Photo Courtesy of Aaron Tan

Another indicator that the Government is running low on cash.

Or it’s a sign that even the Malaysian Government is not spared from the Madame Bovary Syndrome…

MALAYSIA will sell RM3 billion (US$886.5 million) of government bonds on Nov 30, said Bank Negara, late last Friday.

The bonds will mature on May 31, 2013 and tendering for the paper closes on Nov 30, the central bank said on its website. – Reuters

I hope this won’t be applicable in Malaysia anytime soon. This just reinforces the fact that banks are always finding ways to ‘tax’ (in the name of interest) everything that goes through their doors. This makes them more scary than the government…

The banks have spoken.

For the past few years, the banks has been spending millions of ringgit to acquire plastic subscribers. There is no doubt that the credit card department is the most profitable channel for most of these banks. Regulations on approving new cardholders has been surprisingly lacking, which resulted in the need for the government to set up debt management agencies such as the AKPK. A fire-fighting approach I’d say, but it’s better than not doing anything to the rising problem of high-interest credit card debts faced by many Malaysians today.

Now, in the tabling of the 2010 Budget, our beloved PM announced the infamous RM50 service tax on all primary credit card holders, and RM25 on supplementary card holders. It’s easy to see that such a move will indeed be very ‘taxing’ on the plastic population as a whole but the plastic issuing banks are very unlikely going to let their subscribers cut up their cards and leave just like that, just when they are starting to milk the insanely profitable interest and floats after spending a fortune acquiring them. Another way these credit cards are profiting the banks is through the swiping terminals they offer to the business community. It’s quite a common practice these days for the merchant banks (the bank that provided the credit card terminals) to hold the payments for up to 45 days. Imagine the amount of transaction (float) they hold in their coffer, and then imagine the interest accruing for the 45 day period which goes straight into the banks pocket. No, they don’t laugh their way to the banks, they are already having a party right inside ;-)

I still don’t think anyone would need more than 2 credit cards, unless you are a collector. But if you are holding many cards, rest assure that the banks are going to come up with something to offset your ‘losses’. They are used to paying RM100 or more to these credit card agents to sign you up!

As ironic as it might seem, the banks are being robbed (estimated about RM520 million) under broad daylight. Ouch!

(THE EDGE MALAYSIA) 7th November 2009, KUALA LUMPUR: The Association of Banks in Malaysia (ABM) is advising credit and charge card holders not to make any ??asty decisions??in terminating their cards as the mechanics of the imposition of service tax are still being formulated.

??hilst details of how the service tax will be imposed are being finalised, cardholders should continue to use their credit and charge cards wisely to enjoy the many benefits that the cards have to offer as a payment instrument.

??ardholders are thus advised to avoid making any hasty decisions in the meantime. Banks will inform their customers as soon as details are available,??ABM said in a statement yesterday.

It said banks were prepared to assist the relevant tax authorities as best they could in the smooth implementation of the imposition of service tax on cards on Jan 1 next year.

??t is understandable that the imposition of the RM50 service tax a year on each principal credit card and charge card as well as the RM25 service tax a year on each supplementary card has raised many concerns of affordability on the part of cardholders.

??n the short time following from the announcement of the same, commercial banks, together with the other card issuers, have acted swiftly to assess the thrust of the measure with the aim of better pre-empting any issue which may arise in connection with its rollout and apprising the tax authorities,??ABM said.

The association also said it would enhance and promote its consumer education programmes designed to inculcate stronger personal financial management skills among cardholders.

Photo courtesy of Hey Gem

You must have already heard about the RM50.00 service tax imposed on all credit cards (incuding supplementary cards at RM25 each). I certainly do not think that such a blanket policy is aimed at curbing over-spending. I am sure not every plastic users in Malaysia are behind on their payments. Such an act is only a sign that the government is running low on cash, and for all you know, they are going to charge a new road tax for every tyres you have in your car- which includes your spare tyres!

Here’s a nice article from Tony Pua on his thoughts about the new Plastic Policy by our beloved Government…

I MUST say that Budget 2010, announced by Datuk Seri Najib Razak on 23 Oct 2009, contained quite a few surprises for better or for worse. And my observation is from someone who has pored through the government’s budget over the past five years.

For one, I’ll have to start picking up the phone over the next few weeks to cancel my many credit cards. An unwelcome announcement was that beginning 1 Jan 2010, we will be taxed for every card we own, regardless of whether we are or aren’t in debt.

At RM50 per card, and RM25 per supplementary card, that’s probably enough to set me back at least RM700 per annum. Yes, I have indeed a whole string of credit cards, but thankfully without any debt attached to them.

Click here for full article…

Reader Mr Booi sent me something interesting – the ranking of Current Account Balance of every countries on this planet.

Subject: Singapore is No. 10, Malaysia is No. 17.. check who is No.163?

Rank, Country, Current Account Balance (million US$)

1 People’s Republic of China (PRC) 179,100
2 Japan 174,400
3 Germany 134,800
4 Russia 105,300
5 Saudi Arabia 103,800
6 Norway 63,330
7 Switzerland 50,440
8 Netherlands 50,170
9 Kuwait 40,750
10 Singapore 35,580
11 Venezuela 31,820
12 Sweden 28,610
13 United Arab Emirates 26,890
14 Algeria 25,800
15 Hong Kong 20,900
16 Canada 20,560
17 Malaysia 17,860
18 Libya 14,500
19 Brazil 13,500
20 Iran 13,130
21 Nigeria 12,590
22 Qatar 12,510
23 Taiwan 9,700
24 Finland 8,749
25 Iraq 8,134
26 Angola 7,700
27 Oman 7,097
28 Belgium 6,925
29 Austria 5,913
30 Argentina 5,810
31 Chile 5,063
32 Denmark 4,941
33 Philippines 4,900
34 Luxembourg 4,630
35 Trinidad and Tobago 3,259
36 Azerbaijan 2,737
37 Egypt 2,697
38 Korea, South 2,000
39 Bahrain 1,999
40 Gabon 1,807
41 Botswana 1,698
42 Yemen 1,690
43 Indonesia 1,636
44 Peru 1,515
45 Israel 1,643
46 Uzbekistan 1,410
47 Burma 1,247
48 Republic of the Congo 1,215
49 Vietnam 1,029
50 Ecuador 727
51 Bolivia 688
52 Papua New Guinea 661
53 Namibia 572
54 Ivory Coast 460
55 Cameroon 419
56 Morocco 389
57 Bangladesh 339
58 Turkmenistan 321.2
59 Equatorial Guinea 175
60 British Virgin Islands 134.3 (1999)
61 Kazakhstan 113
62 Cook Islands 26.67 (2005)
63 Palau 15.09 (2004)
64 Tuvalu 2.323 (1998)
65 Samoa -2.428 (2004)
66 Tonga -4.321 (2005)
67 Comoros -17 (2005)
68 Kiribati -19.87 (2004)
69 Swaziland -23.13
70 S?o Tom? and Pr ?ncipe -24.4
71 Vanuatu -28.35 (2003)
72 Federated States of Micronesia-34.3 (2005)
73 Anguilla -42.87 (2003)
74 Cape Verde -44.43
75 The Gambia – 54.61
76 Burundi -57.84
77 Haiti -58.72
78 Tajikistan -73.95
79 Lesotho -75.44
80 Seychelles -78.59
81 Antigua and Barbuda -83.4 (2004)
82 Guyana – 84.3
83 Rwanda -104.1
84 Honduras -160
85 Zambia -165.4
86 Republic of Macedonia -167
87 Belize -173.4
88 Malawi -186
89 Ghana -219
90 Armenia -247.3
91 Togo -261.9
92 Zimbabwe – 264.6
93 Kyrgyzstan -287.3
94 Paraguay -300
95 Chad -324.1
96 Benin -342.7
97 Guinea -344
98 Cambodia -369
99 Mexico -400.1
100 Uganda -423
101 Eritrea -440.5
102 Mozambique -444.4
103 Fiji -465.8
104 Panama -467
105 Madagascar -504
106 Laos -404.2
107 Belarus -511.8
108 Syria -529
109 Moldova -561
110 Uruguay -600
111 Burkina Faso -604.6
112 Mauritius -651
113 Albania -679.9
114 Georgia -735
115 Tunisia -760
116 Slovenia -789.2
117 Nicaragua -883
118 Senegal -895.2
119 Thailand – 899.4
120 Tanzania -906
121 Malta -966.2
122 Jamaica -970
123 Cyprus -1,051
124 El Salvador -1,059
125 Sri Lanka -1,118
126 Kenya -1,119
127 Dominican Republic -1,124
128 Costa Rica -1,176
129 Cuba -1,218
130 Guatemala -1,533
131 Bosnia and Herzegovina -1,730
132 Estonia -1,919
133 Ukraine -1,933
134 Colombia -2,219
135 Serbia -2,451 (2005)
136 Latvia -2,538
137 Lithuania -2,572
138 Jordan -2,834
139 Croatia -2,892
140 Iceland -2,932
141 Ethiopia -3,384
142 Slovakia -3,781
143 Czech Republic -4,352
144 Sudan -4,510
145 Poland -4,548
146 Bulgaria -5,100
147 Lebanon -5,339
148 Pakistan -5,486
149 New Zealand -7,944
150 Hungary -8,392
151 Ireland -9,450
152 Romania -12,450
153 South Africa -12,690
154 Portugal -16,750
155 Greece -21,370
156 Italy -23,730
157 Turkey -25,990
158 India -26,400
159 France -38,000
160 Australia -41,620
161 United Kingdom -57,680
162 Spain -98,600
163 United States -862,300

Saving is sin, and spending is virtue…

Interesting article written by an Indian Economist:

Japanese save a lot. They do not spend much. Also Japan exports far more than it imports. Has an annual trade surplus of over 100 billions. Yet Japanese economy is considered weak, even collapsing.

Americans spend, save little. Also US imports more than it exports. Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.

But where from do Americans get money to spend?

They borrow from Japan, China and even India.Virtually others save for the US to spend. Global savings are mostly invested in US, in dollars.

India itself keeps its foreign currency assets of over $50 billions in US
securities. China has sunk over $160 billion in US securities. Japan’s
stakes in US securities is in trillions.

Result:

The US has taken over $5 trillion from the world. So, as the world saves for the US, Americans spend freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, which is $2 billion a day, to the US!

A Chinese economist asked a neat question. Who has invested more, US in China, or China in US? The US has invested in China less than half of what China has invested in US.

The same is the case with India. We have invested in US over $50 billion. But the US has invested less than $20 billion in India..

Why the world is after US?

The secret lies in the American spending, that they hardly save. In fact
they use their credit cards to spend their future income. That the US
spends is what makes it attractive to export to the US. So US imports more than what it exports year after year.

The result:

The world is dependent on US consumption for its growth. By its deepening culture of consumption, the US has habituated the world to feed on US consumption. But as the US needs money to finance its consumption, the world provides the money.

It’s like a shopkeeper providing the money to a customer so that the
customer keeps buying from the shop. If the customer will not buy, the shop won’t have business, unless the shopkeeper funds him. The US is like the lucky customer. And the world is like the helpless shopkeeper financier.

Who is America’s biggest shopkeeper financier? Japan of course. Yet it’s
Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not grow. To force the Japanese to spend, the Japanese government exerted itself, reduced the savings rates, even charged the savers.

Even then the Japanese did not spend (habits don’t change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillions, about three times the Indian GDP. Thus, savings, far from being the strength of Japan, has become its pain.

Hence, what is the lesson?

That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend.

Dr. Jagdish Bhagwati, the famous Indian-born economist in the US, told
Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve. This is one of the reason for MNC’s coming down to India, seeing the consumer spending.

‘Saving is sin, and spending is virtue.’

But before you follow this neo economics, get some fools to save so that you can borrow from them and spend!!!
God Bless You

Warmest Regards

I would really like to know what you think. Is it really foolish saving up for rainy days?

Or is there something not right about the current economy/financial/monetary system?

A sequel to the animated “Money As Debt” video by Paul Grignon- Money As Debt II- Promises Unleashed.

The author has done it again in this very educational and informative video where he reveals all the tricks and social-conditioning by the power-that-be which has been on-going for decades. Such manipulation eventually leads to the collapse of the financial system as we see it in the West. Before you label it as just another conspiracy theory, try finishing the video first before passing any judgments.

Part 7 is where it gets exciting, where the author predicts about the future of the monetary system- digital money.

In fact, our very own monetary system in Malaysia is no better, it’s just that the effect of the flawed monetary system is not as amplified here, simply because the consumers here are not yet on steroids.

The 77-minutes video is a quite a long stretch, but I can guarantee you that after watching it, you’ll think twice again about entrusting your hard-earned money with any financial institutions, if it’s even yours in the first place ;-)