I am not a contributor to this blog. To make thing easier, I post my story inside the comment.
I read the following story from a Chinese Dairy.
Three good friends A, B and C decided to build a house together. The gathered their capital, labour and skill and started to build a three bed rooms house. Beside the bedrooms which are all equal in size, there were lounge, verandah, toilet, bath, kitchen and car ports that were shared facilities. Once the house construction was completed, three of them moved in happily.
The population inside the house grew when the three friends started family. Problems started to arise due to the increasing family members and there were tension and conflict here and there. They decided to renovate the house to accommodate all the family members. The bedroom of A was extended while bedrooms for B and C was shrunk in order to accommodate family member of A.
Despite the renovation, the situation inside the house did not improve. Tensions and conflicts between family members become more frequent. A started to make some ruling that B and C have to obtain permission to use the shared facilities. The front lawn was converted to carports to house A's three Benzs. B and C old cars have to be parked along the street.
After fifty years, the house was aged. There were leaks here and there. The floors were cracking. In the pass, B and C were paying for the repair bill and also utilities bills. B and C cannot longer afford the repair.
B and C spoke to A asking his share of the repair. Instead of committing himself to the repair, A started to question the legitimately of B and C to reside in the house.
What do you think B and C shall do?
Hero you are tagged next.
12 comments:
Why wouldn't anyone comment or reply on this? Takut ke???
I think A's attitude is like the Israelis who claim that they have the rights over the Promised Land.
I for one believe that a right is earned and not inherited. You have to earn your right to be respected, to be a man, to be a citizen, to be a member of the society.
One cannot just say, this house belongs to me because I lived here longer.
There should be a sense of fairness. It is easier to argue if we argue on the basis of justice. It is easier to justify, rather than some intangible thing called honour and pride.
GSM, babe, GSM.
Move away from central planning.
Hansac, no takut but already responded in Joe's stories.
Well, right actually can be earned, inherited or even bought so long other parties is willing. In fact, one must acknowledge that the evil one always works 24 hours not a second less to ensure everyone is not happy with another.
Don't we realise that it is not just among different races, religions or countries but also just among our own family members whereby we may be quarelling over certain rights over certain respect etc..
It is from the individual who had actually propagated the kind of different understanding. like....Karl Max, Napoleon, Mao, Hitler,...those leaders who had changed the thinkings and approaches for one race or many...
So how we form our opinion and put through our actions is crucial in delivering the rippling effect of change to our family, communities and societies at large.
So...the change starts from myself !
As I warn before, a financial winter is coming. The rising of fuel and food is nothing compared to the forthcoming financial crisis. Better be more conservative and save for the winter.
Like the ants who works hard and stored food during summer and still be well during winter.
China this time will also be badly hit leaving less demand for resources. The price of comidity will drop and this is bad for a country like Malaysia which the economy is depended on the raw resources.
William! You scares me lah!
Oil go up, problem. Oil go down, problem. China go up, problem. China go down, also problem.
What lah no problem??!!
I just hope I am high enough in the social strata to weather the financial winter.
NOW I TAKUT ALREADY.
The world economy is always like a seesaw. There is up and down and it affect all countries.
US is still the world largest economy although China nearly overtake it. What happens in US now will affect all countries as US is still the world largest consumers. After the Olympic, China growth will slow down and China economy is also depended on the US market. It is not suprise for China to show a much slower growth in the near future.
What is important now is to cut spending and save more. The saving will be your protector during the winter.
It is definitely a no go in the stock market. Remember that KLCI fall to less than 500 points before. If you don't want to see your investment reduce to half the value, it is safer to deposit in a bank.
Ai yo....my hands itchy lah! I tak nak comment one, but cannot tahan!
The world has existed for 2008 years now, or at least it has in terms of calendar years. This is not the first global economic downturn in history. Economical booms and depressions are cycles that MUST happen, otherwise how the heck are we supposed to progress through the centuries?!?
If you do some digging into history you'll find that some of the millionaires of today found their million-making opportunity during an economic crisis (wish I have names, but I don't, am slapping myself for that). Some push through an economic crisis period and discover that they are able to excel beyond their limits, others succumb to it.
What you think about the current economical situation is a direct result of the financial education you have received this far in life. The big question is this: Is whatever financial education we have received so far correct? Did we receive any financial education at all? What is the source of our financial education, our parents? I can go on and on, but you wouldn't be interested.
If you are already living a moderate, non-luxury life, WHAT spending to cut??? Cut on food? Cut on fuel? Cut on your children's school fees? Cut WHAT?!? Ok, let's say you can actually cut, you really believe that little bit of savings can safe you from a global economical downturn?
Some of us have been waiting for today. Do I believe in savings? Yes. But only so that I can wait for today to come - an economic downturn, the best time to shop becos opportunities can be dirt cheap!
Oh yes, our parents' teachings about money doesn't quite apply anymore in today's world....the world has changed, if you haven't noticed yet.
Really when William starts talking financial I can see Ivy in the background pulling her hair already ha ha, and I was waiting for Ivy to counterpunch.
Hi Ivy,
Thank you for your opinion. There are people who are able to take the opportunity during an econmoy downturn but those are minority. Majority of the people are suffering. Those suffer are mainly share investors but it is not necessary the case.
What cause the financial institutions went bankrupt in the US now is mortgage. That is investing in property. The failure in mortgage repayment has caused the banks to go bust.
The cheap items druing the downturn will be the share market and properties. If there is sufficient funds to hold the investment without worry for further depreciation and repayment, there is big possibility for the investment to generate a handsome return during the upturn. That is why the rich are getting richer.
For an ordinary forks who have to obtain loan from bank to invest in property there is a huge risk. Share market will be even worst.
When the purchase of investment property is commited, the investor has to commit to the monthly mortgage repayment, coucil fees and property management fees. His source of income is the rental collection. During a recession, it is not easy to get a good tenant who pay good rental. There is a hugh possibility for the property to stay vacant or chasing the rental throughout the month. The rental collected can hardly meet the monthly commitment of the investor. There is still room for appreciation for the invested amount but that is provided the investor can hold until the upturn.
What I am suggesting during a downturn is to consolidate rather than to conquer. It can be worthwhile to settle for the exsiting housing loan before commited to a new purchase.
Ivy, I think milk powder can be cut as it is polluted and not good for baby. So, double win, save money and prevent baby from getting sick. You may ask then what your baby need to eat. Hi... breast feeding lah.....
William:
- the "majority and minority", what do you think makes them different? They both live in the same world.
- you need to check your facts abt the US sub-prime crisis, it's a far cry from anything to do with "investing into property"
- borrowing to "invest"??? And you call them "investors"?!
- thank you for acknowledging my "opinion", but I have to clarify that it is not an opinion - it's how I live, it's my reality.
"The rich gets richer"...and quite naturally along with that thought comes this one, too - "The poor gets poorer".
Nothing pains me more than to see our generation passing on that message to the next generation.
Hi Ivy,
Could you share with us a bit more about what you do and how can we use the downturn cycle of the economy to turn around and be a winner?
That will be appreciated.
Matthias Chang
Saturday, 20 September 2008 08:36
If someone is slow in comprehension and or stupid, we should bend backwards and strive to assist such a person to understand the issues at hand.
But when a well-educated and qualified person lies and or misrepresents the facts for a political agenda, thereby causing financial loss and hardship to innocent people, we should not hesitate to demand his ouster or dismissal from his position of responsibility.
I have therefore no hesitation in demanding the dismissal and ouster of Tan Sri Nor Mohamed Yakcob as Second Finance Minister in the Badawi regime because it is abundantly clear that he has been, and will continue to be, an irresponsible minister. My reasons for demanding his dismissal are as follows:
1. Since December 2006, I have been warning the government of the global financial crisis as a result of the corrupt banking system in the United States. He may be forgiven for not taking action and or advising the sleepy Badawi in 2006. But when the crisis erupted in July and August 2007, and was headlines news in all the international mass media, this idiot took no noticeable action to prepare the nation.
2. When the crisis became full blown in 2008, both the Mid-Term Review of the 9th Malaysia Plan and the recent 2009 Budget [1] failed to address sufficiently the impact that the financial crisis will have on the Malaysian economy.
3. If sleepy Badawi and this idiot are of the view that the financial crisis will have little impact on Malaysia's economy, I would like to know their explanations for the massive price inflation in Malaysia, the withdrawal of subsidies for petrol, the massive injection of funds in the public sector – more than RM30 billion for Operating Expenditure in the 2009 budget tabled recently in Parliament and the scaling down and or abandonment of the so-called "mega projects". Additionally, the injection by Petronas of another 6% dividend to the government to enable the Badawi regime to have more liquidity to meet pressing demands.
4. On Wednesday, the Dow suffered a massive heart attack and this immediately caused the KLCI to breach below 1,000, the first time in two years!
5. Yet, our Second Finance Minister dare state, and as reported in the Star newspaper on 20th September 2008 at page 4, that "Malaysia will not be vastly affected by the financial crisis in the United States because of its strong economic fundamentals. " It has been often said that when the US sneezes, Malaysia catches the cold.
Yet, in the same report, a few paragraphs later, this idiot contradicted himself by acknowledging that: "Malaysia as a country which was well integrated into the global economy would not be spared from the US financial crisis." I can come to one conclusion and one conclusion only – Nor Mohamed Yakcob has been infected by the Badawi flip-flop disease and is totally overwhelmed by the crisis and is at a loss as to how to cope with the worsening situation. Is he not an idiot?
6. Like Badawi, he is only too glad to have Najib take over the finance portfolio so that whatever blunders committed thus far (for which he shares equal responsibility with Badawi) and all future financial chaos as a result of the mismanagement of the economy will fall squarely on Najib's shoulders. This scumbag will then hide behind the convenient excuse that he is only the Second Finance Minister and cannot be held responsible as the buck must stop with the Finance Minister.
7. But the public are not fools easily taken in by such rhetoric. This is because when Badawi was the Finance Minister, it was known to all that Nor Mohamed Yakcob was the man running the ministry. This will not change when Najib assumes the responsibility of Finance Minister. Najib has little or no experience in this area and it takes at least a year to settle in any ministry and get to grips with the policies and strategies necessary to keep the ship in good order. It is a given that Najib, like Badawi, will rely heavily on Nor Mohamed Yakcob.
8. Nor Mohamed Yakcob cannot deny and or state that he was unaware that on Wednesaday, all major international mass media were of the view that the global banking system was on the verge of total collapse and that the massive US$85 billion bail-out of AIG temporarily halted the massive collapse of the global stock markets and run on US banks!
9. Major central banks collectively injected a massive US$180 billion into the market – this is on top of the US$ 1 trillion injected betweern 2007 and the first half of 2008. This was part of the package of the US$247 billion rescue structure – ECB giving US$110 billion, the Swiss National Bank up to US$27 billion, the Bank of Japan up to US$60 billion, the Bank of England up to US$40 billion and the Bank of Canada up to US$10 billion. And yet this idiot says that Malaysia will not be affected by this massive financial crisis.. This is either height of arrogance or downright stupidity. Whichever may be the case, it is clear that he is incompetent and utterly irresponsible!
10. So let me ask all Malaysians the following question:
Given the past performance of the Badawi regime in economic matters (for which Nor Mohamed Yakcob played a critical role) and an inexperienced Najib assuming the responsibility of Finance Minister (and his inevitable reliance on this idiot), do you have any confidence in the Badawi/Najib regime to steer the country in an orderly fashion out of the financial mess that will impact massively on our economy before the end of 2008?
11. If your answer is a resounding NO then it is obvious that Nor Mohamed Yakcob must be dismissed and replaced with a more suitable person. Malaysia's economy is like a ship without a captain. This is bearable if we have a good and experienced chief mate [2]. But Nor Mohamed Yakcob has been proven to be utterly inadequate. And unless we address this critical issue within the next two months, we will be beyond rescue..
Let me explain why the situation is so dire and dangerous.
Since Wednesday, when the financial shits hit the ceiling fan, I was hoping that the so-called leading economics and financial commentators and opinion makers would explain the situation to the Malaysian public via the national dailies, the blogs and the TV network. I came across not one article or broadcast that explains the underlying reasons for the inevitable dire consequences.
Sure there were articles on the crisis, but they were merely describing the rescue of the largest insurance company in the USA (A.I.G.) if not the world and the amount involved. No explanation whatsoever, as to why only a few days earlier the Fed and the Treasury allowed the 4th largest bank, Lehman Bros to fold up but rushed in to rescue AIG with an unprecedented US$ 85 billion.
In my various articles published in my website and my final volume of the Future Fast-Forward Trilogy – The Shadow Money-Lenders and the Global Financial Tsunami – I explained in great detail the corruption within the global banking system and how these financial leeches through fraud and political protection created and amassed a global financial fortune in excess of US$500 Trillion.
Let me assure you that this is not a typo error. You got it right. It is not billions but a whopping US$500 trillion. I have been advised that as of the Q2 of 2008, the figure may have reached US$565 trillion.
This is a complex subject but I shall endeavour to make it as simple as I can.
Starting Point
The Ponzi Scheme
The crux of the fraudulent Ponzi scheme is the twin pillars of:
1) Fannie Mae & Freddie Mac – the two giant mortgage corporations of USA
2) The Derivative financial tool known as Credit Default Swap (CDS)
Once you have a grasp of these two concepts, you cannot but agree that we are facing total global banking collapse. Why? Because the entire global banking system has been built on these two financial pillars! But the system became irreparable in the last 7 years when CDS became the linchpin in the massive expansion of derivative trading and financial engineering.
The Mechanics
1. Banks became greedy and were unwilling to earn safe and steady profits from mortgages for housing and commercial properties which usually spread over a period of between 5 to 30 years.
2. Banks wanted massive profits in the shortest period of time and the ability to lend massive amounts and not be regulated as to how to do it.
3. The crooks devised a scheme. It was a simple idea.
4. Banks will provide mortgages to all and sundry.
5. I am going to use a simple example and using small numbers to illustrate for ease of calculation. Thus, assuming the Bank gave out US$1 million to finance mortgages, bearing interest at 10%.
6. The bank then sold the mortgages to Fannie Mae and Freddie Mac at a discount. Fannie Mae and Freddie Mac being Government Sponsored Companies (GSCs) are able to get cheap financing to purchase these mortgages as they were assumed to be "guaranteed by the US Government".
7. Fannie Mae and Freddie Mac then package these mortgages into all sorts of structured financial products and these were sold to investors (private as well governments) . Central Banks hold massive amounts of dollar reserves and they need to find a safe haven for them. Hence, and invariably, Central Banks invest their reserves in US Treasuries and financial "mortgage-backed" products issued by Fannie Mae and Freddie Mac as well as other US financial institutions.
8. With the payment of US$ 1 million by Fannie Mae / Freddie Mac, the bank by law, can lend ten times the amount after keeping 10% reserves i.e.US$100,000. Therefore, the bank can lend US$9 million by "creating money out of thin air" i.e. by crediting the borrowers in their loan accounts in amount of the loans extended. These US$9 million loans secured by mortgages are then sold to Fannie Mae / Freddie Mac again.
The cycle keeps repeating and the banks keep creating more and more loans.
It was so easy that the banks decided to create dubious loans called "Liars Loans" whereby the borrower need not state the actual income and or ability to repay.
9. As more and more of these loans were created, investors (government and private) demanded assurances that these loans were good for investments. The rating agencies (e.g. Moodys, Standard & Poor and Fitch etc.) who in collusion with banks, gave AAA ratings to what were essentially junks. This fraud led investors to believe that these financial products were good investments.
10. The rating agencies were only too aware that this scheme needed something more concrete to prolong the fraud and induce the investors to part with their monies.
11. The insurance companies like A.I.G. came into the picture. They were seduced by the idea that if they can insure against risks of accidents, storms etc., they could also insure risks against default by the mortgage holders. Thus was born the financial innovation – Credit Default Swap (CDS). Any financial product with a sound CDS would be rated AAA. It was as good as being guaranteed by Uncle Sam. Assholes the world over, especially central banks, fell for it – hook, line and sinker. Bank Negara was no exception.
12. The scheme works out like this – AIG sells protection – i.e. in the event there is a default, AIG will pay out to the buyer who buys the protection (the CDS) in exchange for the payment of premiums covering the period of protection not unlike your usual insurance policy. It was easy money for everyone.
The banks get to sell their loans and have the liquidity to create more loans.
Fannie Mae / Freddie Mac and other financial institutions get the opportunity to repackage these loans / mortgages and sells them to investors with a tidy profit.
The investors are happy with their so-called guaranteed returns. The insurance companies, investment banks and other players get their premium income for selling protection. It was old fashion mafia loan sharking and protection business dressed up in modern financial jargon and everyone was too arrogant and greedy to see through the fraud.
13. When loans default and continue to be delinquent, the law (depending on each country) provides that if the loan is in default for 90 days or more, it should be declared a Non-Performing Loan (NPL) and banks must provide reserve to cover the loss.
14. What happened was banks were covering the defaults and kept them on the books for two years or more in the hope that no one would be wiser and interest income from new loans would cover the defaulted old loans – the classic ponzi modus operandi.
15. When the two years default reached critical proportions starting with the sub-prime loans, the fraud began to unravel. Investors began demanding their protection money for the losses arising from these defaults. It has been estimated that the market value of the CDS was in excess of US$60 trillion but the capital of the insurance companies like AIG are only in the billions. It is therefore a physical impossibility to make good the demand for payment for the defaults.
16. If AIG the No. 1 insurer in US and the world is in default, it means the rest are in deep shits. You can take it as a given that no one and no one has good coverage and protection anymore.
17. When there is no coverage and protection, how can there be AAA ratings for new issues of such financial products? Fannie Mae/Freddie Mac etc. cannot package these products for sale to investors and if they cannot sell, they will have no funds to buy more dubious mortgages from corrupt and fraudulent Wall Street banks. With no additional funds, these crooks in JP Morgan Chase, Goldman Sachs, Citigroup, Lehman Bros., Morgan Stanley, Merrill Lynch, Bank of America, UBS, Barclays, HSBC, Deutsche Bank, Credit Suisse, etc. will have difficulty extending new loans.
The "Musical Money Chair" will have to come to a complete halt. The entire system gets into a gridlock.
Given the above explanation, can the US government and the Fed continue to bail out banks and other financial institutions? When US is in deficit in both the budget and current accounts, where else can they get the extra monies except by creating out of thin air (virtually by keying digits into computers) or print more dollars.
If you are a sovereign lender or a private hedge fund, knowing the situation, would you lend more monies to the US Treasury knowing that each dollar issued (whether digitally or in printed notes) are not worth the value stated therein.
These dollars ARE NO BETTER THAN TOILET PAPER.
The bulk of our reserves are in US dollars. Our trade – petroleum products, palm oil and other exports are mainly traded in dollars. When the dollar dives into the cesspool of waste, what then?
This is the impending mess that Malaysia will be facing as early as end of 2008.
Have you heard anyone other than this writer talking about it?
Has anyone got the faintest idea as to how we are to cope with the social disruption arising out of this mess?
Has anyone advised you what alternatives you can adopt to save your family and your hard-earned money from the devastation?
YES, I AM BLOODY MAD THAT THIS STUPID GOVERNMENT HAS DONE ABSOLUTELY NOTHING TO PROVIDE A SAFETY NET FOR THE RAKYAT.
WHEN THE TIME COMES, ARE YOU PREPARED TO STAND IN LINE WITH ME IN THE TRENCHES TO HUNT DOWN THESE CROOKS AND SCOUNDRELS?
This is a decision you have to make.
I hope that you will make the right choice and decision.
End Notes
[1] The Malaysian Budget is tabled before Parliament in the Q3 of the year. Hence, the 2009 Budget is tabled in Q3 of 2008 and the 2008 budget was tabled in the Q3 of 2007.
[2] The chief mate is responsible to the captain for the safety and security of the ship. Responsibilities include the crew's welfare and training in areas such as safety, firefighting, search and rescue. The Chief Mate is second in command.
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