Tuesday, March 16, 2010

Debt and Delusion...

"Why did I go back? Why? Because it's important. It's the collapse of capitalism and the collapse of our society. It is. Our way of life is going to change."
- Oliver Stone on why he made the sequel to his blockbuster "Wall Street"[Link]

There is an extremely interesting book called "Debt and Delusion" by Peter Warburton about the failure of the current economic system brought about by an increased level of debt[Link]. Warburton wrote about how unchecked credit expansion creation through the issuance of bonds, securitization and central bank actions has led to an unsustainable illusion of personal wealth and national prosperity. This would be "just another book" about the recent financial crisis written to jump on the bandwagon of fear and uncertainty except that it was written in the year 2000 when the global economy appeared to be in great shape. Warburton was able to see through the illusion of wealth to write this prophetic book. The last part of the book talked about how central banks will try to monetize debt when the collapse starts to delay the day of reckoning but the attempt to shore up the system will prove futile....I believe there is a good chance that Warburton will be proven right.

“A great book to read about this present generation’s massive debt is a book by Peter Warburton called Debt & Delusion. It’s a little dry at times, but ... there are some great points that Peter makes about how Western Civilization has become too dependent on debt.” (David N. Vaughn, Gold Letter, Inc., February 6, 2004)
.
"Private Property Launches : they are still HOT, HOT, HOT"
-Straits Times. 16 March 2010[Link]

You ever wonder how property prices rise? In a healthy market, property prices rise with the general increase in household income. When the property prices rise faster than income for an extended period of time, the average debt taken up by a household for purchase of property has to increase to support the rising prices. Rising debt in some ways give an illusion of prosperity on the way up. So Singaporean's wealth in the form of property depends on future generation's willingness to take on ever higher levels of debt to buy the property from us. MM Lee warned that if the GDP does not keep growing, our property prices will fall and our wealth will vanish! Singaporeans have about 50% of their wealth invested in residential property[Link] and wealth depends on the amount of debt buyers are willing to shoulder in the future. Packing more and more people onto this little island is one sure way of forcing prices up by getting more people willing to shoulder the heavier debt.
.
The next crisis whenever it may be ...might as what Oliver Stone said change our way of life. People may start to view debt in a different light rejecting the idea of 30 year mortgages as slavery and our 'property wealth' can simply disappear and the little PAP magic trick of asset enhancement operates in reverse fashion to take many of us back to poverty.

52 comments:

Anonymous said...

Not likely for Singapore property prices to drop if our gahmen don't allow it to drop.

Why? Because Singaporeans who have less money must buy HDB direct or HDB resale. No other choice what unless you want to sleep in the park and other public places. And who controls HDB and indirectly HDB resale prices? Gahmen of course.

So how can HDB prices drop if Gahmen don't allow it to drop? And if HDB prices don't drop, how can private property prices drop?

This is simple logic and if I know, of course Mah Bow Tan also knows.

So how can Singaporean go into poverty due to drop in housing prices?

Anonymous said...

Mr Lucky

//
So how can Singaporean go into poverty due to drop in housing prices?
//

Your fans dun read/think much. :-p

Btw, have u seen the M2 money supply 2000-2010?

Anonymous said...

Mr Lucky

More good work from liberals.

http://www.c-fam.org/publications/id.1589/pub_detail.asp

jamesneo said...

to anoymous 16/3/10 19:16 One can rent for example and even share with people when necessary compared to renting the whole flat.

Second one will be forced or can choose to live with their parents even when married.

Third, when many people become unable to pay their debt due to retrenchment and other problems, the banks repossessed the flat but cannot find buyers as the supply are larger than demand and price of flats start to drop slowly.

Lastly, as the world become an ageing society over the next twenty-fifty years, it is predicted that the number of working adults in many developed(OECD) and even some developing countries(china) will fall dramatically. Every country will compete for the increasingly scare labor source and it is difficult to predict if singapore can be as attractive a working environment as before.

Overoptimism and lax regulations that the property will not fall is what land America in the mess.

I am wondering can the government ensure the 2.6% interest for ever. What if the government suddenly become in debt in future. Will they be forced to pass a new law to tie the interest rate to market rate?

Anonymous said...

low iq analysis, what to do. that's why they dont run the country. LOL

Anonymous said...

The current firm property prices has solid foundations. There is a demand/supply disequilibrium. Too many foreigners and too little new houses. I don't see the demand from rich foreigners like those from China abating. Two, low interest rate lower mortgage payment. When rental is as high as mortage payment, the natural reaction is to buy. Three, land is insufficient to handle the kind of population projection the papist are putting out. Four, increasing the plot ratio is one way to accomodate the population of 6.5 - 10 million. This means lots of buildings are sitting on goldmine. The enblock craz is a reflection of this reality. Five, Singapore as an international cosmopolitan city is still very cheap compare to other major cities around the world.
All in I see property prices in Singapore doubling before any meaningful correction.

http://vonhayek.blogspot.com/ said...

Our property boom rest on few factors below.

1) The ablility of EDB to create jobs, even those low level job that keep incoming foreigner employed just above poverty level.

2) The security provided by our citizen soldiers in detering potential agressor.

3) The stability of our neighbour.

I am quite pessimistic about future of Singapore.

Conditions that will create a "property rush" (The property equivalent of bank rush)

1) Sabre rattling from Indonesia or Malaysia.

2) A few bomb from crazy Islamist.

3) A deep recession whereby foreigner flee in flocks.

We are actually sitting on top of powder keg.

Anonymous said...

"All in I see property prices in Singapore doubling before any meaningful correction."

You crazy ah, who pay?

Anonymous said...

Plenty of foreigners with deep pockets will pay. If Singaporeans want to sell, they are welcome to but don't cry when the prices double. Property prices in certain part of Shanghai cost more than Singapore and they are for 70 years lease only. Soon lots more of rich Chinese will want to own a home in Singapore for holiday or to stay. Singapore has one of the most relax laws on property ownerships by foreigners.

Anonymous said...

Aiya, how big is Singapore? How many private properties compared to HDB flats? So who else can and will play a major role in property prices and supply and demand, including release of land for private housing, and control of number and type of foreigners coming in?

No need rocket scientist to analyse lah, unless PAP is voted out.

Anonymous said...

They already say of foreigners form a low percentage(with figures) and not the main players in pushing up property prices, not true?

Anonymous said...

Lee Kuan Yew wants property prices to reach the level of Hong Kong.
That is why Mah must follows. All the measures he had taken are mere lipservice. Mah admitted on TV that they don't want prices to fall.

Anonymous said...

why don't you let your pants fall so we can all see how small your kookoochiao is?

Curious said...

NOW u start talking about debt and how unsustainable the recovery is...

this situation has been persisting for quite some time already..i remember u telling pple to invest during the recession, when the government, despite fiscal stimulus, did not focus on the debt problem one bit...

so how do you reconcile your own views???

LuckySingaporean said...

anon 00:24,

My views are consistent. The stimulus has temporarily generated a recovery in the stock market and property market. The quatitative easing and stimulus effects are about to end everywhere in the world. We will see if this thing has legs in the coming months - if it does there is really not much left anyone can do and it will be a "no eyes to see" situation.

Anonymous said...

best way to dung mbt is to gather hundreds of working young couples who claim their income cannot afford their first home.

if you can do that, you win.

but of course, all these people will be put on a microscope.

lucky, wanna take the challenge?

Anonymous said...

Only 3 ways for s'pore property market to drop:
1) Terrorists blow up raffles place and toa payoh hdb hub. Temporary impact, maybe 6 months bear market for s'pore properties. Good time to buy cheap.

2) M'sia invade s'pore. Maybe 5% chance in the next 10 years.

3) I'sia invade s'pore. Only 0.5% chance in next 10 yrs. Becoz they don't have sufficient airpower and seaborne capabilities.

Therefore, if you think the above scenarios unlikely to happen, just whack into property. Over next 10 yrs sure bao jiak one. Population increasing to 6.5M people. Couples clamouring for flats to start families. Foreigners need to rent or want to buy, even if stuff 10 people into 1 unit still not enough currently. Stretch your mortgage to the longest possible so your cashflow is minimised. If can make 60%-70% increase in property price, just let go and don't look back. I've been buying & selling property for 20 yrs liao. Buy low sell high. Or buy high sell higher. In the interim, stay with parents or relatives. Pay their utility bills, groceries, a bit of rental money etc. Property is just money-making lump of concrete, no need attachment, don't see it as home. That's how you make money.

Anonymous said...

Lucky, I know you are smart. So perhaps you can explain some things to me.
The HDB loan is prised one percent over CPF interest rate. If that is the case, are we not having negative growth in our CPF when we buy a flat.

slo said...

HONG KONG (Dow Jones)--Sino-Tech International Holdings Ltd. (0724.HK) has agreed
to buy a luxury three-story townhouse on The Peak for HK$60,215 (US$7,720) per square foot, as
Hong Kong's property market continues to sizzle. The electronics component maker said in a statement Tuesday it will buy the 4,650-square foot house at No. 8 Severn Road for HK$280 million as an investment.
The per-square-foot price is among the highest paid for a property in Hong Kong, coming after a
duplex apartment in the upscale Mid-Levels district sold in October for HK$71,280 per square foot, which
developer Henderson Land Development Co. said was a residential record in Asia.

Thats the extent of the fever in HongKong, prices about 6 times over us. Outside looking in, we are affordable. We are inside looking out. So irrational it may sound, its not coming off.

Anonymous said...

you are talkin about the super super rich. they have better taste(the world is their playground) then to pump that kind of money here lah.

furthermore,that kind of money is jackpot money not easily reprikate

but will this kind of money distort home prices?

unlikely lah. so dont anyhow pull rabbit out of your green beret lah

Anonymous said...

some of these properties are liken to buying a monet. one of a kind.priceless.

sg where got monet?monkey got, no monet.

Anonymous said...

LOL

Anonymous said...

My take is that property demand will still be strong due to new univited "guests" and the children of the baby boomers generation (1945 - 1960) forming their own family unit. This effect will taper off after I guess another 5 - 10 yrs when we will probably have an over supply of flats (pre war generation flat owners conk off by then). Research into the population demography and you will understand why there is this demand now. It's funny how HDB didn't seem to factor this in.

Anonymous said...

I suggest the authority shd just sell whole island to the highest bidders and the money distribute to all Singaporean. No need to worry about national defence as after all what is there to defend since we have so many foreigners now.

Anonymous said...

Simplistically saying. yes. We are losing 0.1 percent interest by buying a flat. As that only comprises the money you had. on the money outstanding, it will be charged on a 2.6% interest.

But in fact, this is going to depend on how much you are going get from selling your property.

Just hope that Singapore supposed superiority over its neighbors do not wane too soon. For it will be disastrous. And it can be soon...

Anonymous said...

"We will see if this thing has legs in the coming months - if it does there is really not much left anyone can do and it will be a "no eyes to see" situation."

17/3/10 00:57

Lucky

Hi Lucky,

I thought in 2008 it was very bad, if not the worst. But didn't have "no eyes to see" situation here what.

Or what do you mean by "no eyes to see" situation?

Anonymous said...

To the author of singaporemind.blogspot.com,

Dear Sirs,

I am a student at the university of Amsterdam. At this moment I am in the end phase of my study and have started to conduct research for my thesis to complete my master in political science. In my thesis and related research I aim at analyzing blogs in Singapore that focus on Singaporean politics, including for instance political issues, political system critics etc.

I would be very grateful if you could send me the links of the most
authoritative or well known and well regarded blogs writing about
Singaporean politics you know next to your own blog. Maybe you have
friends who also write on these matters. If you could forward my e-mail to them and ask them to respond to me, that would be great.
Alternatively you could send me their e-mail address or url so that I can contact them myself.

I have one more request. Is it possible that you would cooperate with me and that you answer some questions I will send to you in a few weeks?
The questions will be about blogging in Singapore.

Thank you very much for your help!

Yours sincerely,

Sarah Nienke van Voorthuisen
S.N.vanVoorthuisen@student.uva.nl

Michael said...

Dear Lucky,

Thanks for the post. You're becoming much clearer in your writing as you seek to elucidate your appreciation of financial jargon and technical words. I have to admit that they are to laymen such as myself.

With regard to bottom quotation, I need more before I could go on. Could you further expand on why you perceive or reckon that the government is strategising our properties this way? Are you operating on a working assumption that the government desires us to not be financially free and to tie us down with debt as a means of control and a way to sustain their power base? Please say something more on this.

Many thanks.


"...the little PAP magic trick of asset enhancement operates in reverse fashion to take many of us back to poverty."

Michael said...

Anon 21:10,

In Europe, the governmnet pays for your education up to masters level for free.

In Austria, they sponsor you to PhD level.

But in Singapore, the government doesn't promote higher education for you. No way. If they do, they'll bond you using your income tax. Welcome to Singapore. They are playing an elitism game using meritocracy as its engine. Based on meritocracy, the whole country is run by a father, 2 sons and a daughter-in-law and some relatives. Is that meritocracy?

How does the government benefit from a voter who is WELL-EDUCATED? How government only benefits from a voter who is WELL-TRAINED. There is a difference between being well-trained and well-educated. They're not the same.

An educated society is a threat to the government. And they know this. That's why they don't want an educated mass who has had their political consciousness raised.

So, how come it comes as a somewhat surprise when you say such comments are of low IQ? You were crafted to be that way by the system.

Anonymous said...

Fluoridation of water as a means of dumbing down the population. It lowers IQ.

http://www.google.com.sg/search?hl=en&safe=off&client=firefox-a&hs=cy7&rls=org.mozilla%3Aen-US%3Aofficial&q=fluoride+affects+iq

For anyone, even pro-opposition people, who is going to claim the fluoride is good for you!!!!

Yes, the government and the government sanctioned education system told you that fluoride is good for your teeth. They never mentioned anything about INGESTING it and being exposed to fumes during showers. How does re-iterating the "official story" prove that I'm wrong? Sign of low IQ?

And some people think that voting is somehow patriotic? You got the idea from the government sanctioned materials and your dear opposition leaders? You can only choose your owner by voting, you cannot choose not to be a slave. You are owned, they own you. You can't own yourself ever, at all.

Eliminate all government-sanctioned stories of history out of your head!

Google the following facts!
Thomas Edison didn't invent the light bulb
Alexander Graham Bell didn't invent the telephone
Fluoride is one of the top most toxic elements, alongside arsenic, lead and mercury
Governments do not have myopic vision by planning for short term goals, they ALWAYS plan for long term stay in power
Health insurance and government subsidies cause medical costs to increase
The war on drugs is never about helping the mass public, it's about allowing only certain private (CIA-related?) parties to reap the huge profits. Illegal stuff are expensive and highly profitable.
US national debt keeps increasing regardless of which party, whether Republican or Democrat, is in charge. De-facto one party state where nothing changes for the masses, it's not a two-party LEEmocracy.

Lay off the fluoride kool-aid and the voting-is-patriotic nonsense.

Anonymous said...

You're off tangent.

Anonymous said...

If you have a good stable job, thrifty, do healthy portion of your money in wise investments, paid up all your house loan (meaning get the smallest you can afford), insurances coverages since evry young, and SINGLE, or married but NO kids then things will work out fine.

else GOOD LUCK for now and ALL THE BEST for the future.

Anonymous said...

If you have a good stable job, thrifty, do healthy portion of your money in wise investments, paid up all your house loan (meaning get the smallest you can afford), insurances coverages since evry young, and SINGLE, or married but NO kids then things will work out fine.

else GOOD LUCK for now and ALL THE BEST for the future.

Anonymous said...

from the day you are born, you are indebted to your parents(assuming they have raised you right).

not all debts are bad.

Anonymous said...

Any posters here have contested elections before? Or plan to contest next election? As opposition of course.

If none, talk cock sing song is fun and easy, as anon of course.

Anonymous said...

LOL

u mean tok god sing song and laff all the way to the bank? LOL

Singapore Short Stories said...

Housing prices is high these days.

Anonymous said...

"The solution to indebtedness is more debt."

Welcome to the brave new world of financial serfhood / servitude.

Anonymous said...

Anon 19:36,

What you say is somewhat true. I see many male Singaporeans who reads the undercurrents of the PAP government policy in such a way.

What has happened is that the PAP government has given you a template on how to live your life. BE careful not to fall into it. Else, you'll wake up one day and discover in your old age that everything is fine. You are now dying and the only difference is that you realise that you have not lived.

Anonymous said...

Right or wrong, you can't kick them out. Only they can kick themselves out.

Anonymous said...

the only people united are those at the top eating all the fats of someone's hard labor.

the vast majority of bottom losers are mostly pathetic, disunited and disaffected trying to get to the top to so call "make changes"

but once at the top, same thing happens, they become pigs. LOL

and the cycle repeats itself.

Anonymous said...

Singaporeans are INDEED DAFT AND DUMB.
The Leaders have done their very best to inflate the wealths of their people(citizens) such that they(people) can and will be millionaires and billionaires should they leave SIN.
And
yet instead of taking the opportunity CREATED by their Leaders, Singaporeans complain non-stop.
Non Singaporeans will have better and stronger words than daft, dumb, silly and others to describe their envies.

How to make an Online Living said...

Housing prices being high will always be the preoccupation for many Singaporeans.

Goh Meng Seng said...

Hi Lucky,

I applaud you for your effort in trying to educate your readers about the delusion of debt HIDDEN under the magic word "wealth".

However, it is truly sad that many people don't really realize what it means to be "DEBT FREE".

The PAP government has created a dangerous delusion of "ASSET ENHANCEMENT" which in fact, is "LIABILITY ENHANCEMENT" if you are going to finance such things through getting bigger loans. There are many reasons for the PAP government to do this.

The recent assertion by Minister Mah about HDB flat as a source of "retirement financing" is totally flawed or even dangerous. Many people assumed that property prices will also go up which is categorically false. This would be especially so when the population start to age, with more elderly people trying to sell out while too few young couples to buy up.

Furthermore, it has made the assumption that everybody will be able to stay employed for 30 years! What we are seeing right now is that there are 33,000 households unable to keep up their mortgage payment. Many have lost their flats, along with all their CPF savings when HDB or the banks evicted them out and repossess the flats. Such risks has not been fully explained to Singaporeans at all.

For those who chose to stay with their parents instead of buying a flat, they may have a better chance of retiring comfortably.

We could only do that much in trying to show people what they are getting to by this PAP government's dangerous scheme.

Goh Meng Seng

Anonymous said...

I think in the future there will be even more FTs to soak up demands for flats, even older ones. Singaporeans should be all right to downgrade the house for some money to retire.

What I worry is there will be a time where there are more FTs with $$$ than locals to buy these flats.

Singaporeans (Couples rushing to buy their DREAM HOME) taking hefty loans and have difficulties following up the mortagage for that 30 years, basically THEY ARE FINISHED.

I HAVE PAID UP ALL MY LOANS AND I AM BELOW 40 years old, still I worry SHIT what future holds for me now I am in the DANGER AGE ZONE.

Anonymous said...

Mr Lucky

Speaking of delusions ... seems like another scandal coming from the land of the free and brave under the honest leadership of Mr Obama. PAP should be ashamed of themselves.

http://www.zerohedge.com/article/german-prosieben-tv-channel-finds-500-gram-tungsten-bar-wcheraeus-gold-foundary-bank-origin

Anonymous said...

Mr Anon 20/3/10 17:36

Unfortunately the cowardly singaporeans will guarantee another landslide for PAP in the next election.

Looking on the bright side, there is certainty. we already know what the future is like. Very dark. As Breadtalk would say .. naan the neh ... dark.

U might be interested in the blog below.
http://earlyretirementextreme.com/

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