Did Jomo Really Say That?

 

Prof Jomo : Tun Daim Using Billions In Offshore Account To Weaken Ringgit – Pressure The Central Bank To Hike The OPR
16 July, 2023

• Jomo highlighted RM pressured for years by those stashing cash overseas
• Malaysia ranked first in Panama Papers controversy outside of Americas
• companies, individuals from 200 countries hidden money offshore  
• Jomo highlighted ringgit pressured for years by those stashing cash o'seas 
• “When the rates do not go up, they lose money.

OSTB :  Doesnt it take billions and billions of US Dollars worth to "pressure" the Ringgit? We are talking George Soros type of hoarding here. 

Ok lets say they were successful in "pressuring the ringgit". They sold Ringgit, bought USD and stashed the USD overseas. Why? Because thats how you pressure the Ringgit. Then just as they planned it the Ringgit crashed over the years. But to realise the profits from crashing the Ringgit they would have to sell their USD hoard and convert it back to Ringgit again. Otherwise they would not have profited from undertaking this whole enterprise. 

Because dont forget they are doing all that to make money - to make a killing. To make money from a lower Ringgit, they must sell USD and buy Ringgit. In such event the Ringgit would have or should have strengthened against the USD again.   Isnt that back to square one?

But they can then repeat the cycle again. Dump Ringgit and buy USD. Ringgit will fall again. Then dump USD and buy back Ringgit and take profit in Ringgit. 

But the catch is the Ringgit has been crashing against the USD for the past 25 years - since 1998. So how?

• Jomo said “very powerful” people bet Bank Negara to raise interest rates 
• they tried to pressure central bank to hike OPR
• certain “powerful” speculators who hoard cash abroad – exerted pressure on ringgit

OSTB : These are very big accusations. Did Jomo really say this? But this statement directly contradicts what was said earlier.

Earlier the point made was that 'certain powerful' people exerted pressure on the Ringgit to crash the value of the Ringgit  -  "RM pressured for years by those stashing cash overseas"

But now the same people were exerting pressure on Bank Negara to raise the OPR which will increase the value of the Ringgit. So exactly which one is which now?

These powerful people want to crash the Ringgit or boost the Ringgit? It cannot be both. Please make up your mind.

• Jomo said ringgit’s depreciation not caused by economic fundamentals
• weak ringgit not due to fundamentals. It is due to speculation he said.

OSTB : I beg to differ. Unless it is George Soros and gang speculating vs Ringgit using billions of US Dollars, the Ringgit will move up or down because of fundamentals.

And this year our exports have been decreasing:  Malaysia Exports Fall for 1st Time in 31 Months -  Exports from Malaysia dropped 1.4% year-on-year to MYR 129.7 billion in March 2023, reversing a 9.8% surge in the prior month

That was March 2023 but there has been a weakening of exports.

Then there is this point :  

• ringgit under immense pressure as spread between OPR and US Fed rate widened 
• big OPR-FFR differential causes outflow of funds from Malaysia
• Currently OPR at 3%, FFR at 5% to 5.25%.

OSTB : So who pressured the US Fed to raise their FFR rate? Were the same "powerful people" from Malaysia also involved in influencing the US Fed? 

Or are you suggesting that these powerful people could only influence Bank Negara and the OPR here in Malaysia but the movement of the Fed's FFR (also magically in their favour) was pure luck? Random? Very risky 'speculators'. Very risky.

And if these people were so "powerful" that they could pressure Bank Negara to increase the OPR (and thereby increase the value of the Ringgit) then in that much earlier scenario (where they were trying to crash the Ringgit) why didnt they pressure Bank Negara to reduce the OPR which would have crashed the value of the Ringgit? Which one is which?

Interest rates in Turkey are 16.5%. Erdogan recently increased interest rates (at last) by a whopping 6.5%. Yet the Turkish Lira still crashed. How do you explain that?

Our OPR is at 3.0%. No more increases in OPR. Yet over here the Ringgit suddenly strengthened to RM4.53 yesterday. How do you explain that? No way Bank Negara burnt tens of billions of foreign reserves to push the Ringgit from RM4.67 to RM4.53.  

So OPR did not increase but the Ringgit shot up to RM4.53. How do you explain that?

• Jomo noted raising OPR additional burden on pockets and savings.
• 2022, household debt-to-(GDP) ratio 81.2%, of which 60% housing loans.
•  household debt-to-GDP ratio much lower in 2000 - 47%.

2000 was 23 years ago. One wicked advisor at that time encouraged expansion of domestic consumption, fueled by easy credit. Those were the days when the banks handed out credit cards at the front entrances of shopping complexes.  The girls stopped you at the entrance, gave you a form to fill up, show your IC and any type of payslip and you could get a credit card and then go out and spend money you had not earned. That is how household debt increased insanely.  It was designed to destroy our society.

Jomo said govt should require M'sians to bring money generated abroad into the country

OSTB : What about our oil company? Dont they maintain billions in USD in New York? Why not bring that back as well?

Jomo questioned the need to over-liberalise the economy to the extent that such outflows could no longer be contained effectively.

OSTB : Free movement of capital is the corner stone for the movement of wealth. If you restrict movement of capital how do you ensure free movement of wealth? The FDI that we are so desperately trying to attract must also have the freedom to pack up and leave anytime. Otherwise they will not come here. Did Jomo really say all that? 

Source : The Star

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.