Monday, February 16, 2009

Stimulus Package

Failed bond sale was hightlighted here

It seems that at the moment, it is not easy to raise new money.

Well...our Prime Minister in waiting is going to announce the next stimulus package. The question is whether will it be effective?

As I understood, boom and bust is part of the business cycle. So, why are we trying so hard to avoid recession? Look at USA, they tried to avoid recession, and now what has happened? The recession becomes a deep recession that may turn out to be a depression.

I think the best analogy is forest fire. Every now and then, small forest fire clears out the dead shrubs and branches, regenerating the forest floor and supply new nutrient to the trees. If you always put out small fires, the dead material will get piled up. Next time, the regular small fire may be so big that it will just burn down the whole forest.

So, why can't we just let a recession runs it course? Let it weed out the badly run company and the unprofitable industry. Of course there will be suffering. But suffering is part of life. It makes us stronger. It forces us to change for the better. We do not want bad companies to survive in an artificially created environment because they may grow so big that when they failed, the consequence will become a catastrophe. A good example is General Motors.

If government wants to provide assistance to the people, then just make sure that every single Malaysian has 3 meals per day and they are able to send their kids to school. Let's suffer in the short term for the benefit of long term.

A stimulus program will provide the benefit for the short term but suffering in the long term. Politicians will prefer the short term program because they know that they will not be around in the long term, and it is easy to push the problem to the future politicians. That is why I think that Tengku Razaleigh is crazy for wanting a big stimulus program. Who is going to pay? Japan pump in 6.3 trillion USD and it didn't work. The only result is more debt!

Anyway, if the government still wants the stimulus package as it is a "politically right thing to do", then I hope that the government will not raid my money in the EPF. That is my hard earned money. It is not going to be easy to raise money at this time. So, please leave EPF money alone. Why not take Petronas money? It is money from the earth. It is free money. Since I have no access to it, I don't mind you go and raid it. 

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