China’s Zero Covid-19 Policy contributory factor in rising prices worldwide!
PART 1 . . . If there are far too few goods and services in the market, chasing too much money in circulation, there will be much greater rise in prices, and vice versa. Ideally, Supply and Demand must match and equilibrium exists.
If RM10 changes hands ten times during an hour for example, the amount of money in circulation based on the volatility will be RM100. This isn’t the formula on anything but the concept explained in simple terms. If RM10 changes hands only once an hour, the amount of money in circulation by comparison relatively, will be RM10. We can get the idea!
Money isn’t only fiat, i.e. paper, but anything in circulation that passes as/accepted as money and/or medium of exchange combined with volatility. It can even include barter trade which still takes place in Malaysia. Labuan, Sandakan and Tawau in Sabah are recognised barter trade areas.
Cryptocurrencies aren’t considered money but “commodities” which intrinsically, like fiat, has no value. It has been argued that nothing drives cryptocurrencies but hype based on hot air. Cryptocurrencies failed to emerge as a Sotheby’s version of auctions among the well-heeled, forever on the lookout for mechanisms which can store wealth and preserve value. Tesla Founder Elon Musk, for one, has been noted for misleading statements on cryptocurrencies and getting away with it. He went to China for cheap batteries and became the world’s richest man.
Again, perhaps simple explanations may help make understanding the money and/or medium of exchange concept easier.
Fighting Rising Prices . . .
Consumer resistance, where possible, should on paper help fight inflation. However, too much of a good thing can be bad. In Japan, it has created repeated bouts of deflation i.e. prices declining as consumers, driven by the herd mentality, hold back on purchases in the belief — a self-fulfilling prophecy — that there would be further price reductions. Deflation can only drive businesses into bankruptcy. See here . . . and here . . .
500gm of dates, for example, cost RM6 at the local store if imported from Iran and RM36 if they are from the US. It’s about the consumer making intelligent choices. Dates are dates, whether from Iran, the US or elsewhere. They are simply plucked by cheap labour from the date palm in the desert, packed by even cheaper labour at a factory and exported. Pistachio from the US is another product which can’t compete in Malaysia with those from Iran.
We don’t know whether there’s rampant smuggling between Iran and Malaysia in sanctions-hit products. This may be a Malaysia Boleh (M’sian Can) moment as the old Mantra goes.
Sanctions . . .
In fact, recent travellers to sanctions-hit Iran have reported that many goods and services in that country are at rock-bottom prices compared with the US, for example. A Sabahan back from Tehran a few days ago related that a tailor-made suit in Iran, for example, costs just 10 per cent of the price at the tailor in the pricier US east coast. Workmanship in Iran, it’s claimed, was comparatively much better than in the US and meets world class standards. The people in Iran, it has been noted, take so much pride in their work and country. It was the US which first imposed sanctions, economic and otherwise, on Iran following concerns on the latter’s “clandestine” nuclear programme.
Still, if the doors open tomorrow, it has been suggested that everyone in Islamic-ruled Iran would rush for the exit doors and head for the US. This appears a gross exaggeration like claims in YouTube videos that Iranians are embracing Christianity. Earlier YouTube videos claimed that Muslim only won refugee status in the West by “fraudulently” claiming that they would be killed, for various reasons including abandoning Islam, if they did not leave their countries.
In any case, such claims cannot be ruled out. It has been reported by the media that many Malaysians have won refugee status in the West by allegedly claiming that they faced discrimination at home. They cited Malaysia’s status in the annual US State Dept’s World Human Rights Report. The number of Malaysian refugees in Australia, for example, has been reported as the highest in recent years. Many suburbs in Australian cities and towns, it has been reported, have become completely Malaysian.
Ukraine . . .
Ukraine has been cited as the reason for the current global inflationary trends, sudden downturn in economic activities worldwide and disruptions in the global supply chain and international logistics. World Bank (WB) and International Monetary Fund (IMF) experts are sitting for hours at their computers, revising earlier estimates and making new predictions. The prognosis isn’t good but the WB and IMF have also been proven wrong. Their prescriptions have often worsened the plight of vulnerable countries. See here . . .
On paper, Sri Lanka happened because it ran out of forex reserves. In reality, mismanagement of the pandemic caused the country to lose valuable foreign exchange receipts brought by tourism. Sri Lanka’s 22m people may have to move to India, albeit temporarily. See here . . .
China’s Zero Covid-19 Policy may be a contributory factor in the shortage of goods and services experienced worldwide. China has graduated over the years from being an assembler — mooted by paramount leader Deng Xiaoping in a meet with Washington — of components sourced from nearby countries for the American market. China has become a homegrown manufacturer for the world. US-based multinationals got China into the World Trade Organization (WTO) and won the country Most Favoured Nation (MFN) status in the American market. The rest is history on the factory of the world.
Prosperous China . . .
A prosperous China can only be good for the world including for India and America, its arch rivals. China, war or no war, has emerged as India’s largest trading partner. New Delhi, after abolishing the Licence Raj which replaced the British Raj, has kept the economy open. Its giant neighbour benefits from their annual US$125b trade. The US is India’s 2nd largest trading partner at US$120b per annum. Eighty per cent of India’s economy remains domestic. It only exports to facilitate imports. India is a large producer but not a significant exporter on the world stage as its own needs take precedence.
Malaysia benefits by plugging into the giant Indian and Chinese economies. Singapore’s external wing of the economy remains plugged into the Indian economy. It’s a preference based on both countries subscribing to the rule of law.
Cynics claim that Beijing isn’t really concerned about the pandemic but strengthening its grip on power under the guise of the Zero Covid-19 Policy. China’s super duper rich, like The AliBaba Group’s and The Ant Finance’s Jack Ma, are caught between the Communist Party of China (CCP) and fleeing to sanctuary in America and pushing for regime change. Beijing appears willing, under its Common Prosperity Mantra, to abandon the well-heeled minority. The super duper rich, unlike those in India protected by the Supreme Court of India, are seen as a threat to the CCP’s grip on power.
Russia-China . . .
Beijing may see no reason to caution Moscow to exercise restraint in Ukraine. China may see Ukraine as essential in remaking the Global Order dominated by the US$, Washington, the American military industrial complex and the war-mongering UK-US Special Relationship.
India, caught up in the western blame game from the fallout over Ukraine, could not counsel Moscow to exercise restraint in its neighbouring country after the US seized Russia’s US$600b in forex reserves kept abroad. The US itself has admitted that the seizure was a violation of the rule of law. India and Russia are bound by “eternal friendship” forged during the socialist years when the latter was part of the USSR.
India and America are bound, likewise, by common values rooted in democracy, human rights and the rule of law. The difference may be that America has gained an unenviable reputation worldwide as a serial warmonger tied to the US industrial military complex. It has also weaponised the US$ when unilaterally imposing sanctions, economic and otherwise, against countries it perceives as “threats”. See here . . .
Moral High Ground . . .
America has lost the moral high ground. It only harps on democracy, human rights and the rule of law when it suits its convenience. Otherwise, it allegedly acts with impunity.
India, given its track record, will not be party to illegalities like pitting one country against another. India, complying with international law, will make it impossible — by inaction in law — for America to take down China, Russia and Saudi Arabia on the reserve status of the US$.
Critics claim the US cares two hoots for democracy and Taiwan. Washington allegedly wants to provoke China on Taiwan and the South China Sea so that it can impose sanctions and probably seize Beijing’s vast forex reserves kept abroad. That would surely mean World War III. Washington, it has been claimed, has worked on capacity-building which would sink China’s entire maritime shipping in the South China Sea within 72 hours. This may be true in video games in YouTube. It may not be the reality on the ground. China has tactical and strategic nuclear weapons and long-range missiles.
In PART 2 we explore . . . “RM, if pegged within narrow range, will help quash speculative activities . . . RM pegging, last resort for stability, should be introduced if there’s volatility, firstly as policy which ‘may’ be enforced.” – New Malaysia Herald