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Monday, 21 May 2007

Real Income - Feel Good Time for GOP

21st May 2007 - A lot of my close friends and unknown viewers of this blog ask me to write an article pertaining to the salary increament of the government servants. It is my intention of writing the article late after our PM announced it officially this afternoon at PICC so that I'll have a clear picture of what should I write.

You guys will be surprised of what I'll say about the announcement made on the subject matter:-

Yes! It was a very good decision by our PM and the announcement made, came exactly at the right time for us to adjust on the current inflation rate.

Why did I made the statement above? Some of my friends opined that the salary increment will trigger inflation and thus creating a balloning price rise among the businesses and effecting the consumers in a bad way. I had to disagree on that. As for myself, inflation already happened. It is due to the booming international markets and the high speed rise of a certain ex-communist nations (Communism and Marxist-Lenin beliefs proved to be futile and fools errand) such as China, East European Countries, Vietnam, India (a nations once believed on the state centralizing capital and complete socialism).

The prevailing of the Capitalism world and end up of government interference and economic barriers has made the international markets very competitive especially on the basic necessities products such as flour, rice, milk and etc (just to name a few).

This effect thus creating a very competitive markets among the international consumers and increasing the inflation rate world wide. For an example, I took flour on the domestic market scenario. MITI and Treasury alongside with Cabinet Ministers (not solely KPDNHEP) had agreed on the decision to raise the flour price not due to the incapability of the enforcement (KPDNHEP) in enforcing the regulated price on the item above, but due to the swelling up of the flour price on the international markets.

The competition of getting the products produced by a few companies on the international markets i.e. flour had gone very high and deliberately increasing the product prices in the internal market. If the government decided to keep the old price of the flour as RM 1.20 as previously gazzeted, sooner or later, there will be no flour sold within the boundry of this nations and creating an unwanted black markets just for the products. It is not only unnecessary, but also unfair towards the business community.

With the decision made by PM today at PICC on the subject matter (real income). I see it as a way in adjusting the real income to the current inflation. The decision and the rate announced today had been made based on the calculated by subtracting inflation from the nominal income. Inflation will happened no matter how we stemmed it. A lot of people will gained purchasing power compared to fifty years ago due to the booming economic environment and the collapse of the communism-socialism state.

One of the way in allying oneself to the inflation occured is increasing/ stabilising the purchasing power among the consumers and at the same time, utilizing the public money in encouraging growth with development projects such as infrastructure and high quality human produts.


egalitarian said...

first and foremost, I have to say that our gomen servants need to be given payrise as living cost is rising these days.

The police is the one which I believe need it most in order to curb corruptions involving their officers.

On other matter, I quite disagree the way you relate inflation with the rising international trade and the dying world of the left-wing realism. I wonder if you actually ever attend any economic 101 classes during your college days.

First you mentioned that the collapsing of socialism led the rising in worldwide inflation, how come is this be happening?

Inflation happens if the demand exceeds the supply, and deflation happens if supply exceeds demand. How can you explain that the communist China create inflation while it has supplying the world market with so many of cheap goods.

Take a look at Japan, its central bank is endlessly trying to solve economic deflation. To solve deflation mind you, you have to create its counterpart which is inflation. Japanese central bank however, having hard times to create inflation due to ultra-low price 'Made in China' goods supply in the local economy.

Yes I do know about the 'imported inflation' as you explained with the international flour trade issue. But inflation is a complex economic problem which has many other contributing factors such are production cost, credit card debt, and illegal money counterfeiting.

Bro, you have to at least study any SPM or STPM textbook regarding this matter. I'm afraid your comment on this is simplified, and not fully accurate. Still a good comment you gave, however I have to say.

Tun Teddy said...

Dear egalitarian,

Yes indeed perhaps I've gone to emotional in relating left-wing realism economic beliefs in my writings, and I do admit on that. But I do stay on the ground saying that an open up economic milieu post-soviet era pretty much had effected us not only on free trade, but also on our daily spending.

Take for an example, once a nations that had been sanctioned by USA and UN in trades on certain products such as wheat and medical stuff just because their political belief is posturing towards the soviet nations are currently been opened up widely. Thus creating a very competitive markets such one that I've explained on flour.

But I do agree on your point that, once a nations such as China open up their economy to us and our markets had been flood by their cheap and I must say useful products, but on the quid pro quo they too had taken our oppotunity in being a labour cost competitive nations.

US greenbacks that supposed to be siphon to us nowdays are counduit to countries that are much more labour cost competitive nations such as vietnam, china, cambodia and thailan. I do not blame these countries cause taking and bypass our peoples jobs, what I'm trying to say is that, we can be better by moving on from a low labour cost nations to a nations that offers expertise on certain matters.

Look at India for an example. Infosys and Microsoft had moved and invest there. This money concomitantly had created a better quality of life among their peoples.

That's why on the article I wrote, I tried to stress on the imperativeness using and utilizing public funds in promotes a mixed economic markets and not just laissez-faire where private and government sector should be seen separately.

I'll try to write new article explaining the previous one after refering to the STPM and SPM book back again. Thanks for your views, perhaps it'll educate us both!

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