Mamakthir’s words
EUROPE AND NORTH AMERICA
JAN19 2012 WRITTEN BY CHEDET
///1. Ever since the Europeans and this includes the Americans, lost to the Eastern countries in the manufactured goods markets, they have switched to the financial market. Through the many products they created in this market they seem to be able to grow and maintain their wealth and prosperity as shown by such indices as the GDP and Per Capita income.///–Mamakthir
Is it true that the West lost to the East in manufactured goods that they created financial market or was the financial market a development along with other economic activities? Have the West lost out or did they simply move out their activities because of cheap labour, or tax incentives?
Mamakthir had his letter entitled “The west needs to go back to the capitalist basics” published in Financial Times on 12 January 2012. Unlike other letters published by FT, there has been no comment to that letter. The west must have accepted his views completely!
///2. But the business is spurious. The financial market is basically about gambling. Ever since America decided that the market should regulate itself, that there should be less Government, all kinds of unacceptable practices have been allowed. Short selling expanded from shares to commodities to currencies, Banks lend more money than they have and allowed highly leveraged borrowings by hedge funds and currency traders. They indulge in sub-prime loans, securing these imprudent lending by mortgaging and insurance.///–Mamakthir
Insurance is also gambling to those who have stamp size knowledge. If the financial business is spurious, then financial crisis would not bring about economic crisis. Economic development would have remained at a lower level without financial market. The functioning of financial market is not perfect which resulted in problems facing the world now. But is it irrelevant?

///3. In real business the costs in the European countries are unduly high because of high salaries and wages for workers’ pensions, bonuses, short working hours, long paid holidays, unemployment and other social benefits. The standard of living may be high but European products cannot compete with the products of the East in world markets.///–Mamakthir
The west respects human rights and workers’ welfare that makes owners of business pay their employees the benefits commensurate to their contributions to the earnings of the enterprises. The east depends on cheap labour to compete in the world market. The blood and sweats of their workers contribute to the wealth of business owners. The voters allow elected representatives of pseudo democracy such as Malaysia to behave like absolute monarchy. But unlike absolute monarch the Pseudo-king does not have interest of the nation at heart.

///4. The currency trading today, for example is said to be worth four trillion dollars a day, equal to the total productivity of Germany in one year. Whereas producing goods and services by Germany spins off all kinds of supporting and other businesses as well as millions of jobs, currency trading spins off no businesses nor create any real jobs. All the dealing involves only the entry of figures in bank books. The earnings are real enough and can contribute to GDP and Per Capita growth. But the picture of economic growth indicated by these indices is false as the wealth belongs to a very small percentage of the population.
5. The sums involved are however huge, running into hundreds of billions and even trillions of dollars. When the bottom fell out, the losses are equally huge, sufficient to bankrupt even the biggest banks. Even countries can go bankrupt. ///–Mamakthir
US Dollars printed by the US without any backing are tradable with any other currency which is backed by gold. Ringgit would be worthless if it is not backed by other currency or gold. There is nothing Malaysia can do about it except to get jealous. That is how it is.
///6. When you lose money, you become poor. Countries are the same. When they lose money or they borrow beyond their means and cannot pay, they become poor.
7. The problem is an unwillingness to admit that they, the Europeans, the Americans, the icons of the free market and economic prosperity are now poor. As a result all the manoeuvres so far are aimed at staying rich, at maintaining a lifestyle that is untenable.///–Mamakthir
The western countries may be poorer now but the people are capable to produce goods and services that the East want. That is because they have human capitals and human resources. The people around the world are attracted to live in countries in the west, and only those who are considered an asset are acceptable. In Malaysia UMNO government gives foreigners IC to vote for them, and it pushes out trained human resources to ensure that they do not vote against UMNO.

///8. The only real way out is to accept a lifestyle that is associated with lower incomes. But the people are demanding to live the rich life they were used to before. The austerity programs are rejected with demonstrations and strikes. And these simply aggravate the situation.///–Mamakthir
Only Najib called for people to change lifestyle in facing inflation but not leaders in the west. The demonstrations were part of democracy since they are unlike Malaysians who are forbidden from showing their opposition to institutionalized corruption or manipulation of electoral process in general elections. The governments in the west are informed of the wishes of the people all the time and they do not have to buy votes at the end of their term.

///9. If wages and salaries as well as bonuses and other perks are lowered, then the production of goods and services by the workers would cost less. The goods will be able to compete again in the markets against those of the East. Real businesses would then be able to be resuscitated.///–Mamakthir
This is a good example of how to spread poverty to working class around the world. That would make owners of businesses rich. That might not even stop Malaysians emigrating.

///10. At the same time the financial market should be curbed. Operations out of tax havens should not be allowed and all accounts must be submitted to the authorities. Currencies should be pegged to a new independent trading currency based on a specific amount of gold or other precious metal. The fluctuation in value would be minimal, making doing business less uncertain.///–Mamakthir
With currency pegged to gold or any other precious metal, then the increasing world population would have a reducing share of a fixed, however large the quantity of gold or precious metal, amount of currency. Either the people have to get poorer by the day or more currency notes would have to be printed and the value of gold inflated.
Economic activities would be restricted to the movement of limited amount of money with every piece backed by a fixed amount of metal.

///11. With the lower cost of production there will be no necessity to outsource in Asia. The industries of Europe would be revived and contribute towards overcoming unemployment and early settlement of debts. Real wealth would be generated.///–Mamakthir
The east will continue with the old machineries to produce the same goods. New industrialization in the east can begin at a higher level!

///12. The Europeans also spend far too much on weapons. Research, development and upgrading swallow up huge amounts of money. As the weapons become more sophisticated the costs go up sky high. Where before a fighter plane would cost a million dollars, now they cost 50 to 100 million dollars.///–Mamakthir
The west produce modern weapons and the east contribute lives to prove their utility. The billions in dollar are cost to the east to support their development. But if the weapon costs only pennies, how can the government pay huge amount for services contracts?

///13. Yet these weapons are quite useless in fighting the guerrilla wars they are likely to face. And they dare not have wars with countries with the same military capacities because it would be ruinous for everybody and would probably spell the end of the world.///–Mamakthir
The weapons might be useless to defending Malaysia but they are toys to keep the military occupied. Besides without the weapons, how does the defense ministry justify ancillary expenses?

///14. Their military budget contributes to the wastage of funds as the likelihood is that the weapons would never be used for the purpose they are developed, certainly not on the scale they are being prepared for.///–Mamakthir
The west use the weapons as a sale advertisement, and the East save up to buy them. Malaysia would not think twice to make money in the same business activity, had it the capability. But we have exported our human resources.

///15. Everything points towards a new Bretton Woods. The world’s economy has become much more liked and integrated that a new set of monetary, financial and banking system needs to be negotiated and devised, taking into consideration the views and problems of the poor countries as well. There should be no thoughts about hegemony; military, political or economic.///–Mamakthir
Those who have the knowledge and ability and are in the position to effect changes to improving financial market are not asleep. If IMF has no solution, Mamakthir would not have!