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Quantitative Easing (QE), Cyprus’ Bailout, Russia’s Gazprom, China’s Rare Earth, Japan’s Meiji Restoration…And A Malaysian In The Crossfire. What Do All These Have In Common?

March 23rd, 2013 by dimpledbrain

(1) On the World Landscape (a brief outlook on what’s happening around)

  • Quantitative Easing and EU Bailouts
    • Recall from macroeconomics 101 that GDP, which measures a country’s economic output is widely defined as GDP = C + I + G + X, where C = private consumption, I = Investment, G = government spending and X = net export.
    • By engaging in QE, the US is basically exporting its inflation abroad, i.e. growing her X (net export). QE is basically printing more paper money and that means cheapening its currency relative to other nations’.
    • Germany, on the other hand, has to lead in the various bailouts of PIIGS (Portugal, Ireland, Italy, Greek and Spain) and recently Cyprus for the same reason. A collapse in the EU economies will severely affect Germany’s own economy since it’s a net exporter within Europe. What Merkel did is in fact, in the best interest of Germany, something that apparently some Germans fail to grasp, I think, by harping on ‘no to using taxpayers’ money for bailouts’.

  • China and Japan were previously fighting over some uninhabited rocks and trees commonly called Diaoyu Island or Senkaku Island. Also the clash of a Chinese fishing vessel and the Japanese coast guard led to a 100% rare earth halt to Japan. (China controls more than 90% of the world’s rare earth minerals). Japan retaliated by devaluing yen, which could have hurt Chinese exports to Japan. Then somehow the Chinese captain was released, rare earth supply to Japan resumed and yen strengthened.
  • Russia’s Gazprom which produces over 85% of Russia’s natural resources and 20% of the world’s supply is used in the same way as the US’s economic power and China’s rare earth supply. There were also numerous fights between Gazprom and her arch nemesis Nabucco, a natural gas pipeline consortium backed by the EU/US.
  • The GDP (in millions of USD) of the EU, the US and China are USD16,414,483 mil (USD 16.4 trillion), USD15,653,366 mil and USD8,250,241 mil respectively, which add up to more that 60% of the world’s GDP. In comparison, Malaysia’s GDP is around USD300 bil vs Indonesia’s USD900 bil. Hence the saying, “when the US [or EU or China] sneezes, the world catches cold.”

(2) A Malaysian in the Crossfire

  • All these interesting events were happening around the globe for one particular reason, a reason every Malaysian must understand and appreciate. It’s a battle for supremacy for lack of a better word. In every case, it seems domestic consideration outweighs international stability consideration, i.e. massive money printing is necessary to support the US economy, China’s insistence on pegging yuan to USD (if China were to devalue yuan, it will create inflation in China and potentially lead to the likes of Tiananmen Square massacre), Russia’s war on Nabucco and Germany’s rescue of ailing EU countries.
  • While the battle is ongoing in the international arena, Malaysia is caught in seemingly trivial issues. Recently I was talking to two 14 years old Malaysian kids and got the shock of my life. You wouldn’t believe the level of hatred displayed on the recently decentralized public examination for students aged 15 called PBS (Pentaksiran Berasaskan Sekolah or School Based Assessment) and on the federal government, among other things. These are 14 years old kids that we are talking about, for crying out loud!
  • It appears to me there is a systematic attempt to dumb down the nation and split the nation via racial, ethnic and religious hatred. The Malays and the Chinese feel awkward together and a number of undergraduates couldn’t utter a grammar error free English sentence, let alone proper pronunciation. All these are happening despite having the many zillions of As on Malaysian public school examinations.  Adding fuel to the fire are the language barrier divide and local graduates and overseas graduates (those residing in the country) clash.
  • Perhaps the most articulate Malaysian harping on the talent shortage issue in Malaysia is Tan Teng Boo of icapital fame, one of the paid daily newsletters that I subscribe to. Ah, a modern priest at work!

(3) What Do We Do Next? (A Plea to fellow Malaysians)

  • Understand the implication of game theory and the proposed 90% tit-for-tat solution. (click here for the post.) Harbouring racial hatred grudges will only spiral all of us downwards and play into whoever-who-wanted-it-that-way’s hands. The reason why Japan (until the recent 2012 Japan tsunami) is willing to accommodate a cheaper US currency is so that she can tag along the US’s growth. If the world is unmistakably more interconnected, think what is more about each one of us sharing the same economic pie.
  • I would like to propose an alternative explanation to the issue of talent shortage in the country. I think the youths of this nation are a failed product (depending on which camp you are in, you may say it’s a success because they are exactly like how you want them to be) of a cookie cutter approach employed by the government. Lack of talent is the effect not the cause. The reason, I suspect is that most youths are not allowed to find their own elements; their centres have been shifted to accommodate a sinister family ruling agenda in the country. However, just like how devaluing one’s currency is never a sustainable means, the final piece of enough-is-enough snowflake is finally laid to erupt the first ever 308 political avalanche/awakening in the country.
  • If you echo what I say, you must do the following. Be a change yourself. That’s what everyone of us can do and should do. Do not for a moment think that it will not affect you for the Germans of Malaysians must help the PIIGS of the country. A crumbling system will spell disaster for everyone.


(1) The next most anticipated event in this region is Indonesia’s presidential election in 2014. Whether it will resume Susilo’s effort to change the country or fall back to Suharto’s cronyism regime is anyone’s guess. But it will affect us all for Indonesia is within the G20 group. Their resumption of economic growth will give a bigger say to this region in the world.

(2) As for Malaysia, it’s a sad news for anyone below 70 years old. It doesn’t matter who will be ruling next really. The economy probably requires 70-100 more years to undo all the harms of the previous 4th premier. That’s beyond our lifetime to see a resilient country. That’s if Pakatan Rakyat manages to form the next federal government and changes it.

(3) I failed to talk the two 14 years old over. But I hope my words do sow some seeds of encouragement in them. I hope you can do so too, for the sake of a better country ahead. Sometimes, I really don’t know whether I am saddened more by the fact that I come to realize all these things or the fact that I live in one myself.

To end this post, and as we fight this war together, let us join hands:

“Now, we head towards the battlefield. Believe, and our blades will not break. Believe, and our hearts will not bend. Though the roads we take may be different, our iron hearts will beat as one. Swear, that even if the Earth is torn asunder, we will live and return here once again.”

“I have a dream.”

(4) Suggested reading: Currency Wars: The Making of the Next Global Crisis by James Rickards.


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