Do as I say, don't do as I do ....

Mahathir is absolutely right in criticising the US for bailing out US companies in trouble. During the financial crisis of 1997/1998, Mahathir, who was then the man in charge of Malaysia, was heavily criticised by the US, the IMF, the World Bank, and by almost every financial groups in the West, for bailing out Malaysian companies's troubles caused by the plunge in the Malaysian Ringgit. The US president then, the lecherous Bill Clinton, even went so far as to prevent Malaysia from borrowing money from Japan who was prepared to lend, insisting that Malaysia  could only borrow from the IMF. 

They shouted, hey, you can't do that to your companies. Let the troubled companies  go bankcrupt because they were inefficient, they borrrowed too much, they were corruptly managed, and so on and so forth and therefore they deserved to die.

But now, the financial crisis has turned a full circle taking with it the AIG, the Merill Lynchs, the Lehmann Brothers, the Morgan Stanleys, the Bear Stearns, the Fanny Maes, the Freddie Macs, the sub-Primes and many financial institutions in Europe, and George Bush, with a stroke of the pen, is bailing out these companies, using the US taxpayers money in the hundreds of billions (possibly trillions). The IMF, the World Bank, the US Federal Reserve, and the many, many financial groups in the US and Europe all play dumb without commenting anything. What happen to all their talks about efficiencies, prudent loans, free from corruptions, sound managements, etc., etc. 

Going down and down ....

BNM's IFR as at 15/09/08 showed a drop to RM 388 (USD 119.1) billion from exactly 2 months ago of RM 408.8 (USD 125.1) billion. In a mere 2 months, the RM 20.8 billion was wiped out from the reserve. What has happened. Is this the reason for the Malaysian Ringgit's weakening against most major currencies ? What is going to happen to our money in the future. Is it going the way of the rupiah, the turkish lira or is it going to keep pace with the Singapore dollar, the Thai baht, and the Euro ?

The IFR has been building up slowly, by a billion or two Ringgit per month to its highest position of RM 410.9 billion ( in this blog that is) but plunged by RM 20.8 billion in a matter of two months. Its like the KLCI index that went up gradually over the years to 1,500 and then in a matter of months it went down to a 1,000. The behaviour of the KLCI is strange. When the Dow Jones index shoots up, most stock markets in the Asian region also go up in tandem, some more and some less, but the KLCI always goes up the least. And when the Dow Jones index plunges, Asian markets also plunge, some more and some less but the KLCI always plunges the most. It is as if investors had no confidence in our stock market and that if they had bought the stocks before in a rising market, the purchasing was from their surplus funds that they did not know what to do with, and that the moment they saw a a weakening in the regional market, they quickly pulled out their investments as early as posssible. 

The same thing goes for the MYR. From its position of RM 3.80 to the US dollar from July 2005, the MYR slowly, almost excruciatingly, strengthened to about RM 3.20 to the US dollar while other major currencies ( especially the Sing dollar) with some exceptions, strengthened at a much faster pace and stay at their positions, the MYR quickly dropped to at RM 3.45 to the US dollar and still going down.

I shudder to think what would happen to our fixed deposits which might become less and less in value in months to come.

Update:08/10/08: The downward trend continues. BNM's Forex reserve is now RM 379.3 (USD 109.7) billion on 30/09/08. Among the reason for the decline is the revision of the country's exchange rate. This amount is able to sustain 9 months of import and is 4.1 times the country's short term external debts. Since its peak of RM 410.9, BNM's has lost RM 31.6 billion of its reserve.