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Thread: Matthias' Rantings.

  1. #1
    Join Date
    Oct 2008

    Matthias' Rantings.

    Matthias belongs to the Conspiracy Nuts Category. So his postings will be more appropriate here. But he talks sense, though. So I will pay careful attention to his rantings if I were you. :) Thanks to LokGP for the heads-up.

    1. Global Red Alert: US Will Not Be Able to Service Its Debts By H2-2009 - Market Shut Down After Declaration of Force Majeure - By Matthias Chang Saturday, 04 October 2008 06:30

    This is the most important Red Alert to be issued by me. Do not take my word for it. Verify my facts and analysis, word for word, paragraph by paragraph, as your fortune (if any) and more importantly your family’s livelihood depends on you taking all the necessary steps now to avoid the inevitable pain that will follow.

    Read on..

    2. This is equally appropriate in the Gold Forum.

    What Everyone Should Know About COMEX Gold - By Eric deCarbonnel (LATEST UPDATE - 27/10/0
    Eric deCarbonnel
    Monday, 27 October 2008 05:52

    It appears that there is a common refrain going around the investment community. It goes something like this:

    "Gold should be doing better, and, since it isn't, I am not going to buy it"

    Investors who believe this are making the mistake of thinking COMEX gold is the same as real physical gold. It is not.

    COMEX gold is a form of debt. It involves one party promising to produce gold (money) to another at a future date. Like all forms of debt, a COMEX futures contract is only as good as the counterparty behind the contract. Right now, because of low margin requirements, sellers of gold futures only have enough gold to cover 10% of outstanding contracts stored in COMEX warehouses.

    Considering that the biggest sellers of gold futures contract are insolvent financial institutions, it is obvious that COMEX gold has enormous counterparty risks.

    Read on..


  2. #2
    Join Date
    Oct 2008

    More on Matthias' Rantings.

    Matthias Chang:

    The following pre-requisites are essential and critical if Malaysia is to succeed in overcoming the crisis. They are as follows:

    1) The Trinity of Power is completely out of power and has retired overseas;
    2) The 4th Floor Boys at the Prime Minister’s office are declared persona non-grata;
    3) The Governor of Bank Negara resigns;
    4) The 2nd Finance Minister resigns;
    5) The members of Ethos Consultancy are removed from any role in future decision making of any new administration;
    6) Tun Dr. Mahathir Mohamad is invited to play a decisive role in any future administration.


    Matthias, in his usual colourful and inimitable style, is spot-on in identifying the ills besetting the Western Financial System and yet he blithely ignores the cancer killing Malaysia - UMNO. He is proposing a continuation of the existing system with the top emasculated, leaving Najib behind and with Mahathir coming in to be the Maestro.

    With respect to his six points above, they are correct except the last one. It should read:
    6. Mahathir and Najib invited to take a well-deserved rest in Kamunting for life.

  3. #3
    Join Date
    Oct 2008

    Re: Matthias' Rantings.


    Except Chedet, I see no other leader strong enough, smart enough, and decisive enough to take steps to help Malaysia escape from this dire state of financial turmoil.

    The opposition is too weak, inexperienced, no teamwork, and staffed enough to run the government effectively.

    I have seen Lim debate. I came to the conclusion that he is not decisive enough, not solid enough.
    Anw is charismatic, but not correct enough.

    A necessity for direction and strong leadership is of utmost importance.

    If Chedet policies are not good enough, then ask yourself, could there be any better policy during those eras?
    Was there an even better solution given the conditions back in the 70s, 80s, and 90s?

    With the benefit of hindsight, what could have been done better? The Trinity of Power has ruined all the founding stones.

    The opposition is not ready.... not ready, still with their opposition mindset.

    I have my thoughts. And as human beings, we are different. So will our ideas and opinion. Pls don't be offended.

    I see no better leader. Start a poll, and I believe you shall get the same result.


  4. #4
    Join Date
    Oct 2008

    Re: Matthias' Rantings.

    And compared to any statement any leader in the country has made, BN or PR, this old man spoke absolute sense.

    However, he did not foresee the global crisis bottoming in the near future and only expected a recovery in 2010. “This is a very complicated situation unlike in 1997-98 when all that happened was our currency was devalued,” he said.

    Dr Mahathir said what had happened was the collapse of the whole banking and monetary systems and no country could act on its own to resolve the crisis.

    “The Bretton Woods agreement allowed the (monetary) system to be pegged to gold, and then it went off the system and on fiat money. This then gave the banks the freedom to literally print their own money.

    “Banks have been lending out too much money. When you lend billions and the non-performing loans run into millions, you will get into trouble,” he said.

    Dr Mahathir said the banking system, which was a free market system, had to be changed.


  5. #5
    Join Date
    Oct 2008

    Re: Matthias' Rantings.

    Quote Originally Posted by lokgp

    Except Chedet, I see no other leader strong enough, smart enough, and decisive enough to take steps to help Malaysia escape from this dire state of financial turmoil.

    The opposition is too weak, inexperienced, no teamwork, and staffed enough to run the government effectively.

    I have seen Lim debate. I came to the conclusion that he is not decisive enough, not solid enough.
    Anw is charismatic, but not correct enough.

    A necessity for direction and strong leadership is of utmost importance.

    If Chedet policies are not good enough, then ask yourself, could there be any better policy during those eras?
    Was there an even better solution given the conditions back in the 70s, 80s, and 90s?

    With the benefit of hindsight, what could have been done better? The Trinity of Power has ruined all the founding stones.

    The opposition is not ready.... not ready, still with their opposition mindset.

    I have my thoughts. And as human beings, we are different. So will our ideas and opinion. Pls don't be offended.

    I see no better leader. Start a poll, and I believe you shall get the same result.

    Sorry, Lok. You come from the brainwashed generation and don't know any better. Please don't denigrate our Malaysians by suggesting that only Mahathir is strong enough, smart enough, decisive enough. We are approaching the status of a failed state and it did not happen overnight. A major part of the fault can be laid at the doorsteps of Mahathir.

    Mahathir always talk sense when it does not involve his personal interests or pocket. That's why he managed to fool so many people for so long. Mind you, I am not saying he does not have the qualities you suggested. But he failed in a vital test - honesty. Without this, no leader is acceptable.

    Also don't look at the politicians only. They are human and have limited experience. What is important is who are the people they surround themselves with. Are these the honest, intelligent and experienced people who can help formulate policies that can pull the country forward. Lee Kuan Yew may have been a brilliant leader but he couldn't have done it without the support of his colleagues and equally important, the honest, smart and committed bureaucrats who made sure things worked. And he made sure they were honest.

    In our case, we have a corrupt, bloated bureaucracy with a mono-cultural outlook, stupid ministers and equally dumb educationists. Don't delude yourself by blaming Badawi alone. He did not have enough time to mess up so much. It was messed up in the first place. He merely continued past practices not aware that we were near the tipping point (Mar 08 elections).

    Anwar, LKS, Awang Hadi: We don't need them to be brilliant. We only need them to be honest and caring for the Rakyat, and willing to listen. That is enough. The rest can be done by us Malaysians.

    Bottom line: We don't need brilliant leaders. We only need honest ones who are humble enough to listen.

    Enough of my rantings.

  6. #6

    Re: Matthias' Rantings.

    Dear PY.
    Splendid observation.All scriptures demand honesty and not scholastic.

  7. #7
    Join Date
    Oct 2008

    A reply from Soros to Mahathir

    Seeing from both side of the coins and forming your own opinion. Never be too subjective.

    The corruption of Mahathir
    adapted from Bangkok Post

    I have always said Dr Mahathir is a menace to his own people. Now only
    you can see the effects of his foolishness when the ringgit has halved
    its value overnight and your economy goes kaput. Single handedly you
    have caused hardship to millions of your own people. You have built
    useless mega projects at tremendous cost to the country.

    The telecoms tower in Kuala Lumpur and the highest building in the
    world show how stupid you are. Not only does it cause massive traffic
    jam, it has totally no purpose. If you need high ground for telecoms
    antennae a nearby mountain is there for free. This tower has no
    purpose from the ground up to 300 metres. The satellites make this
    totally unnecessary.

    A fool and his money are soon parted. The only thing is you are the
    fool and the money belongs to Malaysians. You make 20% in evey
    project, you have real estate in Japan and billions of shares
    corruptly acquired. Your 3 sons are worth 8 billion US$. Where do they
    get this money? Of course, corruption. You are known as the Marcos of
    Malaysia, having enriched yourself to the tune of billions. You dare
    to shed crocodile tears during UMNO delegates meeting about the ills
    of corruption. Yet you are the most corrupt of all the prime ministers
    before you. A thief is crying thief and hopes people look the other
    way. Who dares to say anything when the chief is caught with his hands
    in the candy jar?

    You said wisdom is not the monopoly of the West. So is foolishness.
    You have more foolishness than most people would believe. Billions are
    used to build two high rise Petronas buildings that benefit nobody. It
    now stand tall, a symbol of stupidity and irresponsibility. Instead
    they just add on to traffic jam. What is this reclamation of 10
    islands off Kedah? Totally absurb and stupid. Of course your benefit
    is 20%. And the bridge across from Malacca to Sumatra across
    international waters? Why not build a bridge to the moon? I am sure
    you still can get your 20%.

    You called me a Moron. How can a Moron make so much money. By allowing
    short selling and borrowing millions of shares from your banks we fund
    managers made millions out of your inexperience and poor regulations.
    You lose all Malaysians money, therefore you are the Moron. Now you
    know too late and start crying over split milk. In Australia you are
    known as the recalcitrant ego maniac; in UK the corrupt *******
    because of your stupid purchase of our movie studio and the 290
    million ringgit Lotus racing car plant and the shady Pergau dam loans
    from the UK. They are useless to us and you still want to buy them.
    What about buying British reject submarines through your agent, of
    course. The agent/ broker is designed to make millions out of
    Malaysian government. Your purchase of our battleships is at least 50%
    more than others are paying. Your purchase of 9 hospitals from UK
    lock, stock and barrel does not support your local architects or your
    industry and the British send you obsolete medical equipment.

    The design is atrocious, one end to the other is half a kilometer and
    there is no CT-scan, an absolute necessity. In the Uk your face
    appears in no less than 17 newspapers as a corrupt dictator. In
    Malaysia you are known as the (IBM) International Big Mouth. In Japan
    they call him the ’smallest one’ (brain size). In Pacific island the
    Santa Claus (giving advice left and right). In south America they call
    him the parrot (he talks a lot but does not know what it is about). In
    Manila the living Marcos.

    In Malaysia they are spending millions to lure tourists and you talk
    rubbish scaring every foreigner away. “When he is dumb he is doubted a
    fool, when he opens his mouth it removes all doubt.”

    While I agree the West does not have the monopoly to wisdom, your
    actions are not the wisest either. Your EAEC has totally no support
    even in Asean. Your South-South dialogue mets with the same fate and
    what is this I hear of the Bridge from Malaysia to Indonesia covering
    20 miles across International shipping lanes? How crazy can one get?

    Even the Japanese don’t have the money. This world’s stupidity seems
    to be concentrated in one man’s mind - yours.

    The multimedia super corridor - MSC -. Well in USA its most stupid
    concept because we Americans, would have thought of it light years
    before. Even if it makes money, we can copy this concept can’t we? Why
    do you want to spend your hard-earned money doing questionable
    projects? It will be like the Bakun project. Abandoned fund wasted and
    another white elephant. I always say politicians should not be
    involved in business. Your ministers are also businessmen and almost
    every official is enriching himself. Look at Rafidah Aziz, selling
    thousands of Approved Permit for cars each worth 20-30 thousand
    Malaysian dollars. Why not your government sell them and make the
    money?She has acquired millions of shares meant for bumis for free
    before she agrees to list them. Look at your Selangor Chief Minister
    collecting millions for approving high rise buildings from
    businessman. He is worth a few billions. Unfortunately he was caught
    with a few millions pocket money in Australia.Every Chief minister is
    awarding useless projects to his cronies then collecting secret pay
    offs on the side.The Land development Boards and the Economic
    Development Boards are used to bailout any loses suffered by
    politicians.The profits they keep, the loses they force the Government
    bodies to absorb.How can your poor ever close the gap when every good
    deal is snatched by your politicians?How can your country get out of
    poverty if all the billions of corruption money is taken out of the

    Look at the Sarawak Chief Minister selling billions worth of timber
    concessions under the table; selling every piece of state land to
    businessman without tender; using his own companies to obtain
    lucrative government contracts; selling approval signatures for a fee
    ‘you pay I approve’. He has 8 billion US stashes overseas. Thousands
    of acres of land are given to one or two companies while thousands of
    poor people still live in cardboard makeshift homes; have no water and
    shit into the river. Thousands of acres of land are sold to companies
    for plantations while the native don’t have even one acre to their
    name. He is selling sand near the beaches to one company for earth
    filling and then ask the government to spend millions to protect the
    coastline when erosion occurs. He lost 300 millions of the Sarawak
    government money trying to make computer chips. He has built a port in
    Northern sarawak town in water so shallow it needs dredging every

    The Prime Minister built highways without tender, your cronies get the
    deal and the price double. Your Langkawi airport runway is built is
    double the cost by your own company Ekran.

    The Malaysian nation has lost at least 30 billions during your last 10
    years of corrupt rule. One billions lost from the purchase of phantom
    skyhawk war planes nobody has ever seen (are they still in the Nevada
    desert USA?). 3 billion lost from the London tin scandal (you thought
    you could corner the London tin market without knowing the Americans
    have a stockpile! Stupidity at its best. 6 billion Perwaja steel mill
    where nobody even know where the money goes, 3 billion bank Bumiputra
    scandal where George Tan bribed all the bank officials to lend him the
    money. 6 billion forex lost by Bank Negara (the fool and his money are
    soon parted) and 6 billion to build three of the worlds tallest
    buildings (built by Japanese and Koreans and furniture imported from
    France - not Malaysia) and 1 billion lost from purchase of British
    warship including fees paid to the broker and under the table. Add the
    10 billion you stole and 5 billion taken by Ministers.

    In the 1997 the World Journalists meeting voted Dr Mahathir the Prime
    Minister of the Decade. It sounded strange to everybody until it was
    revealed those who voted against are threatened by IRD officers and
    with losing their jobs. In New York the United Nations 1997 meeting,
    the most corrupt Prime Minister of the decade is President Suharto and
    second Dr Mahathir (Actually Dr Mahathir should take first place but
    bribed the Indonesian to take honour of Number One.

    There are Fifty thousand of your university students are not given
    places in Malaysia but are good enough for places overseas resulting
    in billion of dollars lost.The British and the Australians are
    thinking how stupid.Your best students are sent overseas raising their
    standards while as in most countries the best are kept in local
    universities and the rejects sent overseas. A university student in
    Hong Kong is much more prestigeous than any Australian counterpart.
    You have been colonised by the British so long you cannot even educate
    your own people. Look at Hong Kong or Singapore less than 5% study
    overseas. All the money saved. Your country could save billions if
    every student overseas is recalled to a local university, and at the
    same time raising your own standards.

    Your people are still without shoes, without land to farm, without
    homes, bathing in rivers shitting in hole in the ground, without water
    and electricity. Your cities are concrete jungles without greenery and
    open spaces. Your KL is jammed with traffic. Yet you still keep on
    building high rises. You should come down from the clouds and stop
    daydreaming and firmly plant your feet in the ground. Your schools are
    cramped 500 students to an acre and thousands of acres are given free
    to some politician who leaves them idle. Your parks are being taken by
    politicians to build shophouses and every cabinet minister is a land
    grabbing businessman who build roads only to their cronies’ land.

    The Malaysians’ prayer “Ya Allah, we thank you for your gifts of
    timber, oil and grain. But then the devil sent us corrupt Mahathir
    without a Brain And look we are back to square one again So just take
    Dr Mahathir back to Hell And we will be alive and well.” In China
    people have been shot for embezzling one thousand dollars. With 8
    billions you have stolen therefore you would be shot 80 thousand
    times. Now you are leading an anti-corruption campaign. We all know
    what you should do. Look yourself in the mirror. You see the crook
    there? Then use your left hand and handcuff your right hand. You have
    put the opposition leader and his son in jail when they said in
    parliament you are the richest PM in the world. And his colleague Mr
    Karpal Singh too for 2 years. So I get a reward or bribe if I now say
    you are the poorest PM in this world?

    Your 3 sons are sitting in the board of directors of more than 200
    companies. They must have been educated in Harvard school of business
    and obtained distinctions? Or is it “you don’t know me you don’t do
    business in Malaysia” law that applies. Billions of ringgit of
    Employee’s Provident Funds and public Petonas funds are used to bail
    out your sons who make losses investing in every venture you thought
    you could make money. How unethical and corrupt.

    Every one of your politicians are sitting on the boards of tens of
    companies making thousands without any effort, lending their VIP names
    to borrow millions from local banks without collateral. Now these have
    become non performing loans. Now you want 20 millions Malaysian to
    sacrifice for the folly of ONE man? Why not the fool resign and admit
    he wasted and took most of the money. I could teach you how to put
    your economy on tract but first you must apologize to the Jews and the
    Malaysian people as well.


  8. #8
    Join Date
    Oct 2008

    Re: Matthias' Rantings.

    Seeing both sides: Lok, I have observed Mahathir for more than 30 years now. So I have seen enough sides of him to recognize evil when I see it.

    Soros article: I don't think he wrote it. It includes details of Malaysia that he is unlikely to know of unless he lives here.

  9. #9
    Join Date
    Oct 2008

    Obama's gamble

    Obama's Gamble - The Ultimate And Final Bet By Obama’s Financial Handlers -

    The $8.5 Trillion Chip - By Matthias Chang (SECOND

    UPDATE - 12/12/08, 11:16am KUALA LUMPUR, MALAYSIA,
    By Matthias Chang
    Friday, 12 December 2008 09:47

    A few weeks ago, I warned in my website that the Dow would dive below 7,000 at the earliest by end of December 2008 and at the latest by the end of the first quarter 2009.

    Any responsible central bankers would want to control a downturn, preferably by a gradual slide of the market as opposed to a sharp hard landing.

  10. #10
    Join Date
    Oct 2008

    Re: Matthias' Rantings.

    A sound judgement by Mahathir on the problems during the Financial Crisis. No other current political leader in Malaysia has such capabilities.

    Handing over the country to Anwar would have doomed our country with his head bowing to the IMF and the financial elites.
    He would have enslaved our people to the financial elites.
    The medicine submitted by the IMF was the one that did the most damage to our country. By raisng interest rates and freezing credit, the medicine had caused severe business disruptions, until Mahathir put an end to it by doing the exact opposite.

    Under a different and incapable Prime Minister, we would have devalued or currency so much more, reduced our buying power to pieces, selling our country(raw material, resources,labour) for pennies to the 'developed' world for even more worthless paper money, making our people poorer.

    Its time we put an end to the useless worshipness on the financial class. We need to stand on our feet. End their monopoly. Stop them from deprieving us of our buying power, degrading our living standard.

    You can see it clearly by comparing the food that we Asian eat and the food the Western World eats.
    They have big meats and fishes for their consumption, yet we have to be contended with our fried anchovies.

    Do you even know that there are anchovy fish that is as large as your palm? That's what they consume, not just tiny bits of fish found in our Nasi Lemak. While they eat big with their purchasing power, we Asian are deprieved of our privileges and scrapping for bits of leftovers due to our poorness.

    Totally Absurd!


    DR. MAHATHIR bin MOHAMAD interview on the Asian Financial Crisis

    January 30th, 1999

    ADAM SMITH: Prime Minister, last fall Secretary Rubin said this is the biggest financial crisis in 50 years. Was he right?

    DR. MAHATHIR: I think it is. Certainly it is in the case of Malaysia. I have never experienced anything like this.

    ADAM SMITH: What was the cause of this crisis?

    DR.MAHATHIR: The currency traders were able to devalue or revalue the currency at will, simply by selling or by buying the currency. And when they devalue a currency, it costs a lot.

    When the devaluation is very deep, then the poverty creates a lot of social problems for the country.

    ADAM SMITH: Why would the currency traders pick on a particular country to cause this damage?

    DR.MAHATHIR: Well they see if they can make a profit out of it. It is basically a condition of what they can earn from the operation. By devaluing and selling short they can make a tremendous amount of money, but in the process, of course, the countries concerned would lose money.

    Obviously if a country has no money, you can not do anything, you don't gain any benefit from attacking the currency. It is because the countries of East Asia have grown rich fairly rapidly that attacking their currencies would give a lot of profits to the currency traders.

    ADAM SMITH: But help me understand this: Let's say there are a hundred countries, and there is this pool of capital floating around the world. Why choose a particular country to attack?

    DR.MAHATHIR: In the first place it is because "they" can make money out of these countries. Of course there are a lot of countries that they can attack. It would seem that that they move from country to country.

    They attack countries in Latin America. And they make money there. Having made money there and disrupted the economy of those countries, they then move on to other countries and attack them.

    In the meantime the first victims might recover. Then the currency traders can go back again.

    ADAM SMITH: Who are these currency traders?

    DR.MAHATHIR: The problem is we don't really know who they are. They have always urged that we should become transparent. But they themselves operate in a sort of mysterious way, not quite open to public criticism.

    ADAM SMITH: Are these banks or hedge funds?

    DR.MAHATHIR: Banks that involve hedge funds are certainly involved.

    ADAM SMITH: You were identified at the time of the crisis as pointing a finger at George Soros. Is he the leader of this pack?

    DR.MAHATHIR: He was the most visible man. But I think there are lots of others, some probably bigger than him. We had discovered that Long Term Capital, for example, is much bigger than Soros.

    ADAM SMITH: Do you think these financial entities communicate among themselves? You said at one point they were a pack.

    DR.MAHATHIR: Well, I am quite sure they talk to each other. In fact there have been articles in the press that pointed out that fund managers often come from the same organizations. They spread out, set up their own operations, but keep in contact with each other. And I think they know more or less what the others are doing.

    ADAM SMITH: Could you now take a moment to explain to the American audience that might not know? What happened, exactly, in Malaysia, as you saw it, from the point of the crisis beginning in Thailand?

    DR.MAHATHIR: Well when the Thais had their currency devalued, it was because of certain weaknesses in Thailand. They seemed to borrow a lot from foreign banks and they were not able to repay. In the case of Malaysia the IMF itself made the remark that Malaysia is fundamentally very strong. As a result we did not expect anything to happen to us. But, now there is this contagion theory that if something happens to your neighbor it is going to affect you. Therefore the currency traders then attacked the Malaysian currency. What that means, simply, is that "they" borrowed the Malaysian currency and sold it down. In other words devalued it. And then, of course, they delivered what they had sold, after purchasing the devalued currency. In that way they made a lot of money for themselves.

    It has nothing to do with the fundamentals at all - it has a lot to do with the wealth that you have accumulated. And once they take out the wealth we naturally become poorer. For example, since our currency was devalued from two fifty to the U.S. dollar to - at one time — four to the U.S. dollar, we have lost 1.5 Ringgits per dollar of buying power. That means purchasing anything from abroad, costs us more, because our purchasing power has been reduced. We have been made poor.

    ADAM SMITH: When you saw this happening did you recognize what was happening, right away?

    DR.MAHATHIR: I believe I was among the earliest to recognize this, which explains why, in my speech in Hong Kong, I pointed out that this was happening. In fact earlier than that I made a speech in Malaysia itself to say that currency traders are impoverishing the whole of East Asia.

    ADAM SMITH: In the "old days," the central bank of a country used to be able to defeat the speculators because it held all the cards.

    DR.MAHATHIR: Yes, but the funds of a central banks are limited, whereas the hedge funds can borrow up to 20 times what they have. It is obvious they have huge borrowings. If we keep on defending ourselves - which means of course buying back our currency- very soon we will use up our reserves. We will be landed with our own devalued currency and will become poorer. That is all.

    ADAM SMITH: So your quarrel, then, is with the lenders to the hedge funds, as well as the hedge funds themselves.

    DR.MAHATHIR: Yes. The hedge funds on their own can do much less harm if they were to use only the amount of capital that they have.

    But when they are able to use 20 times that amount then their strength is often much bigger than the strengths of most countries’ central banks.

    ADAM SMITH: Because a central bank cannot borrow 20 times its own capital

    DR.MAHATHIR: No it cannot. If it could, we would be in a very strong position indeed.

    ADAM SMITH: You said in your speech yesterday here in Davos, that "capitalism is not a religion, but some people treat it as such". Can you explain that a bit?

    DR.MAHATHIR: Well, capitalism means that the free market should operate freely. We believe in capitalism because we think that it is going to enrich us. But when capitalism is used in such a way as to impoverish people, then we should reexamine it.

    The unwillingness to reexamine the operations of the capitalist system seems to imply that anything done in the name of capitalism is above criticism. It is almost as if it is a religion that you cannot question. An article of faith.

    But we believe that a system is only as good as the results that you get. If the results are bad, we should reexamine the system and not say this system is so good that we must not question it.

    ADAM SMITH: Do you see yourself, then, as the leader of a country - or a group of countries - seeking to modify this religion, as you call it?

    DR.MAHATHIR: Well, certainly as leader of Malaysia, we think we should modify this religion called capitalism, or rather, its interpretation. And we think, with proper regulation, it can be made to work for the benefit of everyone.

    ADAM SMITH: The argument of course was that the free markets brought benefits to the world at large. In your modification, how would you keep the benefits while protecting your own people?

    DR.MAHATHIR: Well there are lots of things that we can do. And things have been done before. For example, in the free market system there is nothing to say that there should be no monopolies. And yet, when monopolies in America hurt a lot of people, they decided to stop them.

    Similarly here, we have an administration where market forces are being used in a destructive way. So we should curb that by saying for example: "don't lend so much money to the hedge funds." By just doing that we could limit their activities and lessen the risk of countries being impoverished.

    ADAM SMITH: Korea and Thailand also faced this problem. They went into a more severe recession even than you did. But they now seem to be recovering after taking the IMF medicine or whatever you want to call it. Can you comment on their path as opposed to yours?

    DR.MAHATHIR: Well, they borrow more from foreign sources. Therefore when their currencies are devalued their ability to pay their loans is very much reduced. They got into a state of distress, and needed to borrow from the IMF which means placing themselves under IMF control.

    Now, IMF control - it has even been admitted by the IMF itself - is not the right medicine. Actually these countries got worse.

    The reason why they are turning around now, is because the hedge funds are not being lent as much money as before, after the Long Term Capital debacle. These days the hedge funds cannot move in and out of these currencies at will the way they used to. Therefore the currencies have been able to appreciate and are in a much stronger position.

    At the same time the IMF had to open these countries’ economies to foreign investors, so foreign investors have more confidence to move in. So, in a way, they have contributed to a recovery.

    ADAM SMITH: If I understand you correctly, you are saying that simply decreasing the amount of leverage available to the hedge funds has enabled some Asian countries to turn around.

    DR.MAHATHIR: I think so. I think, once the hedge funds have less access to money, they cannot manipulate currencies as freely as before. So some of those currencies have appreciated.

    ADAM SMITH: You said yesterday, here in Davos, "currency traders are the new weapons of war." Who is in this war? Who is on what side?

    DR.MAHATHIR: Well, you can conquer a country by moving your military forces across the border and taking over its administration.

    But if you impoverish a country and force it to beg for funds, and accept whatever conditions you impose, you then expose that country to manipulation.

    If the economy of a country is totally controlled by outsiders, then the independence of that country is affected.

    We know, for example, in the case of the so called Banana Republics, those governments depend so much on one industry that that industry can actually manipulate the government.

    And we have seen governments overthrown, and policies shaped, by outsiders who control the economy.

    ADAM SMITH: But now, in this new war, do you see this happening all around the world just as in Southeast Asia? Latin America? Russia?

    DR.MAHATHIR: Yes. It could happen to those people who have to submit to the IMF and are now actually being run by the IMF in many ways. So then they have lost their independence.

    ADAM SMITH: So you see this as a similar problem in Latin America, Russia and Asia. It has a common theme. How would you articulate that theme?

    DR.MAHATHIR: I would say that the IMF now controls quite a lot of the countries in this world simply because those countries have to accept IMF policies or else they won’t have access to IMF funds.

    For example, in Indonesia, as you know, the IMF withheld the money that was supposed to be handed over to the Indonesian government until they got rid of their President — Suharto - and changed various systems, and practices that they had.

    ADAM SMITH: Tell me what you would like to see happen in the United States? In the international financial community? In the IMF? In other words, what is your own prescription?

    DR.MAHATHIR: In the first place, the United States would be in a very good position to have the banks lend money to the hedge funds more prudently. That would reduce the capacity of the hedge funds to undermine other countries.

    That is one thing that the U.S. can do.

    The U.S. can, of course, also say that all such transactions must be more transparent. It can say there should be a proper market with a mechanism for devaluing currencies, which should be well known and understood. All these things the United States can do.

    ADAM SMITH: And the IMF?

    DR.MAHATHIR: The IMF should not apply the same medicine to every country. Their medicine is this: firstly you must raise the interest rate. Second, reduce credit. Third, declare loans as non-performing within a shorter period. These are the standard IMF remedies and they don't fit in with every country.

    ADAM SMITH: Too harsh?

    DR.MAHATHIR: Well it has the effect of making the running of businesses more difficult. Under these conditions businessmen don't have access to funds, and they have to pay high interest rates. Consequently they fail.

    ADAM SMITH: Economics Professor, Paul Krugman of MIT, challenged these remedies in an article saying that there ought to be a better way. Perhaps you have a comment on that?

    DR.MAHATHIR: Well, in a way, we agree with Professor Krugman. But of course, when we imposed controls in Malaysia there was mal ditto (criticism, bad press) over a period of almost a year. Also it took a lot of time to convince our bureaucrats that we should do these things. But I would agree with Professor Krugman that a degree of control must be exercised. The international financial system today is in a state of anarchy. It is so bad, with no real regime governing it, that countries all over the world are now being exposed to the activities of the hedge funds.

    ADAM SMITH: Do you anticipate gradually returning Malaysia to what we think of as free markets? Or do you expect it to only return to a modified kind of free market?

    DR.MAHATHIR: There must be some regulation in the so-called "free market." You can't have freedom, you know, without some regulation. The free market must have some regulations to prevent abuse. At the moment we think it is too free and therefore subject to abuse, by people with a lot of money.

    ADAM SMITH: Do you think you can attract foreign capital even with these regulations and restrictions?

    DR.MAHATHIR: Yes we can. In fact foreign capital has been coming to Malaysia because these controls do not involve movements in and out of foreign capital. Investors can come in and invest in Malaysia. They can take out their money. They are not restricted from doing so. All we have restricted is our own currency. It may not go out of the country, that is all. So, while in the country, they can change their currency into Malaysian currency, use it, spend it, and make money. Once they have made a profit they can convert it to foreign currency, and take off. There is no problem.

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