Woodlands Water Tank Saga: More Singaporean Stupidity

The Straits Times reported that the Public Utilities Board had announced steps to tighten control of the access to water tanks installed in HDB apartment buildings, in response to the recent security incident at a block of flats in Woodlands.

Following this, people who appear to enjoy throwing stones at the PAP government immediately came out to post negative comments online, basically wondering why it took 50 years for the PUB to realise that there was a security problem, why the civil service is always reactive, and why taxpayers are paying high salaries for such incompetence etc.  When I saw those comments, my initial response was this: These guys obviously do not understand basic risk management.

One of the most basic concepts in risk management is that a risk should be treated if the cost of treatment is less than the expected cost of the detriment suffered should the risk event occur.  For the past 50 years, the PUB has had no major incidents that exposed our water supplies to the risk of serious contamination, and so I think it is fair to ask if a tighter security posture was appropriate, given that more taxpayers' money would have been spent on what appeared then to be a very low risk event.  Furthermore, knowing the typical Singaporean mentality of blaming all bad things on the government, in all likelihood some stone throwers would have asked why money was 'wasted' on security to guard against low risk events.

I am not trying to exonerate the PUB here.  I think that given what has already happened, it is appropriate to do a reassessment of threat levels and then to respond accordingly, which the PUB has apparently done.  It is also without doubt that all relevant government bodies could have handled the Woodlands incident better.  What has been disappointing but unsurprising is the knee-jerk response of some Singaporeans in blaming the government apparently without trying to understand the situation from a risk management perspective.  To me, there are far too many Singaporeans who believe that life should be without risks, and that the government's job is to help us eliminate those risks. And we wonder why foreigners think we are living in a cocoon.

Long-term Strategic Issues and The 1-trick Pony

I stopped expending effort on reading temasekreview.com a very long time ago.  The reason was quite simple: After several weeks of reading articles on the site, I realised that they essentially attributed all of Singapore's problems to 1 thing - the lack of opposition representation in Parliament to serve as a check on the PAP government.  Having thought long and hard about the variety of issues and challenges facing the country all my adult life, I found such thinking to be rather ridiculous.

I had not wanted to broach this issue for a long time on this blog since its main focus is on the energy and resource scarcity issues facing Singapore, and not on politics.  However, today, Google News Search returned an article from that site discussing the long-term strategic and economic issues facing Singapore which also covered the issue of energy and resource scarcity.  And so I decided to do a very quick scan to see what it was about.  What provoked this blog post response from me was the following passage from that article:

This election, did NOT discussed these medium to long-term strategic issues. I believe we have NOT the right political structure and institutions of essential checks, balances and even the much-desired provocation of directional input in the opposition to drive our economy in these times of great turbulence.

Having concerned myself with the energy and resource scarcity issues for the past 6-7 years as well as being a keen student of global macroeconomic developments since my JC days, I found the aforementioned assertion to be patently absurd.  If having the 'right' political structures and institutions with checks and balances were the solution, then:

• Why can't the USA come up with a credible energy policy to wean itself away from crude oil imports, a promised repeated by every president since Richard Nixon?
• Why can't EU countries face the fact that they are fiscally bankrupt, with public-sector workers deep in denial when fiscal austerity was attempted?

I can list a whole host of strategic economic and resource issues faced by the democracies in the developed world for which there is no political will on the part of these countries to confront, but the 2 above should suffice for illustrative purposes.  There are obviously many other factors besides the lack of checks and balances that account for these problems not being addressed.

While the benefits of checks and balances are undeniable, blaming all of our problems on their absence is stupid and unhelpful.  But for a site which dares to publish unverified rumours as if they were true and then not apologise when found later to be false, I guess expecting mature and responsible behaviour is asking for too much.

Michael Snyder: A Food Crisis is Looming

Many Singaporeans have been complaining about rising food prices in the past 2 years and many have put the blame on the government. As is typically Singaporean, we prefer to look for someone else to blame rather than recognise the fact that irrespective of blame, the most urgent thing to do is the protect ourselves and our families by taking steps to ameliorate the effects of more expensive food.

For those who feel that something is not quite right but need a little bit of extra push to get going in terms of preparedness, here's a recent article on the possible global food crisis that we may soon have to face:

In case you haven’t noticed, the world is on the verge of a horrific global food crisis. At some point, this crisis will affect you and your family. It may not be today, and it may not be tomorrow, but it is going to happen. Crazy weather and horrifying natural disasters have played havoc with agricultural production in many areas of the globe over the past couple of years. Meanwhile, the price of oil has begun to skyrocket. The entire global economy is predicated on the ability to use massive amounts of inexpensive oil to cheaply produce food and other goods and transport them over vast distances. Without cheap oil the whole game changes. Topsoil is being depleted at a staggering rate and key aquifers all over the world are being drained at an alarming pace. Global food prices are already at an all-time high and they continue to move up aggressively. So what is going to happen to our world when hundreds of millions more people cannot afford to feed themselves?

The full article can be found here: 20 Signs That a Global Food Crisis is Coming.

How I Think About the Asset Enhancement Issue

At the request of reader 'Touzi', below is a rough mental framework that I use to think about the government's asset enhancement strategy in respect of HDB flats:

1. The HDB flat has a 99-year lease. In a static economy, the value of such a lease will decrease steadily as time progresses, all else being equal.
2. The value of such a lease can increase if there is higher demand for HDB flats over time. This can be brought about by higher population or economic growth.
3. The effect of economic growth on the prices of HDB flat, in a stable currency environment, comes via higher incomes of people.
4. Based on known data, in the past decade, HDB flat prices have risen a lot more than incomes. Thus, the increase in prices can only be partially accounted for by economic growth.
5. The population of non-citizens have risen significantly over the past decade. So this has definitely some impact on prices.
6. Money supply has been increasing at a brisk pace over the last 5-7 years, so part of the increase in flat prices can be attributed to monetary inflation as well. This gives the illusion of higher asset values when in fact the value of money is declining. This monetary inflation is tied to the global debt supercycle which saw central banks around the world trying to outdo one another in terms of keeping their currencies 'competitive', i.e. devalued and undervalued.
7. The availability of 30-year loans distorts perceptions of affordability, resulting in buyers willing to pay higher prices and sending false signals to the HDB regarding actual affordability.
8. Unlike productive farmland, which can produce cash-flows (if farmed properly) that can help to underpin the valuation of a piece of property, most HDB flats are owner-occupied and thus generate no cash flow. Valuation then becomes purely subjective and dependent on who is willing to be the 'greater fool'. Those of us who play the financial markets know that depending on someone else being the 'greater fool' can be a rather risky proposition.

Based on the above, I am of the opinion that it is a matter of time before the HDB housing market experiences severe dislocations.

Current Reading: The Crash Course

I have just completed the book entitled The Crash Course: The Unsustainable Future of Our Economy, Energy and Environment by Dr. Chris Martenson.

This is my second contact with Dr. Martenson's work after watching his highly educational documentary DVD of the same title. The documentary is available for free legal download here.

The strength of the book is the presentation of the linkages between energy, the environment, and our debt-based global monetary system. It shows how given the way the monetary system is currently set up, exponential economic growth is required. Unfortunately, since no system can grow exponentially in a world of finite resources, the monetary system will HAVE TO implode at some point when hard resource limits are hit.

The other strength of the book is its simple but comprehensive coverage of Peak Oil and related energy issues, which for me was a good 'revision' after following this issue for more than 5 years.

I believe that once we understand the link between finance/economics, energy and the environment, we will see why the 2008 Global Finance Crisis has not actually been properly fixed, and that something bigger will be coming our way.

The book is available for loan from the NLB.

My First World Parliament

Since this has been in the news lately, I'd like to add my voice to the matter.

To me, a so-called First World Parliament should ideally have the following characteristics, irrespective of who its members are:

1. MPs spending most of their time doing grassroots work, e.g. Meet-the-People Sessions.

2. Be in recess as frequently as possible - the less the MPs meet, the fewer the laws they pass, and the more freedom and liberty citizens will enjoy.

3. MPs should only be limited to serving only 2 terms - so that vested interests will never gain a permanent constituency inside Parliament, and people not facing re-election risks can freely speak their minds.