Just Deal With It, Folks. Inflation Is Here To Stay

Screaming at the government every day is not going to change our lives and changing the guards too has proven to be disastrous

Everyone is talking about inflation. The most convenient way is to blame government policies.

True enough, we have been warned when the pandemic began in Feb 2020 that we will be facing this problem. Some were prepared and some were not.

For the last two years, our government was busy handling the pandemic problem and perhaps overlooked the post-pandemic issues that cropped up.

In talking about the economy among us – the economic agents – do put aside things you and I cannot control such as interest rates, exchange rates, GDP, aggregate demand and all those economic statistics and jargon.

That’s the vocabulary of useless economic policymakers who only talk and want to look smart but nothing happens.

Let us get real. Before we look into our domestic issues let’s look at what are the issues affecting our economy.

A serious inflation problem is hitting the whole world now. The US and Europe included, due to the war in Ukraine that started on 24 February 2022.

This leads to supply shock in petroleum, gas, wheat and fertilizers.

Effects Of The Russia-Ukraine War

Looking at what Lithuania had done to Russia, it looks like not only the war in Ukraine is going to prolong beyond 2022 but there is a high possibility that it will spread to Lithuania, Belarus, Poland or even between Taiwan and China as well as in the middle east.

We all know that the cost of household gas consumption in Europe has gone up 60% and the price of crude oil is also up. Inflation in the United Kingdom is now the highest in 40 years!

Soon the oil price at the pump, I mean RON 95 in Malaysia will increase. The price of wheat and animal stock feed will increase further.

We are indeed lucky to have summer all year round. – photocredit: Writer

All these will contribute to an increase in directly & indirectly products.

Most likely, we are heading towards a global recession. The question is whether it will be severe or mild.

As it is now most currencies except Russian Ruble have depreciated significantly against the USD. That means our imports of essential goods are more expensive since most trades are still conducted in USD.

Although correspondingly we will earn more on our exports but at the same time, it makes some of our exported goods less competitive in terms of price if importers have options.

So How Do We Deal With It?

What is funny, the US federal reserve adopted an interest rate hike to manage inflation.

Such a textbook approach does not work anymore. This will lead to more investors grabbing the US treasury bills which are still regarded as safe investments.

This leads to even more liquidity in their system. The more hilarious this is, our Central Bank “aped” that more by increasing our interest rate too, reason given is to fight inflation.

Do you think people will start saving money in the bank if savings rate and fixed deposit rates increased from 3% to 3.2%?

Come on! If interest rates were to increase from 5% to 7% perhaps it will work.

Such a move will only increase monthly commitment to service housing loans for the personal sector and increase the cost of servicing debts for the private sector.

All these will further put pressure on prices. In economic terms, reducing aggregate demand will not solve the inflation problem at all.

So how do we deal with it besides pressuring the government on policy making?

While waiting for policies to be drawn, implement and bear fruits, we need to help ourselves first.

Changing the government is not going to solve the problem and as we all know, the last time we did it, it made things worst.

In Malay, there is a saying, “Bagaikan Tikus Membaiki Labu” or remedy worst than disease.

As it is now Europe is learning to deal with an energy crisis and started to put its coal power plants into operation again.

What about us in Malaysia?

Inflation & Solutions

There are a few methods of dealing with it and most of us knew them already.

The question is, are we willing to do it effectively and change our lifestyle without reducing our quality of life?

Like it or not, some of the methods are to Increase output, reduce consumption and find alternatives.

Are we ready to increase output in terms of productivity to earn more to cope with the higher cost of living?

For the business community, it’s simply increasing the price of products and services. For fixed-income earners, it simply means there is pressure to increase wages.

Is our agriculture sector ready or geared towards more productivity, cost-effectively, meaning increasing production?

Are we willing to cut on our non-essential items such as sugar and wheat-related food intake? Are we willing to walk 500 meters to our nearest grocery store or our nearest LRT station instead of driving?

As it is now I have been using my bicycle for anything that is less than 5 km.

Have we found other cheaper alternatives to our daily protein needs besides chicken?

Since most salt-water fish are expensive, I have been taking catfish alternately with chicken lately.

In Kuala Lumpur, we still can get a plate of rice, catfish and vegetables for lunch and dinner for 8 Ringgit.

Or are we prepared to reduce our consumption of chicken and wheat for example?

Overweight

As it is now Malaysians are generally overweight, isn’t it?

The conclusion is, that inflation is inevitable. Screaming at the government every day is not going to change our life. Changing government has proven to be disastrous too. Well, at least the wrong government.

However, as I said in my earlier article, the fight must start with each individual. The first country that can get out of this situation is a country that has resilient people, not full of whiners.

After all, every one of us makes a nation. At least we are very fortunate compared to the Ukrainians, the young, the old and even women who have to carry weapons to defend their country against Russia as a result of wrong foreign policy.

At the same time, millions have fled the country begging for a new life in neighbouring countries.

Reports I read, sadly, they are not welcomed by locals. At least we are fortunate to have a climate of summer all year round compared to Europeans who are now worried about having to pay more to heat their homes in the coming winter.

Oh yah, having the outlook of a worst economic scenario in the coming months and knowing well even the most advanced economies in the world are raising their hands saying we can’t resolve the inflation issue soon, politically, is it wise for the current government to delay the general election? – New Malaysia Herald

About the writer: Zam Yahaya was a Banking and Capital Market professional by training and a graduate in Accounting, Business & Islamic Finance and is a columnist with NMH. The points expressed in this article are that of the writer and do not necessarily represent the stand of NMH.

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