What We Don't Know (about how governments will redistribute wealth after COV)

(Aside: There's a nice Ray Dalio blog series on this - on LinkedIn.)

In general, printing money has always happened since the 1970s end of the international agreement to peg paper currency to gold.

Now we have to consider what happens to printed money. If it is injected into a closed system, then prices will go up because the same goods are now worth more paper money. If at the same time measures are taken to remove money from the closed system, then prices may be lowered again ... for example if the government (a) raises taxes or (b) borrows money from the private sector. Usually nobody wants to lend money to the government, so the government unilaterally raises tax. Now we know how money can enter and exit the system, but we don't know what happens in between.

In between: so in the 2000s and 2010s, the big countries took a lot of their printed money and gave it to rich people, hoping that the rich people would, you know, "create more jobs and invent more wonderful services", but as we can imagine, the rich beneficiaries of public bailouts simply paid themselves first, and kept squeezing their staff. So during this period two things resulted (c) sharp rise in inequality, or distribution of wealth per citizen, and (d) a financial asset bubble.

This has now jammed the system - but we only noticed because of the COV emergency. Usually the rich can keep their slaves just slightly happy enough to work and not complain - but all of this was interrupted by the stopping of work. When work stopped, wages stopped, and then everyone realises it is a real problem if people have no savings. So governments are starting to give new printed money directly to poor people.

So now we see that money is being injected into the system both to rich people, and poor people. What we don't know, is how governments will take the money out next. Will they start to raise taxes on everyone, and maintain inequality (example: SST), or will they raise taxes mainly on the rich and executively redistribute income across the rich and poor (example: corporate taxes, capital gains taxes).

My own view is that Malaysia, specifically, needs to spend more and devalue its currency farther. This is the best time. (Actually, it will be a better time once we can manufacture our own medical supplies.)

I proposed a USDMYR 5.30 target. The article I wrote was snarkily titled #crashTheRinggitNow LOL