Article: Ballooning National Debt

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IS BALLOONING NATIONAL DEBT A PROBLEM?

First and foremost, as Monetary Reformists we put in the proviso that we do not endorse a debt-based and debt-led economy. We propose a Sovereign Money system where money is not created by Commercial Banks but created by a Central Monetary Authority that is independent of the ruling govt and reports to Parliament. 

Money is then passed to a State Investment Bank which directs money to the real economy and directs money to the SME sector that creates 70% of jobs in a nation and contributes 40-60% to GDP. This will lead to high employment, high economic output, low inflation and strong Ringgit.

But this system is not in place yet, it still generates mental demons, hantus, and international pontianaks that Monetary Reformists have to battle and summarily dismiss. What we do have is an economy with a RM1.5 trillion debt that a horrified Prime Minister wants reduced and removed immediately at all costs. There is no intention whatsoever for this write-up to be political. The thrust of the article is to inject a new idea into the communal economic mind to see whether it holds traction and will germinate seeds.

There is a new group of thinking people who sees fairly the same views as Monetary Reformist but loyal and beholden to old knowledge they will not call themselves Monetary Reformists but Modern Monetary Theorists. Monetary Reformists see the lie Economics is, and happily divorce and disassociate themselves from this tired dinosaurus subject.

Modern Monetary Theorists (or MMT) says cool it dear Mr. PMX, debt may not be a bad as you think for certain countries, like Malaysia. In other words, countries that have very little foreign debt. Debt is good, because debt jumpstarts covid laden economies and creates jobs for people, and output for the nation, and tax for the govt! So, what they say is, it is not about reducing debt but ensuring the debt raised goes to the right places, the real sector.

These are the debt facts about Malaysia. Total National Debt RM1.5 trillion of which liabilities like govt guarantees RM0.3 trillion. So actual Debt RM1.2 trillion. 76% local debts and 24% foreign debts. Or RM910 billion local debt; RM 290 billion foreign debt. Short term debt RM43 billion. Annual govt revenue RM 234 billion. Debt to GDP 80%. Singapore,168 % Japan 227%.

So, the MMT’s are saying relax, we have only 24% foreign debt to total debt to Sri Lanka’s 59%. Just continue to minimize foreign debt and we are in safe and not choppy waters.

Then the MMT’s goes on to say relax our debts are majority local. If we can’t pay from tax revenue, we will just print the RM to pay. At this time, the Riba Masters brainwashing will kick in and freeze us in the fearful name of Zimbabwe. But hold on, it's not as simple as that. Money printing that goes to the real economy do not generate Zimbabwean fears, it generates economic output and employment. So, if we can manage where the printed money goes to have, we not solved the problem? 

So, in the current system when the government needs money for economic development it sells government bonds to local bond holders. It uses the money for Economic development; it owes money to the bond holders. Economic development is achieved; it owes money to the bond holders.

Does not this sound similar to something? In a Sovereign Money system when a govt needs money for economic development it just creates the money and directs the money to economic development. Economic development is achieved but it owes money to none!

Of course, the key here is money creation is not in the hands of the ruling government. It is not! 

Key here money does not go to the personal sector to create inflation. It does not! It goes to the real sector via the State Investment Bank. 

Key here money goes to the SME sector to create jobs since SME sector in any nation creates 70% of jobs and contributes 40-60% of GDP. It does!

Key here the politicians understand and tables a Money Reform Bill in Parliament tomorrow. Oops!

Hmmmm…….

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Dikemaskini [Updated]: Sam Ahmad 20231122