World Today November 2018

There are few trends going on around the world which I think are interesting.

1. Malaysian Economics
The Malaysian politicians seem to have stopped having any interest in the growth of the economy. Their prime concern has been on witch-hunt - which is a crucial enough job for cleaning up the house after the mess of a five decade prolonged party of hubris. Who is to blame? It doesn't matter, economically, for the impact is also being paid for by the ordinary people through high prices and a weakened currency as well as a slowdown in growth of economic activities. The bankers have also had a good time in playing the real estate market. It is now interesting to see how they are going to unravel the piles of tall bricks sitting in vacancy. They say developers have deep pockets, but then no one can live forever.

2. End of QE
Of course, the Malaysian economy has not been so clever as Malaysian politicians and policymakers who like to be imagine themselves to be. we are all being influenced by the mother of all policy, the US monetary policy. I am happy that at long last, the US Fed has decided to raise interest rates and slow down the growth of the money supply. We are now beginning to see the impact of this monetary tightening. Bitcoin crashed. Tech stocks plunged. Banks are beginning to see problems. The problem of monetary tightening is that it is impossible to do a soft landing. When the crack appears, the crash will follow. The US Fed has the tough job of having to raise interest rates which ensuring that there is sufficient liquidity to keep ordinary businesses going.

3. US-China Trade War
The problem of the world economy is that China, having expanded aggressively in the past, is now left with massive production over-capacity which it must sell. Because of their massive over-capacity, their cost of production is likely to be the lowest anywhere in the world, to which Trump is accusing them of dumping. For the US to produce its own basic industrial inputs now is not viable. So the US-China trade war will leave everyone very unhappy and possibly a global recession.

4. China Economy
The China economy is in a very bad state of health, with overspending by the GLCs and imprudent lending by its financial institutions, all funding over-capacity in industrial production and real estate. As we have seen elsewhere in Asia before, it is often that public institutions will suffer while gains will be made by private individuals. This is where the fight against corruption in China is so intense. It is a matter of national security as well as political vendetta. Punishing individuals is one thing. The crucial thing is to focus on the flow of money and see whether any new money is going into new economic activities. If not, recession.

5. Mass Migration
As with the massive flows of money around the world, there are also massive flows of people around the world, people looking for a better way of life. This was what the great Washington Consensus was out to do, to liberalise the world. It was a good idea, a good thing. In practice, however, when the great rush of people into a country is not officially recognised and followed by a massive programme of social housing and creating of jobs as well as of taxing new incomes, then the system will not be sustainable. There will be massive budget debts for social development which must some how be paid. It's an irony if the immigration does not boost GDP growth and raise government revenue. These massive migrations cannot in no way be unconnected to the previous massive increase in the supply of money in the world, which leads to greater economic disparity, greater flow of money into military weapons, and the maintenance of regimes by force because there is good money to be made.

6. Brexit
Theresa May comes out as such a tough cookie. Brexit becomes more complicated than as I have earlier imagined. It was supposed to be a simple case of immigration control. It spiralled out to be a total departure from the customs union, which may be so wise. Then, to checkmate the immigration control, the Europeans brings up in the border issues with Northern Ireland and Granada. If Brexit is seen as an economic issue, it may not have been that wise to bring it up in the first place. But if Brexit is seen as a fight for political independence, then it should be worth every penny of it.

Conclusion
It is good to be alive. But it is not wise to be influenced by the collapse of the total whole picture into a few stories in a blog or a website. Like chilli, you have to take a small dose of the real stuff at a time. Sorry for this summary of world events.