bracing for difficult times ahead of us

It is going to be a grim outlook indeed. The American credit crunch as it is called is contagious. The fault lines apparently pass through Europe and are heading towards our shore. That is what the economists are saying. Our number one economist aka Najib Razak and his bunch of merry-men of lawmakers turned lawbreakers are saying otherwise. Malaysia’s economy is as solid as a rock. Funny though, secretly they are ransacking treasury for some leftover dough.

Will it hit us hard? Well, the extent depends very much on how fast we can instil measures to lessen the impact. If our response is fast enough, we may not have to resort to putting in money into the vacuum created by defective financial system of the IMF the world subscribed to.

Financial institutions’ penchants for creating innovative products that has subjective values and widely distribute them further increase their risks. As these products are not inside the balance sheet of the financial institutions, we are not able to detect them. We do not know who is badly exposed and by how much and who is credit-worthy and who is not. The flow of funds between banks stop as money market respond by freezing credits. Financial system becomes totally without credibility. People will chose to hold onto their money instead of dealing with banks. Governments scramble to guarantee savings to prevent massive withdrawal.

A new system has to be founded and that would mean a total reconstruction of existing financial system. Not an easy feat to achieve.

Already we are seeing prices of commodities, steels and other raw materials and oil come spiralling down. Cost of manufactured goods would be lower but demand falls a lot faster and hence recession sets in.

When we, a general public are grappling with these complex issues, we will be at a loss and require a caring, competent and responsible government to see us through these difficult times. But in our case, when our pilot and co-pilot are engaged in a power struggle, the country is running on auto-pilot en-route Bora-Bora, a sunny carefree holiday destination.

We are seeing a panic move by the finance minister and proposed for a propping up of the share market with a view of saving a few companies. This is a classic piecemeal solution that is devoid of aggregate effort and highly likely to be flawed.

Let us for God’s sake forget our differences and sit down together on a discussion table to finding solutions to these conundrums. We have to get passed this self-denial and look again at our budget and the country’s financial planning. A revisit is crucial in response to an already changing circumstance and new playing field. We must act fast enough and brace ourselves for an arduous spell ahead of us. We are indeed living in the most challenging period. This global village is small enough and Uncle Sam sneezes, we catch cold and if not attended to we will die of high fever.

Good night and good luck Malaysia, wherever you are.

troubadour