The short-term interest rates of Bank Negera have far-reaching effects on the economy. The Bank Negara must adjust interest rates in order to control the movement of Ringgit within the country and abroad.
The Federal Reserve in United States regulates short-term bank interest rates based on the index of national inflation. This is because excessive circulation of US dollars in the market leads to over-consumption by the public, which increases the demand and therefore the price of goods. Higher prices of goods also lead to higher production costs for manufacturers and higher prices for goods, so that the manufacturers can pass the costs to consumers. This vicious circle will exacerbate inflation. When this happened, the Federal Reserve must raise bank interest rates to attract more people to put money in the bank to reduce the flow of USD. Higher interest rates will lead to an increase in the demand for US dollars, as money from all over the world that is seeking a stable rate of return may flow into the US in order to get higher interest income.
The increase in demand for US dollars will lead to a strong exchange rate for the US dollar. This is one of the main reasons why the US dollar is on the verge of breaking 4.8 (to the Malaysian Ringgit) this year. Unless Bank Negara Malaysia follows the US in raising interest rates, the demand for the Malaysian currency cannot be boosted. However, Bank Negara is not at liberty to raise the interest rate as this will lead to higher cost of loans, weakening the public’s willingness to take loans for investment and hence weakening the economic growth. On the other hand, the interest rate on housing loans or other loans for the public will also be raised, adding to the financial burden of the Rakyat, and possibly leading to an increase in the number of bad debts of the banks, and many houses will have to be put up for auction. This is something that no one wants to see.
Malaysia’s foreign reserves are limited, unlike some countries with abundant foreign reserves. These countries can enter the currency market and buy the country’s currency to stabilise the country’s exchange rate. For example, Singapore can enter the currency market to buy SGD to stabilise the exchange rate of SGD to USD. Their foreign reserves are abundant, and they have the backing to do so. Malaysia does not have this ability; therefore, we can only watch the exchange rate go downhill helplessly.
The country’s foreign reserves are the country’s savings, just like our savings in the bank. If you have hundreds of millions of deposits in the bank, then the impact on you in the economy crisis is very minor. If you have only a few hundred dollars in the bank, even a slightly economy crisis will be a great impact to you.
Malaysia’s economic conditions were better than Singapore’s in the 1960s, so why are they doing better and better while we are becoming weaker in comparable? Why does Malaysia have less foreign reserves and more debt? Why does Singapore have more foreign reserves and less debt? The answer, as you and I both know, is the general quality of our people. Many of our people just want to rest at home, rely on nepotism, rely on connections, rely on corruption, rely on the political patronage to get money. In additional, our government does not rely on meritocracy, but on political maneuvers. Such a government can hardly have good political performance.
If our government confiscates the assets of those few super corrupt people and their family members, then I think the exchange rate of RM will go up immediately. Of course, this is just my little fantasy, it is impossible to realize.
If the country is to progress, we must have the support of all the people to work together so that we can see the results. If some people only want easy money, refuse to work hard, rely on nepotism, corruption, pandering, and only want benefits, then the country will be dragged down.
The same is true of the church. If there is a part of the church member that only wants to satisfy their own needs and do not want to contribute, this will only take up the resources of the church and hinder its growth. How can the whole church be mobilized to grow the church together? The only way is to awaken them and help them grow spiritually. This is why discipleship training is an indispensable ministry of the church.