The gist of the manifesto remains the same. Copy the practices of developed nations as long as they don't go against the teaching of the Quran.
After interpreting the Surah Al-Maun(tools), and new information about inflatikn and currency revaluations, the manifesto can be itemized more clearly.
1. VAT of 25%. Or similar sales taxes on all items including food. This is not against the teaching of the Quran because Zakat is a form of taxation also. It is not the tax that is frowned upon, but how the tax collections are distributed.
25% appears to be the largest amount practiced by even Norway that is rich in petroleum and hydroelectric resources.
2. Abolish all subsidies, even for food and medicine. The savings will be given to all citizens on a per Capita, regardless of income status, i.e. universal basic income (UBI)
3. Implement UBI from the VAT(consumption tax) and removal of subsidies. It will mean that each citizen will get around rm6,000 per year at current value ( 1us to 5rm).
Residents who are non-citizens will be paid 20% of what citizens who are allowed to vote can get. All residents will be given identification cards and tourists must have valid travel documents.
Orphans who do not have any affiliation to any country will be given full citizenship and the full amount of UBI. It is the government who must prove that these orphans are stateless but any evidence to the contrary will be retroactively, as commanded by the Quran that intentional sins will not be forgiven. Surah Al-Maun also condemn strongly the neglect of orphans and the poor.
4. Implement deflation economy just as Japan had experienced. GDP of Japan in world currency has increased, only in local currency. Of course, once our currency increase, our GDP increases also if the amount of GDP remains the same. Any apparent decrease of GDP that is less than the increase in the value of the currency means that GDP has grown(increase) instead of shrinking(decrease).
Despite criticisms of the deflation economy, all of these are false and the so called advantages such as encouraging growths, is nonsense. Grown in a devalued currency is worthless. The disadvantages are real and led to human slavery and destruction of a nation economy especially those natikns that have poor regard for rule of law, such as Malaysia. In developed nations such as Japan, when their currencies devalue, workers can get pay raises. When Japan experience deflation, workers did not demand pay rises, and there were no massive loan defaults as property values drop below the financing margin.
Implementation of Deflation Economy
Method 1. Use Foreign Exchange Reserves
All currency reserves will be used to buy back local currencies. It will cost a lot of the local money but we can treat this expenditure as giving cash to all savers and holders of the local currency.
If we publicize this deflation strategy, and guarantee that the value of the currency will surely increase in value by at least 1%. It should encourage more people to hold onto the ringgit. It should cost the government 1% of it's annual revenue, around 3 billion RM (300 billion RM for Malaysia in 2023).
Inflation economy that is universally practiced rely on printing more money than the collected revenue so that inflation is a certainty, at least 1% every year. I call inflation caused by real drop in the value of currency as the real inflation.
Method 2. Divert UBI fund
Some money in UBI diverted towards buying back the ringgit. After all, it is similar to UBI because money is used to increase the value of available UBI. Increasing the value of the currency (ringgit) is equivalent to giving cash money to all cash holders, as well as all savers.
True vs false inflation or deflation
Price increases due to location, materials or workmanships are false inflation. For example the price of land in cities is higher than rural areas because cities have better support infrastructures that increase the value of land in them. Although false inflation, it is still inflation or deflation in the case of electronic devices. Due to rapid advances in technology, prices of new electronic devices with similar specifications are lower. This deflation must be taken into account in financial management. Similarly for managing real properties in a true deflation economy.
Banks in deflation economy
In an inflation economy, banks pay interest to depositors so in a deflation economy, banks need to charge commissions in order to keep money safely. The amount of commission need to be lower than the deflation rate so that depositors feel that they still earn money.
Borrowing money for business expansion purposes will be more expensive. However, there will be more lenders, charging extremely low interest rates because lenders know that their money will increase in value.
Deflation Economy stimulates business growth
There will be abundant cash for business growth at extremely low interest rates so business growth shouldn't be a problem. Inflation economy is not the only alternative to growing businesses and finally the growth of GDP, gross domestic product.
Consumer behaviour in deflated items
Will demand for consumer items increase? When it is with certainty that prices of items will drop due to appreciating currency, will consumers still buy in huge quantities in order to drive the gross domestic product.
There are 2 scenarios. One scenario is the false deflation of electronic devices. Despite knowing for certain that electronic devices will fall in prices rapidly, in even less than a year, sales of mobile phones have never decreased. In fact it led to the biggest company, with the highest profit margins. Apple.
Despite the certainly in price drops and increasing specifications, consumers still buy mobile phones in huge quantities as soon as the latest models appear. Consumers need the items now, and this is true to real properties, scenario 2.
People need to stay in homes or work in offices or shops now. Normally real property prices will increase. The Japanese deflation experience showed that even real properties will reduce in prices. Japan may be an exception because of its aging population but most nations suffer from aging populations.
Role of 25% Consumption Tax and Deflation in reducing wastage.
To finance the deflation economy, we need the 25% consumption tax. Despite such high taxation, the number of cars and mobile phones sold has not been reduced in nations that practice such a high consumption tax such as Norway.
Despite the high prices, consumers still buy the items, at least the most essential and urgent consumer goods.
The purchasing pattern difference between high consumption tax and low consumption tax is the discouragement of wastage. If the tax is low, consumers will still buy items despite not really requiring them leading to wastage and therefore the destruction of the nation's economy.
Deflation serves the same purpose exemplified by electronic items. The reduction in price discourages consumption. Increase in prices encourage consumption because it motivates consumers to buy now as quickly as possible because prices will surely rise in the near future. This behaviour encourages wastage and worse, speculative buying.
Comments
Post a Comment