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Showing posts with label KEITH HIEW. Show all posts
Showing posts with label KEITH HIEW. Show all posts

Wednesday, September 27, 2023

Malaysia's FDI figures down but not out

PETALING JAYA: Since coming into power last November, the unity government has made it abundantly clear it is eager to keep Malaysia as a magnet for foreign investments.

Prime Minister Datuk Seri Anwar Ibrahim has travelled to several countries to promote Malaysia as an investment destination, including to China in April and recently, as well as to the ongoing 78th United Nations General Assembly in New York, following the Invest Malaysia New York event in The Big Apple.

On the other hand – while Anwar has been busy making stops worldwide to foster economic ties on behalf of the country – the official numbers from the Statistics Department showed that for the first half of 2023 (1H23), foreign direct investment (FDIs) into Malaysia amounted to RM15.1bil, only a third of the funds that came in at the same time last year.

For the whole of 2022, Malaysia had managed to garner RM74.6bil of FDIs, which plainly means that it would be a mountain to climb for the country to match that number this year.

For many analysts, the apparent political ambiguity before the six-state elections back in August had played a role in discouraging foreigners to commit their funds to Malaysia, and with that having been resolved, they are looking forward with more optimism.

According to Nixon Wong, chief investment officer for Kuala Lumpur-based fund management firm Tradeview Capital, the year-on-year (y-o-y) decline in FDIs for 1H23 was also due to the strengthening of the US dollar, which capped FDI inflows, on top of the uncertainties before the state elections.

However, he believes the tide could be changing, with major global players such as Germany’s Infineon Technologies AG as well as Intel Corp, Amazon Web Services and Tesla Inc of the United States having set up shop in the country or pledged to commit further investments.

Moving forward, he told StarBiz: “I believe with the initiatives on green energy generation and increasing adoption of environmental, social and governance (ESG) principles in doing business could attract more FDIs our business environment becomes a better match to the ESG criteria these global players are looking into.

“Also, momentum could be built by taking advantage of trade diversions due to uncertain geopolitical tensions that include the United States-China trade conflict and the Russia-Ukraine crisis.”

At the same time, Rakuten Trade head of equity sales Vincent Lau is similarly expecting “more FDI good news” towards the end of the year and into 2024.

“Of course, there were also other factors for the y-o-y pullback (in FDIs into the country) such as the high interest rates environment globally, but there is a sense of relief now that politically the country is stable. This, coupled with the aggressive efforts of the Prime Minister, means things should improve from here,” he predicted.

Having said that, Lau believes the upcoming tabling of Budget 2024 would be essential to clarify Putrajaya’s policies on many issues, including how it intends to further encourage and more importantly ease the entrance of FDIs into the country.

Besides that, he noted that the targeted subsidy reforms and the possible amendments on the government’s tax base could also set the tone for FDIs if further details could be ironed out next month.

While recognising it may be a big ask for Malaysia to surpass the RM74.6bil FDI amount of 2022 for this year, Lau is hopeful of the situation over the longer term as the government has been active in its efforts in attracting investments.

“This can also be seen by Bursa Malaysia organising its first physical Invest Malaysia New York in six years last week, which is part of a push for investments for the Madani Economy initiatives,” he told StarBiz.

Offering his views from an economical perspective, Centre for Market Education (CME) chief executive Dr Carmelo Ferlito opined that FDI quarterly volatility has been a consistent trend over the long term, and therefore should not set off any alarm bells yet.

In addition, he said the 2022 FDI data is likely to have been boosted by the post-lockdown recovery that the country experienced last year, an effect that is quickly fading.

While the news has been flushed with reports of FDIs being granted approvals since the start of year, such as the RM170bil commitment by China and RM23bil pledge by Japan that was announced in July, Ferlito suggested it may be more meaningful to look at implemented FDI’s instead of just approved ones.

He said that back in April, the CME has backed a call by former second finance minister Datuk Seri Johari Abdul Ghani for the setting up of a special committee under the International Trade and Industry Ministry to monitor investments in Malaysia.

“The commission would have had to monitor not only the inflow of FDIs and the approvals, but also how many get implemented, as well as the reason why some of them are not implemented and so on. It was a good proposal, and we think it deserves to regain interest,” he says.

With Anwar having called for the cutting down on red tape and striving to improve the ease of doing business, Ferlito said the Prime Minister is aware there are issues for foreign businesses to enter the country which are related with institutional arrangements.

As such, he has urged Anwar to take the lead in creating a reform process to achieve those goals of reducing red tape and increasing the ease of doing business, as advocated in the Prime Minister’s Ekonomi Madani speech.




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Thursday, September 7, 2023

Battle for deposits forecast to intensify



PETALING JAYA: As competition for deposits intensifies in the months ahead, one research house has bucked the trend by downgrading its outlook on the banking sector. It believes that competition for deposits could intensify towards year-end although pressure on net interest margins (NIMs) and operating expenditure may abate.

RHB Research commented that overall, banks have recorded decent second-quarter (2Q23) results, but they may not see a repeat of the hefty income in the first half of the year (1H23) from treasury and markets.

It said that with digital banks poised to launch operations in the months ahead – as exemplified by GX Bank (GXB) which began operations on Sept 1 – it will be interesting to note how conventional banks react to the attractive deposit rates these new entities are expected to offer.

RHB Research said in a note published yesterday that the revised guidance on NIMs would imply that banks are expecting 2H23 NIMs to be stable versus that of 1H23, or slightly better, while remaining watchful of loans exiting relief programmes for both the retail and small-medium enterprise or SME segments.

“For now, we forecast 2024 sector earnings growth to revert to the trend growth rate of 6% to 7% year-on-year (y-o-y), in line with our forecast corporate earnings growth of 7% to 8% y-o-y for 2024,” it said.

The research house pointed out that the banking sector has rallied by 8% since end-1H23 and by 9% since the 1Q23 results season, compared with 6% for the FBM KLCI, underpinned by the banks’ earnings holding up relatively better against the broader market.

It added: “Investors have started to look ahead towards NIM stabilisation – given that 1Q23 was likely the worst quarter in terms of NIM pressure. Also, 2Q23 earnings met expectations, while the declaration of interim dividends helped further support share prices, in our view.”

Meanwhile, casting a glance at Singapore’s GXS Bank Pte Ltd to ascertain what its subsidiary GXB would offer, RHB Research reported that GXS started off last year by offering depositors 0.08% interest in its regular savings and an additional 3.48% for its “saving pockets” accounts.

Calling GXS’ deposit account a “fuss-free product”, the research house commented, “Apart from offering better rates than some high interest savings accounts, the features that made GXS’ deposit product attractive were no minimum deposit amount, no maintenance fees and no tiered interest rate structure.”

The research unit added that the deposit account was well-received, and was followed up with the launch of micro loans, given the bank’s focus to render services to the underserved or unbanked segments such as gig economy workers and small businesses.

It revealed that in 2Q23, GXS began offering instant micro loans that the bank’s app users could apply for with ticket sizes from S$200 with tenures as short as two months, as interest rates start from 3.8% per annum.

As such, RHB Research is of the opinion that the features of GXB’s deposit product could be similar to that of GXS, while also expecting it to be similarly well received.

“That said, given the RM3bil cap to asset size during the foundational phase, the potential deposits that could migrate from conventional banks to digibanks should not be material, perhaps less than 1% of total deposits in the initial years,” it said.

It added that there had not been any significant deposit competition among Singapore banks last year as well.

Moreover, the research outfit said given the estimated deposit market share up for grabs in the Malaysian banking sphere, deposit competition should likewise be under control. “The key question is whether incumbent banks will stay rational,” it said.

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Saturday, August 5, 2023

Is progressive wage model the solution?

 



Malaysia is set to announce a progressive wage model. What will this mean for the future of employee wages in the country?

Dissecting the practicality of the progressive wage model and its potential impact on Malaysian's welfare


AS the Unity Government continues apace on its attempt to uplift the livelihood of Malaysians, as announced at the launch of the Madani Economy by Prime Minister Datuk Seri Anwar Ibrahim last week, the debate on the best wage structure for the country rages on.

Especially pertinent after a number of announcements by Economy Minister Rafizi Ramli regarding the government’s consideration and proposed implementation of the Progressive Wage Model (PWM), which could be modelled after neighbouring Singapore’s version, wage experts and economists are offering varying opinions on the subject.

To be clear, Singapore unveiled its own PWM since 2012, and according to its National Trades Union Congress, the PWM is based on the key objectives of helping Singaporean workers climb the four ladders of skills upgrading, productivity improvement, career advancement and wage progression, on top of helping companies make better use of and retain their workforce.

Notably, the island nation does not have an official blanket minimum wage structure, except for two sectors, namely for cleaners, where the minimum wage is S$1,000 (RM3,390) per month; and for security guards, who are required by law to be paid S$1,100 (RM3,729) monthly.

However, its Manpower Ministry has outlined the progressive wages (PWS) Singaporean workers are to be paid in a number of sectors, including the landscaping, food services and retail industries.

For example, a local Singaporean working as a cashier has to be paid a minimum of S$1,850 (RM6,277) monthly from Sept 1, 2022, which would increase to S$1,975 (RM6,701) from Sept 1 this year; while a landscape worker would be required to be paid S$1,650 (RM5,599) per month.

Singapore also has a Local Qualifying Salary (LQS) – S$1,400 (RM4,746) – which its Manpower Ministry describes as a determinant for the number of local employees who can be used to calculate a firm’s work permit and S Pass quota entitlement.

Since September last year, firms employing foreign workers who require work permits, S Passes or employment pass holders are mandated to pay PW salaries to local workers covered by the relevant Sectoral or Occupational PWS in the aforementioned cleaning, security, landscape maintenance, and retail sectors as well as in-house workers covered by the PWM, while also remunerating at least the LQS to all other local workers.

Can the PWM be successful here? 

The discussion naturally hinges on whether what Singapore is doing can be implemented here, and what are the benefits of a blanket minimum wage structure as compared to a PWM.

Aside from that, the (business) man on the street could also be concerned as to whether the government has set its sights on making the PWM a mandatory initiative, or would this be optional, perhaps at its nascent stage at least.

As argued by Socio-economic Research Centre (SERC) executive director and economist Lee Heng Guie, the PWM offers more of a winwin solution for both employees and employers, if compared to a blanket minimum wage structure.

By looking deeper into the numbers since Malaysia’s Minimum Wage Order (MWO) was first enforced in 2013, he observes that 2022 marks the fifth time of implementation as the minimum wage rate was reviewed at least once every two years.

“The new minimum wage of RM1,500 per month was fully enforced on July 1, an increase of between 25% and 36.3% compared to the RM1,100 to RM1,200 monthly wage in 2019.

“Over the period from 2013 to 2023, minimum wage has increased by 5.8% per annum from RM900 per month for Peninsular Malaysia and 6.5% per annum from RM800 per month for Sabah and Sarawak on Jan 1, 2013, respectively. However, overall labour productivity increased by only 2.3% per annum for the same period,” he reveals.

As such, Lee says the government is looking into the appropriateness of other wage models to benefit both employees and employers, and he believes the PWM may be an appropriate and feasible substitute wage model to improve the income of low-skilled workers to have a living wage.

Theoretically, a living wage differs from a minimum wage because the former refers not just to the existence of a minimum level of remuneration, but also to a minimum acceptable standard of living, according to the International Labour Organisation.

Therefore, living wage rates are usually higher than the minimum wage rate, especially when the latter has been less frequently updated in line with living cost increases.

While concurring that employees should be compensated according to their skillset, efficiency and education levels, Juwai IQI global chief economist Shan Saeed says the issue of increasing wages and productivity would be best based on a market-driven approach.

He tells Starbizweek this would be best achieved if all stakeholders were to get involved to enhance workers’ productivity to ultimately buttress economic outcomes at the macro level.

“Workers’ efficiency, solid skills and education are major variables in influencing economic growth. In turn, economic expansion and innovation have a direct correlation with strong deliverable outcomes benefiting the masses in improving their living standards and purchasing power,” he points out.

Citing the late Gary Becker, former professor at the University of Chicago Booth School and Nobel Laureate, he says Becker believed that investment in an individual’s education and training is like a business investing into equipment, being the epitome of applying economic analysis to human behaviour.

In addition, he says higher wages allow firms to attract and retain better employees – assuming competitors don’t follow suit and raise their wages as well.

“But there is an important – and often overlooked – second effect. Paying wages that are above the market rate, known within economics as efficiency wages, can also be an important motivating force for a company’s existing employee base.

“The intuition is straightforward: higher wages make a job more desirable. This leads to a larger applicant pool waiting to take over when openings occur and makes it easier to replace another employee. Malaysian companies can follow the similar footprints to achieve desirable outcomes,” says Shan.

Handling a chronic situation

While one can understand the perspective of the SERC when it compares the PWM with the MWO, there are parties who are arguing for the benefits of the MWO before embarking on any “progressive” initiatives.

Even Rafizi has reiterated this week that it is his “job”, through government policy, to prioritise increasing the wages of Malaysians, for them to better cope with rising living expenses.

He emphasised that instead of embarking on new billion-ringgit projects, the unity government has fixed its focus on improving the incomes of Malaysians, echoing Anwar’s warning that the country has been caught in a vicious cycle of high costs, low wages and low profits.

In fact, the argument can be made by looking at Malaysia’s gross domestic product (GDP) per capita over the past 50 years, especially against economies that were considered inferior to it but have since made significant progress, advancing beyond Malaysia’s growth. Two good examples of this, of course, are Singapore itself and South Korea.

For starters, the GDP per capita breaks down a country’s economic output per person, calculated by dividing the GDP of a nation by its population. It is a metric often used by economists to analyse the overall prosperity of a country based on its economic growth.

In an article for Taiwan’s The New Lens, Singaporean writer Roy Ngerng observes: “Up until the late-1970s, Malaysia’s total wages per capita were actually higher than South Korea, and were in fact over three times higher in the early-1970s.

“Today, however, the tables have turned and South Korea’s total wages per capita are about four times higher than Malaysia. The total wages per capita of Czechia and Estonia were also similar to Malaysia’s at one point, but have grown to be about 3.5 times that of Malaysia, while Poland is twice as high.”

On top of that, up until the mid 1980s, Malaysia’s GDP per capita – in US dollar terms – was higher or on par with South Korea, while in the early-1990s, Malaysia’s GDP per capita was also similar to that of the Eastern European countries like Czechia, Estonia and Poland.

“In other words, Malaysia’s economy used to be larger than those countries. However, while the economies of those countries have since expanded rapidly, Malaysia’s GDP per capita stagnated in contrast. Today, South Korea’s economy has grown to three times larger than Malaysia,” says Ngerng.

He says the reason is because Malaysia’s wages have stagnated relative to these other countries, and consequently it has hurt the growth of domestic consumption.

In contrast to many economists, Ngerng believes it is not necessary at this point in time for Malaysia to adopt Singapore’s PWM, but rather it should focus on increasing minimum wage more rapidly.

Wages at other levels in Malaysia are not growing faster because Malaysia’s minimum wage is rising too slowly, and with wage increase at other levels being dependent on the growth rate of minimum wage, the stagnant minimum wage therefore prevents wages from rising across the board.

As a result of Malaysia’s wages stagnating, this has resulted in its economy stagnating as well, he says.

A cursory look at the GDP per capita numbers taken in December 2022 on CEIC Data sees Malaysia posting a figure of US$12,472 (RM56,828). In comparison, Singapore is way ahead at US$82,794 (RM377,000), with South Korea also almost three times ahead of Malaysia at US$32,236 (RM146,883).

Notably, Czechia registered a GDP per capita of US$27,566 (RM126,000), while Estonia and Poland both posted respective figures of US$28,568 (RM130.165) and US$18,222 (RM83,000).

Is a Pwm-tiered subsidy the way to begin?

Perhaps a move that could also be given some thought would be to make the PWM optional to businesses, with the government at the ready-to-subsidise progressive and productivity-linked wage increases, tied in with certain key performance indicators that could be seen to contribute to the country’s GDP growth, of course.

Again, Singapore has put in place a similar structure, a fiveyear plan to subsidise wage increases, so as to provide support for businesses to pay higher wages.

Malaysia could copy such a programme where the government subsidies wage increases but on an annually decreasing scale, so that as companies grow more financially sound, they would be taken off the subsidy programme after a number of years to manage their own wage growth measures.

Sunway University professor of economics Dr Yeah Kim Leng is striking a more balanced view when he says the PWM is definitely worth experimenting here – given the decades-old problem of depressed skilled and unskilled wages, with the exception of chief executives and senior management.

“To be sustainable, wages need to be linked to increases in efficiency, productivity and competitiveness.

“Where there are wage rigidities and labour market failures due to weak bargaining power of employees, inefficient labour market information systems and lack of skills recognition and certification, the government has strong grounds to adopt more interventionist policies such as minimum wage regulations and progressive wage models,” he tells Starbizweek.

Suggesting a way for implementation, Yeah says the government would need to bring industry players together with workers’ unions or representatives to determine basic wages, skills grading or levels and wage ranges for each skill level.

The wage ladders for each industry will enable employees to upgrade their skills and earn correspondingly higher wages along with greater responsibilities, says Yeah, with the other challenge being to link higher skills with higher productivity that enables the company to be more productive and generate better profits for the sustainability of wage growth.

He opines: “A minimum wage will ensure that no worker is paid below a decent living wage thereby enabling the country to eradicate hardcore poverty, while a progressive wage model has the advantage of ensuring that workers are paid productivity-linked wages and to earn progressively higher wages that commensurate with ‘middle-class’ status.

“A well-designed PWM will contribute eventually towards achieving what we see in advanced economies where blue collar workers earn as much or higher than white collar workers.”

Cultural attitudes: A road block to growth?

However, there also exists the viewpoint where Malaysians on average are culturally less inclined to acquire knowledge and new skills or upgrade themselves, something perhaps anyone with recruiting experience would understand well.

If such is the case, how would the government go about justifying increasing the minimum wage more quickly in this catch22 situation?

This has led Joey Gan, market lead for Singapore-based regional corporate consultancy firm Precious Communications Pte Ltd, to remark that even for the citystate, one of the primary challenges in implementing PWM is that many training programmes require a certain level of literacy, basic education, or even certifications, but unfortunately, a significant proportion of workers do not meet these requirements.

“I believe Malaysia may also face a similar challenge, on top of the obvious cost factor for many companies. Moreover, the readiness of workers to upskill and adapt to new opportunities is also a key obstacle.

“Personal development through training largely depends on an individual’s internal motivation. Therefore, for this initiative to succeed, employees would need to undergo a radical change in attitude towards training for upward social mobility,” she says.

While a beneficial step would be to prioritise employees’ welfare by implementing some form of PWM, she believes that replicating Singapore’s approach might not be feasible without comparable government incentives – such as subsidies for training and wage increments – especially for Malaysian businesses already burdened with rising operational costs.

Ergo, Gan says employers might prefer the reverse income tax model, while employees may appreciate a reasonable wage increase that keeps pace with inflation.

Resonating with SERC’S Lee, she notes: “The PWM is a more holistic approach to help our low-wage earners enhance their skills and, in turn, their productivity, so increased wages are the ultimate result of this progression.

“While PWM is not without its challenges, it offers employers better productivity from their workforce, considering the cost, and employees benefit from developing and evolving skill sets over time. In the end, it’s a win-win situation where both employers and employees gain from this approach.”

More crucially, however, she points out that the high productivity and standards in Singapore are a result of both the young and the elderly realising that there is no guaranteed help or support as they age.

This awareness, says Gan, is the major reason that has motivated Singaporeans to work harder and longer to secure a better future, despite the role that the PWM may have played.

“It is essential for our entire workforce, regardless of our wage band, to embrace a growth mindset. Increasing wages goes hand in hand with continuous learning, skill development and improvement.

“To facilitate this growth, it is essential for the government and companies to collaborate and propose people-centric policies that support the development of a highly skilled workforce,” she says.

The Star - StarBiz
By keith Hiew keith.hsk@thestar.com.my

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Friday, May 12, 2023

Gold reserves on uptrend

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 Storage of bullion seen as key in inflation fight. Gold likely to perform better than the US$

PETALING JAYA: Asian central banks, including Bank Negara, were seen upping their gold reserves in the past decade given the versatile use of the precious metal as a hedge against inflation and, a protective measure against purchasing power risks.

Malaysia has emerged as having the fifth-highest increase in gold reserves between 2013 and 2022 among Asian countries, said Singapore-based brokerage firm City Index, which released the data yesterday.

The brokerage noted that Bank Negara has overseen a 6.84% increase in the country’s gold reserves, from 36.4 tonnes to 38.88 tonnes over the period under review.

This is 90% more than Indonesia, whose gold reserves only increased by 0.64% between 2013 to 2022

However, the republic continues to hold 50% more gold than Malaysia with 78.57 tonnes.

The increase in Malaysia’s gold reserves also paled in comparison to third-placed Singapore’s 20.7% climb in bullion stock at 153.7 tonnes, which itself is dwarfed by China’s near-doubling of its storage of gold to 2,010 tonnes, taking the top spot among Asian nations.

“Gold reserves in China averaged 1,694.78 tonnes from 2013 until 2021, reaching an all-time high of 2,010.51 tonnes in the fourth quarter of 2022, accounting for 3.6% of its total foreign reserves,” City Index pointed out.

Notably, the brokerage firm said China’s increase in gold imports is largely considered to be the result of an effort to reduce its reliance on the US dollar and to diversify holdings of the People’s Bank of China.

According to City Index head of market research Matt Weller, the surge in gold investment demand signals a growing concern among investors regarding the inflationary pressures in the market.

“As central banks continue to use gold as an inflation hedge, it’s not surprising to see individual investors following suit in the form of coins or jewellery, especially in countries such as India and China, where gold has long been considered a traditional store of value,” he said.

Meanwhile, the brokerage firm said Thailand has had the second-largest increase in gold reserves in the last decade, increasing by 60.2% from 152.4 tonnes to 244.1 tonnes.

Quoting the World Gold Council, City Index said gold remains a popular and effective inflation hedge amid global economic uncertainty in Thailand, exemplified by a 40% increase in demand for the metal year-on-year in 2022, fuelled by the rebound in tourism.

The debate, though, continues on whether gold could live up to its reputation as a buffer against inflation compared to other means employed to stem the inflationary tide, namely bonds, the greenback, and much more recently, cryptocurrencies such as bitcoin.

This is evidenced by the price of gold taking a beating from mid 2022, coinciding with the Federal Reserve’s 50-basis-point hike in May which was followed by four giant 75-basis-point surges, sending gold price from approximately US$1,800 (RM8,032) an ounce to just over US$1,600 (RM7,140) by November as the US dollar strengthened.

Meanwhile, Bernard Aw and Eve Barre, economists at Singapore-based Coface Services South Asia-Pacific Pte Ltd, pointed out that the relationship between the dollar and gold tends to be inverse, although this negative correlation has weakened since 2018.

“Although there is an easing trend, inflation rates are expected to be above historical trend at least through 2023, while global growth remains sub-par. Gold may therefore perform well relative to the dollar since the United States rate hike cycle appears to be nearing its peak.

“Moreover, geopolitical factors have also contributed to emerging market central banks stocking up on gold reserves, pushing up demand for gold, amid a very gradual shift away from the US dollar,” they told StarBiz.

Concurrently, chief executive of Centre for Market Education Dr Carmelo Ferlito also believes the decision to increase gold reserves among Asian countries may be seen as a signal of worry among these countries, and their consideration of the dollar as a less dominant currency in the future.

“Thus, despite the decrease in its price last year, gold is perceived as a more stable store of value,” he said.

Ferlito opined that the cessation of the gold standard has been the biggest source of inflation in history, as inflation in the last 50 years have exceeded any before it.

“In fact, currently measuring inflation through the Consumer Price Index is meaningless with the fiat system. A more effective way would probably be to measure price indices against wage indices,” he said.

With Asian central banks embarking to fortify their bullion stockpile in an apparent effort to mitigate inflation, Ferlito said returning to the gold standard would be ideal but practically impossible at this point in time, as the quantity of money in circulation is exceedingly high.

“Free banking and competition among currencies may be a better option for the current financial climate,” he added.

Coface’s Aw and Barre too did not advocate a return to the gold standard, believing the system will deeply restrain the ability of governments to support economic activity when needed since money supply would be limited to the amount of gold detained.

They said: “Considering the way central banks acted during the last two economic crises by expanding their policy instruments, as well as the massive fiscal support provided by governments during the lockdowns, it is difficult to imagine a return to the gold standard, which would imply the end of this important interventionism.”

Providing an interesting balance to the gold against inflation idea, Forbes in an article published earlier this month reported that gold has at times in history been found wanting as an inflation hedge.

“From 1980 to 1984, annual (US) inflation averaged 6.5%, but gold prices fell 10% on average each year. Returns not only fell short of the inflation rate, but they also underperformed real estate, commodities and the S&P 500. Annual inflation averaged about 4.6% from 1988 to 1991, but gold prices fell approximately 7.6% a year on average,” the report revealed.

On the other hand, while concluding that gold has been an inconsistent inflation hedge, Forbes recommended holding some amount of the precious metal as a diversification strategy.

“Gold has historically had a low or even negative correlation to both stocks and bonds, suggesting it offers value as a tool of diversification,” it said. 

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