Similarly, regional stock markets have not experienced the acute volatility of 1997. Rather, they have improved in capitalisation and drawn the interest of foreign inventors.

But our authorities choose to tell us through the government-controlled media of the need to take unorthodox measures in these difficult times. Effectively, we had to create a safe harbour for ourselves in the choppy seas of the world economy. Well, it is now clear that it may be well and good to be in a safe harbour, but a ship in a harbour goes nowhere! And that is what the introduction of an exit tax is a tacit admission of.

The NEAC admits it needs some RM62 billion in funds to carry out its bold sweeping plan of reviving the economy. Tun Daim admits that they have raised only about half of what they need. Whatever capital freed by the reduction in SRR has been taken up to recapitalise the banks. No real money is flowing into the real economy. The government was hoping that consumption could be increased by stimulating lending again. CEOs of banks were told either to achieve 8% growth in lending or loose their jobs. It was a ridiculous threat. Not only were banks reluctant to lend, why should borrowers want to borrower in uncertain times? Further, some banks were in no position to prudently lend
any more money.

Take another example; not long after the dismissal of the previous DPM, Bank Negara told the banking community to release some RM5 billion in loans for infrastructure and property projects which had been frozen under the lending limits set be the previous governor, Tan Sri Ahmad Don. The justification was this would help stimulate and pump prime the economy. With a multiplier factor of 11x, this seemed to be an easy solution. But the change in policy last month of banning loans for property projects worth RM2500,000.00 or more shows that the idea of pump priming the economy on our own steam just could not be done. We do not have the enough capital to do so.

So, this leaves us with one of two options: either print money to finance the recovery program or to seek foreign investment again. I am glad to find that the government favours the latter option. If we ever print money, the consequences would be disastrous. One need only look at what happened to Russia in this regard. The imposition of an exit tax system is a halfway measure towards dropping capital controls. Let’s hope the authorities continue down this path and do away with it all together. After all, we built
the economy of the last 10 years on foreign capital, and we still need them now. So, bunk goes all the theories of evil Jewish conspiracies and greedy hedge funds set to destroy our economy because they are jealous of our success.

By the way, isn’t Solomon Smith Barney a Jewish American investment bank?

Now that we are coming to the year of the rabbit, I look back on the events
from 1 September last year and cannot help but conclude:

1. The powers that are must have known that the controls could fail if they did not have enough in the kitty. I have a strong suspicion that they know the game is up.

2. It was imposed to prevent capital flight that would certainly have happened after the former DPM was sacked.

Since the media credits the authorities with a great deal of wisdom in their management of the country, they surely must have known of true economic situation before they imposed capital controls. It was a gamble at best. But did political considerations weigh more than economic ones. I wonder……

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