Private Sector Expenditures
1997 72 Billion
2008 56 Billion

These two figures recorded a 22.2% drop in the Private Sector Expenditures of Malaysia during 1997 and 2008, after about 12 years’ lapse. The figures clearly showed that the general Malaysian public are much poorer now as compared to 12 years’ ago.

There is no evidence showing that the personal income of the Malaysian individuals or the corporate income of the Malaysian corporate citizens will go up in the near future, as Malaysians have largely lost their business competitiveness to Vietnam, Laos, Kemboja, Mainland China, India and Indonesia.

“But our forex reserves are at a high of US 100 billion.
Sometimes figures are very confusing to understand.” (sheriff singh)

In order to explain why the foreign reserves (also called international reserves in the United States) of BNM can be kept as high as USD100 billion but the Federal Government still finds that it has gotten not enough of money to spend, perhaps we should look at how some Malaysian private companies conduct their daily businesses in a debt-ridden situation.

Assume Fat Cat Company borrowed RM10 million from a commercial bank. It spent about RM7 million investing in the long-term fixed assets such as development lands, Office Building, Plants and Equipment, Motor Vehicles, Electrical Fittings and fixtures, Office Equipment and etc. Fat Cat Company’s Balance Sheet indicated that the company has a paid up capital of RM2 million and an accumulated loss of RM5 million but the company still keeps RM1 million in the bank account as a contingency plan to prepare cash for servicing the bank loan interest expense and the trade creditors’ demand for payment which falls due soon. The RM1 million deposit in a bank account does not mean that the company is financially sound because that RM1 million savings will not be enough to pay back the commercial bank in case the commecial bank is to serve a legal demand to the company for a loan call back by the commercial bank.

BNM has to keep a high level of foreign reserves because it makes Malaysia’s official currency Ringgit being pegged to the US Dollar. The foreign reserves which worth USD100 billion in total may just be barely enough to keep the Ringgit’s international value stabilised at around RM3.50 against USD1. In case the BNM is no longer able to keep the foreign reserves at USD100 billion level (let’s say it has to draw out the money from a foreign bank in order to finance Najib’s fiscal budget spending), it is quite likely that the international value of Ringgit will drastically drop. A weakened Ringgit will cause a worse-off situation to the domestic inflation because Malaysia basically is still a net food importer!

In other words, a high level of foreign reserves at the Central Bank may not necessarily mean that the Federal Government is rich. This can be explained by the analogy of using a private company mentioned above. The fact of high bank savings being held by Fat Cat Company does not necessarily translate into a financial soundness or financial health of a business if Fat Cat Company already makes big losses in business operations and is struggling in a debt-ridden situation.

“Are we pokai or not?” (sheriff singh)

The above question is something which I really wonder. That is the reason why I made a request to YB Kit asking him to raise question in the Parliament on how many percent of the Fiscal Budget Expenditures is used for the purpose of financing the interest expense of Government Foreign Debt.

“The more sustainable foreign reserves are one from trade surplus, i.e. foreign exchange we earned from Malaysia’s exports.” (limkamput)

The above point is the best practical knowledge Mr limkamput has tried to teach we the Malaysians. Our immediate neighbour, Singapore, is able to survive many rounds of world economic recessions even though it has gotten negligible natural resources simply because the tiny red dot nation has successfully built up its strong foreign reserves based on its trade surpluses accumulated throughout the past 40 years. The Singaporean Government is deemed to be a debt-free government because it does not depend on foreign debt to build up the strong foreign reserves. The efficiency of Singaporean Government is definitely something worth noting by us because Singapore is a good economic model which can inspire us along the line of doing the economic planning works!

“The US is able to continue to live beyond its means simply because the rest of the world, particularly China and other East Asian economies, have remained stupid to finance it.” (limkamput)

limkamput has shown his arrogance here when he calls the rest of the world beyond the US, particularly China and other East Asian economies “stupid” because they continue to finance the US in order to enable its people to live beyond their means.

If limkamput’s opinion is to prevail, then I believe he can also call the high interest rate loan offeror, the so-called loan shark or “Ah Long”, stupid for giving away loan to the loan borrowers. However, as far as I know, most loan sharks in Malaysia are not stupid. They are only the high risk takers. They are just holding a very lenient view on the importance of the security of loan recovery therefore they don’t usually request that the loan given out must be secured by some valuable collaterals.

Japan and China may be the daring high risk takers by buying a huge amount of the interest-bearing sovereign bonds of the United States. However, the monies which Japan and China have continued to deposit into the hand of the American Government will be proven to be some kind of fruitful investment. Besides the bond yield, the monies lent to the US Government will eventually be put into the hands of many American import businesses, which will continue to import goods and services from Japan and China. This kind of economic arrangement is mutual beneficial between the US and the East Asia, as the Americans keep having some monies to spend while the factory workers in Japan and China will continue to retain their jobs even when the world is having a big financial turmoil.

For the past 11 years, the only person who kept criticizing the Americans’ predominance in world currency choice and unshamefully claimed his glory in fighting against the American predominance during the 1997-1998 Asia Financial Crisis is Dr. Mahathir. Nevertheless, we still ironically find that the central bank of Malaysia, BNM, continues to peg Malaysia’s official currency Ringgit to the US dollar since September 1998 until todate.

Dr. Mahathir likes to prejudically despise the capability of the typical Americans because he has attributed Americans’ success in International Trade on the sole reason of the existence of highly overvalued US Dollar which dominates the World Trade as the most popular World currency. However, he may sometimes forget about the truth that one of his sons is successful in doing business mainly due to the reason that his son has received the profound training in business with his petrol chemical engineering education in an American University at Oklahoma State during early 1980s.

“Eventually there will (be) tears for those who keep accumulating the papers and there will be hard reality for those keep spending beyond their means. The arrangement is not sustainable and it will break down.” (limkamput)

When Ah Long gives out loan to a loan borrower, he may not look at the borrower’s tangible asset on hand. Ah Long may look at the income earning potential of the loan borrower, or worse still, to look at whether the loan borrower has the potential to work as a prostitute! It is that simple!

The US has the hi-tech weapon technology and many other things which the East Asians want. It is also that simple!

“Yes, US have high tech weapons and they also owe you lots of money. Why don’t you try to force it on them to pay back?” (limkamput)

limkamput, in Americans’ political dictionary there is a word called “lobby”. Indeed, it is not necessary for Japan and China to use force on the American government in order get back the loan proceeds receivable because employing a lobbyist to do lobbying on the politicians for purpose of seeking the U.S. politicians’ consent to pay back the loan will be a much cheaper and much easier way than using “force”. Don’t you know that the BN Government did also use a lobbyist in Washington D.C. in order to get Americans’ acceptance on the appointment of a Malaysian ambassador to the United States during Dr. Mahathir’s rule and during Former US President G.W. Bush’s administration?

If the political leaders of China and Japan start to open their mouth uttering some words about their intent to buy high tech weapons such as aircraft fighters from the United States, I believe many lobbyists from the American aircraft companies may quickly go lobby the Senators and the Congressmen in order to get them to agree to declassify certain high tech aircraft fighters which have already stimulated the buying appetite from Japan and China. In America, almost everything is up for sale, so long as the price is right and the political climate permits.

Americans earn a lot of their foreign exchange from weapon sale to the Middle East. In the past American politicians from time to time were willing to risk the enlisted soldiers’ lives in the unrighteous wars being waged against the so-called terrorist government in Middle East simply because the lobbyists from the American weaponry industry had successfully been able to pursuade the American politicians to put the soon-to-be-obsolete weapons in actual use in order to justify additional replenishment of more advance new weapons. In the event that Japan and China are interested to buy some advance weapons from the United States, it will be even a much easier task for the lobbyists to accomplish because weapon sale to East Asians does not involve killing of anyone and does not risk the life of any American soldiers.

If Najib is interested to buy American weapons, please be rest assured that the American politicians will not ask him to go fly kite. I am willing to offer myself as the middleman and I can assure him that I will give him a large portion in the shares of kickback, surely much more attractive than that being managed by Razak Baginda!

If Najib is interested, just leave your email address in this comment blog and address to Onlooker Politics. I will keep you in touch later!