Grow Up Greece!

"Cage them! Cage them now!"

To be a single nation or not to be? That is the question.

In order to answer this question, another question must be answered beforehand - would Greece be able to pay off their debts? Clearly, the answer is no. Knowing thism Greeks must unite and take the necessary measures in oreder to contain their financial problems - but the problem is even the citizens themselves don't know who to elect. Reason being? All the candidates speak of austerity measures which is extremely unpopular with the public.

Are fucking retarded?

Its high time that you put a sock in it after years of binge spending. You want to tell me you're unwilling to cut down your spending? Isn't that a bit childish? Look at how Koreans were willing to give their personal gold during the Asian Financial Crisis 97/98 just to help their country to get out of the debts in which those IMF & World Bank assholes put them into.

Get your act together retards!

Say No To Populism

Take ALL the money!

I've always wondered by the name Bahk Jae-wan comes up in ChosunIlbo; turns out he's one of those policitians who actually knows shit but not sucumbing into populist measures during election years, unlike Malaysia. Its these kind of politicans that we need - people who act not based on what the people want, but what what's best for the people.

Overdependancy On Credit Rating Agency

Oh relax Sarkovsky. It just means that a woman can manage their finances better than you.

This is a good article on how investors should not rely too much on Credit Rating Agencies - much like how professional violinist, olympic judges, and wine critics lack consistency in their judgement. Humans by nature are prone to bias hence, we shouldn't solely rely on other individuals as a proxy to our own critical thought process and judgement.

The Chinese Government; Keeping the World in the Dark

Gotta love them pandas

I recently came across this 10 page article (if you print it out) about how the Chinese Government controls certain economic and political aspects of the country. As I read through two things started to happen; I become more and more curious, at the same time even more clueless about what they are doing - a total paradox. But keeping to the point, let me just elaborat on what they're doing as of now;

Now to put it in simple terms, the Chinese Government has a policy where, for transactions conducted in US Dollars, all the money has to be forwaded to their Central Bank, which is then to be exchanged with the Yuan Renmibi - this is apparently a must as they treat dollars as contrabands! Now what do they do with the money? They buy US Dollar denominatd government bonds. Now, if the buying of bonds were only limited to millions, I can understand, but apparently it runs in the billions (refer to chart below).

This is the prime reason why some governments are crying foul play; as this is the prime reason why their currency is undervaluated - to a point where the American Congress nearly went through the Exchange Control Act, and could be the reason why they've been targeted for Trade Protectionist Policies. If you look at their exchange rate, for a period of two years - there have been miniscule if not no major volatility against their exchange rate with the USD, even during the 08/09 financial crisis.

So what does this show? Clearly, a sign of government intervention. Many had hoped for the Chinese Government to change after their ascension into WTO - but apparently based on two articles from the Economist; much of their economic policies and political structure remains the same despite a significant amount of pressure to become "Westernize" and open up their market. This system apparently is much resented by the Chinese Government who prefers to have a stake (even a small one) in all if not the majority of the private entities running in China; for the sole purpose of control.

Now, in actuality, what the world is concerned about is their transparency - What do they plan on doing with the bond? There have been speculations that once reaching a certain threshold, they would do a firesale - but this would in turn hurt them as well as a healthy American economy would be essential to their Export-Driven economy, to which America is a big customer. So if this isn't the case, why don't they spend the money domestically? Why bother buy bonds when you can build infastructure? Well the answer to this is apparently as they build more and more manufacturing plants, major constructions shifts to public utilities would drive their inflation rate to the moon - and when that happens, a global rise in inflation would eventually come.

I believe that this is something long term - my experience which Chinese people, regardless of where they are born is that they have two distinct characteristics; the natural ability to make money and a very good long term vision. So whatever most pundits perdict in the moment is particularly off track - only the Chinese would know, and I'm pretty sure its something more which would develop within the following decades rather than years.  

In any case, keeping the world in the dark would only result in the Chinese Government open to scrutinization by the Western Media and Government. What I can see is definitely, a clash of ideologies from the Capitalist West, to the Communist / Socialist East. Within the coming decades, we would probably see a second Cold War; using not spies as weapons but rather dollars, purchasing power and economic influence.

Thats something new to look forward to.

Japanese Yen; Up And Away

Exactly what Japan needs to kickstart

Further to my previous post, it seems like the Japanese Yen is continuing its upward trend against the US Dollar. Many see this as a reaction to the financial volatility in the EU and US, opting to use or conduct transactions in Japanese Yen as they're considered to be safer (although in reality, Japan has a much higher Debt-to-GDP Ratio compared to any country in the world) - and many analysts has describe the sudden rise to be abnormal as the actual exchange rate does not reflect the market price. Further to BOJ's efforts by increasing credit easing scheme by a further 5 million yen, the government hopes to stabilize the price and prevent it from going up further, hurting the south heading export-dependant economy. As seen in the picture below ( taken from http://www.xe.com/ ), the Japanese Yen was stable for much of the year until fears on the American Debt ceiling broke out by July / August 2011.

Despite the additional monetary easing planned by Bank of Japan, I doubt that it would carry much effect since the Yen is the 3rd Largest Traded currency in the world, and adding another 5 Trillion yen to the initial 50 Trillion Yen would not be enough to hold the exchange rate still. As much as the government promotes purchasing overseas companies in US Dollars, the exchange rate remains at a still. I think the major issue would be for the massive panic and loss of confidence with the Dollar and Euro - rather than focusing on credit easing, they should be more focused on buying the Dollar or Euro; but the American government is keen on keeping their currency low in order to promote exports (something they should've done before China's rise).

As much as this has turned out to be a disaster for the Japanese, it could bear some fruit in other ways - particularly in terms of overseas investments and cheap prices of imports (domestic consumption). Personally I've always thought that despite the high standards of living, their level of domestic consumption has not been on par with other advanced countries in the West. The Japanese should also learn to stop being such an export dependant country and view other countries as potential markets (much like how Korea has focused on ASEAN and China focusing in Africa). Their failure to change and adopt to new times (particularly in business) was reflected perfectly in a Korean-based newspaper I found the other day.

So where do we go from here?

Household Debts; A Major Concern?

So how long will it take until it goes boom?

There seems to be some concerns by economists after the Budget anouncement; that the government seems to be spending their coffers without taking into account the global conditions - in other words, they're being too optimistic. Economists are concerned about the rising household debt in Malaysia, apparently walking on a trend similiar to the 2008 financial crisis. Apparently the rising debt is attributed to repayment of loans (housing and car) as well as private consumption. Let me just touch on the two; repayment of housing and car loans.

For housing loans, I think its quite evident that the majority of the snowballing rise is attributed to owners purchasing their 2nd or even 3rd house ; leaving to the younger first house buyers outside of the loop. The reasoning? Pure investment. But many people fail to realize that once the market moves into a purchasing frenzy through, driven by pure investment rather than consumption, this could flow into a housing bubble. The result? Those with vision (too much vision) and considerable income have no liquidity; whereas the young ones end up homeless and fighting for a good space. As for car loans, its simply pure manipulation; the government actually wants people to get car loans - to help Proton, much like how they subsidize fuel to keep it cheap, to help Petronas. These two factors inarguably results in citizens not pressuring the government enough to develop a world class effecient public transportation system.

Now apparently, the same problem is happening in Korea, but it is slightly different in the case of Koreans. Based on my readings and observations, the rise in debt is mostly attributed to Jeonse Loans, and unlike Malaysia, they have limited land and twice the number of people. What is similiar to Malaysia is the rising debt is attributed to rising living expenses however there is no market distortion in Korea; no subsidies, no manipulation of preferences - creating a competitive and effecient market driven system. The Korean government was even forced to take measures such as increasing interest rates, with a more extreme method of blocking personal loans. To the least, the government recognizes this issue and is actually formulating a plan to combat and reduce the household debt in the country. What about Malaysia's Government?

Now I hate banks even more.

The Second Plaza Accord

Be smart; Why not have both?

Recently, America has been developing a bill called the Currency Exchange Control Act to penalize China for undervaluing its yuan - and the Chinese are not happy with it. Although a number of Senators agree on imposing the act, others on the other hand, are much more skeptical if not oppposed to it. The funny thing I find about this whole drama is that America claims that the undervalued Yuan (see how Chinese & Indian government undervalues their currency) has resulted in the loss of jobs, in addition to the widening trade deficit between US and China. Some are claiming that America is indirectly trying to push China into the same position it did to Japan through the signing of the Plaza Accord; resulting in a devastating deflationary spiral in which Japan has been suffering over the past 20 - 30 years.

Now to be frank, I couldn't agree more on how America is playing the dirty game again. They did it to Japan under the banner that it would reduce trade deficit but it is nothing more than just a political ploy. What I think the American government is trying to do is push the attention away from them by using external distractions. Despite all the calls on how Chinese yuan is undervalued, the new Big Mac Index suggested that the Chinese Yuan is not severely undervalued as it is claimed to be (although this itself has its own limitations). Another key point which was mentioned is that the passing of the bill may have more harm on America's exports to China than imports; fits the bill - neither benefiting  both parties.

Its funny how despite strong indications that the global economy is heading towards a double dip recession, we have countries like America (as well as Argentina and Brazil) trying to enforce trade protectionism policies, claiming that it would help put their economy back on tack where in fact, the risks of it backfiring is apparent. But like all of the things the American Government has been doing for the past 10 years; its nothing more than a political ploy. It seems that they're much more encapsulated in trying to find an external explanation to the public rather than taking the blame themselves, and rather than thinking about the American public they have been selfish; affecting the entire world at the same time.

I hope they're happy with what they're doing.

Miracle of The Han River; South Korea

I dont think that'll be enough for him

This is mainly a compilation article about some of the interesting articles I've found about South Korea. We'll start with the latest one I found off of a Korean Newspaper. This was relating to the current level of debt being taken out by individuals, corporations and the government. To be frank though, I don't think its nowhere alarming yet, but for some reason they're starting to freak out over it. Logically, for any export oriented country who wishes to turn its economy into more of a domestic consumption based structure, then obviously you'll need to debt to rise to generate retail sales. However, for some reason, I think Korea's rising debt is more related to its rising living expenses rather than a showcase of increase in domestic consumption. Now if that was the case, it could be something noteworthy.

The second article I read was actually a compilation of McKinsey; featuring a 6 articles each with its distinctive topic of focus. The first one elaborates on how South Korea spends more on Research & Development Per GDP compared to other advanced nations. The second article touches on Korea's resilient economy with the third talking about its national brand. The fifth details on how Korea should start shifting its economy to a service-based economy, and finally, a four step guide on how Korea can propser further in the future. Rather interesting, but I still think they still lack China's manpower, and Japan's technological superiority over them, not to mention how I think that the people in the region lack English proficiency; an essential component in becoming a globalized economy. But then again, English is without a doubt over-rated.

Annyeong!

The Yen, Gold and Swiss Francs.

Show me teh moneyz!

    Here we have the Bank of Japan intervening in the Yen to US Dollar exchange rate which hit an all time low (but I thought that was meant to be high?) since the Post-World War II. Apparently the bank did this by purchasing the Dollar on mass, with a major selloff of the Yen which helped the Yen to climb back up to 78 Yen, with the Nikei showing gains as well. But it seems like the efforts were futile as at the end of the day Nikkei went down, along with other major markets across Asia as a result of the massive sell-off taking place on Wall Street. 

    The effect of rise of the Yen against the dollar is apparent; much like any export reliant countries, a strong domestic currency would definitely hurt its economy. South Korea is currently facing similiar problems as well - both as a direct result from the collapse of Wall Street, shaken as a result form the loss of investor's confidence on America's & Europe's debt crisis. I'm so sleepy I feel like dying  One thing which grabbed my attention is how the price for Gold & Swiss franc would normally increase during economic recessions. I can understand swapping your investments to Gold, one month low-yielding government bonds, but why the Swiss Franc? Even the Swiss Central Bank had to lower its domestic interest rates to cope with its the sharp increase which would have had adverse effects on its economy.

I should look into this.

Notes To The Prime Minister.

Is full of typos.

But the book itself is a vivid reminder of the Asian Financial Crisis which struck the region in '97. What made me like the book (aside from the fact that I got it for free) was how the author wrote, in detail, how the crisis affected the country, as well as Tun Dr. Mahathir's predicament at that time. The conditions and perils in which Malaysian citizens suffered, as well as the reasoning for the drastic measures in which Mahathir was forced to take, to subsequent castigation's by the international community, all documented in one full of typos good book.

Although I might have thought differently if I actually had to pay for the book. 

There were a number of pages which caught my attention but one page stood above all else - Page 336, where details on the criticisms made by the international community was laid down. Business Week labelled Malaysia as a renegade economy, and that the government made the worst possible choice. The International Herald Tribute proclaimed that Malaysia shut the door on the global economy. A London-based analyst claimed that Malaysia suffered an IQ-crisis. Pretty harsh.

When the government decided to peg the Ringgit to USD$3.80 it was blatantly obvious that the ringgit was being undervalued, depriving Black Market traders from the incentive to conduct currency exchanges. Since the country refused support from the International Monetary Fund, they were not burdened with ridiculous interest rates unlike Indonesia and Thailand, allowing them to have much more freedom in managing their budget without foreign intervention. In the end, it seemed that the measures which the government took neither helped the economy to recover, nor did it inadvertently made it worse. Recovery ensued nonetheless.

Where most of the western community backed the IMF's revival package for Asian countries, one particular oddball, Paul Krugman's Plan B to revive Asian markets was very similar to the actions Mahathir took. In his article, he noted that instead of cutting spending and increasing interest rates, the exact opposite should be enacted. He believed that the Asian economies were in dead water and all they needed was something to jump start them back into drive mode. So maybe he was spot on, in a way.

I believe that the book should be kept in close quarters for young Malaysians as a reminder of the past, to never forget the difficulties in which the country faced, and how it survived and recovered faster among its peers. Although I'm pretty sure most youngsters would prefer having Justin Bieber CD's with Japanese Mangas stacked up on their book racks.

To the least, it will have a place on my bookshelf.

Explaining Monetary Economics by Baby Sitting.

Would be difficult to do.

But here we have Paul Krugman explaining how a simple co-op of babysitting through the use of coupons as medium of exchange (where seasonal changes are the variable factor affecting the demand and supply of coupons), could end up in a disaster if there were no 3rd party element in the system to regulate and manage the supply of the coupons (a.k.a Central Banks).

I found Krugman's simplistic approach in explaining Monetary Economics to be very enlightening, and further showcases the importance of financial regulation by Central Banks in any country in order to ensure the stability of its economy as well as manage its currency fluctuations. In terms of governmental intervention in financial regulations, I believe he is a much more competent person as opposed to Alan Greenspan. 

The article written by Krugman also implicates citizens to keep calm during recession times, and hold in the belief that the good times will return, once the Baby-sitting coupons are regulated in an orderly manner.