Sunday, October 12, 2008

Understanding the root cause of the current crisis.

Many investors understand this to be a "subprime or mortgage crisis" linked to the housing bubble in US and parts of Europe that eventually lead a credit crunch that brought about a recession in Singapore. There is however a bigger picture and something you cannot ignore to understand the current crisis fully. I've written something about it here : [link] and those of you who read Krugman's book "Conscience of a Liberal" will understand what happened to the middle class in America and the same happened in Singapore as import much of the American style capitalism. The person who really nailed this was an economist by the name of Ravi Batra. In his book "Greenspan's Fraud" he bravely explained the flaws of Greenspan's policies and how it would lead to the eventual collapse of the American system - when the book was published Greenspan was know as the Mastro and the greatest Fed Chairman ever in history - his reputation has been almost completely shattered in the current crisis as most of the problems can be traced to what he did in the past 15 years. Batra's book has been prophetic and accurate. More than one year ago he did a video for a conference describing how he expect events to unfold...and things have unfolded almost exactly as he describled:

"No matter what the authorities do, this crisis will not stop. The only way to stop this crisis is to raise wages in relation to productivity. ...but this the govt will never do..."
- Ravi Batra Sept 2007.

In the next part of the video : [Link] he described what will happen beyond the crisis we are seeing today. The central message is the current crisis is caused by the wage gap and cannot be fixed until a more equitable system is put in place. Several weeks ago a separate study by a British economist showed that the wage gap today is only seen once in 1929 before the Great Depression. Much of the demand in the past 10-20 years was driven by the growth of consumer debt in US and Europe. When this debt grew to an unsustainable level it collapsed and demand will not return until there are major economic and social changes put in place. In other words we are not in a garden variety recession that is easily cured by Greenspan style of easy money policy and encouraging more borrowing. The Americans are maxed out, they simply cannot borrow anymore ....we are seeing a collapse of demand, that will worsen as unemployment rises. According Ravi Batra, things will fall apart and Americans and others will start clamoring for major socio-economic changes...and until the wage gap is addressed, the system no recovery can be sustained.
My blog and many other socio-economic blogs highlighted the wage gap problem in Singapore for almost 3 years. There was no determined effort on the part of the govt to address this. The PAP govt believed that if the economy kept growing everything else can be solved. Ironically, we are the 1st economy in Asia to enter recession despite our govt's "growth at all cost" policies...and the economic growth of 2004-2007 did little to ease the pain of those in the lower income groups. Recession will only worsen the situation. Hopefully the recession compels the govt to act and change.


Anonymous said...

But that's life! And not to worry; we have the best people in town with helicopter vision to ensure more good years.

Anonymous said...

"if the economy kept growing everything else can be solved."

This is exactly what the old farter says.

janitor said...

egos are the root cause. we think too highly of talented people and we pay them too much.

perhaps lucky will be smart enough to show us a way out?

Anonymous said...

Recession? What to do? It has happened, let's move on...

Anonymous said...

Conscience of a liberal sounds interesting. Too lazy to read, can give a condensed version, lucky?

Greenspan too cheem, can also give a condensed version?

Thanks. I am sure all will benefit from their wisdom and your editorial maestro.

Anonymous said...

you got money to move on or not? tok cok.

Anonymous said...

What ravi batra is alluding to but does not say is that the basic cause of the problem are political systems run by "corrupt" politicians. Politicians who put economical interests of the chosen few over those of the masses.

Capitalism is not being put on trial here as the media loves to simplify. Look at who is running the system and their ideology and the beneficiaries.

Anonymous said...


Does this mean I am going to get a wage raise soon?


This is Singapore. We must keep wages depressed, so that Singapore Inc can have a stronger balance sheet.

We reject wage increments!

Anonymous said...

sorry, to each his own :)

security guard said...

More MRT disruptions?

Anonymous said...

Hi Guys,

It is great that Lucky can point out what was foretold, hindsight is 20/20, please don't trivalised, I recall Lucky had posted some helpful advice on getting a handle of a recession, do that, be prepared, this recession being global in nature is neither short nor with precedent.

The transmission mechanism of our economy as reflected on the stock market will work its way to you, there's a couple of months to plan ahead.

Anonymous said...

today papers say got rental scam. whose fault i ask?
garmen believe work and more work is your salvation
they say we got nothing
so we got to think ingenius ways
to build fat garmen bank account
as our fortress
so go global
import talents
expand population
build beautiful city
hope singaporeans don't go
green elsewhere
so more they progress
more they need foreigners
to sustain progress
all kinds of foreigners come
they now need homes
garmen relax subletting
rules for hdb
more greedy and desperate people
make money from foreigners
homes and families relationships
unhealthily compromised to make money
whose fault when scam or crime increase in housing estate?
whose fault when kena scammed and foreigners no recourse because,
lawyer say not enough evidance to file
criminal claim?
so it treated as civil dispute.
do you know what civil dispute all about? do know when you feel kena injustice garmen says can bring all
your problems to small claims tribunal or mediation mental places like CASE means?
all these places of resolving injustices
got no legal bite. why?
i tell you why.
i got friends who kena cheated and lied to by big corporation and you know who owned it but cannot say wait kena sued( write to papers, write to ministry all pretend all wayang all keep quiet, you know why lah and who own these places lah. you see, all scare, you want nail them? go court lor. go court? who own court? please lah)
you see, our legal system make it very hard to nail these crooks. it has all these no legal bites, and deliberate ok,
so the people get eaten up by big boys bullied by big boys.
legal system make it difficult for common man, especially no money or little money but not poor enough for free legal help to seek justice. because many many kena injustice in this kind of money minded garmen, garmen clever say go this so call cheap mediation centers like CASE with no bite, deliberate ok. but what kind of people work in CASE? we all know lah.
so conclusion.
there is no real justice for small people lah.
all for show. success in prosecuting culprits especially those big boys, like what my friends went through, is very difficult. but they clever. cannot say cannot. but you got time and money to pursue justice or not for small people? please lah.
at the end of the day, that's how they non corrupt lor. how to fight them with this kind of lawyers, this kind of newspapers and this kind of legal system?

all lies

big bullies

so scam

and story never end

now so many depend money from rent from foreigners

financia crisis more lose jobs
foreigners pack and live
how neh?
many singaporeans lose income from rental
rental drop
value home drop
more people less money to spend
less money to pay mortgage
more bankrupt,more crime , more suicides
basically more trouble for everyone
go tribunal go CASE?
potentially another scam again
so more desperate
long queue at garmen offices
garmen people clever?
where got?

people get hurt, more injustices
more whitewash
more grey areas
so they can say they non corrupt?

please lah

Anonymous said...

some more titbits

the fuker big corporation big man on top can still write book about building people. pui.
big hypocrite. face splash on papers somemore. but nobody knows what he did to small people.

welcome to sg justice system.


and dont think so you can bully small people and run

we got facts we got record of your dirt one ok

and we say, this kind of problem, from experience, is many many many lah

aiyah, what you people know. papars know...but keep quiet and wayang so they keep job mah


Anonymous said...

i ask you lah
what good our education system?
just take a good look at our finest, most upright professional high minded high attitude high living high egos high pay highly respected loyals

one died and i can only see one lawyer brave enough to stand up, a not so bright one he said, fight injustices.
in the open and the rests of the loyals who know more dirt than anyone of us put together are monkeys see no evil, hear no evil and speak no evil.


what fuking use these elites hah? what fuking use our education system produce this kind of people hah?

arent they all accessory, associate, abetter,confederate,collaborator,cnspirator,
conniver to crimes?

but they say, be prudent, take it slow and easy

fuk you

with powers come responsibilities

dont wait until thousands of small people get slained and then do something

never mind somemore, these elite pigs who live the high life and behaving like monkeys can preach..stand up for sg..speak up you small people..


you fuking elites with powers for what?

eat more pigs and snakes is it?

fuk you!

Anonymous said...

Thanks for highlighting Ravi's work.

Anonymous said...

Hi Lucky, you may be interested to know that Paul Krugman has just won this year's Economics Nobel Prize

Anonymous said...

Most Sporeans think that local banks are safe. After decades of propaganda and feel-good news, they tend to listen to MAS blindly. European banks are not any less well regulated than Asian or local banks. Yet they got hit eventually too. The crisis will certainly spread to Asia and Spore. Dont say you are not warned.