Knee-jerk Government | Malaysian Sentinel : Malaysia's Politics from a Malaysian Citizen Blogger

Thursday, September 4, 2008

Knee-jerk Government

It is now pretty obvious the current government is one that is knee-jerking it's way. It's reactive in nature and seems to have no proper direction. We now hear that the government would lower the price of fuel before the onset of Aidilfitri. Remember what can be lowered can also be raised and the trend of the government to lower the price at will seems headed for disaster.

Disaster as it would throw the price of goods into a chaotic frenzy. It takes time for prices of goods to adjust itself to market forces and the strongest force at the moment is the cost of transportation which is passed on to the consumer to bear. If fuel prices bounce around like a ping-pong ball in a box, the prices of goods would also bounce around like a ping-pong ball. Traders would have a hard time fixing prices for essential goods. Though this may ultimately be good for the consumer whereby they can scout around for the best price, in the long run it may even slow the market down. Uncertainty is the root product of such a volatile market.

When people are uncertain about a situation then they tend to react in fear. With the government being uncertain about the price of fuel and with no clear measure on how they would control the price of essential goods, traders would react in fear. They would price goods at a price that they perceive would blanket them from these mad fluctuations of cost. Some goods may be overpriced and remain overpriced over market price in order to cushion the traders pockets. Fair enough, the traders are entitled to protect themselves.

Would the government react to this?

I think they would. This is after all a knee-jerking government, who doesn't seem to know what's going on and worst still, the left hand doesn't know what the right hand is doing. Gone are the days when Malaysia was a trend setter in Asia. Instead, we now have a government that reacts badly towards whatever situation it gets itself into.

Sure, lower the fuel price in time for the Hari Raya holidays and maybe the price of essential goods would catch on fast enough and everyone would have an affordable raya. If they lower it now, would they raise it again if the price of crude increases?


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