Little by little, a little becomes a lot

NOW that Christmas, New Year and Chinese New Year are over, many of us have started to reconcile the amount spent for these celebrations.

Not surprisingly, many have underestimated the current cost of living and have therefore overspent.

Hence, it did not come as a surprise to me when I overheard one of my relatives saying that the price of an eight-course Chinese New Year package at the restaurant that she often frequents has increased by 15% from RM898++ to RM1,028++ within a year. Not only has the price increased, she also noticed the serving portions were smaller than the previous year.

The rising cost of living caused by the depreciating ringgit, hike in transportation costs, the goods and services tax implementation, etc, was the hottest topic of discussion during these festive gatherings. Among the various counter-measures, some young ones welcomed the option to reduce the Employees Provident Fund (EPF) contributions, citing that it would help relieve their burden.

The reduction in EPF contribution came about early this year when the Government announced that employees had the option to reduce their EPF contribution by 3% from March 2016 until December 2017 to spur economic growth and at the same time, put more money into the rakyat’s pockets. According to our Prime Minister who is also the Finance Minister, this move is expected to increase consumer spending by RM8bil a year.

It sounds good as we now have the option to have more disposable income. Yet, should we encourage spending or saving during this challenging time.

Before answering this question, let’s ask ourselves what we should do with the extra disposable income. Repay credit card instalments, go after items such as expensive household goods, electronic gadgets or gourmet food?

If we are not careful, we will end up spending based on our desire instead of necessity. Hence, having more money to spend is not necessarily good. It depends on how we plan our future finances, and whether we spend the money on “good debt” or “bad debt” as explained in my previous articles.

If we unnecessarily spend the additional income on luxury goods such as a new car which depreciates over time, we are practically paying for “bad debt”, as these items are liabilities instead of assets.

In contrast, if we convert the additional income into “good debt” such as investing in commodities/ shares or to fund our housing loan, we can enjoy the long-term benefits as the value of these assets will likely appreciate over time.

At a glance, 3% taken out from the EPF per month may not be seen as a lot. However, it will become a significant amount in the long term.

For an individual earning RM5,000 a month, 3% equals to RM150. As such, the total amount is RM3,300 for the duration of 22 months (March 2016 to December 2017). Assuming the average EPF interest rate at 6.5% per year (based on the dividend declared this year), the compounding rate for RM3,300 could potentially become RM23,190.64 after 30 years!

Therefore, unless there are really good reasons to use this additional disposable income, it is better to retain this seemingly small amount as retirement funds, giving its potential to grow significantly in the longer term. Besides, the savings in the EPF can also be withdrawn during rainy days to fund the payment for children’s education, purchase a new home and payment of medical expenses for treatment of critical illnesses.

At this testing time when many are faced with the burden of rising costs and economic slowdown, it is important to resist the temptation of instant gratification, be prudent in spending, and be able to differentiate between “good debt” and “bad debt” in making financial decisions.

For those who have yet to opt out from reducing the EPF contribution from 11% to 8%, it is important to use the additional money wisely so as to ensure that your retirement fund is not affected. Every ringgit saved or invested is essential in making a difference in our future financial position.

When I was a kid, my parents encouraged me and my siblings to save. Each of us would have our own piggy banks and they would continue to remind us about the beauty of saving. Until today, I still like this Malay proverb – ‘Sedikit, sedikit, lama-lama jadi bukit’ (little by little, a little becomes a lot).

Datuk Alan Tong has over 50 years of experience in property development. He is the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

Related posts:
 

 A challenging year ahead

Feb 16, 2016 ... It is therefore crucial to invest to fight inflation especially monetary ... Datuk Alan Tong has over 50 years of experience in property development. 

How to allocate your money wisely: lessons from my father

Datuk Alan Tong was the world president of FIABCI International for ... Property investments: good Infrastructure a way to huge profits and

Penang is best for property investment in Malaysia

Penang has dislodged Kuala Lumpur's Golden Tringle as the top investment choice GEORGE TOWN: Penang has now overtaken the Klang V...

Old and ageing abused by their own Children

PETALING JAYA: When his son left him at a bus station, John (not his real name) waited patiently for him to return. Five hours later, he was still waiting. Passers-by noticed him and called the police.

The 72-year-old man has dementia and was sent to hospital. Medical social workers managed to get him to recall his son’s telephone number.

When they called John’s son, he did not want to take his father home.

People like John are vulnerable to abuse and neglect, and he is not eligible for government shelter for the elderly because he still has a family.

John is among many Malaysian elderly folk who are facing abuse and neglect. According to a study, one in 10 urban elderly Malaysian is abused, with financial abuse being the most common.

The survey by a team of researchers from the Department of Social and Preventative Medicine under Universiti Malaya’s Medical Faculty said psychological abuse was the next most common followed by physical abuse.

“A pilot survey was done among the urban poor in Kuala Lumpur in 2012 involving 291 individuals above the age of 60. There were elders living in low-cost government-subsidised flats. Of the total, 9.6% said they experienced one or more forms of abuse within the last 12 months of the survey,” said Dr Noran Naqiah Hairi.

By S. Indramalar The Star/Asia News Network

Related Story:

You really should know what it feels like to grow old 

Dr Noran is leading the Prevent Elder Abuse and Neglect Initiative (Peace) with her colleague Dr Clare Choo.

The team also found that one in 20 rural elders have experienced abuse based on a survey they did among 2,000 respondents in Kuala Pilah, Negri Sembilan.

The most common abuse reported among rural elders is psychological followed by financial.

Anita (not her real name) is a subject of financial abuse. As she has arthritis, she found it difficult to go to the bank. Her son persuaded the 68-year-old retired clerk to give him the authority to handle her finances.

Soon after, he got his widowed mother to sign over her house to him.

“I didn’t want to, but I was bullied into signing my house over. He kept accusing me of not trusting him.

“At first, everything was all right. But then he began investing my money in all kinds of ventures. I have no say in what he does with my money. When I ask him, it gets unpleasant.

“But I am worried what will happen when my money runs out,” laments Anita, who lives with her son in Petaling Jaya.

Still, she would never report her son because elder abuse is not a topic Malaysians discuss openly.

Deputy Women, Family and Com­munity Development Minister Datin Paduka Chew Mei Fun admits that reported figures do not paint the actual picture.

“These are only the cases that come to us. There may be more that we do not know of,” she said.

Most of elder abuse cases go unreported as many see it as a “family problem” which can be dealt with behind closed doors.

Only 23 cases of elder abuse and neglect were reported in the past three years, according to statistics from the ministry.

The study, however, shows it is far more prevalent.

“The Peace study is the first of its kind in Malaysia and it corroborates prevalence rates of elder abuse and neglect in other Asian countries which range from 14% to 27.5%,” added Dr Noran.

Related stories:

Urgent need to address elder abuse
Old mums face wrath of addict children
Aging in agony

Malaysia slides in global Corruption perception index

KUALA LUMPUR: Malaysia's ranking dropped four places in the Corruption Perceptions Index (CPI) last year.

The index, released by Transparency International, showed that Malaysia was ranked 54th out of 168 countries this year compared to 50th out of 175 countries last year.

Malaysia ranked 52 the previous year.

he CPI scores and ranks are determined by the perceived level of corruption in the country's public sector.

Transparency International-Malaysia president Datuk Akhbar Satar said Malaysia's position would be even worse if seven other countries were included in last year's evaluation as their scores were above Malaysia in 2014.

"Despite many steps implemented, the level of corruption experienced in Malaysia does not seem to be decreasing," he said.

Globally, Denmark received the highest rank with a score of 91 followed by Finland (90) and Sweden (89).

Malaysia slides four points down global corruption perception index

Issues surrounding 1Malaysia Development Berhad and the RM2.6bil donation were among reasons why Malaysia slipped four points down the global corruption perception index (CPI).

The survey of the CPI of 168 nations for 2015 revealed the country's score dropped from 52% to 50% compared to 2014 while its ranking slid from 50 to 54.

Transparency International Malaysia president Datuk Akhbar Satar said the recent controversy surrounding 1MDB and the RM2.6bil donations contributed to the drop.

"There were 175 countries that were surveyed last year.

"However, seven countries were not included in the survey which would have pushed our ranking down further," he said during the announcement of the global CPI

Among the nations that scored the top marks were Denmark (91%), Finland (90%), Sweden (89%), New Zealand (88%), Netherlands and Norway (87%).

Among the nations to score the lowest were Angola, South Sudan, Sudan, Afghanistan, North Korea and Somalia.

Related posts:

Malaysian citizens' declaration to oust Prime Minister

The signing of the Citizens' Declaration on Friday was hailed as a landmark re-alignment of forces in the country as it brought toge...

Malaysia's Vision 2020: Falling apart with alarming speed; Dr M is creator and destroyer, said Musa

KUALA LUMPUR: Former Deputy Prime Minister Tun Musa Hitam said Malaysia’s Vision 2020 objective was “falling apart” with “alarming speed”...

MH370 families file biggest lawsuit in Malaysia

KUALA LUMPUR: Seventy-six next of kin of the passengers on board Flight MH370 have launched the biggest suit in the courts here aga...

South China Sea among world's freest and safest shipping lanes

China was the earliest to explore, name, develop and administer various South China sea islands. Our ancestors worked diligently here for generations. Beijing's control is justified, says Wang Yi

http://t.cn/RGEz7El

BEIJING: The South China Sea is one of the world’s freest and safest shipping lanes, Chinese Foreign Minister Wang Yi said, arguing that Beijing’s control over the disputed waters was justified because it was the first to “discover” them.

China has come under fire from the United States and its allies in recent months over its land reclamation activities in the South China Sea, through which US$5 trillion (RM20.3 trillion) in ship-borne trade passes annually.

The US Navy has carried out freedom of navigation exercises, sailing near the disputed islands to underscore its rights to operate in the seas. Those patrols, and reports that China is deploying advanced missiles, fighters and radar equipment on islands there, have led Washington and Beijing to trade accusations of militarising the region.

The freedom of navigation does not equal the “freedom to run amok”, Wang told his yearly news conference on the sidelines of China’s annual parliament meeting.

“In fact, based on the joint efforts of China and other regional countries, the South China Sea is currently one of the safest and freest shipping lanes in the world,” Wang said.

“China was the earliest to explore, name, develop and administer various South China Sea islands. Our ancestors worked diligently here for generations,” Wang said.

“History will prove who is the visitor and who is the genuine host,” he said, adding that China would “consider inviting” foreign journalists to islands under its control when the conditions are right.

China was neither the earliest country to deploy weapons to the South China Sea nor the country with the most weapons there, Wang added, without saying which country was. Beijing claims almost all of the South China Sea, but Brunei, Malaysia, the Philippines, Taiwan and Vietnam have overlapping claims.

US Defense Secretary Ash Carter has warned of “specific consequences” if China takes “aggressive” action in the region.

He has said the US military was increasing deployments to the Asia-Pacific region and would spend US$425mil (RM1.7bil) through 2020 to pay for more exercises and training with countries in the region that were unnerved by China’s actions.

Wang was also asked about the Philippines case against China in an arbitration court in The Hague on the South China Sea dispute. Manila has asked Beijing to respect the decision, which is expected in May.

China refuses to recognise the case and says all disputes should be resolved through bilateral talks.

Wang repeated that China was quite within its rights not to participate and accused unnamed others of being behind the case.

“The Philippines’ stubbornness is clearly the result of behind-the-scene instigation and political manipulation,” he said, without elaborating. — Reuters

Related:

Chinese Ambassador gives exclusive insight into China-US relations

Related posts:
 

China responds to US's militarizing the South China Sea

It is the US that is militarizing the South China Sea The U.S. has recently been hyping the idea that China is militarizing the South ...

Philippines violated agreements and laws by filing arbitration over South China Sea

China: Rejection of the Philippines' arbitration 'in line with law'   Foreign Minister Wang Yi says China's rejection...

Philippine ship towed over safety concerns - No more tricks allowed in South China Sea

China confirmed on Wednesday that it sent ships to the Wufang Jiao, an atoll of the Nansha Islands, to tow a stranded Philippine ship to e...

 Political issues deserve diplomatic solutions to South China Sea...

MH370 families file biggest lawsuit in Malaysia

KUALA LUMPUR: Seventy-six next of kin of the passengers on board Flight MH370 have launched the biggest suit in the courts here against Malaysian Airline System Bhd and four others over the plane’s disappearance.

With the deadlines to do so up by today, the group – made up of 66 Chinese nationals, eight Indians and two Americans – filed the suit last Thursday, naming MAS, Malaysia Airline Bhd (MAB), Department of Civil Aviation (DCA) director-general, Royal Malaysian Air Force (RMAF) and the Government as defendants.

They are claiming for negligence, breach of contract, breach of statutory duty and breach of Montreal Convention against MAS

Lawyer N.Ganesan representing Indian, Chinese and American families said this is the biggest lawsuit against MAS in Malaysia as it involves a large number of families as plaintiffs.

In the statement of claim filed last Thursday, the families alleged that the plane’s disappearance on 8 March 2014 was caused by MAS’ negligence and the national carrier had breached the Montreal Convention by causing the injuries and death of all 239 passengers and crew..

Besides MAS, the families also named the director-general of the Department of Civil Aviation (DCA), Royal Malaysian Air Force (RMAF), and the government.

They claimed that DCA, RMAF and the government had conspired with MAS in conducting the investigation in a “grossly negligent manner” to delay the search, causing the death of all the passengers and crew.

They also contended the government and MAS had acted fraudulently and in a dishonest manner by hiding information about MH370’s disappearance from the public, and the families of passengers and crew.

The 76 next of kin are seeking damages and losses they suffered after their loved ones went missing.

“The families opted to file the lawsuit here because they have confidence in our court,” said Ganesan when met at the High Court here.

He also pleaded with the government not to move to strike out the lawsuit.

“This lawsuit deserves a day in court, and all the families deserve a fair trial,” he said.

When asked if the families were given consent by the MAS administrator under the MAS Act to initiate the lawsuit, the lawyer said they were denied consent. “They had previously said in the media that they would act in ‘good faith’ to determine fair and equitable compensation.”

“What they said was they were inviting next of kin to initiate lawsuits against them.”

Ganesan disclosed that an American law firm, Hod Hurst Orseck, will be joining the families’ legal team.

“They are the experts in civil aviation. We will be having the firm’s partners, Steven Marks and Roy Altman with me and lawyer Tommy Thomas.”

“When necessary, we will be filing for leave to the court for them to be conducting the trial,” he said.

Last week, 12 families of passengers from Malaysia, Ukraine, Russia and China sued MAS and the government for damages, shortly before the two years deadline for initiating a civil suit under the Montreal Convention.

Sources: The Star news and Free Malaysia Today

Related posts:

 Malaysia's flight MH370 mistakes reflect stagnant politics ...

Jul 2, 2014 ... Malaysia's flight MH370 mistakes reflect stagnant politics; Bad apples in NZ sex crime.. Malaysia is poised to escape the middle-income trap, ...

 
  Malaysia paying the price for flight MH370 !

Apr 16, 2014 ... Flight MH370: Paying The Price Of 6 Decades Of Nepotism, Racism, Rampant ... Dr Ling, former Malaysian Transport Minister slams AG .

  
Stupid fellow ! Dr Ling, former Malaysian Transport Minister slams AG ...

Malaysian citizens' declaration to oust Prime Minister

The signing of the Citizens' Declaration on Friday was hailed as a landmark re-alignment of forces in the country as it brought together the establishment loyal to former premier Dr Mahathir Mohamad, the opposition and civil society.

Much of the spotlight have been on the top activists, opposition leaders and members of the ruling coalition who signed declaration, which among others called for the ouster of scandal-plagued Prime Minister Najib Abdul Razak and institutional reforms.

But little attention has been given to how the 37-paragraph document (see below) came about as it reflected the behind the scenes debates and negotiations in the run-up to the high-profile announcement.

Citizens' declaration spells out demands for removal of Najib

Former prime minister Dr Mahathir Mohamad, ex-deputy prime minister Muhyiddin Yassin, opposition and NGO figures have inked a declaration for the removal of Prime Minister Najib Abdul Razak and to institute reforms.

Below is the list of demands contained in what is described as the Citizens’ Declaration:

1. We, the undersigned citizens of Malaysia, append below our concerns over the deteriorating political, economic and social conditions in the country.

2. We wish to draw the attention of the people of Malaysia to the damage done to the country under the premiership of Najib Abdul Razak.

3. Under his administration, the country has ascended to become one of the 10 most corrupt countries in the world according to Ernst and Young in their Asia Pacific Fraud Survey Report Series 2013. The 2015 Corruption Perception Index showed Malaysia has dropped four places from 50 to 54.

4. This is because he believes that money can ensure his position as prime minister of Malaysia. He believes that "Cash is King".

5. Allocations to all ministries and public institutions including universities have been reduced because of shortages of funds. Even when allocations are budgeted for, no money was available.

6. In 2009, he decided to set up a sovereign wealth fund to earn income for the government.

7. He created the 1MDB which became indebted with RM42 billion of loans which it is unable to repay. It is no longer a sovereign wealth fund. It is a sovereign debt fund.

8. 1MDB borrowed approximately RM20 billion to acquire three power plant companies for an over-priced (sum of) RM12.1 billion. Despite being awarded new power plant contracts and extensions to the expiring power-producing concessions, the 1MDB power companies were sold for RM9.83 billion, or a loss of RM2.72 billion.

9. 1MDB invested or lent a total of US$1.83 billion to Petrosaudi International (PSI) Limited between 2009 and 2011 under the pretext of bogus projects or non-existent assets. Bank Negara Malaysia had demanded 1MDB return the above money to Malaysia as its approval was given based on misinformation submitted by 1MDB. Of this sum, a total of US$1.4 billion was directly and indirectly siphoned off to Good Star Limited and other companies controlled by Low Taek Jho.

10. To hide the missing funds, 1MDB "disposed" of its investments and loans to PSI for US$2.318 billion, claiming to have made a profit of US$488 million. However, no money was returned to Malaysia. Instead, 1MDB claimed it invested the funds in Cayman Islands that was subsequently found to be an unlicensed investment manager. KPMG was sacked as 1MDB's auditors for refusing to confirm the value of the investment in the mysterious Cayman fund.

11. 1MDB claimed that the Cayman Islands investment has been fully redeemed. (A sum of) US$1.22 billion was reportedly redeemed on Nov 5 2014 but was substantially utilised on the very same day to compensate Aabar Investments PJS for the termination of options granted to Aabar to acquire 49 of 1MDB's power companies. This is a lie because the parent of Aabar, International Petroleum Investment Corporation (IPIC), did not mention receipt of any such payments in its audited accounts published on the London Stock Exchange. Instead, the accounts stated that 1MDB owes IPIC the sum of US$481 million for the termination.

12. 1MDB also took another loan of US$975 million from a Duetsche Bank-led consortium in September 2014, for the very same purpose of compensating Aabar for the terminated options. The Wall Street Journal has exposed the fact that this money may have been paid to a different British Virgin Islands entity with a similar name, "Aabar Investment PJS Limited", whose beneficial owner is completely unrelated to IPIC. The simple scam has fooled even the 1MDB auditors, Deloitte Malaysia, into believing that the payments were indeed received by IPIC's Aabar.

13. 1MDB announced that it made a second and final RM1.1 billion redemption of the Cayman Islands investment in January 2015. Initially the PM told Parliament that the sum was held in cash in BSI Bank, Singapore. However, two months later in May 2015, he informed Parliament that it was not in cash but "assets". Subsequently, it was explained that these assets were "units" which meant that they were never redeemed in the first place. This proved that 1MDB and the PM have been consistently lying to the Malaysian public. It also means that the money invested in Petrosaudi, which was reinvested in Cayman Islands, is still missing and unaccounted for.

14. A former Umno vice-head of the Batu Kawan division made a police report on the loss of large sums of money by 1MDB. No investigations were carried out by the police. Instead, he was interrogated by police, detained and charged under anti-terror law (Sosma) for sabotage of the Malaysian economy. His lawyer was also arrested and charged under the same law. This has the effect of frightening people from making police reports on the 1MDB.

15. The Wall Street Journal reported that Najib had US$681 million in his private account at Ambank.

16. Najib denied this at first but later admitted he had the huge amount of money in his account. He claimed that it was a gift from an Arab; then that it was a donation to help him win GE13 in Malaysia; then that it was given because of his dedication to the fight against Islamic terrorists. He then claimed to have received the money from a Saudi prince, then from the King of Saudi Arabia who had passed away.

17. Later a Saudi minister stated there was no record of such a gift by the Saudis. He suggested it was probably a Saudi investment. The amount was small.

18. Najib expressed his intention to sue the Wall Street Journal. But he did not. Instead, he asked his lawyers to ask the Wall Street Journal why it published the report.

19. To this day the WSJ continues to report more and more details about the US$681 million he has in his private account. He has not sued WSJ, which he can do in the country the WSJ is published.

20. Concerned over the huge sum of money in Najib's private account, a task force was set up in Malaysia to investigate the origin of the money. Four government institutions became members of the task force. They are the police, the attorney-general, Bank Negara and the Malaysian Anti-Corruption Commission.

21. Before the task force was able to finish its work, the attorney-general was removed by Najib claiming that he was sick and could not continue to work. Basically Najib had misrepresented to the king to get the attorney-general to be replaced. The Public Accounts Committee was basically paralysed by Najib removing its chairman and members to prevent its investigations of the 1MDB. A new chairman, friendly to Najib, was appointed and he promptly declared that Najib had done nothing wrong.

22. He then appointed a new attorney-general. Shortly thereafter the new attorney-general dismissed a recommendation by Bank Negara for action to be taken, claiming that nothing in the report showed Najib had done any wrong.

23. Bank Negara appealed but this was brushed aside.

24. The new attorney-general also dismissed another report by the MACC. The contents of the report are not revealed and threats are made against revealing its contents.

25. The new attorney-general has, without valid explanations, dismissed the recommendations of the two institutions that possess the powers and expertise in their areas.

26. That dismissal prevented the matter from being determined by a court of law after all the evidence was evaluated. By doing that, the attorney-general has acted as prosecutor and judge. Due process and the rule of law has been denied.

27. The sacked deputy prime minister later revealed that the former attorney-general has shown him proof of Najib's wrongdoings relating to the scandals. At the same time, various foreign government agencies, namely from Switzerland, the United States, Hong Kong and Britain have initiated investigations on the 1MDB.

28. The press in Malaysia is heavily censored so that Malaysians have to rely on the foreign press. Yet when Malaysians discuss or write about the foreign press reports, the government (inspector-general of police) invited people to make police reports so that the police can carry out questioning and investigations against the person concerned.

29. This is in contrast to the failure of the police to investigate the police report formally made against Najib, Jho Low and the reports to the attorney-general by Bank Negara and MACC. The attorney-general even threatens to amend the law to provide for jail for life with 10 strokes of the rotan against anyone "leaking" government papers. This means that crimes committed in the administration can be hidden from the public.

30. The attorney-general claims that a part of the RM2.6 billion (about RM2.3 billion) has been returned to the donor or donors. Apart from this statement, no proof has been provided.

31. The people are suffering.

32. Najib's GST and increases in toll rates have increased the cost of living, forcing some businesses to close down and also causing foreign-owned industries to stop operations and relocate to other countries, creating unemployment.

33. Despite protests by the people, Najib joined the US-sponsored Trans Pacific Partnership (TPP) which erodes our freedom to make policies and laws suitable for our country.

34. Today Malaysia's image is badly tarnished. Apart from being classified as one of the 10 most corrupt countries, Malaysia is now regarded as undemocratic. There is denial of freedom of speech and freedom of the press and people live in fear of arrest and detentions. Security laws are enacted to allow the prime minister (and not the king) to declare security areas where anyone could be arrested and detained without trial and tried under procedures that violate normal and fair criminal justice standards.

35. On the other hand, where errors are made in applying these laws by government officers, or where there is a blatant abuse of that power, the people are unable to hold them accountable. Whistleblowers are harassed and punished instead of being protected. Other repressive laws are used to stifle free speech and the legitimate comment about wrongdoings. The fundamental rights enshrined under the federal constitution have become meaningless.

36. For all these reasons, we, the undersigned citizens of Malaysia agree and support:

a) The removal of Najib as PM of Malaysia through non-violent and legally permissible means.

b) The removal of all those who have acted in concert with him.

c) A repeal of all recent laws and agreements that violate the fundamental rights guaranteed by the federal constitution and undermine policy choices.

d) A restoration of the integrity of the institutions that have been undermined, such as the police, the MACC, Bank Negara and the PAC.

37. We call upon all Malaysians, irrespective of race, religion, political affiliation, creed or parties, young and old to join us in saving Malaysia from the government headed by Najib, to pave the way for much-needed democratic and institutional reforms, and to restore the important principle of the separation of powers among the executive, legislature and judiciary which will ensure the independence, credibility, professionalism and integrity of our national institutions. - Malaysiakini

Related reports:

11 questions Dr M did and did not answer
Dr M: Strange group, but all agree Najib must go
Citizens' declaration spells out demands for removal of Najib
'No right-thinking Umno member will accept Declaration'
Save M'sia group divided on whether to save Anwar
Coming to terms with 'authoritarian' Mahathir
'Mahathir-opposition alliance just a face-saving exercise'
After Anwar alliance, Mahathir can now die in peace, says MyKMU
Citizens' Declaration a signal that S'wak should keep Najib away
Please hug and kiss Kit Siang's cheeks, minister tells Dr M
Wait for GE: Putrajaya chides 'desperate' band
Useless to give Umno a life-line, says PAS VP
MCA distances itself from ex-president, backs PM
Analyst: Najib may accuse 'Save M'sia' of illegal coup
'Dr M easily swayed by smart, good-looking, charismatic people'
What's next - People's uprising, Umno rebellion or crackdown?
Umno Youth calls for Muhyiddin, Mukhriz to quit or be sacked
Umno Youth rejects PKR invitation to join agenda for change
Otai Reformis to join 'oust Najib' move, with conditions
Wan Azizah needs to 'stay above', says Rafizi
It’s not about opportunism, but swallowing of one’s pride
Carrying the joke too far, again
Can the opposition trust a Machiavellian Dr M?
Dr M key in shaping the Malaysia he's unhappy with

Related posts:

Malaysia's Vision 2020: Falling apart with alarming speed; Dr M is creator and destroyer, said Musa KUALA LUMPUR: Former Deputy Prime Minister Tun Musa Hitam said Malaysia’s Vision 2020 objective was “falling apart” with “alarming speed”.

Liberating Malay mind: Shed ‘excess baggage’ of privileges ..

The Origins and Evolution of Ethnocracy in Malaysia: The Malay ...

Brain Drain in Malaysia | Waltham Economy of Asia Review

Modern finance and money being managed like a Ponzi scheme ! Economic Collapse soon?

Ponzi schemes and modern finance

Andrew Sheng says when the originator of a scheme to pass on debt to others is also ‘too big to fail’ – like America – then the global economy is heading for some painful restructuring

The dilemma today is that the US is the world’s largest “too big to fail” debtor, with gross international liabilities of US$31 trillion, equivalent to 40 per cent of global GDP. Photo: AFP

THIS global financial crisis is not over, as the volatile start to the New Year showed that 2016 may be a precursor to the 10th anniversary of the 2007 sub-prime crisis, which itself evolved from 1997 Asian Financial Crisis, after which the US Fed cut interest rates and started the rapid financialisation of the US economy.

READ MORE: Don’t listen to the ruling elite: the world economy is in real trouble

Two terms came out of the crisis that we see almost everyday, but have not been explained well by modern financial theory. Most economists think of them as aberrations that are at the periphery of normal economic behaviour. In fact, “Ponzi schemes” and “Too-Big-to-Fail” are at the heart of individual and social behaviour which go a long way to explain what is happening today.

A Ponzi scheme is a scam named after American Charles Ponzi. The term Ponzi scheme started in the 1920s from an American Charles Ponzi, who thought of selling an idea in making money from arbitraging the value of international reply coupons in postage stamps to a larger and larger investor scheme where he made money by getting new investors to pay for promised high returns to old investors. Of course, this is the “borrowing from Peter-to-Pay-Paul principle”, where the music stops when everyone want their money back. Ponzi schemes should in principle collapse naturally because it is of course impossible to pay unusually high returns. By this time, the founder would have run away to the Caribbean with a lot of OPM (other people’s money).

 

A foreclosure sign tops a “for sale” sign outside a property in northwest Denver in this 2007 photo. The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages. Photo: AP

The securitisation (packaging) of sub-prime mortgages into CDOs (collateralised debt obligations) and turbo-charging these into CDO2 (creating a highly leveraged synthetic financial derivative) and selling these to investors with a AAA credit rating was a 21st century Ponzi variant.

In simple terms, this is like selling a box of rotting apples, getting a rating agency to say that the box is worth more than the individual apples, with a guarantee against losses by adding more (rotten apples). In the end, the investor is buying a box of rotting apples, in which all his savings have been eaten up by those who sold the boxes (the derivatives) in the first place.

There are two fundamental elements of Ponzi operations – the promise of very high returns (false expectations) and the widening of the investor circle. Variants of the Ponzi scheme can be found in asset bubbles and pyramid schemes, in which more and more investors (new suckers) are enticed in until they are the ones who bear the final losses. Like the game Musical Chairs, the ones who did not get out when the music stops are the losers.

Actually, Ponzi schemes work by the originator taking profits by selling (or passing) his losses to all his investors – the more suckers, the bigger his profits and the more people to share the losses.

Technically, a Ponzi scheme is sustainable if the new funds that come in actually deliver good returns, but because the Ponzi promises a return higher than anyone can actually deliver, most Ponzis end up as fraudulent schemes.

READ MORE: Bank woes bode ill for world economy as talk of another global financial crisis gains traction

 

Under globalisation, the smaller reserve-currency countries like the euro zone and Japan can engage in quantitative easing, because instead of getting inflation, their currencies depreciate against the dollar. Photo: Reuters

But the Ponzi element in modern finance should be understood with another phenomena – the Too-Big-To-Fail (TBTF) dilemma. We all know that if we borrow US$1,000 from the bank, we are in trouble if we can’t pay, but if we borrow US$1bil from the bank, it is the bank that is in trouble. Thus, if a Ponzi scheme reaches the scale of TBTF, it has to be “rescued” somehow, because if everyone had bought the Ponzi product, everyone ends up being the loser.

This is the essence of modern money. Advanced country central banks can engage in quantitative easing (QE or printing money in whatever way you want to call it) to bail out banks that are losing money, because their banks are TBTF. The difference between QE and Ponzi is that the QE interest rate promised is near zero to negative, but the escalation of scale is the same. I call these Qonzi schemes.

In theory, in a closed economy, if you print too much money, you would get higher inflation. This is why the Germans are very much against the European Central Bank’s QE measures.

However, in a world with excess production capacity, you would not get into high inflation, because there are many more people in the emerging economies who are willing to hold reserve currencies like the US dollar, euro and yen. Under globalisation, the smaller reserve currency countries like the eurozone and Japan can engage in QE, because instead of getting inflation, their currencies depreciate against the dollar. The losers call such action “beggar-thy-neighbour” policy.

In other words, currency depreciation countries gain by passing “losses” to others, because they gain competitive trade advantage. But if everyone depreciates at the same rate, the whole world ends up with more deflation. Remember, when the Ponzi music stops, all losses are crystalised. As Warren Buffett used to say, when the tide goes out, you know who has been swimming naked.

READ MORE: Chinese scramble to safety of US dollar as yuan weakens and forex reserves drop

  Rail cars and oil tankers sit on railway tracks as water vapour and smoke rise from a steel plant in the distance in Tonghua, Jilin province. The city's once-vaunted state-run steel mills have slipped inexorably into decline, weighed down by slumping global markets and a changing economy. Photo: Bloomberg
 

READ MORE: The crisis in markets shows how our financial and political leaders have failed since 2008

The dilemma in the world today is that the US is the largest TBTF debtor in the world, with gross international liabilities of US$31 trillion, equivalent to 40% of world GDP (gross domestic product). In a world where interest rates are near zero, the threat of the Fed increasing interest rates causes capital flight into the dollar. But a dollar that also yields near zero interest rate, with the inability to reflate due to political constraints, plays exactly the deflationary role of gold in the 1930s.

Hence, a strong dollar is deflationary on the whole world. As geopolitical tensions rise, flight into the dollar causes its own deflation. The latest US net international investment position is a deficit of US$7 trillion or 40% of GDP at the end of 2014, sharply up from US$1.3 trillion in 2007. A strong dollar in which the US would run larger even current account deficits is clearly unsustainable for the US and its creditors.

During the Asian financial crisis, countries with net liabilities of over 50% of GDP got into crisis. But the US is the TBTF country in the international monetary system. Further QE will not solve this dilemma. The only solution is painful structural adjustment by all concerned. This is why investors are all so downbeat.

Consequently, I see no alternative but a coming new Plaza Accord to ensure that the dollar does not get too strong, with a concerted effort to have global reflation. Otherwise, watch out for more “Qonzi” schemes.

- Andrew Sheng writes on global issues from the Asian perspective.

Peter Schiff Warns Of Economic Collapse In 28 May 2016 DAYLY NEWS

Philippine ship towed over safety concerns - No more tricks allowed in South China Sea

China confirmed on Wednesday that it sent ships to the Wufang Jiao, an atoll of the Nansha Islands, to tow a stranded Philippine ship to ensure navigation safety and protect the marine environment.

Foreign Ministry spokesperson Hong Lei made the remarks at a daily press conference in response to a Philippine media report that said China's Wufang Jiao did not allow Philippine fishermen to approach it.

According to Hong, a foreign fishing boat was stranded near Wufang Jiao at the end of 2015. After several failed towing attempts, the shipowner abandoned the ship and removed all its major equipment.

To prevent the stranded ship from affecting navigation and damaging maritime environment, China's Ministry of Transportation sent salvage ships to tow the ship and dispose of it appropriately, Hong added.

During the process, China persuaded fishing boats in the operation waters to leave to ensure navigation safety and necessary operation conditions, Hong said, adding that the salvage ships had returned after the operation.

The spokesperson reaffirmed China's sovereignty over the Nansha Islands and its adjacent waters. China will implement the Declaration on the Conduct of Parties in the South China Sea (DOC) comprehensively and effectively with the members of ASEAN and jointly maintain the peace and stability of the South China Sea, Hong added.- Xinhua

No more ship-grounding tricks allowed in South China Sea

The Chinese foreign ministry confirmed Wednesday that China had towed away a foreign ship that was grounded on Wufang Jiao in the South China Sea. For safety concerns, China urged nearby fishing ships to leave.

However, Philippine media and some Western reports rendered a different picture of the same affair, saying several Chinese ships were sent to patrol the surrounding waters after a Philippine boat was grounded, and "blocked" the waterway.

In their reports, Wufang Jiao and the surrounding waters are the Philippines' "traditional fishing grounds." Due to the blockage of Chinese vessels, Philippine fishermen could not go fishing, feeling they were being bullied by China.

This is not the first time a Philippine vessel was grounded on South China Sea islands and reefs. In 1999, the Philippines sent a warship and grounded it on Renai Reef. Manila kept promising to China that it would tow it away as soon as possible, but 17 years have passed, and Manila shamelessly broke its promise, delivering provisions to the ship and reinforcing its structure, in an attempt to make it a permanent stronghold.

Philippines sent a warship and grounded it on Renai Reef

In recent years, China has taken countermeasures to prevent Philippine ships conveying construction materials to the ship, but out of humanitarian consideration, China allowed the Philippines to deliver provisions to the crew. Now the ship, a focal point of Sino-Philippine tension, is in bad condition and about to fall apart.

China will never allow Wufang Jiao to be a second Renai Reef. Towing away the grounded Philippine ship is a once-and-for-all measure to leave no troubles behind.

The Philippines is untrustworthy in the international community, often resorting to dirty tricks to deal with diplomatic issues. What it did on Renai Reef is a vivid reflection.

China has been exercising self-restraint amid fishing disputes with the Philippines in the South China Sea. However, Manila has captured and sentenced Chinese fishermen several times, and even shot Taiwanese fishermen dead. Manila's barbarity finally triggered a standoff near Huangyan Island in 2012. Since then, China has been in full control of the island.

Now, Manila hopes it can bring US troops back, like a Mafia gangster asking their "godfather" for help. The Philippines, obviously aware that international arbitration has no jurisdiction over territorial disputes, filed a petition to an international court in Hague. China's non-participation in the arbitration is protected by the UN Convention on the Law of the Sea, but the Philippines, with the support of the US, has used this chance to taint China's image internationally

All these shenanigans cannot twist the fact that it is the Philippines that breaks its promises and makes troubles over and over again. China's countermeasures are reasonable.

China has overwhelming advantages against the Philippines, but its disputes with the Philippines in the South China Sea are complicated due to the West's bias for Manila. China should be resolute in defending its legitimate rights, and be wise in dealing with the West's prejudice and US military and diplomatic interventions.

In recent years, China has gained major progress in stemming the encroachment of the Philippines in the South China Sea. Beijing is regaining strategic initiative in the region. The Philippines will have a new president this year, and Benigno Aquino III will step down. After the shift in leadership, Manila will be a spent arrow, and will have nothing left in its bag of tricks. - Global Times

Related posts:

Philippines violated agreements and laws by filing arbitration over South China Sea

China: Rejection of the Philippines' arbitration 'in line with law'   Foreign Minister Wang Yi says China's rejection...

Political issues deserve diplomatic solutions to South China Sea disputes

China responds to US's militarizing the South China Sea

It is the US that is militarizing the South China Sea The U.S. has recently been hyping the idea that China is