Over the past few years, many Malaysians have realised what business journal Forbes has now articulated: Malaysia’s economy, complete with high property prices, low interest rates, rising federal government and household indebtedness, shows all the signs of a classic credit and property bubble. When is it going to pop?
Siti Hajar Aladin’s letter to the PM in my earlier post is a cry from the people about their indebtedness and inability to keep up with the higher cost of living.
By now, most of us will be familiar with all the worrying trends and stastistics cited in this Forbes story.
Study the familiar charts in that story carefully.
The Forbes analyst makes an interesting observation:
Plans to build the tallest building in Southeast Asia, the 118-story Warisan Merkeka Tower, are a major Skyscraper Index red flag.
The Skyscraper Index theory suggests that many of the world’s tallest buildings were in the pipeline just before an economic slump; investments in such towers usually peaks when growth tapers off and the economy is poised to slump.
Still want to go ahead with those megalomaniacs’ Menara Warisan? This tower is classic Mahathirism, just as the Petronas Twin Towers were (on the eve of the East Asian Financial Crisis), and it could put Malaysia on the map for all the wrong reasons. (And now they are resurrecting another Mahathir administration mega project, that stupendous bridge to Sumatra.)
All this should indicate to us that Mahathir is back in the driving seat or his ideas are back in favour. But our elites have forgotten the East Asian Economic Crime in 1997 that spelt the beginning of the end of Mahathir’s grip on power. They have short memories, don’t they?
So when will the Malaysian bubble pop? Forbes says:
Malaysia’s bubble will most likely pop when China’s economic bubble pops and/or as global and local interest rates continue to rise, which are what caused the country’s credit and asset bubble in the first place. The resumption of the U.S. Federal Reserve’s QE taper plans may put pressure on Malaysia’s financial markets in the near future. Malaysia’s rapidly deteriorating current account surplus due to weaker exports is another worrisome development.
As I’ve been saying even before this summer’s EM panic, I expect the ultimate popping of the emerging markets bubble to cause another crisis that is similar to the 1997 Asian Financial Crisis, and there is a strong chance that it will be even worse this time due to the fact that more countries are involved (Latin America, China, and Africa), and because the global economy is in a far weaker state now than it was during the heady days of the late-1990s.
And, all the while the Najib administration milk (think of the cow-and-condo scandal!) the nations coffers for their mega projects and crony-driven feeding frenzies.
Fasten your seat-belts and pray to God (or whatever you prefer to call the Supreme Being!). We are going to need all the help we can get.
Do share your thoughts below.