Money is shrinking !

Malaysians have to adjust their life style now. There is really no choice when your disposable income is less due to the hike in petrol prices.

On the surface, those with cars less than 2000 c.c. and use about Rm120 per month will not be affected, since although he pays 40% more (about RM50) more a month, he will be compensated by the RM625 rebate a year. But in practice, he will also be affected because of the chain reaction that petrol hike brings.

Shipping and transportation costs will go up, energy cost such as electricity will go up. Cost of manufacturing goods will therefore go up and since businessme are not philantropists, you can expect a price increase in almost all manufacturing goods  and services. Thus , even if the person using less than $120 petrol a month and not affected directly by the petrol increase because of the rebate given , his money will shrink like the money of all others.

This is the ugly face of inflation. Inflation is now a world wide phenomenon, and being part of the global economy, we have no choice but to accept the fact that prices will be going up.

Last year, i have written a post “Shrinking money, daytime robbery and pay cut”   when my favourite Koey Teow and One-Ton-Mee went up in price from $3.50 a plate to $3.80 a plate. This was what I posted:

Yesterday was a public holiday and I took a rest from work too.

I went to have my usual breakfast in the neighbourhood coffeeshop, and ordered a fried Koey Teow and a glass of coffee.

I gave RM3.50 in exact change to the Indon girl who brought me the plate of Koey Teow, but surprisingly she told me I was short of 30 cents. It is now RM3.80 per plate. Just one week ago, it was RM3.50, an increase of 8.5%.

An old pensioner in the next table told me that his plate of One-ton-Mee was also RM3.80 now. Apparently, the hawkers in PJ have all raised their prices, even before an expected adjustment in petrol prices and electricity tariff, as predicted by the numerous articles and letters in malaysiakini .

The old pensioner told me that he usually eats out every morning. So for the poor old man, his saving of Rm38000 in bank is suddenly worth about Rm35000 in purchasing power as compared with just one week ago.

For a person with saving of RM380,000, the amount can now buy only the same number of Koey Teow or One-Ton-Mee as Rm350,000 just one week ago. It means a loss of purchasing power of RM30,000.

It is like being robbed of RM30,000. A lot of value just disappeared almost overnight.

For a person earning a salary of RM3,800 , the pay now is just like RM3,500 one week ago. Meaning that he has in fact taken a pay cut without realising it

What I wrote then may be very dramatic but that is how inflation really affects us. What we can do is to eat less Koey Teow or One-Ton-Mee.

But what about those who are already living on the brink of poverty and who has not had any One-Ton_mee for a long time because they really cannot afford? We cannot tell them to eat less rice !. They have to survive and live! This group must really be taken care off.

Another group will be those already retired and is no more working. Their saving is getting less everyday, and the pittance that they get from bank interests cannot even cover the increase in the price of goods.

In the same post I wrote:

The best way to counter inflation, as a  nation, is to increase growth. So that those earning 3,800 payroll can now be paid 4,200. But with growth stagnant, it is just not possible for employers to raise pay for their employees.

But even with good growth, the old and the retired, with money earning pittance in banks, (38,000 in bank will earns you 1330 a year based on 3.5% interest per annum) will still be badly hit. These groups will have to rely on government or the caring public to survive.

Perhaps the few billions of money wasted in Port Klang fiasco could have been better deployed to be given as an inflation allowance to  old and retired people. Say, 1 million of old retired people can receive RM 4000 each, if 4 billion Rm can be saved from the project to be channeled as allowance to this group.

I do not even want to talk about the space tour program which is an utter waste….

We need to tighten our belts, especially those of us living in urban and suburban areas. For the government, it is time to cut wastage, increase efficiency, increase growth, check corruption (corruption leads to wastage of funds), cut down on grandiose projects which do not really benefit the people.

So, hopefully, the government can use the 18 or so Billions savings from this petrol hike prudently to increase economic activities and bring about good economic growth, so that the  people can earn more to counter the effect of inflation. But if some leaders do not change their ways and carry out a few projects like the PKFZ, then they can expect the people to throw them out the next round.

It is also time to really cut down abuses and wastages and channel whatever funds that can be saved  to help the poor and the old. A totally independent Anti Corruption Commission (ICAC) will go a long way to help combat these abuses ad wastages.