Saturday, February 23, 2008

Financial contagion

Dear Mr. Tan KL,
As you are well aware of the on-going credit crunch in the USA with credit defaults rising, subPrime losses mounting, big financial institutions being forced to write off billions of dollars from their balance sheets.

Do you see this as a growing contagion? Will it spread to Asia? Will financial institutions in Asia such as NTUC Income (which I believe currently has a "A" rating) suffer from such contagion ?

REPLY
The experts do not know. I do not know either. I think that the Fed chairman also does not know. He said that the losses have probably been recognised, but still no one knows.
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1 comment:

Anonymous said...

Even though experts, Mr. Tan and Fed Chairman may not know but we know someone know. The Singapore government.

Both GIC and Temasek invested billions to bail out the troubled financial institutions so I am sure they know or else how dare they risk the country's reserves in this way?

One thing is certain. When companies "write-off", it means they will have less cash. Less cash means retrenchment and less growth. It means slowdown in growth. Don't forget there is inflation which is ever increasing.

In economics, when there is slowdown in growth and increasing inflation, what does it imply?

February 23, 2008 1:43 PM

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