If you are looking at the perspective of an exporter (originating from Malaysia) to say a country like Singapore (or any country that has a stronger country), yes they will be able to make better profits when they export even though those goods when subsequently resold can be cheaper at their respective market, but isn't this due to a strong currency which is determined in the open market. Bear in mind that back in the old days, Malaysia and Singapore's currency is about the same but it has appreciated tremendously against us. It surely must be something that other countries want from Singapore that they are willing to pay more of their own currency for SGD. So say if there is a egg distributor in Singapore, all of his cost will be in SGD and if he was to export his products to Malaysia, we have to pay like double the price, don't you think their strong currency will hurt their export instead? So, they will probably not be able to export eggs if their cost structure is too high so they wouldn't. Instead, they will have to focus on industries that people are generally willing to pay even though it's for a high price. Or they will have to improve their productivity to a level that they are able to justify for their high prices.

And in any case, on your question on inflation. Although you may argue that if you were to convert the price of goods from Singapore back to Malaysia, it is more expensive than Malaysia and hence Sg has a higher inflation than Malaysia (prices more expensive) according to your logic but that is untrue. Because if you were to convert what a typical person working in Singapore earns back to Malaysia, they amount that they earn will be able to buy more relative to what a typical Malaysian earn. The best way to see who is in a better position is by looking at their purchasing power. No point if you were to earn a salary of say RM3k but a TV cost you RM2k wherelse in Sg, you earn SGD3k but a tv only cost you SGD1.5k. So, if you work in Malaysia will only be able to buy 1.5 times TV with your salary wherelse if you work in Sg, you will be able to afford 2 TV. Although the TV in Singapore after converting back to Malaysia is more expensive, you will be able to afford more TV's if you work in Singapore rather than in Malaysia.

Most of Malaysia's debt are also funded locally too, so shouldn't we also deserve the AAA rating too and going by your logic? And, it has an even lower debt in comparison in to Singapore, so shouldn't we be better than them?

This post has been edited by legiwei: Apr 1 2012, 08:00 PM

Perhaps you should read this.
http://www.indexmundi.com/malaysia/debt_external.html
http://www.indexmundi.com/singapore/debt_external.html

Furthermore, ratings on sovereign debt does not cover debt only if that's the case USA would be junk status. Just compare our GLCs Khazanah/PNB to Singapore's Temasek/GIC, and which one does better with taxpayers money? You tell me ....

Spot the difference:





Good on you if you've already spotted it.

Fiat is based on Faith.

Do you trust me? Give me all your gold and silver and I'll give you an equivalent amount in a piece of printed paper.

This post has been edited by pubmut: Apr 2 2012, 05:32 PM

Both Singapore and Malaysia have low external debt. External debt is the total public and private debt owing to foreign lenders, so don't assume that all the external debt is owed by the government.

For example, Australia has low public debt of 26% of GDP, but it has an extremely high external debt at more than 1.1 trillion US$. The typical Australian spends more than what he earns, so he has to borrow the difference from Australian banks, which source their funds from overseas lenders. Most Western countries are like that - huge external debt and some also have huge public debt as well. Many Asian countries used to be like that, but after the 1997 Asian Financial Crisis, most Asian countries are very carefull not to borrow too much from outside.

Malaysia's public debt is around 50% of GDP. Singapore's public debt is around 100% of GDP. But because both governments have low external debt, it is still ok.

Which GLC did better? Khazanah or Temasek. Read this article: Temasek Portfolio Lost $39.91 Billion

I read somewhere more than 95 % of money in circulation is digital while the balance is in notes & coins. So my question is who creates and controls the 95%+ money? Bank negara or the private banks.

The central bank of a country controls the money supply of its given country. For instance, The Federal Reserve is in charge of controlling the money supply in the States. When is prints more money, the currency depreciates. The Fed could choose to print money for many reasons. For instance, the Fed many decided to print more money to enable the currency to depreciate which in return results in not only a lower level of interest rates but the spending power of consumers would also increase tremendously as credit is easier to be obtained. Moreover, US exports would also increase as more foreign parties would be importing goods from the States due to the lower currency exchange.

On the other hand, the Fed could decrease the amount of money in circulation by various methods such as by increasing the SRR (Statutory Reserve Requirements), increasing interest rates ( loans become more expensive hence consumers would delay their purchases and would start saving more), and it could also sell various securities such as gov.bonds and T-bills.

So the choice of using contractionary monetary policy or expansionary monetary policy boils down to many factors such as the condition of the government, economy, current political situation etc.

Oh yeah and before i forget, in Malaysia its Bank Negara Malaysia (BNM) that controls the money supply in the economy.

Hope this answers your question. Do feel free to ask for further clarifications and i would try my best to answer your questions based on he knowledge that i have

so how about now? our money currency keep on lowering..

TL;DR

But happy4ever have probably the best explanation. Currency is just a way to store value. BNM is the monetary authority in Malaysia. So basically BNM create a finite amount of money, and put it into the system. BNM will keep some foreign currency & gold as reserves.

In reality what happens is just BNM will go to the FX market and buy some USD from banks, and then credit the bank's account (in BNM) with some MYR. The USD becomes our reserve. That MYR is really just a number (eg system says bank X have 100Mil in BNM.). If bank need hard cash they can ask from BNM (known as "currency in circulation"). This is what people say as "print money". It happens more often than you think, but BNM must control when to print and when to "destroy" (i.e. use USD to buy MYR back). If not our currency will be worthless.

So what happens right now is a series of chain event. When US decided to "print money" in 2008 (basically the Feds create USD to buy bond), people see USD will devalue, and move them to emerging market like Malaysia. So they sell USD and buy MYR. MYR value rises. Right now 2015, USD increases in interest rate, which means it's more attractive to hold USD. They then reverse the transaction. Plus oil price slump, plus 1mdb, end up everyone sell MYR to keep other currency. In order to handle such large transaction, BNM have to use their reserve to be the one "buying MYR and selling USD". But with limited reserve we can't keep holding USDMYR = 3.2000. That's why it slides..... rather drastically.

On the original question by TS: "How does Malaysia print their money?"

For clearer understanding, there are 2 types of money that can be created:
1) Base money (aka hard currency)
2) Fiat money

Base money is the actual amount of currency (money backed by real notes / coins etc.) plus the "cannot be lent out" reserves that banks must keep with the central bank.

Fiat money is "fictitious" money that only exists as digital accounting entries. It is created as a result of bank lending (you can read about it on the internet how lending creates money). Fiat money adds to the money supply without having any real physical currency.

When you say print money, usually, it means creation of new base money. It is achieved via a mix of (you guessed it) printing new currency and distribution to the wider economy via central bank lending to commercial banks or governments.

---

All the other discussions here re. inflation, SG / Msia debt etc is irrelevant to your question.

back in late 60s and early 70s, Mr Lee is not in good terms with Tan Siew Seng.
Mr Lee proposed a peg systems that every dollar is pegged together with a basket of foreign currency.
every dollar you have in your country is fully backed by an equal value in foreign currency as far as i remember "Singapore Story". There is very little room for $$$ printing. Thus,
this will prevent country from over spending.
But Malaysia boleh need more $$$budget so that more highway can be built, buildings can be built, etc... can be build.


However, Mr Tan goes for the central bank approach. Once Mr Tan left the finance ministry, with the discpline and system in place, over spending is possible. the downfall begin.

Even if Mr Tan agree on the peg SGD, Brunei Dollar and Ringgit, eventually some other politician will disagree to it very quickly I think by 80s.

in the early years, the bank note was printed oversea. you can see the symbol Thomas De La Rue, US bankNote, Canadian Bank Notes, "Thomas De La Rue", "Bradbury Wilkinson & Co", "Harrison And Sons", "BA Banknote", "United States Banknote Co", "CanadianBanknote" or "Giesecke & Devrient".

After financial crisses 1999, the series by year 2000, mostly printed in Malaysia from what I know. better quality control.

Plz read

https://www.community-exchange.org/docs/Mod...eyMechanics.pdf