We should learn from our mistakes. It’s wiser if we can learn from the mistakes of others. I’m writing this before our Friday Nov 2, 2018 unveiling of Pakatan Harapan’s maiden national budget for Malaysia. However, you’ll read this at least a day and a half after Finance Minister Lim Guan Eng tells us what we can expect by way of government hand-outs and clawbacks throughout 2019.
Since I’m not clairvoyant, I have no idea what Malaysia’s Budget 2019 contains. Nonetheless I suspect there are more angry people reading this column than happy ones!
Hopefully, though, if our Budget achieves Lim’s short- and medium-term goals, then our frowns may yet turn to smiles later. At least that’s the heartfelt hope of millions of decent Malaysians still reeling from the scope and scale of the economic theft visited upon us.
This Budget is a sacrificial one – meaning we the rakyat have the honour of making personal financial sacrifices to help restore Malaysia’s long-term economic health. It wouldn’t surprise me if some of those sacrifices include pared down subsidies and bumped up taxes.
To help you understand why I’m bracing for higher taxes, let me take you back three and a half decades...
I was 19-years-old and living in London when Britain’s Iron Lady, Margaret Thatcher, explained in October 1983 a profound truth at the Conservative Party Conference:
“The state has no source of money, other than the money people earn themselves. If the state wishes to spend more it can only do so by borrowing your savings, or by taxing you more. And it’s no good thinking that someone else will pay. That someone else is you.”
Maggie went on to drive home a stark fact:
“There is no such thing as public money. There is only taxpayers’ money.”
Modern proponents of Quantitative Easing or QE might disagree with Thatcher’s views. After all, for the last decade the world’s major central banks, the Fed, the ECB, the BoJ and the BoE, printed – pretty much out of thin air – mountains of USD, €, ¥ and £, respectively. But this brand of fiscal stimulus spun out huge piles of debt-related paper for the countries that embarked on varied QE experiments to rescue our economic system from plummeting down the abyss of the Global Financial Crisis.
As with all government debt, the piper must eventually be paid by regular people through elevated inflation caused by a dramatic expansion of the money supply or by their governments channelling scarce resources to pay down that debt instead of on productive development. (Note: When a country like Malaysia, say, overspends on vanity projects of dubious economic benefit or suffers outright theft of precious capital through kleptocracy, it runs the risk of tipping into failed statehood.)
If you’re curious about what such large scale missteps might mean to us, there are direct lessons here that can be applied to our personal and family finances.
Lessons to learn
In my last two columns, I referenced Tom Wright and Bradley Hope’s riveting book ‘Billion Dollar Whale’ on our ignominious 1MDB scandal. But for those who prefer a closer, more technical look at the specific ways 1MDB led to Malaysia’s worsened debt position through outright theft, my ex-boss P. Gunasegaram’s fascinating book ‘1MDB – the Scandal that Brought Down a Government’ is one I recommend to those with an analytical streak. But be warned: It isn’t for lightweight readers.
Guna pulls no punches when he reports in his Preface: “This is an account from a journalist and his colleagues of the 1MDB scandal as it developed, gained attention, spun out of control, and finally helped bring about the collapse of a government which by that time had become the most kleptocratic in the world with evidence indicating a plethora of corrupt practices sanctioned directly or indirectly by the government of the day, and indicating collusion among many.”
We all acknowledge that we should learn the lessons of history to avoid repeating old mistakes. That’s true for both ancient and modern history. Malaysians therefore should ruminate on what occurred in our most recent mega-scandal to minimise the likelihood of something like it or worse occurring again, at least in our generation.
Guna’s book helps attentive readers better understand the various mechanisms used by smart yet morally bankrupt people to steal directly from us, the rakyat of Malaysia.
In ‘1MDB’, Guna references a comprehensive investigation by the US Department of Justice (DoJ) which revealed in two different civil filings of July 2016 and June 2017 that there were four different phases of misappropriations from 1MDB amounting to US$4.507 billion (or over RM18 billion based on the current RM to US$ exchange rate).
Each phase contains lessons we can learn to help us manage our own money better. Before I dive into those next week, note that each time we’re entrusted with resources belonging to others, we should strive to be honest, diligent stewards, even if it requires personal reinvention.
In next week’s column, I will outline those four phases of theft and elaborate on the associated financial planning lessons. Till then, study our Budget 2019 for specifics that may hurt us now but which I hope will help us prosper later.
© 2018 Rajen Devadason
Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at https://www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com You may follow him on Twitter @RajenDevadason