On that National Conversation

Since the PM's National Day Rally speech, the country has been abuzz with talk about the national conversation. We got all sorts of voices clamouring for attention, and as expected, complaints from certain opposition parties about being excluded.

While I expect many issues to be discussed, I suspect that what I consider the really important issues facing the country will be left undisturbed.  Based on the noises so far, all the talk about an inclusive society and so forth centres around the issue of social welfare, with many Singaporeans asking for assistance and handouts of one form or another from the government.  While these issues are important, they are secondary, in my view.

What I think ought to be discussed, but won't will include things like the fundamental vulnerabilities facing the country, like the lack of food and energy security, as well as geopolitical issues like the South China Sea disputes.  To me, given the current and expected future global environment of the next 10-20 years, there will be a lot of external forces that will serious rock Singapore's 'boat', whether we like it or not.  The best thing to do is to have everyone understand these issues and prepare for them.  Unfortunately, the exercise will likely turn out to be like a squabble over who gets to eat more of the buffet while the ship is heading into stormy seas.

I am of the view that we need desperately to address the fundamental issues, as they will affect how Singaporeans see our own future prospects, and in turn, our willingness not to commit collective suicide by refusing to reproduce ourselves.

More on these in a future post.

Somewhat Disconnected

In recent months, I have been telling some friends that Singaporeans appear to be oblivious to the ongoing financial and economic crisis that is raging across the globe.  I base my claim on the following:

• Record COE prices


• Property prices that continue to rise despite a decade of inflation at roughly double the rate of wage increases


• New graduates asking for higher pay and quick promotions.

While I'm not sure when reality will reassert itself in the Singaporean consciousness, I'm waiting patiently and collecting data points in the mean time.  And one such data point is the following comment by that consummate financial insider, George Soros, made recently to Newsweek:

“I am not here to cheer you up. The situation is about as serious and difficult as I’ve experienced in my career,” Soros tells Newsweek. “We are facing an extremely difficult time, comparable in many ways to the 1930s, the Great Depression. We are facing now a general retrenchment in the developed world, which threatens to put us in a decade of more stagnation, or worse. The best-case scenario is a deflationary environment. The worst-case scenario is a collapse of the financial system.”

And to put money where his mouth is, Mr. Soros has reportedly been selling his financial stocks (the growth story) and buying more gold (the-sky-is-falling story).

In the meantime, the bubble continues to expand in Singapore.  We live in interesting times indeed!

Our Fundamental Vulnerabilities

I had a conversation recently with an old friend over Whatsapp, wherein we discussed issues pertaining to the challenges that Singapore faces.  I was surprised when he commented that the country was in general decline.  The reason for my surprise was not that I didn't know that the country was in decline, but that I didn't expect it to come from him, given, as it were, that he was knee-deep into the property market, having only recently bought a second property in what I consider a topping market.

Be that as it may, the idea of a coming crisis as a conversational topic is not particularly attractive to most Singaporean at this time, a point which I re-validated last week when a friend of mine who shares many of my views introduced me to another person.  After trying for 15 minutes to discuss the fundamental problems facing the country, I found that he was not at all interested, thinking that it was something too remote.

In fact, given that episode last week, I am quite close to giving up altogether trying to get the people I know to think about some of the challenges that I believe will come our way within the next few years.  I had also thought about closing down this blog permanently.

So while I ponder about my next steps in this area, let me list down some of the very basic vulnerabilities that we face, as an antidote to the maddeningly irrelevant issue of whether Feng Tian Wei deserves our praise or otherwise.

The list would include:

• Energy


• Food


• Dependence on foreigners in key areas of the economy


• Dependence on government to take initiative


• Loss of expertise in key technological area, which results in


• Key pieces of national infrastructure being increasingly vulnerable to systemic failure


• Excessive household debt due to overpriced COEs and property

The above is a short list, but it includes factors upon which the entire edifice of Singaporean life is built.

More on these issues in future, perhaps.

Global Slowdown

This week we hear quite a bit of news of global economic weakness. We have various central banks around the world cutting interest rates and taking other easing policy measures in the face of a rapidly weakening global environment.

China's GDP numbers came in weaken than expected while the US earnings season has been kicked off with more warnings of forward weakness.

Back at home, the Singapore economy shrank in the 2nd quarter at an annualized rate of 1.1%, although things appear not to be weak enough given the government's position that emergency measures are not needed as of now.

Despite this, though not unexpectedly, news of. Cut in COE quota has people all agitated about higher prices in the coming months. In fact, there appears to be signs of buyer capitulation, as reported in the news this evening on TV, wherein those who have been holding off buying new cars have decided to go ahead in fear of higher COR prices.

As I have maintained for a long time, that which is unsustainable will break eventually. Thus while the supply of COEs may be falling, I am expecting that demand would also be falling in view of the global economic situation. It is possible that we get a repeat of 2008 in late summer that will lead to a crisis of a more serious nature than the liquidity crisis back then.

Let's see what happens.

Greek Elections

Markets were quite on Friday as many traders were wary of committing to positions before the Greek elections today, given the risks involve either way.

From a longer term perspective, the results of the election are irrelevant, since it will change nothing as far as the economic fundamentals are concerned.  Greece will continue to have too much debt that they can never pay back, and the only difference will be whether the newly-elected politicians can negotiate with the rest of the Eurozone to agree to measures that will merely postpone the underlying problems for a while more.

This looks to me to be an interesting period in European history, as friction between nations increase and there is a threat to the global financial system.

Debt and Derivatives Crisis

The current financial crisis that we are in has 2 causes:

• Excessive debt, especially in the developed world; and


• Excessive speculation, especially in financial derivatives

Given the size of the problem, a worsening of the global economic and financial situation is, in my view, inevitable.  To only question is timing, and that is dependent on how much longer governments around the world can delay the collapse due by using various policy measures, including monetary easing.

Enclosed below is a short presentation on the financial crisis situation from someone who appears to me to be very well-informed.  Be warned, and be prepared!

[scribd id=95493792 key=key-2bukmjiiyjtzns9qcorz mode=list]

Euro Crisis - Greek Children Abandoned

I heard a podcast yesterday wherein a member of the EU Parliament mentioned that some Greek parents are now leaving children at the doorsteps of Greek Orthodox churches, with notes around the children's necks, saying that they could no longer afford to feed them on account of the severe economic depression that is now happening there.  Is it any wonder that the Greeks are now rioting and demanding an end to austerity?

From the looks of things, the Greeks are on their way out of the Eurozone, unless Germany agrees to the issuance of Eurobonds.  But that would be very unfair to the German populace.

So it looks like we have a crisis on our hands.  I really wonder to what extent the ECB and the US Federal Reserve can postpone the problem by more quantitative easing.  Besides this, the stock market appears to be egging the central banks to move in the direction of more QE. But if we look at things from the Austrian School perspective, given how little impact the previous 2 rounds had on the real economy, and the fact that QE is subject to the law of diminishing returns, I wonder how much of a boost to the stock market another round of QE will achieve, unless it is in the multiples of trillions.  But imagine what that would do to oil and commodity prices?

In any case, given that the Singapore government was not particularly prepared during the initial part of this crisis in 2008, we need to brace ourselves for a rough ride in case they read things wrongly again, and/or are too preoccupied with domestic issues.

EUR crisis - Impact on Singapore

Read a story on zerohedge.com claiming that Singapore is rightly worried about the fallout from the European sovereign debt crisis because European banks have claims in our financial system that amounts to around 60% of our GDP.

I asked a banker friend about this and he said that his guess regarding this would be that a lot of European banks have bought Singapore government bonds.  In any case, he felt that MAS would be able to handle any suddenly repatriation of funds back to Europe.

I personally am not sure what impact any fund repatriation will have on our financial system. Could it lead to a drop in the value of the SGD against other major currencies? How will it affect the stock market and property market, if at all?

Bank Run In Europe

If you still have money parked inside the EU financial system, including the UK, it's time to bring the funds out. There is still time before the crisis gets worse.