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. Last Updated: 07/27/2016

Mahathir: Amputate Currency Speculators

KUALA LUMPUR, Malaysia -- Currency speculators impoverish millions and should be chopped off like a "gangrenous leg," Malaysian Prime Minister Mahathir Mohamad said Thursday.

One year after Malaysia imposed capital controls that abruptly ended trade in the Malaysian ringgit, the outspoken leader launched a verbal attack against the Western media and critics who had predicted the measures would be a mistake.

Mahathir said Malaysia was able to recover from Asia's financial crisis without "blood on the streets and political turmoil throughout the land," unlike some countries that turned to the International Monetary Fund.

In a hard-hitting speech to a business conference, the unrepentant 73-year-old leader blamed currency speculators for sending Malaysia into its deepest recession in decades, and said the free market could live without currency trade.

"I don't understand why there is this reluctance to curb currency trading," he said. "If you have a gangrenous leg, you chop it out, and I think this is a gangrenous cancer and we need to chop it off."

"Currency traders have impoverished millions of people but not a word from Amnesty International," he said at a news conference afterward, referring to the human rights group that on Wednesday said Malaysia had undermined basic human rights.

Japan's former Deputy Finance Minister Eisuke Sakakibara, speaking at the same conference, agreed there should be some "infrastructure" to control currency trading.

But he stopped short of endorsing Mahathir's call for a ban on trading. "I myself think currency transactions cannot be prohibited," said Sakakibara, once known as "Mr Yen" for his influence over the currency's exchange rate.

Mahathir defended his government's move in September 1998 to impose controls on capital flows and to peg the ringgit to the U.S. dollar.

Mahathir said foreign currency speculators, equity investors, free market economists and the Western media had reacted to Malaysia's capital controls with "abuse, undiluted and constant."

"But the abuse from the English-language world press is a little puzzling," he said.

"The first line of argument marshalled against us was that we were absolute idiots. Disaster would immediately strike. Malaysia was kaput. Finished.

"Then, when it was clear that disaster had not struck, that Malaysia was not kaput, not finished, we saw the argument that whilst death was not at hand, the Malaysian economy would be crippled. The medium-term effects would be enormous."

But he said Malaysia defied the critics. "The unorthodox, bold and strong measures which we took 366 days ago have borne fruit," he said. "We can now say that the great Malaysian economic recession of 1998 has come to an end."