Things are getting uglier; I wish ringgit goes back to 3.80

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Jun 03 2008
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Not many moons ago, I’ve wrote why I don’t really fancy the local Ringgit to appreciate further against U.S. dollar. In fact I would love the local currency to float at RM3.80 to US1.00 or even weaker. Why am I so cruel and unpatriotic? The reason is pretty simple (hey I’m not a complicated person in the first place) – I don’t see how stronger ringgit would benefits the people, period. Do you see foods especially the imported types are getting any cheaper? Heck, can you see any happy faces at the market buying those “local” products? You hardly can smell the buying-power with the ringgit nowadays, RM3.80 or RM3.20 to a dollar does not make any difference.

When the dollar was strong suppliers were screaming that imported raw materials were expensive hence the pricey stuffs from chicken to building raw materials. But now the dollar has weaken not only the stuffs such as foods are not getting any cheaper but instead it is getting more expensive. Sure, blame it on global short-supplies and speculators etc but how about local manipulators? And now Bernanke signaled that further interest rate cuts are unlikely because of concerns about inflation. So the dollar will make a U-turn and strengthen against major currencies including ringgit and the same old song will be on the air again.

I found it amusing when Bank Negara (Central Bank) Malaysia’s Governor Dr Zeti Akhtar Aziz said the ringgit will not be a tool of monetary policy to curb inflation. She said the strength of the ringgit has been and would continue to be determined by the market. Yeah, try to say that to the face of Mahathir during the 1997-1998 Asia Crisis and see if the old man would not spank her. The fact is the country was taking the free ride on the weakening dollar when Bernanke began the adventure of rate-cutting due to sub-prime crisis. Bank Negara did nothing but to sit and watch the show. And it is puzzling why there wasn’t any impact to the imported goods despite the appreciation of more than 15 percent in local currency.

Stop Currency and Oil Future TradingRinggit might not be the only tool to curb inflation but it’s a major weapon to do so. That was the reason why Bernanke signaled the halt in interest-rate cut, no? Can someone from the government comes out and honestly tell the people why the inflation has been going north since Abdullah Badawi took over (since the 30 cents a liter of fuel hike to be precise) and damn those inflation figures of 2-3 percent released. I’m no PhD in economic theory but the fact is nothing seems to be working in fighting the inflation. And you can be sure of another fuel hike soon and depending on the mechanism deployed, you might need to fork out RM4.00 a liter for petrol. How’s that for inflation?

Of course the silly PM Badawi has came out with the brilliant idea of scrapping the global future markets on the black-gold, the same way silly Mahathir screamed till his throat sore to eliminate currency (trading) speculation 10 years ago. In a way Goldman Sachs & Co. was right in certain way when it cut the nation’s equities to “underweight” from “market weight” although the main reason was political uncertainties. It was all about fear of contagion effect from Vietnam’s surging inflation, not that Malaysia’s own inflation is in any good condition. Cash is king my fellow readers. And I believe many people whose income is in U.S. dollar would love to see ringgit weaken to RM3.80 and beyond.

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Malaysians should thank their luck stars that the US dollars was weak and China was over producing everything in the World; if not, Malaysian inflation would be much much higher.

Since so much consumables are imported, it is wiser to have higher ringgit; in fact, RM3,20 to a dollar is too low. Just look at Singporeans and Aussies dollars, they are strong and have no problem in coping with inflation.

Mahathir’s capital control had significantly distorted the entire economy for a whole decade and had withered the global competitiveness of Malaysia vis a vis Ringgit. Malaysians will suffer badly this time. If the Ringgit goes beyond RM3.80 to a dollar, like you wish, Malaysians will be parachuting into the developed countries or die starving in Malaysia.

I couldn’t agree more.Middleperson import products from U.S keep on increasing prices despite ringgit is appreciating against U.S.The reason given,high price of raw material and commodity due to tight supply or crude oil price.

Then, they should reduce the prices of these items when prices of commodity go down.Prices should not have upward revision only but vice versa.I felt like being short changed here.

U.S keeps on profiting from high crude oil price because now they have secure Iraq which produces 20% of world’s crude oil.America has been pushing crude oil price to ensure high return on investment/Internal rate of return from its investment in Iraq’s war.By reducing the payback period to recoup their investment,U.S is preparing its war chest to conquer the next oil producer-IRAN.

When will this stop?

hello pak dollar,

why should malaysia thanks the lucky star when it doesn’t make any difference either when the ringgit was 3.80 or 3.20 to a dollar? i guess we wouldn’t know if the inflation would be much worse if the ringgit remains at 3.80 now, would we?

i doubt anyone can “guarantee” the inflation will be much better even if ringgit is at 2.50 to a dollar now … of course singaporean and australian have done great jobs (although their inflation is increasing) but are you sure if the bunch of malaysian policymakers were to sit on singaporean chairs, they could perform equally well?

sure, everyone knows how the evil old mahathir screwed up everything upside down but aren’t the same mamak advisor who advised mahathir on the capital control is not sitting on the chair as deputy finance minister? … so, can’t this genius do something to reverse the problem he architected in the first place?

i would prefer to exchange my dollar to 3.80 and starve than to 3.20 and starve … even if i were to starve, i would like to starve with much more notes in my pocket …

but then compared to indonesia, i should thanks the lucky star …

Dear Stocktube

The favourable exchange rate was more due to the weaker US dollar rather than a stronger Ringgit. Nevertheless, it will reduce the price of import and in that will reduce inflation as many consumables are either direct import or produced from imported ingredients or parts paid in dollars; therefore, without a favourable exchange rate, Malaysians will have to pay more for the import and will drive up the inflation even more.

Singapore and Australia are maintaining strong currency policy, even with higher inflation, their economy can sustain it coupled with the fact that exports will bring even more wealth into their countries.

I did not say anything about Malaysians policymakers able to run Singapre economy as well, what is your point? All I can say is ever since Mahathir took up capital control, Malaysians have not been able to take the necessary bitter pill to reform their economy unlike South Korea, Singapore and Austrlia.

Mahathir as was stated in Lingam RC, does not take advice from anyone to decide so there is really no advisor but himself. Anyway, any economic reform will take time to show results and it will be bitter, no doubt about that but will Malaysians take it?

From your second last paragraph, you seem to have lots of US dollar income to be exchanged into ringgit and I can understand your frustration in getting lesser ringgit for a buck. Anyway, it won’t be long that ringgit will go further down against the dollar. And with those overseas income, you will not be the first to starve, if at all.

hello pak dollar,

there’s nothing with your theory and i agreed with it but my point was it DIDN’T happen as per-theory here …

of course you didn’t say that … my point was, if you put the same pool of suckers managing the finance and economy of a nation, the end result is still the same … don’t get me wrong as i totally agreed with you mahathir was the root of most of the problems now …

but just to put the blame on his predecessor without looking at the mirror and ask what has the current leader done since 2004 to correct the problem is rather amusing …

no, i do not have US dollars … so if the IRD people were to read this, i declare that i don’t have any 🙂

cheers …

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