Thursday, June 21, 2012

Nation with majority business owners

The current structure of the world economy is focusing on business development for major business so that job opportunity is created.

I am in front of Kaabah, and was thinking how a nation will be if let's say 60% of the population are business owners.

Majority of the population will be thinking how to improve their business and to excel in entrepreneurship. How will this kind of mass brain exercise will contribute to the nation.

I really believe that strengthening the initial or micro equity platform will really transform the economy of a nation.

This could be well a policy to be initiated by the government of Malaysia in reducing the equity ownership gap of various races in the country.

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Location:As suq As Saghir tunnels,Makkah,Saudi Arabia

Monday, June 11, 2012

Creative economy

Something that I believe vital to Malaysia is the human development to the stage that the economy can be converted to creativity or new product and services development stage.

It will be very important that the government should be doing more than tax incentive to bring Malaysian brain back to the country or at least make sure the best student do not leave the country.

Government spending on making sure these developers and inventors to stay in the country will benefit more in economic development of the future. Malaysian workforce are no longer cheap that makes it economically viable for companies to build manufacturing facilities. Malaysia have to go beyond economy of scale manufacturing.

Universities with talented students should be funded accordingly to come up with more invention and product design.

Talent drain in Malaysia will cause harm to the country in the long run. Malaysian government had initiated a program but, I strongly believe that inventors, idea generators, concept developers should be given a more than tax incentive, but grant or leading them to agencies that their skills can be made to actually invent things that will not only generate economic development but also spur creativity materialization amongst Malaysian.

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Sunday, June 10, 2012

Method of transition to Gold gram currency

I like to call it gold gram currency just to indicate the weight of the gold in assessing its value. Most Muslims understand it as Dinar.

One of the state in Malaysia uses Dinar, while the country is still using Ringgit (RM) as its currency. Currency usage can't be executed in isolation. It cause more harm and uncertainty that is detrimental to the user.

Example when one purchase paying in dinar, the next day value of dinar went down, and thus causing the problem of holding dinar shrinking in value. The seller ended up losing value of gold in his possession, and may end up losing, since the gold will be used as working capital that is subject to daily fluctuation. Though it may be different if holding the gold for long period of time.

Transition to Dinar may begin by pegging the RM to gold value. Once this is happening, slowly change it to using real gold and silver.

With the current electronic environment, there is really no need to carry kilograms of gold for any purchase.

I strongly believe that transition to using Dinar is possible and will be beneficial to the country, provided that it needs to be done at macro level.

Wednesday, June 6, 2012

Real value currency

We all know that the current paper money was supposed to be backed by gold or precious commodities. In another words, bank should hold enough valuable commodities for each currency they issue. This is not happening anymore as the value of the currency is now based on value determined and backed by the issuing government, it is also called fiat money.

Thus, we are now in the world depending on governments of the world to be responsible and trustworthy.

Though some argue that it is backed in the value of goods and services a country generated. Lets discuss it from a service value situation. Imagine a government that uses a lot of services from the private sector. Valuing the services value is the judgement of the government. One government may value a cleaning service to be 1 ounce of gold while another government value the same service at 2 ounce of gold. Should the value of the country and currency based on this method? How fair it is in the international trade, when exchange is happening using a currency based on those principles?

Think about the stock market. A company may originate to sell their shares in the market for a value around its net book value, the shares are traded and suddenly become 15 times its net book value. It is only a perceived value of ownership of the part of the company. The perceived value is further traded in other derivative markets. As you can see, the real asset is the company vs the value published around the world may not present reality. But most of us are educated to accept and believe in it.

Thus we are now in the world depending on government of the world to be responsible and trustworthy.

Have you ever wonder how easy it is to print money, during chaos or during period of war? There will be no eyes watching anymore.

I believe should Bretton Woods concept are applied in the world today by every government and irrevocable, we should see a more stable and fair world.

Ability to revoke the system seems to suggest the system was only design to educate and increase confident of using paper money in international trade. Once it is accepted, cut the link to real value and start with something easily manipulated. Don't you think?

Sunday, June 3, 2012

Car Equity Ownership

If interest free economy is to be materialized, I see potential change in car ownership system in country like Malaysia where the cost of imported vehicles are double the real market price due to tax and permits cost.

Perhaps government could introduce, car rental system where tax and permits are reduced to a point where in total the lessee will pay only the total cost of the car after a term of 5 years.

Simple example will be a Honda Accord will cost USD 46K and with financing for 5 years monthly payment of USD 1,073 per month will be required. Thus involving interest of USD18K ignoring time value of money.

Imagine a system where the government tries to inculcate equity ownership. This may be an option.
Honda Accord will actually cost USD 22K outside of Malaysia. If the government introduces the car equity ownership, there should be a place or a centralized car ownership system properly legislated and protected where individuals with money will buy the car, and subsequently rent it to interested parties for USD767 per month that will bring the total rental payment of USD 46K, equivalent to current selling price of the car without interest.

It sounded beneficial to the people while being disadvantageous to the government. Lets analyze it a bit further for simplicity ignoring time value of money and subsequent ripple effect.

Government will lose out about USD16K++
1) Loss of USD 21K over permits and internal tax.
2) Loss of 30% on USD18K income tax over the interest earned by the bank.
3) Gain of USD3K on distributorship earnings
3) Gain of USD7K on income tax of lessor’s profit of USD24K

Lessee will gain about USD18K from savings on interest. Increasing the lessee's disposable income for further economic spending, which will subsequently generate income tax revenue for the government.

Lessor makes USD17K net after paying 30% tax on USD24K profit that will further be translated into economic spending or further investments that will generate income tax revenue for the government.

Banker will lose their net after tax interest income of USD13K

Looking at this simplified calculation Government lose out USD16K, Bank lose USD13K while the people profit USD35K. Look at it from the country point of view and you will realize that overall it is more beneficial.

Interest Free Economy

I wonder how the world will be like if there is no monetary interest. The idea of stoping money from multiplying with time. The idea that wealth should only be generated through hands on hard earned ventures.

Imagine a society where wealth are generated only from goods and services, and making money using time is only on the goods and services not on its medium. Everybody will be working towards getting more money by putting more effort to produce. It is very fair as those that work will be rewarded more than those who doesn’t. Since there is no other way to generate money, society will be forced towards a hard working society.

Imagine the moderate growth the economy will be experiencing, prolonging the optimum standard of living. It feels like the fast economic development via unexisted wealth of debts only reducing the standard of living with influx on money when the physical goods and services does not increase in tandem.

I believe the world will be better off without interest, and grow naturally via genuine goods and services output.

Saturday, June 2, 2012

Seed Capital Market

Is there a need for seed capital market? if it is there what should it offer? How will this system helps the economy especially into equity based  economy?

I have always asked question if there are many people out there trying to build a business of their own but have no time nor someone that can help them build one while they are still in employment.

I always imagine if there is a market similar to those of NYSE where there are listing of potential business idea needing:
1) Capital to finance the operation and start up.
2) Expertise in different field required by the business.
3) Business support services to assist new business.
4) Legislatively supported by government trade development agencies.

I can imagine that plenty of middle class employee would see this as an opportunity to utilize their skills and expertise in a business of their own without having to leave employment until the business start to be able to generate sufficient income for a decent salary.

Those with time and specific skills can meet with people with money and have little time to spare. Those with  money and skills can meet with people with potential and viable business idea.

Since money is involved, someone has to be a watchdog preferable from the government. Making sure that rules are laid down for execution and compliance. Business services should be able to attest to a business plan while taking up responsibility to somewhat similar level to audit firm.

I foresee that having a well organized business development for the people interested to own a business will generate a real positive effect to the economy as more idea and brainpower are channeled towards creating business. These will later be transformed into mergers and acquisition that will convert multiple small business into a business giant that may well be very strong to explore bigger market.

Imagine a society where employees or salary takers are those willingly wish to stay as an employee while unborn entrepreneur are revealed with opportunities simply to be executed.