Malaysia had spent RM250 billion on the stimulus package and yet we continue to hear people losing their job and business close down. What really went wrong?
(First 2 pictures I randomly download, those are not mine)
The Makcik Kiah example which our Prime Minister use is a poor example. She only represents one sector of the market.
The market is made out of many sectors like F&B, entertainment, banking, mining and etc etc.
Today I will use five circles to represent the 5 sectors in the market.
Under a normal economy, the stimulus money would work because all these 5 sectors would spend the money they received on each other.
However during Covid-19 crisis, the affected sector which I marked with red cross does not gain many benefits from the stimulus money. As you can see, the flow of money beside stimulus money did not flow in from other sectors since the affected sector is ordered to not operate.
For unaffected/partially affected sectors, they will continue to be able to operate for some time unaffected by the crisis because they receive the stimulus money and spending from other sectors.
In the end, the effected sector still close down due to lack of money coming in and needed to tap into their saving/reserve.
How should it be solved?
What we have here is the government using the same strategy and expect the same result in the different markets without giving it a second thought and resulted in many people losing their job and business shut down.
The correct move is to temporarily freeze all debt/loan collection from the affected sector and have all the financial aids focus on the affected sector.
In the long term, the government and banking sector should try to write off debt for sectors involved in the production in exchange for a lower price of goods/services so that the affected sector reserve won't run out so fast with the lower cost of living.
The stimulus not only failed to prevent job losses and business closures. Now there is a debt nobody can payback since the affected sector can't generate any tax for the government to payback.
The stimulus package should only be used after the Covid-19 Crisis, not during the Covid-19 crisis.
This is a good one... It's nice how you outlined the problems and also proferred solutions to those problems... Nice article