Do’s and Don’ts when the currency is low

Malaysian Ringgit (MYR) has been depreciated and still depreciating I believe since mid 2015, not really sure the exact stats, my argument is only based on currency graphs on XE Currency.

I remember when I first came to the UK, our first allowance was in MYR and was given lump sum for 6 months allowanceIt was a painful period because at that time;

1 GBP = 6.8 MYR

We tightened our budget for a semester. Whenever we bought something, we’d convert in our mind. Even bread was expensive. Our minds were acting like an automatic converter, 1 bread costed £ 1, that is equivalent to RM 6.8?

What I observed from the netizens of course, my main interaction with fellow Malaysians while I am here in UK, the same people who mourn about the low currency are the same people who don’t act like the currency is low.

There is nothing in Economy that is purely bad. I remember my professor Peter Backus once said to us

If an economist gives you his arguments without saying ‘on the other hand‘, beware, because he is a bad economist. He is bad because he is saying something out of his own interest.

Economics is like a coin. There are always two sides of story that you have to listen before making any judgement.

True.

Believe it or not, there are some things you can do with low currency, and actually get profits from it.

I begin with the don’ts because people are more inclined to act against the set rules

Don’t travel abroad if you can avoid

This is a simple math, if previously 1 USD = 3.3 MYR, and right now 1 USD = 4.46 MYR. When do you think you should travel? Even if you have enough money to travel abroad now, you will have more money to travel later.

Will the currency keep falling? No. At least at certain point it will be pegged because it is Bank Negara’s duty to hold currency from falling. Explaining why and how would take a fortnight so we’ll keep that. My aim is to make Economics sound at least sensible to the general public.

Don’t buy imports (directly)

The time has come. For you to pause buying Kate Spade New York, LV, Chanel, Givenchy, or even Nutella. As long as it is imported products, avoid buying them, if possible.

If you ever bought from igshop who does arbitrage business (arbitrage business is a business that make profit from different prices in different market. For example, buying US goods that the prices are lower than in Malaysian market, and sell it lower than the market price in Malaysia) they will note that they increase the price due to low in currencies. And why is that?

That is because imported goods right now is more expensive than before. For example if previously you only have to pay RM 1,072 for a Kate Spade handbag with conversion 1 USD = RM 3.3, right now you have to pay RM 1,449 for the same handbag with 1 USD = RM 4.4. Yes, you afford that additional RM 337, but people with economics knowledge will buy with cost minimization strategy and sell with profit maximization strategy.

I gave two main don’ts and I shall continue with the dos

Travel local

Isn’t our country is beautiful and worth travelling? If I can choose right now, I will wander around Malaysia and shop freely without converting money in my head. I will make use of low currency conversion and actually help our local proprietors by buying their products.

Start your business

Weird you can start your business when the currency is low? No. Foreigners are tempted to visit countries with low currency. Why do we love Indonesia? Because the country is simply beautiful and their currency is lower. Who doesn’t feel rich when travelling to Indonesia? (I have never been to Indonesia yet, but will do since I have friends to visit now hehehe Auri and Melya, if you’re reading this)

Start your business in tourism sector or if you already have a business, diversify it to tourism. If your current business is involving imported goods and you’re losing customers as the result of falling currencies, back up your profit by diversify to tourism. Example would be starting AirBnB, or opening your estate property for a homestay, or just simply open a stall near tourist spots.

I don’t know exactly the exact statistics whether or not our tourism sector has been improving, because I have not yet that determined to check every stats for my mere blogpost, but out of logic, people love travelling to where they feel rich.

With my lacking Economics knowledge, I hope my explanation will somehow give you an idea or two about the good and bad of low currency. Trust me, Economists are the best listener because we always hear two sides of story. Well, unless the one is a bad economist like Peter Backus said.

Laters.

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