Tuesday, 04 November, 2008
The Malaysian Investors' Association (MIA) says that, irrespective of who is elected the 44th President of the United States, the current financial crisis in the country will remain a thorny issue for some time.
Its president, Datuk Dr P.H.S. Lim said the economic problems of the US had become a global issue, resulting in financial markets turning volatile.
"The US is facing a recession as its manufacturing activities are now at a 25-year low. Consumption will remain low and unemployment which is also up, may reach 9% by Christmas with two million workers out of jobs," he said in a statement released to Bernama here Tuesday.
He added that the basic problem of the US is the high labour cost.
He said its end products or services carry an average of 60 percent labour cost.
He also said the US economy is no longer competitive. At the same time, its banking system had low savings and deposits while banks were greatly dependent on Federal Reserve Bank loans for lending.
Three decades of easy credit in the US had caused many of its housing loan companies, banks and insurance companies to be bailed out during the present financial crisis.
According to Lim, the United States had a national debt of US$10 trillion, mostly spent on wars and for 2009; the deficit may exceed US$800 billion.
"Such a financial situation makes it hard for the new President to cut taxes," he said.
Barack Obama and John McCain are the two presidential contenders in the election which began Tuesday.
Meanwhile, Lim said that stock markets all over the world had lost US$10 trillion in value in October.
In the case of Bursa Malaysia, its market value was RM1.1 trillion in January 2008 and was now at RM 671.7 billion.
"Like all major financial meltdowns of the past, the current financial crisis will come to pass when investor confidence returns," he explained.
Source: http://www.bernama.com/