy selecting candidates for his new Cabinet line-up that might be announced in the coming days.

There is certainly some overlap between Mosti and MICC, making sense for them to be merged into one entity. Arts, on the other hand, could be part of the Youth and Sports Ministry or spun off into a new ministry under Arts and Heritage.

It is not an easy decision, but whatever the outcome, one things is for sure Malaysia's Cabinet should not be bigger than China's, which has a population of 1.6 billion, as opposed to our 28 million.

Australia and Singapore have gone though the same phase that Malaysia is going through now in terms of merging and segregating its various ministries. In 2001, Singapore's Ministry of Communications and Information (MCI) was expanded to include Arts.

Over a decade later, the Arts and Heritage portfolios became a part of the culture ministry. At present, the role of the MCI is to oversee the development of the ICT, media and design sectors, public libraries and the government's information and public communications policies.

On a similar note, Australia expanded its Communications Ministry to include Arts in 1994. Four years later, the ministry expanded to include information technology (IT).

However, in 2007, Arts became a part of the Environment/Heritage Ministry. The Communications/IT Ministry was renamed as the Broadband, Communications and Digital Economy.

Even the United Nations has a specialised agency to deal with technology in the form of the International Telecommunication Union because the role of the Internet and broadband transcends all boundaries.

The vision of Malaysia's MICC is to be a pioneer in promoting the 1Malaysia Concept based on national principles to achieve a harmonious and gracious nation. The ministry's main aspiration is to enhance Malaysia as a global ICT hub in the region, to ensure information from all sources of media is accurate and precise and to preserve and promote Malaysia's heritage and culture to the world.

Culture preservation is vital in the era of the social media, but once there is widespread awareness, culture can be placed under the Arts, Culture and Heritage Ministry, or could even be one of the units under the Prime Minister's Department or the Tourism Ministry.

There are even suggestions that MICC be part of the Prime Minister's Department so that it would fall directly under the Prime Minister's purview. However, whether this is feasible remains to be seen.

Communications and information have become vital because of the digital era, and their role in Malaysia might need to be reviewed. Australia and Singapore felt the “need to change because of the need to redistribute and re-focus its ministerial workload to improve public communications and engagement for an increasingly diverse society in the age of social media and rapid technology progress”.

All this brings us to the next question: Who is best to lead the MICC?

There are many talented people out there, but the industry feels the choice of candidate should encompass someone “well rounded, well experienced, but not too old or too young”. The person, while having sound knowledge of Law and Economics, should also fulfil the most important criterion being savvy enough about the workings of the Internet and the new/social media.

The choice of candidate is important because there is no room for mistakes, unlike the blunders made in the past over spectrum allocation and technology choices. Most importantly, the candidate should not regress but rather, take the nation forward on the digital path.

Friday Reflections - By B.K. Sidhu

● Deputy news editor B K Sidhu has some candidates in mind, but they are not politicians.

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This is what the Malaysian Chinese want

This is what the Malaysian Chinese want

The Utusan Malaysia headline of May 7 posed an interesting and pertinent question of what more do the Chinese in Malaysia want. It is a pity that Utusan is unable to see that what the Chinese want is, in fact, what the educated urban Malaysian voter wants, regardless of race or religion. There are three important characteristics lacking in the Barisan of today.

Intelligent, courageous leadership

The Chinese comprise only 30 per cent of Malaysian voters, yet Pakatan Rakyat won 51 per cent of the total votes cast. By saying that the election result was because of the Chinese voters, the Barisan Nasional leadership demonstrates an inability to objectively face reality.

Barisan’s acceptance of Zulkifli Nordin as its direct Shah Alam candidate similarly shows a lack of intelligence and courage. Here is a lawyer who does not feel that dialogue and discussion can resolve matters, having forcefully disrupted a Law Society seminar a few years ago. He has vowed loyalty to, and then turned on, his previous political parties (PAS and PKR). He has publicly belittled an ancient religion with a million Malaysian followers.

UMNO making way for Ibrahim Ali to contest the Pasir Mas constituency is similarly bad judgement, showing its acceptance and approval of a crude man who prides himself with using vulgar words in public interviews.

Principled means acting in accordance with morality and showing recognition of right and wrong.

To give them such special honour and credit shows a lack of intelligent reasoning and an inability to stand up against the loud extremist faction of the party.

Attributing the election outcome to a “Chinese tsunami” is illogical in the face of concrete facts and data. PAS won an additional seven state seats in Selangor, all in Malay majority areas.

Lim Kit Siang could not have achieved a majority of over 14,000 votes in Gelang Patah without good support from Malays who form 35 per cent of the electorate there.

Similarly the UMNO-backed PERKASA extremists were conclusively rejected in Pasir Mas (96 per cent Malay) and in Shah Alam where Malays make up 70 per cent of the electorate.

To blindly spin the 2013 election outcome to suit its raced-based founding philosophy of 1947shows up a political party that wants to be stubbornly unwise. Unless UMNO’s leadership can find the courage to face facts, the party may become redundant and obsolete for the educated 21st century voter.

Respect for and recognition of rights

Academic studies have consistently shown that increased income brings more happiness and satisfaction only up to a certain point. When a society progresses out of poverty into middle class, increasing income does not increase satisfaction proportionately. It is the psychological aspects of living that produces a better quality of life.

Whatever the radiation scientists claim, the people of Bentong (45 per cent Malay, 44 per cent Chinese) will ask why a factory run by an Australian company is unsuitable for Australia or Damansara Heights but can be located in their backyard.

In 2008, Health Minister Liow won Bentong by over 12,000 votes. This year he retained Bentong with less than 400 votes against a political novice who is a green activist. The urban electorate, Chinese or Malay, seeks respect and recognition of their right to a safe living environment.

MCA contested in 37 parliamentary seats and managed to win seven in GE13.

In Penang, the 1 Malaysia Charity organisation hosted numerous concerts and dinners in support of Barisan candidates. At their functions, T-shirts, beer, hawker food and lucky draw gifts were given free.

Initially there was merriment and wonder at this new campaigning style; this then became anger and disgust when even cash incentives were handed out. The electorate felt they were treated with disrespect, as if their rights, dignity and vote were up for sale.

Numerous development issues had plagued the Penang DAP government in the months leading up to the election, and the increased majority they subsequently obtained can only be explained by the strong rejection what the other side represents. Money cannot buy happiness, and similarly, the urban electorate set out to show that money cannot buy their vote in Penang.

The urban electorate in Malaysia is obviously better off economically compared to the rural dwellers. They have reached a stage when extra economic incentives can no longer easily win their approval.

Instead they asked for respect, and an acknowledgement of their right to an inclusive, peaceful existence in the country. They seek recognition as a legitimate electorate with the right to choose the governing party. Blaming and insulting them for voting against the Barisan will only guarantee the DAP and Pakatan a brighter future.

Competent and efficient institutions

There is no doubt that relative to those who were once our equivalent, we Malaysians have fallen behind. The Singapore dollar which was equivalent to the ringgit in the 1970’s is today 2.5 times higher. Malaysia beat South Korea and Japan in the 1972 Olympic football qualifying rounds; today we are nowhere near these 2 World Cup Finals participating countries.

Malaysians have fallen behind in economy, education and sports.

Universiti Malaya had topped the list of universities passing the United States medical qualifying examination in 1969, ahead of Melbourne and Singapore University. In 2011, Universiti Malaya was ranked 401 out of the 500 universities in the Shanghai Jiao Tong University’s Academic Ranking of World Universities.

The educated, smart-phone holding, internet-surfing, urban voter is aware of world-wide trends and wants to experience the best that life can offer. When the governing party is unable to develop the country to its full potential, its popularity will drop.

As demonstrated by the Noble prize winning Dr Ivan Pavlov, animals respond to incentives, and man is no exception. A system that promotes those who agree with and pamper those in power while sidelining those working hard to pursue competency will breed inefficient malfunctioning institutions. Even those not under their direct employment will be affected by these incompetent institutions.

Malaysians want a competent and efficient institutions.

When the police force is politicised and crime rate increases, more money will have to be spent on personal and household security. Even Datuk Nazir Razak admitted that he had hesitated coming back to Malaysia because of concerns about his children’s education. When the middle class spends on private education or healthcare, votes for the governing party will drop.

Conclusion

The Chinese now make up only 25 per cent of Malaysia’s population and to be named as the cause of major developments in the country is to be hurtful to this minority and insulting to the majority. On the other hand, government statistics show that Malaysia’s urban population has increased from 62 per cent in 2000 to 71 per cent in 2010.

 No amount of rhetorical whitewashing can hide the fact that the poor performance of Barisan in the 2013 election is due to its failure to win the heart and mind of the urban voter. The faster it faces reality and move away from its obsolete race-based mindset, the better its prospects for the next electoral battle.

by Ong Hean Teik

* Dr Ong Hean Teik is a consultant cardiologist in Penang. He reads The Malaysian Insider.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.

Reblogged from Din Merican: the Malaysian DJ Blogger

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