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First we have PM Najib Abdul Razak who said that the cost of living in Malaysia is still one of the lowest in Asean. Then we an economist from Universiti Malaya who said that inflation in Malaysia is largely due to external factors such as the prices of oil and the Donald Trump phenomenon.

When are they going to take responsibility to come up with coherent policies and measures to tackle the scourge of inflation which has affected almost everyone except perhaps the super-rich?

Since when is inflation not due to bad policies, poor macroeconomics management, inefficiency, massive corruption and loss of confidence?

Why single out some external factors igniting inflation when these factors are also applicable and affecting other economies? Malaysia is a net oil exporting country, but rising oil prices have now become a major factor accounting for our high inflation. Can we not see the baloney and the irony here?

What about countries with no oil to begin with? Would they not be affected by high prices of oil as well?

The ‘Trump phenomenon’ is a uniform factor likely to affect most countries. Why should Malaysia suffer more than others if indeed Trump has caused reverse capital flows and currency realignments globally? The Malaysian ringgit has depreciated not just against the US dollar, but also the Singapore dollar, Chinese renminbi and Thai baht.

Malaysia’s inflation is unprecedented in recent months. When global oil prices were more than US$100 per barrel, did Malaysia’s inflation reach 8 percent?

I hope some of us have heard of this statement before, “Inflation is always and everywhere a monetary phenomenon.” The primary cause is always too much money chasing after too few goods.

The causes of inflation

We can argue and debate whatever we want, inflation is invariably caused by the following factors:

First, high taxes and unproductive use of tax money: I have lived in this country long enough to know that the Goods and Services Tax (GST) is a major culprit of inflation, causing prices to escalate higher than the GST rate due to our half-baked implementation.

Second, when there are too much fat or unproductivity in the economy: When there are sectors that get the bulk of the income/subsidies/wages for doing nothing, they cause inflation.

Third, when we have too many over-priced projects and contracts: When contractors and promoters get too much profit, the people must pay for it through higher prices. There are no free lunches in this world.

Fourth, when government borrows and spends too much: Fiscal deficit is a given in Malaysia, regardless of the state of the economy. Borrowing to finance deficit from inflationary sources could make the situation worse.

Fifth, when policies favour the cronies: When we have massive distortions and profiteering due to collusion and complicity, prices will escalate. Prices of homes are high because developers have always got what they wanted at the expense of the buyers.

Sixth, when foreign monies are allowed to pour in indiscriminately: When we have too much foreign money going into our real estate and property sector, it is almost certain the locals, including even the middle class, would not be able to compete. Probably the purchasing power of five per cent of rich Chinese is bigger than the whole middle class of this country.

Seventh, we have too many ‘bad news’. It is almost a daily affair we heard of mega deals going upside-down. I must say Malaysia is a strong young man but has subjected himself to constant drugging, drinking and smoking. Sooner than later, something must give.

This is the essence of lack of confidence being manifested in our country today. I believe the ringgit is suffering not just because foreigners are pulling out. I think many high net worth Malaysians, too, are hedging to protect themselves.

We owe ourselves the responsibility to look at issues confronting us honestly and objectively. Even if there are external factors affecting inflation, we must still avail ourselves the macroeconomic tools to mitigate them. Have we resolved issues that are likely to restore confidence? Have we reduced the distortions and inefficiency prevailing in our economy?

Some have argued that Pakatan controlled states such as Penang and Selangor are also suffering from high inflation and hence it is something to be accepted. I think this is a ‘political’ argument devoid of economic logic and reality. Penang and Selangor are subjected to the same economic and political environment as the rest of the federation. They are not exempted from the effects of bad policies or the erosion of confidence arising from bad policies.

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