| There is one truth about money: if you live high on the hog on borrowed money, the day will come when your world will come crumbling down and the U.S. has been living high on the hog on borrowed money for too long. Things cannot carry on like this forever. I see no way out for them and actually, even Ben Bernanke (the Chairman of the Federal Reserve) agrees: "The large U.S. current account deficit cannot persist indefinitely because the ability of the United States to make debt service payments and the willingness of foreigners to hold U.S. assets in their portfolios are both limited." So now I'd like to share some thoughts about the matter, which may help you make a better decision about money and investments. After all, knowledge is good but there is nothing like money in the bank, or more appropriately in this case, gold in your hands. Being in Malaysia, we are far from where the action is taking place. So we cannot see it, cannot hear it and to some extent, cannot feel the heat from all the upheavals. It is therefore easy to be hoodwinked by the notion that we will be sheltered from any fall-outs from the excesses. Unfortunately, that will not be the case at all. The whole world is now interconnected, not only through the World Wide Web, but more importantly, through trade. We buy and sell from each other, hold each other's currencies, hold each other's IOUs (through bonds, treasuries and other securities) and hold each other's assets. That is why a problem with one country, especially a major trading nation, will affect many others and when that country is the U.S. – the largest economy on the planet – it is obvious that the whole world is going to suffer as well and that includes us. In actual truth, it is especially us who are going to suffer, because the US is one of our largest trading partners. They have been so for a number of years now. Furthermore, they are one of the largest foreign investors in Malaysia and also our biggest export market. So if they are in trouble, we will be in trouble. And especially us, because we, like all the other ASEAN countries, are just mere pawns in this big game of financial chess. We are the cucumbers and they are the durians. As the Malay proverb goes: we roll, we get hurt; they roll, we get hurt! In case some people think that this is all just theories, let me bring you back just 10 short years ago when the financial crisis hit South East Asia and unlike some other incidents, I was personally there and was personally affected – just as many people reading this book were. Thailand was big in the mid-90s. The economy was booming, the construction sector was in full bloom as tall buildings rose like mushrooms in Bangkok, there were parties every night and the people were in euphoria of the good life. There were so much money that Thais were travelling throughout the globe, and other countries even provided Thai-speaking guides to cater for them, much like the Japanese-speaking guides that we see around the world today. But that euphoria was built on borrowed foreign currencies. (The current account deficits for 1995 and 1996 are both -8 percent of GDP; a significantly low and dangerous figure.) So one fine morning sometime in May 1997, the Thai baht was attacked by currency speculators. The central bank spent billions of dollars trying to defend the baht but soon realised that it was a futile effort, and so they allowed the baht to float. The baht nose-dived and soon lost more than half its value. The stock market followed suit and the index dropped by more than 75 percent. There were massive layoffs in the finance, construction and real estate sectors. The parties came to a grinding halt. Unfortunately, the story did not end there. The crisis quickly spread to neighbouring countries, which included Malaysia. The ringgit came under attack and fell from RM2.50 to under RM4.80 against the US dollar. The KLSE Composite Index crashed to below 600 points from the 1,200 plus levels, and later sank further to below 270. So, the party was over in Malaysia as well. The manufacturing, construction and even agriculture sectors all plunged. To cut the story short, many businesses closed down, billionaires became ex-billionaires, the Finance Minister was sacked and capital control was enforced. There are uncompleted buildings in the streets of KL even today. There are thousands of people who are still waiting to get back their capital from their unit trust funds even today. The ringgit is about RM3.00 to the dollar. Of course, this is not a pleasant memory for many of us. It is not something that we like to remember or even talk about anymore. But, it happened and we paid the price. So the point I'd like to make here is that we will not be spared and we will be affected by the coming fall-outs. If anything, as the cucumber, we will be paying a bigger price than the white men from distant shores. So the main thing is to accept that reality and see how we can make the most out of it. If not as a country, then as private individuals. How? I bought a couple of properties for half price in 1998. And so that you know, I've been buying gold for the past two years. PS: If you'd like to find out more on how you can protect yourself and your loved ones from the coming disaster, I urge you to come for the upcoming Retire RICH by Investing in GOLD & SILVER workshop on Saturday 24 September 2011. If you have not registered yet, you can get the full details from the website www.millionairesPlanet.com/GoldSilver.htm. Among others, I will elaborate on the complete reasons why the current system is on a ledge and more importantly, what you can do to protect yourself from the collapse. Log on to the website, register now and take the steps to protect yourself and your family.
Copyright © Azizi Ali 2011 | 
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