On the Beat | By Wong Chun Wai

Shooting from the hip

It’s a malaise rooted deep in the legacy of our political forefathers, and we want none of it.

IT’S common knowledge that the ringgit’s value has depreciated. Anyone needing to purchase foreign currencies for trade and travel purposes can vouch for that.

So, when Deputy Youth and Sports Minister Wan Ahmad Fayhsal Wan Ahmad Kamal suggested that Bank Negara print more money notes to give to the people to spend, brickbats came flying at him.

The Bersatu Youth chief was invited by BFM Radio to share his thoughts on Budget 2021’s impact on the young, especially the B40, or Bottom 40% tier of low-income earners. I listened closely to the recording of the interview online titled “Wan Fayhsal: BNM Should Print Money.”

In impeccable English, he spoke about the plight of the young, expressing concern that some of those in M40 (middle group) are slipping into B40.

It was a quick point he shared, but one that has turned Wan Ahmad into the butt of jokes. He suggested what’s called helicopter money policy, where the central bank can directly print money and give it to people to spend, adding that it was “quite doable” and “we just need an innovative policy from the central bank.”

It doesn’t help that neither economics nor finance are the forte of this former lecturer, who specialises in geopolitics and security, which he studied at the prestigious King’s College in London.

He’s also a trained chemical engineer from Universiti Teknologi Petronas and was an employee of the national oil and gas company. However, that doesn’t mean he can’t comment on other issues including economics, like journalists, who are jack-of-all-trades but masters of none, as the saying goes. But do your homework, at least.

Printing money won’t help the economy and will further diminish the ringgit’s value. It leads to inflation and reduced purchasing power, and ultimately, less wealth.

The difference in the United States is that it can afford to print the green notes because it’s in demand and is used as the standard global trading currency. It’s the only country making money from printing currency notes. But for bankers and economists, printing money doesn’t mean handing out cash to the people. And it’s not the Zimbabwean way, for sure.

The ordinary worker worries about getting retrenched, facing a pay cut, being unable to pay bills and servicing loan instalments.They are wary of spending, which consequently renders restaurants the casualties of this socioeconomic structure.

The well-heeled talk about withdrawing their savings from banks because the interest rates are too low. Lower interest rates make it easier to apply for a loan to buy assets such as houses and cars, but it being approved is an entirely different story.

The affluent are also exchanging tips on which stocks to buy and what foreign currencies to cash in on, instead of cradling the weak ringgit.

Speaking economically, there’s plenty of liquidity, meaning there’s a lot of money going around. The rich and upper middle class can’t travel, so they trade at the stock market. In fact, the Bursa is doing very well, some stocks particularly.

Governments are looking at quantitative easing (QE) or creating currency. Central banks create new money electronically and don’t print money for distribution to the people. The Bank of England, for example, determines how much should be in circulation, but they’re not physical bank notes. They are electronically generated to support government bonds.

Bonds are a kind of investment, where you lend money to the government and it pledges a repayment with an interest in a stipulated timeframe. In many countries, investors buy government bonds as it’s regarded a safe instrument with the public expecting the government to repay.

According to the BBC, the first QE programme in the UK was launched in 2009 when the financial crisis was threatening the economy, unemployment was rising, and the stock markets were in freefall.

“The Bank subsequently launched new rounds of QE after the eurozone debt crisis, the Brexit referendum and the coronavirus pandemic. Other countries started QE programmes after 2009, including the US and Japan.”

It said the government will spend well over £300bil on fighting the coronavirus pandemic this year, through measures such as the furlough scheme, support for businesses and extra funding for the NHS.

“That means it has to borrow hundreds of billions of pounds, which it does by issuing bonds. The fact that at the same time the Bank of England is buying hundreds of billions of pounds’ worth of bonds helps the government to raise that money.

“The Bank doesn’t buy directly from the government, it buys from other investors, but its actions make government borrowing cheaper and easier.”

The news agency explained that the government also pays lesser interests on bonds by the Bank of England than other institutions, taking further pressure off public finances.

In another news report, Kameel Mydin Meera, a former dean of the Institute of Islamic Banking and Finance at the International Islamic University Malaysia, believes the government should opt for QE. He said the government’s move to raise its debt ceiling will give it more room to borrow money for programmes to stimulate economic recovery. However, he believes Putrajaya should opt for a different approach.

“QE allows the government to increase the supply of money in the economy without borrowing. It involves printing or creating new ringgit and the idea is to boost spending within the economy and in doing so, stimulate the economy.”

Former Finance Ministry secretary-general Tan Sri Mohd Sheriff Mohd Kassim equated Wan Ahmad Fayhsal’s idea of printing more money as handouts to “Aladdin’s magic carpet.”

“Bank Negara will not do that because it is not what central banks do. Central banks around the world do print money, but it’s not for the government to distribute the currency notes around, ” he said.

The highly respected economist said central banks use the money to settle debts, including bonds the government or the private sector issue.

“The bonds that a central bank holds become its asset to balance against the liability of the notes that it issued. When a central bank buys the bonds, it is effectively lending the money to the issuer, which could be the government or private sector.

“When a central bank does this, it is putting more liquidity into the economy – it is like adding the engine oil to get the car to run. No central bank prints money like Santa Clauses to distribute candies for children during Christmas, ” he texted this writer.

In our country, financial knowledge is low with almost 70% of Malaysians in need of education on the subject, according to a survey by financial literacy platform Multiply. It found that 21% were ranked Finance Newbies – those who don’t know the basics of personal finance, while another 48% were ranked Finance Cadets – those who have just begun to learn the ropes.

Communication by our leaders and policy makers is also poor. It’s reflected in how Covid-19 decisions are made and carried out. With flip flop calls, down-liners like policemen and enforcement officials of councils invariably receive vague guidelines. That’s why they’ve been constantly issuing summons, which has upset the public. Then there are the double standards, which has fittingly earned our ire.

So, Malaysians won’t entertain politicians talking about “printing money” without explaining it well.

Wan Ahmad Fayshal has put his foot in his mouth too often. He has called for the abolishment of vernacular schools, claiming these schools have failed to instil a strong sense of national identity in students.

He later said he merely called for it to be institutionalised, missing the obvious point that it’s already institutionalised because vernacular schools are government funded and part of the education system.

Wan Ahmad Fayshal is only 33 and has a future in politics, but he has grabbed the headlines for all the wrong reasons with his poor arguments and ineffective communication.

At the minute, he’s perceived as lacking progressive ideas and preferring to play the racial card, just like the rest of the old school politicians, the ones Malaysians are fed-up with.

It’s still about race, patronage politics and giving handouts. Sadly, for a young politician we hope can offer a fresh perspective, he’s starting out like a chip off the old guard’s block.

Malaysians are now living in unusual times and they don’t have the patience to deal with politicians like him.