Wednesday, September 22, 2010

What Is It - The Economic Transformation of Malaysia - A Roadmap, A Plan, A Programme, A Blueprint?

By Matthias Chang
Wednesday, 22 September 2010 10:50

Yesterday, the Malaysian government, more specifically Pemandu (Performance Management and Delivery Unit) CEO, Datuk Seri Idris Jala announced a RM1.3 trillion or about US$444 billion investment - (Roadmap? Plan? Programme? Blueprint?) to transform Malaysia’s economy. To the Chinese, 444 is definitely a bad omen – literally die, die, die!

There were enough acronyms - ETP, GNI, EPPs, NKEAs, KPIs etc. to confuse everyone.

What was most interesting in the power-point presentation by Datuk Seri Idris Jala was his emphasis that the economic transformation is not a PLAN but a PROGRAMME, whatever that means.

A major initiative such as the economic transformation must be conveyed to the people in a way that would not lead to confusion and or ridicule.

Jala for reasons best known to himself and his think tank insist on the emphasis and the difference between a PLAN and a PROGRAMME.

But, please do explain what is the difference, for if Datuk Jala cannot even convey his own idea and concepts of the two words, PLAN and PROGRAMME, the initiative will be still born.

Why am I so pessimistic?

Bearing in mind Jala’s emphatic distinction of PLAN and PROGRAMME, why did NST in its front page blare out:


And in the second paragraph of the story, it was reported,

“Minister in the Prime Minister’s Department Datuk Idris Jala, who is also Performance Management and Delivery Unit (Pemandu) chief executive officer laid out THE PLAN, conceived primarily to get Malaysia out of the middle-income trap”.

Then we have another paragraph,

“Presenting the economic ROADMAP at the ETP open day in Kuala Lumpur yesterday …”

The SUN newspaper had a different take on the initiative, and its headline cried out,

“NO business for government – Corporate leaders want level playing field, free competition and government to exit business”.

Is this the essence of the ETP?

I have examined the 94 pages of the power-point slides by Datuk Jala and I did not come across this message as being central to the ETP, although private sector investment will be the main engine for the so-called growth in the next ten years.

The STAR newspaper headline had a different slant or emphasis,

“RM115 bil start – seven projects under ETP to triple nation’s income”.

The lead story is all about the value of the EPP (Entry Point Projects).

There were no references to road maps, but there were specific references to PLANS such as,

“PLANS in the pipeline include making Malaysia a number one regional hub … there are also PLANS to build 141 km rail lines via a mass rapid transit high-speed rail system to connect Kuala Lumpur to Singapore”.

No doubt, a lot of hard work has been put into the ETP etc. and this effort must be applauded.

But, if the leading newspapers cannot get it right, I wonder who will get it right!

Saturday, September 18, 2010



By Dr. Mahathir Mohamad on September 17, 2010 9:52 AM | Permalink | Comments (38) | TrackBacks (0)

1. One reason advanced by the advocates of letting the Ringgit to be traded abroad is that it will encourage foreign direct investment.

2. There was a time when Malaysia practically pioneered encouragement for foreign direct investment. It was even before FDI became popular with many developing countries as a shortcut to economic growth. Malaysia wanted FDI for job-creating labour intensive industries because of the need to create employment opportunities for its workforce at that time. It was really not about growing the economy.

3. For Malaysia at that time, foregoing taxes and even local participation were not important. The Government did not rely on FDI to fill its treasury.

4. The policy of attracting FDI was so successful that it resolved the problem of unemployment until it created a problem of labour shortage. This led to an inflow of foreign workers and the expatriation of billions of Ringgit back to their countries. FDI no longer helped Malaysia's growth.

5. But being used to this easy approach we keep on inviting FDI believing that it would still help with our economy. But let us look at what really happens when there is foreign direct investment.

6. Most people think that there would be an inflow of capital. But actually only about 10 per cent of the capital needed was brought in. The rest is borrowed from local banks, preferably foreign owned banks. It is therefore Malaysian money that is invested.

7. Apart from tax exemption Malaysia also subsidised the operations of foreign owned companies through subsidised electricity, fuel and domestic transportation. Of course the Malaysian workers contribute through their cheap labour.

8. There is another type of FDI which is even less beneficial. This take the form of investments in the stock market. Usually the objective is not to benefit from profits and dividends but from capital gains.

9. When foreign investors buy Malaysian shares, the prices are likely to appreciate. Foreign institutional investors, especially pension funds can easily push up share prices with their repeated purchases.

10. When the prices are high enough the investors would dump the shares and collect capital gains. The local investors would lose money as prices depreciated.

11. During the financial cirisis of 1997-98, foreign investors dumped their shares so as to quickly change the Ringgit into foreign (US) currency before further falls in the Ringgit would give them less foreign currency in exchange. This invariably caused a steep fall in the share prices and Stock Market Index with consequent losses by local investors.

12. The Malaysian Stock Exchange makes money from commissions or the sales and purchase of shares. Consequently they are happy with more selling and buying on the Exchange. They therefore welcome foreign investors in the market. In fact they believe that if short selling is allowed they will make even more money.But these kinds of market activities do not benefit the nation.

13. FDI is double-edged and caution is needed when deciding on encouraging it. Today FDI is not coming into Malaysia because countries such as China, Vietnam, even Thailand and Indonesia offer lower cost of labour. Besides the economic recession in America and Europe mean less capital is available.

14. But what about the Ringgit? How will it affect the FDI? We need to know whether there was a lowering of FDI due to fixing the Ringgit exchange rate in 1998. If there was, was it directly due to the exchange control or other factors like increase in the cost of labour and competition with the above-mentioned low cost countries?

15. Actually when the Ringgit was fixed at RM3.80 to 1 US Dollar, the cost of investing in Malaysia was lower in terms of foreign currency. Now that the Ringgit has appreciated to RM3.20, the cost has appreciated. If we allow free trading of Ringgit abroad, two things can happen.

16. If the Ringgit strengthens then the cost of investment in Malaysia would increase, This would not facilitate foreign investments.

17. On the other hand the currency traders may once again cause the Ringgit to depreciate. This may result in increased FDI. But remember how we went into recession when our ringgit was devalued by foreign currency traders? Do we want to have that crisis again?

18. The present financial crisis in the world is due to the abuse of regulations in the financial market. No positive steps have been taken so far to regulate it. Certainly currency trading remains unregulated and selective.

19. The latest report says that every day currency trading is valued at four trillion dollars, equal to the total output of Germany in one year.

20. Whereas Germany's 4 trillion dollars yearly output creates millions of jobs, businesses big and small and much trade, the 4 trillion a day currency trade creates practically no jobs, businesses or trade. Of course the currency traders make tons of money. In the process we know that they can cause a repeat of the crisis faced by the world when they lose. Why should the world allow such greedy people to put the world at risk.

21. If we fully free our Ringgit the risk of being attacked by currency traders will once again be faced by us. Do we really want to have the financial crisis once again?

22. So I hope the Government will explain why it wants the Ringgit to be traded again. I hope it is not because we want to be good boys who will always do what we are told to do.

Monday, September 13, 2010

Saturday, September 11, 2010


Red Marbles

Saturday, 11 September 2010 09:54

I was at the corner grocery store buying some early potatoes. I noticed a small boy, delicate of bone and feature, ragged but clean, hungrily appraising a basket of freshly picked green peas.

I paid for my potatoes but was also drawn to the display of fresh green peas. I am a pushover for creamed peas and new potatoes.

Pondering the peas, I couldn't help overhearing the conversation between Mr. Miller (the store owner) and the ragged boy next to me.

'Hello Barry, how are you today?'

'H'lo , Mr. Miller. Fine, thank ya. Jus' admirin' them peas. They sure look good.'

'They are good, Barry. How's your Ma?'

'Fine. Gittin' stronger alla' time.'

'Good. Anything I can help you with?'

'No, Sir. Jus' admirin' them peas.'

'Would you like to take some home?' asked Mr. Miller.
'No, Sir. Got nuthin' to pay for 'em with.'

'Well, what have you to trade me for some of those peas?'

'All I got's my prize marble here.'

'Is that right? Let me see it' said Miller..

'Here 'tis. She's a dandy.'

'I can see that. Hmmmmm, only thing is this one is blue and I sort of go for red. Do you have a red one like this at home?' the store owner asked.

'Not zackley but almost..'

'Tell you what. Take this sack of peas home with you and next trip this way let me look at that red marble'.. Mr. Miller told the boy.

'Sure will. Thanks Mr. Miller.'

Mrs. Miller, who had been standing nearby, came over to help me.. With a smile she said, 'There are two other boys like him in our community, all three are in very poor circumstances. Jim just loves to bargain with them for peas, apples, tomatoes, or whatever. When they come back with their red marbles, and they always do, he decides he doesn't like red after all and he sends them home with a bag of produce for a green marble or an orange one, when they come on their next trip to the store..'

I left the store smiling to myself, impressed with this man. A short time later I moved to Colorado, but I never forgot the story of this man, the boys, and their bartering for marbles.

Several years went by, each more rapid than the previous one. Just recently I had occasion to visit some old friends in that Idaho community and while I was there learned that Mr... Miller had died.

They were having his visitation that evening and knowing my friends wanted to go, I agreed to accompany them. Upon arrival at the mortuary we fell into line to meet the relatives of the deceased and to offer whatever words of comfort we could.

Ahead of us in line were three young men. One was in an army uniform and the other two wore nice haircuts, dark suits and white shirts....all very professional looking. They approached Mrs. Miller, standing composed and smiling by her husband's casket. Each of the young men hugged her, kissed her on the cheek, spoke briefly with her, and moved on to the casket.

Her misty light blue eyes followed them as, one by one; each young man stopped briefly and placed his own warm hand over the cold pale hand in the casket. Each left the mortuary awkwardly, wiping his eyes.

Our turn came to meet Mrs. Miller. I told her who I was and reminded her of the story from those many years ago and what she had told me about her husband's bartering for marbles. With her eyes glistening, she took my hand and led me to the casket.

'Those three young men who just left were the boys I told you about. They just told me how they appreciated the things Jim 'traded' them. Now, at last, when Jim could not change his mind about colour or size.....they came to pay their debt.'

'We've never had a great deal of the wealth of this world,' she confided, 'but right now, Jim would consider himself the richest man in Idaho.'

With loving gentleness she lifted the lifeless fingers of her deceased husband.. Resting underneath were three exquisitely shined red marbles.

The Moral: We will not be remembered by our words, but by our kind deeds.... Life is not measured by the breaths we take, but by the moments that take our breath.....

Today I wish you a day of ordinary miracles ~ A fresh pot of coffee you didn't make yourself.. An unexpected phone call from an old friend...Green stoplights on your way to work....The fastest line at the grocery store...A good sing-along song on the radio...Your keys found right where you left them.
Send this to the people you'll never forget.. I just did....
If you don't send it to anyone, it means you are in way too much of a hurry to even notice the ordinary miracles when they occur.


New Economic Model (NEM) vs New Economic Policy (NEP)

PM: Tindakan afirmatif MBE disemak semula

Sep 11, 10 4:14pm

Pelaksanaan tindakan afirmatif di bawah Model Baru Ekonomi (MBE) akan disemak semula bagi menjadikannya lebih adil dan saksama, telus serta mesra pasaran, kata Perdana Menteri Datuk Seri Najib Tun Razak.

Katanya, apa yang berjaya dilakukan pada masa lepas, mungkin tidak lagi sesuai pada hari ini, dan Malaysia akan kembali tertinggal di belakang serta kehilangan daya saing jika tiada pembaharuan atau perubahan dilakukan.

"Kami akan melakukan semua ini kerana kami komited untuk mencapai Wawasan 2020, yang dimulakan oleh Tun Dr Mahathir Mohamad pada 1990," kata Najib semasa diwawancara dalam rancangan The CNBC Conversation oleh pengacara Martin Soong.

Najib menegaskan untuk mengekalkan status quo bukanlah satu opsyen.

Namun, komitmen dari segi menstabilkan masyarakat untuk mewujudkan masyarakat lebih saksama yang akan membawa kepada kestabilan jangka panjang akan terus kekal.

"Oleh itu, intipati Model Baru Ekonomi bukanlah segala-galanya mengubah sasaran makro tetapi bagi memastikan bagaimana kami melakukannya untuk menghasilkan kejayaan lebih besar," katanya.

“Dan dengan melakukannya, saya fikir ia akan lebih diterima semua pihak. Dan ia juga dilihat lebih adil," katanya.

Najib berkata ada sebilangan orang yang berasa khuatir dan mungkin juga takut dengan perubahan, tetapi itu bukanlah perkara baru.

Badan bukan kerjaan yang memperjuangkan hak-hak orang Melayu, PERKASA dan bekas perdana menteri Dr Mahathir telah menyatakan pendirian mereka membela hak istimewa orang Melayu di bawah dasar MBE dan menentang perubahan-perubahan yang dilakukan terhadap dasar sedia ada mengenai kaum Bumiputera.

"Mereka tidak menentang kami. Mereka lebih banyak membicarakan mengenai hak-hak Bumiputera. Tetapi sebenarnya, kami tidak menarik balik apa-apa daripada kaum Bumiputera, tetapi kami hanya menyatakan marilah kita melakukannya dengan kaedah berbeza," jelasnya.

Najib menegaskan bahawa adalah penting adalah untuk mendapatkan hasil yang lebih baik dan mencapai hasrat mewujudkan masyarakat lebih saksama.

"Tetapi pada masa sama, berlaku adil kepada kaum bukan Bumiputera kerana kami ingin membina 1Malaysia," kata Najib.

Perdana menteri berkata komitmen itu sebenarnya akan membawa pembangunan yang lebih adil, termasuk Sabah dan Sarawak, yang merupakan satu daripada sendi MBE, mesti inklusif dan dijayakan bersama.

Sebahagian besar sumber-sumber akan disalurkan ke Sarawak dan Sabah di bawah Rancangan Malaysia ke-10, khususnya berkaitan Program Transformasi Kerajaan, kata Najib.

Beliau berkata ini termasuklah, contohnya infrastruktur pembangunan, jalan raya kawasan luar bandar, bekalan elektrik, air dan sebahagian besarnya akan dilaksanakan di Sarawak dan Sabah.

"Dan kami sedang melihat hasilnya kerana saya memantau secara berterusan, maka perancangan berkenaan sebenarnya sedang dilaksanakan dan kami akan melihat kejayaan lebih tinggi semasa kita bergerak ke hadapan kerana kita kini sedang mendapatkan momentum," katanya.

- Bernama

Saturday, September 04, 2010

What happens in UMNO, affects Malaysia. What happens in Sabah politics will affect Malaysian politics as well

Sabah PKR's stumbling block - Anwar Ibrahim

Joe Fernandez

Tuesday, 31 August 2010 21:28

COMMENT The flip-flops in the continuing saga of Sabah Parti Keadilan Rakyat (PKR), a troubled chapter, should come as no surprise to anyone who knows party advisor Anwar Ibrahim.

Anwar has a long history of unfulfilled pledges in Sabah. This is a history which began with his entry into Umno in 1984. He stepped up his reputation further when the Barisan Nasional (BN) overthrew the Parti Bersatu Sabah (PBS) government a month after state elections in 1994 with the elaborate promise of “Sabah Baru” (new Sabah) in 100 days.

The sole exception, pledge-wise, is the appointment of Kota Kinabalu division chief Christina Liew Chin Jin Hadhikusumo as the Sabah state deputy chief late last year as part of a peace plan. For this, credit must go to party president Wan Azizah Wan Ismail, who is close to Liew. The rest of the plan is in ruins, thanks to Anwar, the only stumbling block.

Anwar is a political animal who does not say what he means and does not mean what he says. It’s for no reason that Umno, his old party, has labeled him a political chameleon. What benefit he gets by adopting this mindset is beyond anyone’s comprehension. Anyone would like to know where he or she stands vis-à-vis another. Those who don’t subscribe to this ethic would soon be history as any good businessman would swear.

This is something to be said in favour of former Prime Minister Mahathir Mohamad who is no doubt a hardcore racist. He leaves no one in any doubt what he stands for and never hesitates to let the other person know where he stands with him (Mahathir).

Anwar, however, is no Mahathir despite the fact that the latter is an original political animal. He lacks the flexibility and resilience of the older man.

So, it’s highly unlikely that 12 senior party activists – 11 Dusuns, 1 Barunai – currently facing a one-year suspension will have their punishment reduced upon appeal. The sentence for their involvement in the aborted formation of Parti Cinta Sabah (PCS) will stand undiminished and perhaps even enhanced to push Sabah strongman Jeffrey Gapari Kitingan to his limits. This will take his 12 disciples out of the running for the divisional elections slated for Sept 18 and 19, if not the party altogether.

The likely result, even in the event their sentences are not enhanced, will be the inevitable departure of the 12 from the party.

Any discussion on a new deal struck between Anwar and Kitingan on the fate of the 12 would be an exercise in utter futility even if it doesn’t fuel polemics. If the recent history of the written peace plan is any indication, the new verbal deal is as good as dead.

The PKR advisor virtually called Kitingan a liar yesterday. This was after the latter apparently pre-empted the reneging on their secret deal on the 12. He prematurely disclosed the 12-9 = 3 formula for the resolution of the crisis i.e. nine of his 12 men to have their sentence substituted by warning letters. The remaining three would have their suspension reduced by half and backdated to Jan 4, the date when the PCS application was officially withdrawn, according to what the Registrar of Societies reportedly told PKR.

Anwar has capitalized on Kitingan’s pre-emptive strike to entertain his inner circle with his own take on the 12-9 = 3 formula i.e. all 12 to be suspended but can appeal. The sentence on the three principal office-bearers of PCS would stand and take them out of the running for the Sept 18 and 19 polls. The other nine would be eligible. Their sentence would be back-dated to Jan 4 and reduced sufficiently to enable them to stand for the polls next month. This can be seen as another of Anwar’s fairy tales if his rubbishing of Kitingan’s take on the formula is any indication.

Kitingan and Anwar, it is clear, have been talking past each other for a very long time. This is very likely to continue and end in even more broken pledges to test Kitingan’s patience to the limits of human endurance. Sabah rights, the Malaysia Agreement, the Tambunan Declaration, the 20 Points and autonomy are yet to enter the PKR Constitution despite many promises.

The Sabahan, as a member of the majority local community, sees himself as the rightful ruler of his state, an idea which is anathema to Anwar who is Umno unreformed, unrepentant. Mahathir may have taken Anwar out of Umno but no one can take the Umno out of him. He stands for Malay Muslim political supremacy in Sabah as well and justifies this on the grounds that “the Muslims are now in a majority in the state”.

This may be true if one includes the illegal immigrants with MyKads who have entered the electoral rolls as Malay Muslims. Besides, Sabahans now number only 1.5 million while the foreigners including illegal immigrants have eclipsed them at 1.7 million.

So, Anwar’s idea for the immediate future seems to be to make full use of Kitingan for his hidden agenda in the state while stringing him along until he has no further use for him. The PKR supremo figures that ten parliamentary seats from Sabah and an equal number from neighbouring Sarawak, both through Kitingan if he remains politically naïve and trusting long enough, will help put him firmly in the saddle in Putrajaya in 2013.

How going from the frying pan (BN) into the fire (PKR) benefits Sabah and Sarawak is anyone’s guess on the other side of the South China Sea.

PKR, and by extension Pakatan Rakyat – despite DAP and Pas having some saving graces – will be another, certainly more degenerate, version of Umno and BN. There’s still the possibility of making BN and Umno see reason especially in Sabah and Sarawak. The same cannot be said for Anwar given his dubious track record.

The writing is on the wall. Long before push comes to shove, Kitingan will leave PKR for his own political vehicle as his people have already been long demanding. In that case, BN will win once again in Sabah and Sarawak but by default if Anwar doesn’t give way to him in the seats that he wants. The question of BN giving way to Kitingan’s new political vehicle does not arise.

He could also return to PBS, which he co-founded in 1984 with his elder brother, especially if the latter becomes Chief Minister once again to complete Musa Aman’s – another Dusun -- term. This is the hottest topic in Sabah today. If Joseph Pairin Kitingan becomes Chief Minister of Sabah once more, even if just for the run-up to 2013, the BN will win the state with a landslide. Not a single KadazanDusunMurut vote will go to the opposition.

The return of the KDM to the BN will make it extremely difficult for the Dayaks in neighbouring Sarawak to abandon the ruling coalition at this juncture. The Dayaks are looking to the Kitingans for their political lead as they lack leaders of similar calibre, the continuing polemics on them notwithstanding.

* The views expressed here are those of the writer and do not necessarily represent the views of Malaysian Mirror and/or its associates.

Wednesday, September 01, 2010

The Collapse of Fiat Money and the Global Financial System

Too Big To Fail Global Banks Will Collapse Between Now and First Quarter 2011 - When Quantitative Easing (QE II) Has Run Its Course and Fails, Is the Time for the Global Collapse of the Fiat Money System - By Matthias Chang (1/9/10)

By Matthias Chang

Wednesday, 01 September 2010 01:25

Readers of my articles will recall that I have warned as far back as December 2006, that the global banks will collapse when the Financial Tsunami hits the global economy in 2007. And as they say, the rest is history.

Quantitative Easing (QE I) spearheaded by the Chairman of Federal Reserve, Ben Bernanke delayed the inevitable demise of the fiat shadow money banking system slightly over 18 months.

That is why in November of 2009, I was so confident to warn my readers that by the end of the first quarter of 2010 at the earliest or by the second quarter of 2010 at the latest, the global economy will go into a tailspin. The recent alarm that the US economy has slowed down and in the words of Bernanke “the recent pace of growth is less vigorous than we expected” has all but vindicated my analysis. He warned that the outlook is uncertain and the economy “remains vulnerable to unexpected developments”.

Obviously, Bernanke’s words do not reveal the full extent of the fear that has gripped central bankers and the financial elites that assembled at the annual gathering at Jackson Hole, Wyoming. But, you can take it from me that they are very afraid.


Let me be plain and blunt. The “unexpected developments” Bernanke referred to is the collapse of the global banks. This is FED speak and to those in the loop, this is the dire warning.

So many renowned economists have misdiagnosed the objective and consequences of quantitative easing. Central bankers’ scribes and the global mass media hoodwinked the people by saying that QE will enable the banks to lend monies to cash-starved companies and jump start the economy. The low interest rate regime would encourage all and sundry to borrow, consume and invest.

This was the fairy tale.

Then, there were some economists who were worried that as a result of the FED’s printing press (electronic or otherwise) working overtime, hyper-inflation would set in soon after.

But nothing happened. The multiplier effect of fractional reserve banking did not take off. Bank lending in fact stalled.


What happened?

Let me explain in simple terms step by step.

1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS.

2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K.

3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers.

4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade.

5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go?

6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why?

7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be told of this as otherwise, it would trigger a massive run on all the global banks!

8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. .

Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent.

It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT.

9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box.

10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements.

11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits?

12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.

Now that you fully understand this SCAM, it is left to be seen how the FED will get away with the next round of quantitative easing – QE II.

Obviously, the FED and the other central banks are hoping that in time, asset prices will recover and resume their previous values before the crisis. This is a fantasy. QE II will fail just as QE I failed to save the banks.

The patient is in intensive care and is for all intent and purposes brain dead, although the heart is still pumping albeit faintly. The Too Big To Fail Banks cannot be rescued and must be allowed to be liquidated. It will be painful, but it is necessary before there is recovery. This is a given.


When the shit hits the ceiling fan, sometime early 2011 at the earliest, there will be massive bank runs.

I expect that the FED and other central banks will pre-empt such a run and will do the following:

1) Disallow cash withdrawals from banks beyond a certain amount, say US$1,000 per day;
2) Disallow cash transactions up to a certain amount, say US$10,000 for certain transactions;
3) Transactions (investments) for metals (gold and silver) will be restricted;
4) Worst-case scenario – the confiscation of gold AS HAPPENED IN WORLD WAR II.
5) Imposition of capital controls etc.;
6) Legislations that will compel most daily commercial transactions to be conducted through Debit and or Credit Cards;
7) Legislations to make it a criminal offence for any contraventions of the above.


Maintain a bank balance sufficient to enable you to comply with the above potential impositions.

Start diversifying your assets away from dollar assets. Have foreign currencies in sufficient quantities in those jurisdictions where the above anticipated impositions are least likely to be implemented.


There will be a financial tsunami (round two) the likes of which the world has never seen.

Global banks will collapse!

Be ready.