NEW MONETARY SYSTEM MUST BE BASED ON GOLD, SAYS FORMER PM

KUALA LUMPUR, Nov 11 (Bernama) -- A new monetary system must be devised
based on something of real value such as gold, former prime minister Dr
Mahathir Mohamad said Wednesday.

He said that despite everyone knowing that the abuses of the banking system
which had caused the present economic crisis, no one was seriously thinking of
changing the system.

"The US dollar has no backing whatsoever. Other currencies, including the
Malaysian ringgit, are backed by gold or other so-called hard currencies held in
reserve," he said at the World Congress of Accountants 2010 during his session
on "Transitioning to a Sustainable Global Financial System: Lessons from Global
Financial and Economic Crisis".

As to whether the Malaysian ringgit should be internationally traded in the
market again, Dr Mahathir said: "During the Asian financial crisis, to prevent
currency traders from selling our currency and devaluing our currency, we
decided that our currency could not be transferred between buyers and sellers
and so the curency trading stopped and the government decided to fix the
exchange rate that stabilised the market."

"Malaysian currency has became very stable and the economy grew. Now the
ringgit can be traded to a limited range and people are thinking of allowing for
the currency to be traded in the international financial market. However, many
countries are talking about fixing their currency exchange rates," he said.

"When money is printed by private banks and there is no backing for the
money thus created, how can anyone accept these pieces of coloured paper as
money?"

According to Dr Mahathir, the present financial and economic crisis is due
to greedy people abusing the system.

"Accountants examining the accounts of the banks involved in the sub-prime
lending must have noticed that the bank people were not adhering to prudent
banking practices and they were lending far too much money to borrowers who they
must know would be unable to pay," he said.

"But because the banking system regards the loans that they give as assets,
the urge to lend far more than what was proper overcame prudence."

Dr Mahathir said to secure the bad loans, the bankers bundled and insured
them with insurance companies and mortgage companies.

"They could still have avoided disaster but so greedy were they that the
sub-prime loans became so big that when they failed as they must, neither the
banks nor the insurance companies nor the mortgage companies could cover the bad
loans any more and so the banks, the insurance companies and the mortgage
companies collapsed," he said.

Dr Mahathir urged accountants to blow the whistle hard and long and alert
any abuses in the system.

"Accountants can play a positive role. The accounting profession must be
willing to tell the rich that they must no longer abuse the system, that in fact
they must devise a new monetary system and that they must return to gold." he
said.

-- BERNAMA