Tuesday, March 03, 2009

Are we in a 2nd spiral downwards?.... ......

If you read Buffett's letter over the weekend, he said the economy will be in 'shambles' for the rest of 2009. Buffett was among the first to say the US economy was in recession early last year. Economists have upgraded this recession to "deep" recession and I heard one guy on CNBC calling this the Great Recession. I'm quite sure the economy is in very bad shape. However, what is worrying is we have not just entered a recession from a period of crisis - that would have been things just slowing down and deterioration. There are signs that we will enter another crisis period - which some are saying will as bad the one in Sep 2008.

There is so much debt in the US and global economy, the recession would result in many problems associated with companies and individuals unable to service the debt. In Eastern Europe, the former communist states were like the Asian Tigers borrowing heavily from English and Swiss banks to fund their growth. There is now the equivalent of a currency crisis there as the currency of these countries have collapsed (by 50%) and their debts in Swiss francs/ British pounds has doubled within a few months. EU refused to fund a rescue package - the Germans objected strongly wanting to keep their deficits down. This alone might erupt into a full blown crisis of the same magnitude as the Asian Crisis. But this is not the only time bomb ticking. The next few shoes to fall in US are the other types of debts outside of housing - student loans, commerical property, credit cards, etc. The reason why many analysts think BoA and Citigroup are insolvent is the deterioration of commercial property loans on their books. Some people believe these are even bigger than the housing loans. Much of the effect is not felt yet because the properties are still under construction or are leased out to existing tenants. With the recession, shops become empty, rents will fall and it becomes hard to service these loans. As the unemployment rate soars, credit cards defaults will increase and people will default on their car loans ...and so on. The main problem is not the recession but the amount of debt the global economy has piled up.

"I know people say, why didn’t you help households more directly, but the right way to help people now, to us anyway, is not to give them vouchers or coupons or hongbaos to spend but to help them keep their jobs.” - PM Lee, 1 March 2009 [Link]
The time for saving jobs is over. Anyone still thinks Jobs Credit Scheme is working? Oh goodness, helping the jobless is not about giving them hongbaos! For the JCS, the govt gave $4.9B to companies for an almost negligible impact. It is now time for plan B - helping the people. Where is the balance in our policy making? $4.9B would have been a critical lifeline that will save tens of thousands of Singapore families in this crisis. Right now people can't even get rental flats - the queue is 4 years long, walk around and you noticed more families are put on PAYU - use electricity only when you have money not when you need it, proper nutrition is a problem for many Singaporeans and many do not seek medical treatment when they are sick because they can no longer afford it. To help these thousands of Singaporeans does not even require half the amount they gave out in the JCS scheme. Some people might have supported the JCS because they thought it is a plausible scheme that may work, but MP Low & NMP Siew are right. The collapse in demand is so sharp, companies simply kept the money rather than expand or retain staff. ...PM Lee said he did it the "right way"...no he didn't, what this govt did was ineffective. Not giving people aid directly is an ideological decision not one based on pragmatism. These are the toughest economic conditions we have ever faced, the govt has to do what is necessary not what they think is ideologically right.


Anonymous said...

Aiyah, when erection time comes, sure got hong bao one lah. Most of our poor will survive this year. maybe very uncomfortably but they will live.

Actually, the problem w ideology is not PM Lee. In the larger scheme of things, PM Lee is not very significant. Its the Republicans in US (with the same ideology) saboing the recovery. And with Madoff still in his luxury penthouse... wait long long. Yankees talk only.

Its game theory all over again. China, Europe and US making the decisions that on paper benefit themselves but in reality makes every1 worst off.

I still think u should check out the NATAS packages and take a break while it is still safe. :-)

Looking on the bright-side, the stock market should bottom soon. Dow Jones 2000? I dun think it will go to zero.


Anonymous said...

i would like to vote you into parliament, if you ever want to.

good job and keep up the good work

Anonymous said...

I don't anyone would vote the opposition into parliament soon.

Why do I say so? Because Singaporeans are cowards and they will vote in the PAP again despite the crumbs the PAP throw at them.

Kaffein said...

I presume our godfather actually meant:
"I did it _MY_ way. Not happy? What can you do about it?"

Already very good already if they threw some crumbs at your way. Now crumbs have also given to other people. Amazing how they'd rather throw the wholemeal bread, french loaves, pizzas and donuts to feed other people's children when the wheat are sowed by our own people.

Look, I'm not against helping the financial institutions. However to keep on spending on them whereas your own people go hungry is a tad bit too much. Singapore government has always been business-friendly... so much for the uniquely government-union relationship.


Anonymous said...

i agree with skeptic. don't hold your breath for a govt makeover. the majority of us are ball-less, cue-less or plain greedy.

Anonymous said...

The difference between old lee and small lee is old lee is purely pragmatic and has zero ideology. Being uneducated in humanities actually worked to his advantage in the past. Now his ramblings show up his deficiencies aplenty.

Small lee (and his cabinet of generals), is better educated, but unfortunately is schooled in and came up during the times of Reaganomics aka Republican, right wing ideology. Hence their fervent pro-capitalist, pro trickle-down economics stand. This is leaning way too far to the right.

Someone like Ngima Tong Dow, based on his publshed musings, actually strikes me as more knowledgeable, wiser and even keeled.

Anonymous said...

Yeah, the moment people leave the civil service they probably have freedom to say things 'beyond the book', instead of going 'by the book'.

That probably gives you an idea of why smart people are unable to do much when they are in the civil service, beyond taking extravagant salaries.

But the general idea is probably to get these smart people into the civil service first, just in case they fall out of their control and create nuisance like Francis Seow and Tang Liang Hong. You never know.

Lost Citizen

Anonymous said...

How is the JCScam going to work when it is not putting money into the hands of the people who need it most but help to shore up their finances of some businesses and the ones in dire straits simply sack the workers when they can't make ends meet.

So at the end of the day the ones who benefit the most from the JCScam are the GLCs and MNCs. What about the SMEs? they are smaller players who depend on the largesse of the formers. In a failing economy no one is spared and the losers are the workers which the JCScam is supposed to help is not benefitting at all.

Anonymous said...

Our gahmen lost billions of our reserves and still get to keep their million dollar salaries when the economy is on fire, yet they do not want to dole out money to help the retrenched but gave it freely to companies who might not deserve it, and this is our tax payers money not PAP's !!

You know which party you should Not vote for in the next election !

Onlooker said...

Supplier vs Consumer.
supplying country over supply (while controlling their currency to make sure their products sells).
consuming country under consume (with companies making profit by producing the products cheaper in countries that can control it's populace by denying them better work condition while demanding their former retrenched employee to consume their products).
All the while everyone striving for the ever decreasing lower cost of operation while striving for ever increasing profit.
Sacrificing quality for quantity.
Ignoring the welfare of their charge.
Just to have luxury items to invoke the jealousy of peers.
Yeah it a spiral downward.