Tan Kin Lian's Blog: Fragile global economy

Sunday, May 23, 2010

Fragile global economy

The Greek cisis is a bad sign for the global economy. Many countries have large budget deficit and depend on borrowings to finance the deficit. Lenders are now worried that these countries cannot repay their debt.

The crisis is now affecting Europe. It is likely to spread to other countries. The countries that have large budget deficits that depend on borrowings include the USA, UK and Japan. Investors may lose confidence in these countries and lead to another crisis.

Look at what happened to Dubai and now Greece. It is a matter of time before the loss of confidence spread to other countries.

The global economy is fragile. It is bad to depend on private money to fund government deficits. A lot of the private money are in hedge funds. I consider these hedge funds to be financial terrorists. They can bring down a currency or a country, so as to make a large profit from the destruction. I think that hedge funds should be banned.

Tan Kin Lian

15 comments:

Collin said...: Why can't countries just run balanced budget or even better, budget surplus? Sacrifice a bit of growth for greater stability.; May 23, 2010 2:47 PM
Createwealth8888 said...: Similar question as to why some people take so much leverages to invest in properties and thinking sure make money?; May 23, 2010 3:14 PM
Anonymous said...: My dear Collin Yeo.
Take a look around Singapore.

With so many
- unemployed PMETs over 40 years old
- senior citizens needing low salaried jobs to eat on a daily basis
How much growth do you think is left to sacrifice?

Unless of course you believe our newspapers. In which case, I agree. Let's all balance our budget.; May 23, 2010 3:50 PM
Anonymous said...: Employers have a choice. Take in low cost workers with equal or slightly qualification or capability so that bottom line can improve which in turn boost employers' salary and company P & L.

You can raise retirement age, invent lots of PMET Trainings, Producitivity initiative etc. Be realistic, as long as employers just give lip service to such initiatives, what can Govt or NTUC do?

End of the day, foreign workers or so-call talent will continue to take over 40s and above jobs. Forcing these 40s and above to take over low income work like Mcdonald, taxi driving etc.

If you believe the wayang of Faster, Cheaper and Better or Productivity drive, just look around yourself or your neighbourhood. More and more of your friends or relative in their 40s are unemployed and nothing change.; May 23, 2010 4:43 PM
Anonymous said...: …Risk is not the source of wealth in securities markets or anywhere else.

The notion that risk equates with reward is worse than a myth – it is a mass delusion, a mass delusion that in our time has cost investors of trillions of dollars that we can measure…

It has lulled an entire generation of financial advisors into complacency about the risks to which they expose their clients.

At every turn of economic life, the reduction of risk is the key to prosperity. Except in financial markets? Why should it be so?”

Source:
Panic: The Betrayal of Capitalism by Wall Street and Washington.
Author: Andrew Redleaf; May 23, 2010 6:49 PM
Anonymous said...: Many contries are talking about extending the retirement age because MONEY NO ENOUGH!

Some pension funds gone burst, some bleeding and cannot meet influx of retirees withdrawl request.........so looks like many
gahments are play "tai chee" in a way!; May 23, 2010 7:05 PM
Anonymous said...: Rememebr to attend the ntuc income AGM to vote the FT out as ceo; May 23, 2010 7:52 PM
wjsim said...: You don't have to ban hedge funds. Hedge funds dumb enough to have large holdings of those governments' debt will soon be gone.

The real terrorist are the governments irresponsibly running up deficits and passing the debt to their grandchildren. Greece of today is probably paying the debt of their grandfathers.; May 23, 2010 8:34 PM
JSLEE said...: If no confidence in sovereign balance sheet then i think everyone will rush to commodities or other real assets. Prices will shoot up.Civil unrests from the middle class & the poor might occur. To counter this,corporations or individuals controlling the production of these commodities/resources might face government takeover or be nationalised to control pricing. People will feel a bit of socialism,but during this time of "absolute" government control it is a good time for financial reform including dealing with issues relating to hedge funds. I think that's what the US is doing now with the FinReg,GlassSteagal?Volcker rule..however no one knows whether it will work,if not,then your government will "own" you soon.; May 23, 2010 8:53 PM
optimist said...: Everyone talks about how fragile the world economy is, and worry about debt and budgets.

But no one knows how to deal with it.
Interest rates are extremely low and will remain below 1% for at least another 3 years.
If rates remain low, where will you park your money? Any place as long as its not in the bank.
Thats why property prices will continue to rise and so will commodities and lastly stocks.

There is not a single Gov in the world that will dare raise rates except for Australia.. and even then the country is headed for inflation.

Fragile economy? Not in Singapore's case.. its all system GO! highest quarterly growth compared to the rest of East Asia.

Lets go shopping!; May 23, 2010 10:52 PM
Anonymous said...: We are already losing confidence in MAS..a regulator which is beholden to the FIs is dangerous.The consumers become sucked and dry.; May 23, 2010 11:20 PM
STG said...: Banning Hedge Funds are not the solution to the current financial crisis resulting from the beggar thy neighbour monetary and fiscal policies that governments adopt.

While the Hedge Funds do bet against the EURO or Greek Government Bonds, there must be a logical rationale for these funds to do exactly so. The countries that adopt loose monetary and fiscal controls cannot be totally absolved from their responsibilities for an erosion in the value of their currencies, government bonds, stock markets or economies. No Hedge Funds are strong nor powerful enough to force a sovereign state to adopt a specific set of monetary or fiscal policies. Neither should the Hedge Funds be blamed for pinpointing and highlighting the issues which the perpetrators would gladly hoped that they will never be discovered.; May 24, 2010 10:00 AM
Anonymous said...: Saturday, May 22, 2010. 9:30 am.

European leaders surprised the world two weeks ago when they announced the massive $1 trillion EU/IMF debt rescue plan.

Oddly, they then immediately began making remarks questioning whether it would succeed, or might even make the situation worse.

For instance a few days later, Jean-Claude Trichet, president of the European central bank, said, “Europe’s economy is in its worst situation since World War II, and perhaps even World War I . . . . . There is always the danger of contagion among countries like the contagion we saw among private [financial] institutions in 2008.”

The chief economist of Germany’s largest lender Dekabank AG, said, “It will be very, very difficult for Greece to orderly repay its debt.”

Last Thursday, the Finance Minister of Germany added fuel to the fire saying, “Markets are out of control.” Global markets obediently then proceeded to plunge further, the Dow closing down 376 points on Thursday.

European leaders must wake up and realize they need to talk their rescue plan up if it is to have a chance of succeeding. It is dumb to spend hundreds of $billions on stimulus and rescue plans and then proceed to raise questions about whether they will work.

As readers might recall, in early 1999 I ranted about the seemingly endless gloomy speeches and warnings in the U.S. from Fed Chairman Ben Bernanke, the President, and Congressional leaders, months after allocating a couple of $trillion in various stimulus and rescue efforts that didn’t seem to be working. As soon as they reversed to talking positively about the future and showing confidence in the rescue plans themselves, consumer confidence began to pick up and the economy began to pull itself out of recession.

Providing the money that could turn things around addresses only 50% of the problem. The other 50% is always psychological and depends on improving the confidence of consumers and investors.

They make that half of the problem worse with their gloomy assessments.

Source:
Sy Harding; May 24, 2010 1:52 PM
Anonymous said...: I am a small shareholder in NTUC Income, and I never get a chance to attend the AGM. How to vote out the CEO? I am very unhappy with the annual dividends that are diminishing as the years go by.; May 24, 2010 3:18 PM
Anonymous said...: voting out ceo,pap, or anyone does not solve your problems. Vote with your feet. walk away; May 24, 2010 10:21 PM