CURRENCY TRADING

As posted by Dr. Mahathir Mohamad at Che Det on April 28, 2009 9:59 AM

(This is the third instalment in a series on the trends that led to the present financial crisis)

1. Currency trading is another non-real contributor to the wealth of the rich countries. The trading again involves non-existent money. Banks would lend as much as 30 times the amount of investors' money held by the traders. The loan is again made up of bank created money. So also would be the investors' money if they borrowed from the banks.

2. The huge borrowings by the currency traders enable them to manipulate the market; pushing the value of the currency up or down. When the value of the currency changes the traders make a profit. Since the currency traders control trillions of dollars, their profits would be huge, and so would the dividends paid to the investors.

3. The trade in currency is estimated to be 20 times bigger than total world trade. The earnings per dollar invested would be higher than the dividends from production and trading in goods and provision of services. The investors and traders would therefore earn far more than what they would expect if they were to invest only the money they really have.

4. Individuals cannot borrow 30 times more than the money they have in order to invest. But currency traders can. Hence the investors' preference to invest with the currency traders.

5. The trade in currency is not in order to finance business or trade. It is for gambling on the appreciation or depression of the particular currency. Either way the bettor (trader) would make a profit. Since the profit is from 30 times more than the investors' money, both the traders and the investors would make far more than if they trade in the real amount invested.

6. The profits earned by the traders and the investors would one way or another go into the calculation of the GDP and per capita income of the country.

THE BANKING SYSTEM AND THE FALSE ECONOMY

As posted by Dr. Mahathir Mohamad at Che Det on April 25, 2009 10:11 AM

(This is the second instalment in a series on the trends that led to the present financial crisis)

1. Another contributor towards the per capita and GDP of the rich countries is the banking business.

2. Banks are apparently allowed to lend more money than they have, sometimes as much as ten times more. When they lend this money which they do not have, it became their asset on which interest can be earned.

3. Effectively they are creating money and earning profits from the money they have created.

4. Real businesses cannot do this. They cannot sell what they don't have nor earn income from services they don't provide. Doing business is therefore far less lucrative than banking. If the per capita and GDP excludes bank earnings then they should not be as high as is shown.

5. Because banks can lend more money than they have, the tendency is to lend as much as possible. In many rich countries banks offer to lend even when the clients are unable to pay.

6. If the banks lend 10 times more than the money they have then their profit must exceed the sum they would expect if they lend only the money they have from capital and deposits.

7. This extra money they earn is not real because it is "created" by the bank out of thin air. Nevertheless the profits earned from this money would be part of the banks profits and therefore the dividends for the shareholders. In the end they would contribute to the per capita income and GDP.

8. Banks also issue credit cards. The credit card holders expend far more than the money they have with the banks. The excess money is regarded by the banks as loans which may be charged a hefty interest of up to 18 per cent.

9. Since credit card holders often hold credit cards from several banks, the amount spent in excess of the money they hold with the banks would be very considerable. These bank loans from credit cards would again exceed the real money or assets of the banks.

10. The banks consider that even if some credit card holders fail to pay up, bank earnings from those who do pay would exceed the loss from non-payment.

11. The credit cards have effectively become money created by the banks. The earnings of the banks are therefore not from real money held in the form of capital or deposits. Yet the interest on loans via the credit cards would add to the profits of the banks. They would boost the share prices of the banks and contribute towards the profits of investors and eventually increasing the per capita income and the GDP of the country concerned.

ECONOMIC INDICES AND THE WEALTH OF NATIONS

As posted by Dr. Mahathir Mohamad at Che Det on April 23, 2009 4:15 PM

(This is the first instalment in a series on the trends that led to the present financial crisis)

1. We all believe that the great economically developed countries achieved prosperity through their genius in economic management and their skills in business. They are also seen to be able to govern their countries well.

2. They had developed various indices to indicate the level of prosperity they had achieved. And gleefully they compared these indices, especially per capita incomes and Gross Domestic Product, with those of the poor countries, to show how competent they were in the management of their economies. The poor are poor because they did not learn how to manage their countries. They should be regarded as failed states.

3. The claim by the rich that they were good in management and governance is only partly true. They did produce goods, provide services and they traded domestically and internationally. But their wealth from these activities is not as big as they made out to be. If the per capita and GDP are based only on these real businesses they would not be as rich as they claim to be. Certainly the United States and Britain would actually be nearly bankrupt.

4. What has sustained their high indices is their genius at gambling and manipulating money. It is this which had earned them huge profits and enabled their people to enjoy a very high level of prosperity.

5. Take the stock market for example. The money made in playing the stock market has nothing to do with real business. Usually the dividends paid out are very small, being based on the original share value. Thus if the shares were initially valued at one dollar, a five percent dividend would be only five cents.

6. But if the demand for the shares is great the one dollar share may be valued at very many times the initial share price. If the "market price" of the share is five dollars, a five per cent dividend would give the shareholder only 0.5% or half-cent dividend for each share bought at five dollars. That is not likely to make the shareholders rich.

7. It would be better to put the money in fix deposit and get a four per cent interest i.e. on five dollars one would get 20 cents in interest.

8. However, if the value of the shares appreciates say from five dollars to six dollars the return on the five dollar investment would be one dollar or 20 per cent. But the real worth of the business in assets term will not be as reflected in the market value or capital.

9. If the business fails then it would fetch only a fraction of the market price should it be liquidated.

10. On the other hand the assets may be worth far more than the depreciated market price. By then the investors in the shares at market price would have lost much of the money invested.

11. If a buyer buys up all the depreciated shares, he would make a good profit selling off the assets and liquidating the business. This is not really business, though some do buy to do asset stripping. After that there would be no more business to contribute to the GDP.

12. What is clear here is that the share prices have nothing to do with the business being done. Even when the business is profitable the very high share prices do not really reflect the market value or profitability of the business. The share prices are really artificial. The shares, basically the pieces of paper have become commodities on their own.

13. Yet investors can become very rich buying and selling the shares. Of course they can also lose all their invested money.

14. The share prices are also subject to manipulation. Through short selling the prices can be pushed up or down. Again the movements of the share prices have nothing to do with the real business being done.

15. The stock market has degenerated into a casino where bets are made which may have nothing at all to do with the businesses. This gambling in the rich countries can be far bigger than the worth of the companies listed in the stock market. Yet this wealth from non-business will get into the calculation of the per capita income and GDP.

16. But this is not the only non-real wealth which pushes up the per capita and the GDP of the rich countries.

17. I will follow this up with other wealth which are the result of shuffling papers.

BY-ELECTION

As posted by Dr. Mahathir Mohamad at Che Det on April 23, 2009 10:13 AM

1. I went to Bukit Gantang and Bukit Selambau to campaign for Barisan Nasional. We lost in both places; lost with bigger margins.

2. The papers reported that an independent post mortem will be conducted. I hope the people doing this will question me also.

3. In case they won't, can I give my opinion via this blog. There were lots of banners and posters in Bukit Gantang. A lot of them showed the portraits of the candidate. But quite a lot showed the picture of the Menteri Besar.

4. There is a belief in some UMNO quarters that if pictures of the politicians are displayed everywhere, people are going to like and support them. So, huge billboards have been put up with huge portraits of the Ministers and Menteri Besar/Chief Minister. To show that the Ministers are close to the Prime Minister, the portraits of the PM are shown close to the Minister concerned. In particular the (then) Tourism Minister together with the Prime Minister are seen everywhere. Maybe this is a tourist attraction.

5. Along Jalan Syed Putra there is a huge portrait of the 5th Prime Minister.

6. People are going to say that it was the same when I was PM. If you care to check you will find that only the Menteri Besar had these billboards with their portraits and mine. Ministers did not in those days. Certainly there were no big portraits of me. In fact the first thing I did when appointed PM was to forbid pictures of me to be displayed even in offices. But they nevertheless put up my pictures.

7. I really don't think having huge portraits of politicians will make them popular. In fact it is likely to make them very unpopular.

8. Another practice which should be looked at is that of Barisan Nasional State Governments, Government parties as well as Ministers like taking full page advertisements in the papers to congratulate the Prime Minister on his appointment and on other occassions.

9. I can understand the private sector doing this but Ministers and Ministries should not be wasting public money doing this especially before the Cabinet is named.

10. I have lots of observations on the conduct of the two by-elections. But I will reserve them for the future.

DEMONISATION

As posted by Dr. Mahathir Mohamad at Che Det on April 21, 2009 8:17 AM

1. The Western Press launched a concerted effort to demonise the new Prime Minister. From France to Britain to Australia, the articles are identical and carried the same message. The in-coming PM is said to be corrupt and involved in a murder case. The Australian writer says Malaysia is a "pariah" nation. I cannot believe that this demonisation by so many at the same time is a coincidence.

2. Included in the condemnation of the new PM is the allegation that he would bring back "Mahathirism". By this the Western press seem to imply that the fourth PM was a dictator who detained for no reason, manipulated the judiciary, controlled the Press etc etc.

3. As the person concerned I will leave it to Malaysians to judge and to define "Mahathirism". They are the constituents which Najib should care about. The foreign press has an agenda of their own. And their friends in Malaysia are feeding them with the anti-Najib stories as they fear Najib would put a stop to their control of the media.

4. Najib can expect to hear more of this kind of demonisation from the foreign press but it is what Malaysians think that counts. It is with them that Najib has to clear his name.

THE CROOKED BRIDGE

As posted by Dr. Mahathir Mohamad at Che Det on April 20, 2009 8:00 AM

1. The Star reported that Chinese businessmen in Johor Baru want the Crooked Bridge to be built.

2. Newspapers of April 15 reports on an UMNO Youth leader in Johor Baru requesting that the bridge be built for various reasons.

3. When the previous Prime Minister stated that the people of Johore did not want the crooked bridge or any bridge, no one said anything, much less protest.

4. Is it because no one in Johore at that time really wanted the bridge, or is it that no one dared to differ from the open-minded and liberal ex-PM or the Press did not dare to report the real opinions of the people.

5. There was for a very short while complaints regarding the Custom, Immigration and Quarantine complex. No one explained that the inconvenience was due to the complex being designed to complement the proposed bridge but when the bridge was cancelled a temporary road was built to join the complex with the causeway. This caused a misfit as the two could not be properly linked together. Hence the inconvenience. In addition the traffic problems near the causeway remained unsolved.

6. Does the Government need to ask Singapore for permission to build the now desirable crooked bridge? Is Malaysia free to do things in its own territory? Are we really independent? I wonder.

THE NEW CABINET LINE-UP

As posted by Dr. Mahathir Mohamad at Che Det on April 16, 2009 2:00 PM

1. I would like to congratulate the new Ministers and Deputy Ministers chosen by Dato Seri Najib.

2. The exclusion of Khairy Jamaluddin, UMNO Youth head who was found guilty of corruption by the UMNO disciplinary committee but allowed to contest for head of UMNO Youth seem to indicate a desire on the part of the new Prime Minister to rid UMNO of the blatantly corrupt politician.

3. Unfortunately the inclusion of several unsavoury characters who had been accused of being corrupt while in the previous Government, seem to negate this desire.

4. The Government must know that it has less than three years to regain the support of the people. A good opportunity for doing this by meticulously excluding dubious characters has been partially overlooked.

5. Ministers and Deputy Ministers are required to declare their assets during my time. So are the Menteris Besar and Chief Ministers.

6. But the declarations did not reveal much. Some Ministers were queried by the then Anti-Corruption Agency but no charges could be made.

7. Still talks about corrupt Menteris Besar and Chief Ministers in particular were frequently heard. No one was prepared to come forward to give evidence.

8. In the end I had to simply drop the MBs whom I heard were corrupt. No charges were made against them as they would not stand up in a court of law.

9. What matters is that the level of corruption among Ministers and civil servants was never high before and did not hamper the implementation of Government projects and did not result in abuses of Ministerial power.

10. I don't believe that corruption can be totally eradicated. But it can be minimised. From the complaints I hear today, corruption especially in the Government party has reached record levels during the tenure of the last PM. Certainly everyone is aware as never before of the corruption of the candidates for the UMNO Supreme Council. The results of the enquiry by the Disciplinary Committee are hardly satisfactory. But a committee member has said that the enquiries would go on.

11. I hope there will be no cover-up whether by the UMNO Disciplinary Committee or by the Malaysian Anti-Corruption Commission even if the corruption involves big names in the Government.

THE GENERATION GAP

As posted by Dr. Mahathir Mohamad at Che Det on April 15, 2009 11:37 AM

1. When in 1957 we became independent the population was only five million. Even after 1963 when Sabah and Sarawak joined the Peninsular to form Malaysia the population was only slightly more than six million.

2. Today Malaysia's population is 27 million. Obviously most Malaysians were born after 1957-1963. Meaning to say they had not known anything but being free, being independent, being ruled by their fellow countrymen.

3. History is not a compulsory subject in our schools. If at all history is taught it is sketchy, not really giving a clear picture of what it was like to be ruled by foreigners, by the British, the Japanese and in some cases the Thais.

4. I am not trying to say that those who lived under colonial rule are more appreciative of independence, although that is basically true. But what we should all be concerned with is that we appreciate our independence and our freedom more, whatever may be our political leanings.

5. Is it wrong for us to look back on the past? Some think it is irrelevant. That was before, this is now. Don't tell us all those stories about the struggles of people gone by. We have always been independent. All our life we have been independent.

6. But I think we should know where we came from. Otherwise we would not know which way we should go. We may think we are going forward when in fact we are going backward, back to where we started. We would not be making progress.

7. I am pleading for the teaching of history. George Santayana, an American philosopher once said; "Those who forget the lessons of history will be condemned to repeat their mistakes over and over again", or words to that effect.

8. How do we know we are not repeating our mistakes now if we do not know of our mistakes in the past. We need to know.

9. We need to know how we came to be colonized. We need to know how we barely managed to escape from being a Communist state.

10. We need to know how our Rulers were forced to surrender their states to the British. We need to know how the British were forced to rescind the MacMichael treaties. And so on, and so forth.

11. Somewhere along we would recognize the mistakes we had made. And knowing them we would be better able to avoid making them again. Our country would continue to grow and prosper.

12. The independent generations have enjoyed the independent country they inherited.

13. Surely they would want their children and grandchildren to inherit the same.

14. And this they can ensure by knowing the history of this beloved country and the mistakes of the past.

KENAPA SAYA MASUK BALIK UMNO (Jawapan)

As posted by Dr. Mahathir Mohamad at Che Det on April 9, 2009 6:31 PM

1. Terima kasih kerana ramai yang bersetuju saya masuk balik UMNO. Ramai juga yang menyoal "flip-flop" saya. Izinkan saya jelaskan sedikit.

2. Does the bruising blow to Barisan Nasional at the recent election show that you cannot hold one MAN entirely responsible for all the ills?

3. I think they still do. A leader plays a big role especially in Malaysia and the quality of his leadership affects the behaviour and performance of his subordinates whether elected or of the permanent service.

4. Yes there had always been corruption but when the leader is accused of being corrupt, his subordinates will emulate him and be equally corrupt. When that leader defends his son-in-law who had been found to be corrupt, the people's perception of the Government would not improve. That corruption has become blatant and widespread after Abdullah took over cannot be attributed to coincidence.

5. For 6 years now there had been practically no development. Malaysian businessmen had to look for jobs abroad. Yet people know that there were contracts given out to chosen people via the Government Linked Companies. Sometimes the PM himself would announce the GLC which had been given the contracts even though the EPU had not determined the specifications. This was the case with the four billion Ringgit Penang bridge. The PM had no respect for procedures.

6. I can list a whole lot of things done by the PM or neglected by the PM which caused a loss of direction for the whole Government. The curved bridge to Singapore was abandoned by the PM supposedly because the people of Johor did not want it. Everyone knows this is not true.

7. Yet for 50 years before this man, the country had grown steadily and the support of the people was solid. Had he been handed a rotten party and Government he would not have won the 2004 Elections with 90 per cent majority.

8. One of the direct results of this one man's stewardship was to create deep divisions between the races in Malaysia.

9. I did not agree with the way the Perak affair was handled. The BN could easily regain Perak through a vote of non-confidence.

10. The BN was very anxious to regain power in Perak and indeed it had always been anxious to regain power in all the states where it had lost in the past. It did not matter whether the opposition was Malay or Chinese. The BN had strived very hard to get back Kelantan which had always been ruled by Malays.

11. On the other hand when Penang was lost to the Alliance and a Gerakan Chinese Chief Minister was appointed, instead of trying to defeat the opposition Gerakan, the BN invited the Chinese-led Penang Government to join the BN. Even when the Gerakan and MCA did badly in the 1986 elections and UMNO became the majority party, the Chief Minister appointed was still a Gerakan Chinese.

12. Harking back to the past, in the 1955 Elections when the electorate was made up of 82% Malays and most of the constituencies were Malay dominated, UMNO gladly accepted Chinese and Indian candidates for these constituencies and ensured that they won. And all these Chinese and Indian candidates were contesting against Malay candidates from PAS.

13. Following upon that election, the Tunku gave away one million citizenships to the Chinese and Indians without adhering to the usual conditions which effectively reduced the percentage of the Malay voters. He must know that this would prevent Malays from totally dominating Malaysian politics.

14. Yet in the Bukit Gantang and Bukit Selambau elections the BN was accused of wanting to remove a "Chinese" Government in Perak. This is blatantly racist. The BN simply wanted to get back a State ruled by the oppositionIt had nothing to do with wanting to remove a "Chinese Government". By using this racist argument to win Chinese votes, it is clear that the Pakatan is far from being dedicated to multiracialism.

15. Yes we do need to look closely at the reasons for the defeat of BN in the two constituencies. If we fail to understand the reasons for this defeat we will repeat our mistakes and will be defeated again even in the General Elections.

KENAPA SAYA MASUK BALIK UMNO

As posted by Dr. Mahathir Mohamad at Che Det on April 7, 2009 3:44 PM

1. Ramai yang mengalu-alukan penyertaan saya semula dalam UMNO. Tetapi ramai juga yang mengkritik saya kenapa saya menyertai sebuah parti yang saya sendiri menuduh sebagai pengamal rasuah dan pemimpinnya menjadi pemimpin kerana menyogok wang kepada pengundi.

2. Yang pertamanya di waktu saya keluar UMNO pada Mei 2008 saya telah nyatakan saya hanya akan kembali menyertai UMNO apabila Dato Seri Abdullah Ahmad Badawi tidak lagi jadi Perdana Menteri.

3. Sekarang Tun Abdullah tidak lagi Presiden UMNO atau Perdana Menteri Malaysia dan syarat saya sudah dipenuhi. Justeru itu saya perlu tunaikan janji saya.

4. Ini tidak bermakna saya terima amalan rasuah dalam UMNO. Rasuah mesti dihapuskan. Saya berpendapat Dato Seri Najib Tun Razak lebih mungkin berusaha menghapuskan rasuah daripada Abdullah. Saya percaya dia tidak akan pilih perasuah yang terkenal dan diketahui umum seperti Khairy dan beberapa lagi sebagai Menteri atau anggota Kerajaan.

5. Walaupun saya sekarang adalah ahli UMNO, ia tidak bermakna saya tidak akan kritik UMNO atau Kerajaan Barisan Nasional jika ada apa-apa kesalahan yang dilakukan. Selepas saya berhenti daripada menjadi Perdana Menteri tetapi masih menjadi ahli UMNO saya telah kritik UMNO dan Abdullah apabila perbuatan yang salah dilakukan oleh Kerajaan.

6. Saya juga telah kritik Najib. Tetapi saya sedar yang dia bekerja di bawah Abdullah dan tidak sanggup bersikap bebas. Sekarang dia tidak lagi terdedah kepada tekanan oleh Abdullah dan sudah pun bebas. Oleh itu kemungkinan dia menolak amalan buruk yang menjahanamkan UMNO dan BN yang dilakukan oleh Abdullah memang ada.

7. Perkara yang baik telah ditunjuk oleh Najib apabila dia secara terbuka menunjuk dia tidak bermusuh dengan saya seperti yang dikehendaki oleh Abdullah bagi semua Menterinya.

8. Dalam ucapannya menutup mesyuarat agung UMNO Najib telah menjelaskan bahawa selain parti, rakyat juga harus menguasai Kerajaan. Tidak seperti ramai pemimpin UMNO sekarang, dan ketua mereka dahulu yang berpendapat Kerajaan adalah milik UMNO sahaja dan mereka sahaja yang harus dapat "keuntungan" daripadanya. Najib nampaknya berpendapat rakyat juga punyai saham dalam Kerajaan. Justeru itu rakyat tidak boleh diketepikan oleh Kerajaan yang diketuai oleh UMNO.

9. Rakyat tidak dapat menyertai mesyuarat agung UMNO tetapi mereka akan dapat menunjuk pendirian mereka apabila pilihanraya diadakan.

10. Jika Najib hanya layan UMNO, kemungkinan besar UMNO akan dikalahkan dalam Pilihanraya Umum ke-13.

11. Jika Kerajaan pimpinan UMNO dianggotai ahli dan pemimpin UMNO yang perasuah, rakyat dan juga sebahagian daripada ahli UMNO yang kecewa akan tentukan BN dan UMNO akan kalah juga.

12. Pada hari kedua Najib jadi Perdana Menteri dia telah pergi berjalan-jalan untuk berjumpa rakyat berbilang kaum. Ini juga meyakinkan saya yang dianya lebih prihatin terhadap masalah rakyat.

13. Oleh kerana sebab-sebab ini saya berpendapat Najib akan cuba bersihkan parti dan Kerajaan daripada rasuah dan perasuah. Tanda-tanda ini akan diperlihat apabila beliau menubuh Kabinetnya pada 8 April, iaitu esok. Walaupun Abdullah tidak lagi memimpin UMNO, jika ternampak kuasanya keatas UMNO masih ada, saya akan anggap syarat saya tidak dipenuhi.

OBAMA AND THE FINANCIAL CRISIS

As posted by Dr. Mahathir Mohamad at Che Det on April 5, 2009 10:04 AM

1. When President Obama made a bid for three trillion dollars in order to deal with the financial crisis, I assumed that like the immediate past President and the Head of the Federal Reserve, he was going to use the money to bail out the failed banks and financial institutions.

2. This would be an exercise in futility because those banks and institutions failed because they cheated, because they abused the system. The only way they could be restored is by allowing them to cheat and abuse again, creating money out of thin air and lending 20 to 30 times more of this money to the funds held by the borrowing institutions for them to invest. It is this practice which has precipitated the financial crisis.

3. The bailouts have clearly failed. Increasing the amounts of bailout will not result in success. The failure will only get worse. It's the classical sending good money after bad money.

4. Now Obama and Brown are talking of going against the powerful financial elites. Brown implicated a shadow banking system based in financial havens - a system that has been beyond the control of Governments, and bereft of rules and regulation.

5. For decades the shadow banking system has been raping the world. Previous Governments had been forced to cover up their depredations. The bubble they created should have burst earlier. But the political elites did not have the guts. And so the abuses and cheatings had gone on until they became so big that cover-ups became no longer possible.

6. And when the bubble bursts the miscreants expected as a matter of right for the political backers to help then recover through bailouts with public money.

7. Now it seems there is a leader who dares to take on the powerful financial barons. 8. If I am not wrong I think Obama is about to destroy the cozy relationship between the American political elites and the financial elites.

9. This is because the only way to stop the rot is to destroy completely all the failed banks and financial institutions including the great insurance companies. They must not be revived, much less restored to their former selves.

10. Their victims should be helped out but they too must not be fully recompensed.

11. The world must return to doing real business - that of producing goods and supplying services. This will lead to the economies of the rich in particular to shrink. The GDP and the per capita will be much reduced.

12. There is no way this impoverishment of the rich can be avoided. There is no way the world can avoid a shrinkage of the total world economy, if we are going to stop a repetition of this financial crisis.

13. I hope Mr Obama will break the stranglehold of the financial elites on the political elites of America.