For high saving rate, it is good practice for individual and economy health.
But too high saving rate is bad if one looks at macro-economy level as saving can be non-productive to the economy. Just like current situation we had now, too much liquidity in local banking sector as people save more and more FD in the banks, while banks find not much use of the cash (company needs little loan because of lesser expansion programme around since 1997 as 1997 crisis has taught company not to overly expand, also economy is not growing at red hot pace since then, not much and aggressive expansion needed as well) which resulted our local interest rate remains low since 2000.

Economy is about flow of money and money exchange between hands which result more money being earned by general people and more businesses in between. A sustainable of spending by people will make the economy stronger as with spending, businesses become more, job being created, more disposal income and more spending power eventually, which is a loop cycle that makes a economy stronger.

Actually one of the fundamental reason, why Japan economy can't recover or grow after so many many years? one of the reason is the Asian culture of high saving rate, the more insecurity they are, the more they save, eventually less money being spent in the market,
Less money being spent -> less job created -> less disposal income -> less businesses -> cycle goes on.

For US, their economy is more dynamic and can recover fast, because they are high spender which in this kind of economy, it is much more easy to handle. What gov to focus is to think about how to increase people disposal income by creating job for them, then the economy will be back on running already.

Interest rate has not much room for the downside, currently overnight rate of BNM is 3.5%, the most it can go probably 3%, so BLR may be can go down from 6.75% to around 6.25% level. I think BNM knows well interest rate is not the ultimate factor that's why they don't eager to cut down the rate as many others central banks did. Just like in US and Japan, the current fundamental problem is not interest rate, so cutting to zero also won't have much effect on the economy and stock market won't react too much on it.

Welcome back, Sifu.


Yes, I do agree with you we cannot cut interest rates much. Moreover, our inflation is pretty high at 8%.

Malaysia is not without her own problems. Like the US, one is involving the changing of the Government " thinkings ". The changes could be painful, and the time taken could be pretty long one.

Certainly, Malaysians could learn much more from President Obama. And no matter how powerful a country is, it still could collapse if they do not manage the economy properly.

If interest is not cut, there are still many ways to channel lower interest rates to the business people, and we are doing that through BNM, with loan funding of 4 to 5% ( without BLR ).

Secondly, like US, we have neglected the low and middle income masses for a long time. For many years, their income levels stagnant, while certain politicians' incomes are raising rapidly.

Third , it is about time to open up NEP partially or totally to boost up the economy. It is a rather sensitive issue, so I do not want to discuss any further here.

If there is a severe recession, then our Government has to forgo on taxes if companies do not do well. So the amount of tax forgone could be much higher than the budget deficit funding , or let say the amount of money needed to pump prime.

Fourth, as some forumers mentioned earlier, our productivity is sub standard. The same goes to our education system. We need to boost up these areas.

Fifth, if our income levels boost up ( or course it takes time ), then we can cut down on fuel subsidy, in order to narrow down budget deficits.

Again, if the economy is doing well, we can impose indirect taxes such as GST or VAT like in Singapore or Thailand.

I may not answer all because there are too many issues deemed to be sensitive in Malaysia, another hinder in our progress.

Once again,we welcome you back to the board.

This post has been edited by SKY 1809: Nov 9 2008, 08:32 AM

danmooncake,

1) Do not be such a strong supporter of EPF. I have seen enough bail out by EPF money that I hope that I can get my money back when I retire.

2) You do know that Median Age of Malaysian is 26. So, if we do not have economy growth of at least 6% to 7%, we will have HUGE unemployment problem.

3) Given that most local graduates are ONLY good enough to work at 90+% places, government has to go into BIG deficit spending to avoid problem.

<<Education sector needs to play a vital role and we need to overhaul our entire education system in Malaysia.>>

4) We spent 30 years destroying our education system. It will take at least 30 years to fix this if we start now. Meanwhile, what are you going to do with ALL THOSE unemployed graduates??

It may take 5 to 10 years to recover from the next recession if we EVER recover. Our economic fundamental are VERY BAD.

Dreamer

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Added on November 9, 2008, 8:11 amSKY 1809,

1) Business people has the money. They just CHOOSE not to invest in Malaysia. Lower interest rate does not matter since they do not need the loan to begin with.

2) Look around you. Even Telekom and Maybank are investing OUTSIDE of Malaysia. The market size and growth are much better outside of Malaysia.

3) For large number of extreme savers, they can invest outside of Malaysia without giving out 30%. And, they get BETTER treatment in foreign countries.

We are in a global world. Money and talent go where it get the most favorable treatment.

Dreamer

This post has been edited by dreamer101: Nov 9 2008, 08:11 AM

I would rather disgaree that a higher saving rate would hinder the progress of a country.

By parking the money such as FDs , the banks could multiply the loans by 10X in Malaysia, and 100X in US. So the money still flows back to the system. It is rather lacking of incentives for business to grow, than a problem of saving.

We could consume more in term of education, e,g by building good WIFI free of all , and certainly boost spendings like through Lowyat.net.

By building a good WIFI infra, is a way to pump prime the economy, as more capex incurred but without having more budget deficit if it is privately funded, generate more advertising revenues and boost consumptions through the net.

This post has been edited by SKY 1809: Nov 9 2008, 09:51 AM

Lower int rates matters la ... thats the biggest boost to spending the govt can make. With lower int rates, we dont keep as much in the banks - we will take more risks at the klse , maybe even buy property ....

Even if we practice the American system of loaning out 10x the deposits in the banks ... it doesnt mean people will borrow the money cos of high int rates.


should go back to basics ... education , infrastructure ...AND maybe a int rate cut

I can see many of sifus here are optimistic to our economy in next year. But my price to buy has not come yet , don't know next year how.

No economy of the world could escape from the boom and the bust , the so called economic cycles.

It is just you have a choice to make :-

1) Invest when there is a boom, majority do.
2) Invest Somewhere in a bust, that may take a lot of the guts.

The bottom line, you still have a choice.

This post has been edited by SKY 1809: Nov 9 2008, 09:55 AM

Lower rates is does matter.

the is 2 possibility which those business people who has loaded with cash they might see other way to invest their money maybe not locally. is also depend on the risk appetite that the person has. Malaysia population only has around 25,274,133 population, when they want to sell thier product they would have limited customer to sell to, if they want to expend to oversea sometime may have many rule and regulation that make it hard for them to expend. sometime is good for them if they start at other region.

When the interest is low and the lending interest is low sometime it may attract many business people to come in. this help to create jobs, and help the economy to grow. This usually apply to every business person or a person who want to venture into business.

Thank you SKY!

Sorry, in a world of low interest rates, and possibly going to a zero interest rate world, (barring Malaysia) I can only see Malaysian commodities stocks doing well because of the possibility of the hyper inflation.

I hope Sifu Adam could create a New Economic System that could escape the bust, only the boom.

Perhaps, people could short sell hyper inflation to make it lower ( future trading in commodities ).

This post has been edited by SKY 1809: Nov 9 2008, 10:05 AM

yeah, oil and gas related stocks as well as other commodities recover first as soon as economy shows even a slight good sign.

LOL.....sorry i can't. All i can say is; long commodity stocks.

Unfortunately, many people i know is going to long commodity futures and speculate that oil and crude palm oil will head north from here. We might see oil heading to high 80s.

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Added on November 9, 2008, 10:12 amToday's meeting at KLCC starbucks from 12 pm - 2 pm.

This post has been edited by AdamG1981: Nov 9 2008, 10:12 AM

Inflation is still the long term threat, especially with cheap massive money available around, although near term definitely not, but it is a long term threat.

So it is kind of contradict factor for the market. If economy and equities continue to plunge then you will see inflation threat being tamed, in fact deflation. But if everyone wants to see better economy and stock market, then inflation will come alive again.

The ideal scenario would be economy is in better shape (eventually stock market) but inflation remain stable ie. oil price doesn't go up even if economy and stock market go up. But currently, it is not a case here. Whenever, stock market rise, oil follows suit.

http://biz.thestar.com.my/news/story.asp?f...36&sec=business

I smell oil prices going up ?

Oil Rises as Rate-Cut Forecasts Outweigh Unemployment Increase (http://www.bloomberg.com/apps/news?pid=20602013&sid=abzuapSmkDjI&refer=commodity_futures)

Oil May Rise After Prices Tumbled, Survey Shows (http://www.bloomberg.com/apps/news?pid=20602099&sid=atxEwtqZ2bTI&refer=energy)

This is a heated weekend...

I agree we have to long on commodities, partly because other sectors might down for a long time, but partly because we failing to move up on the value chain, we actually stayed where we were for years. And education system might play a part in that, as well as other policy. We have to be strong to compete with other globally , if we still stay in a denial state, we might be staying there forever.

At the moment commodities stocks are beaten down, but I think we might see them lower in coming months, due to investors behavior to rush to safe heaven during difficult time. Those with brave heart (a strong one ) and stomach would see their rewards coming in eventually, but how to jump into the market at the correct timing remains the finest art to be master .

O&G companies on KLSE mainly doing mainly construction & maintenance, I would like to invest on someone who own the field (too bad Petronas is not listed ). I does not mean their (those listed on KLSE) business are no good, but they rather depends on contracts awarded to them and as we know, the criteria to award contracts is sometime quite vague.

This oil cuts and increases r kind of laughable, in a span of 1 yr we have experience extreme lows and extreme highs on oil prices.

When Opec steps in and start cutting oil prices, price of oil rocket (for abit). A few more cuts here and there, more cuts here and there...

In Opec's mind they see oil prices low means cut production, rather than to stabilize the price deemed reasonable and according to market demand.

conclusion?

You have Opec either cutting to much during oil demand is "high" or for that matter very high (and vice versa)... and causing prices to sky rocket to insane levels again. There wont be price stabilization any time soon rather than a flactuating yo-yo..

I believe the current low in Oil prices is due to the effects of supplies kicking in when oil prices were at USD 140 a barrel. When everyone was screamin for more oil productions.

If they do so, they risk the global economy as a whole, I believe they should be rational enough to understand their important role to others.

My predictions for CPO.

Commodities stocks r definately the key, was told (a planter) that FFB production is at peak this Nov & Dec. Palm oil mills r refusing to take anymore more FFB from the field except for their own (especially from small stakeholders) forcing them to burry their harvest due to excess capacity.

The contract mths to look out for is Jan 09 Feb 09 (especially) and March 09 FCPO.

If u look at historical information for Nov 06 & Dec 06 and Jan 07 Feb 07 March 07, FCPO prices tend to close higher. I am supposing. (check KLSE web site)

Keep an eye on Dec 08 contract.

If it bucks the this trend than, can cross those fingers and hope for the worse to come.

Disclaimer:

Predictions, advise and forecast ("statements") given by Aurora97 are merely random statements that may or may not be based on facts, possibly fictitious scenario's, not fact checked and not well thought through. Users/Forumners whom choose to use such statements for the purpose of investment should do so at their own risk.
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Added on November 9, 2008, 2:05 pmits all about the money.

Russia needs cash being one of the leading oil producers, so does Venezuela.. i think this OPEC members r more desperate becoz they survive on oil exports.

This post has been edited by aurora97: Nov 9 2008, 02:10 PM

That's true, for my hometown, some of them already suffer that, thinking of getting a small kebun cheap, looking now...

We strife for a better world, but self-interest come first. We have to follow the trend and make something for ourselves in between. But frankly, I don't think oil can hike too much if economy is not improving, and oil hike sky high might kill the recovery immediately. God bless everybody