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Malaysia - Financial Crisis Looming With The Giant Squid Wrapped Around It

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http://www.zerohedge.com/news/2015-08-29/mass-protests-sweep-malaysian-capital-anger-goldman-backed-slush-fund-boils-over

If we told you that thousands of protesters donning bright yellow shirts had taken to the streets to call for the ouster of a leader in an important emerging market, you’d be forgiven for thinking we were talking about Brazil, where President Dilma Rousseff is facing calls for impeachment amid allegations of fiscal book cooking and government corruption.

But on this particular weekend, you’d be wrong.

We’re actually talking about Malaysia, where tens of thousands of demonstrators poured into the streets of Kuala Lumpur on Saturday to call for the resignation of Prime Minister Najib Razak whose government has been accused of obstructing an investigation into how some $700 million from 1Malaysia Development Berhad mysteriously ended up in Najib’s personal bank account.


1MDB was set up by Najib six years ago and has been the subject of intense scrutiny for borrowing $11 billion to fund questionable acquisitions. $6.5 billion of that debt came from three bond deals underwritten by Goldman, whose Southeast Asia chairman Tim Leissner is married to hip hop mogul Russell Simmons’ ex-wife Kimora Lee who, in turn, is good friends with Najib’s controversial wife Rosmah Manso.

You really cannot make this stuff up.

What Goldman did, apparently, is arrange for three private placements, one for $3 billion and two for $1.75 billion each back in 2013 and 2012, respectively. Goldman bought the bonds for its own book at 90 cents on the dollar with plans to sell them later at a profit (more here from FT). Somewhere in all of this, $700 million allegedly landed in Najib’s bank account and the going theory is that 1MDB is simply a slush fund.

So you can see why some folks are upset, especially considering Rosmah has a habit of having, how shall we say, rich people problems, like being gouged $400 for a home visit by a personal hairstylist. Here’s The New York Times with more on the protests:

Tens of thousands of demonstrators in Malaysia defied police orders on Saturday, massing in the capital in a display of anger at the government of Prime Minister Najib Razak, who has been accused of corruption involving hundreds of millions of dollars.

The demonstration in central Kuala Lumpur, which has been planned for weeks, has been declared illegal by the Malaysian police, and the government on Friday went as far as to pass a decree banning the yellow clothing worn by the antigovernment protesters.

But the demonstrators, who represent a broad coalition of civic organizations in Malaysia, including prominent lawyers, asserted their right to protest on Saturday.

The government has acknowledged that Mr. Najib received the money in 2013 and said it was a donation from undisclosed Arab royalty.

One group of protesters on Saturday carried the image of a giant check in the amount of 2.6 billion ringgit, with a sign that read, “You really think we are stupid?”

The group organizing the protest goes by the name Bersih, which means clean in Malay.

Calls for Mr. Najib to resign have come both from within his party, which is divided, and from the opposition. One junior member of Mr. Najib’s party, the United Malays National Organization, filed a lawsuit against Mr. Najib on Friday asking for details of how the money was spent.

Of course the most prominent voice calling for Najib’s ouster is that of the former Prime Minister Mahathir Mohamad. "I don’t believe it is a donation. I don’t believe anybody would give [that much], whether an Arab, or anybody," he says.

Meanwhile, Malaysia is facing a re-run of the 1997/98 financial crisis as the ringgit plunges amid broad-based pressure on emerging markets. With FX reserves now sitting under $100 billion some fear a return to capital controls (let's just call it the "1998 option") is just around the corner despite the protestations of central bank chief Zeti Akhtar Aziz. Here's BofAML:

Yeah another potential timebomb to factor into debt morass that is the global economy and nice to see that the giant squid is ocean deep into this one as well. Obviously doing gods work.

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The economic world is really in a precarious situation - $US230 TRILLION debt worldwide (that's a LOT of future-work to pay that off) - lots of money tied up not in production, but speculation - the world is like a big casino these days.

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At least the BBC reporter is actually on the ground rather than reporting from Bangkok like the NYT one.

Malaysia has had a one party state which is only nominally a democracy for around six decades - is it any wonder it is corrupt? Governing parties in this country tend to start loosing the plot ethics wise during their first term. If you aren't Malay there is a massive glass ceiling in Malaysia too.

I'll be surprised if anything comes of it personally.

Edited by StainlessSteelCat

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