Monday, November 22, 2010

Will Singapore face the same outcome as Ireland?

Should we be worried about Singapore? Prevention is better than cure.


Ireland was one of the poorest countries in Europe when it joined the EU in 1973 along with Britain. Even with European subsidies, unemployment in the mid-1980s averaged 16 percent.

In the 1990s, lured by a 12.5 percent corporate tax, companies such as Pfizer Inc. and Microsoft Corp. helped Ireland export its way into becoming the “Celtic Tiger.” The jobless rate sank to 3.9 percent by 2001. In the decade through 2006, Ireland grew at an average annual rate of about 7 percent, the fastest among euro-area countries.

That expansion, together with easy credit, fanned a real- estate bubble. Home prices almost quadrupled in the decade through 2007. It went disastrously wrong for Ireland following the 2008 demise of Lehman Brothers Holdings Inc ., which turned the slowdown in the property market into an implosion that engulfed the economy. The ISEQ stock index has plunged 70 percent from its record in 2007.
My view
Singapore is following the same path and is likely to face the same outcome.


Chee Ming said...

Tell that to the Minister of Finance. He will taiji it to Prime Minister. Then PM will taiji it to Chairman of MAS. Then Chairman of MAS will taiji it to some God-knows-what committee, where they taiji it back to the Ministry of Finance, where it eventually gone and vanished into thin air, never to be heard again.

Marcus Aurelius, Mediations: Because a thing is difficult for you, do not therefore suppose it to be beyond mortal power. On the contrary, of anything is possible and proper for man to do, assume that it must fall within your capacity. I guess that doesn't applies to Singapore government.

wjsim said...

I doubt Singapore will have it as bad as what Europe minus Germany is going through. The crux of the problem in Europe is government budget deficit while I believe Singapore still has her budget under control. I say that with less confidence after YOG but that is of a totally different scale relative to Europe's debt problems.

A property price drop might happen here but I believe that would bring about more good than harm. Given that property prices have risen past Pre-Asian Financial Crisis level, I think it's about time something happen and give new home-buyers a breather.

Europe might be going through financial turmoil now but I believe they will recover much better than the US. Same problem, different approaches. US had done bailouts, now QE2 and possibly followed by QE3, QE4... The Fed's aim is to blow up another stock market bubble and encourage consumption backed by perceived growth in wealth (they never learn). Bernanke wrote in an Op-Ed saying exactly that in paragraph 5.

Europe has done the exact opposite, Greece implemented "austerity measures", France increased retirement age, UK cut education subsidies, Ireland now cutting government spendings. They are sucking it up and dealing with the problem the hard and right way. I'll put my bets on the Euro.

I can't see how Singapore can be remotely compared to Europe's situation. If there is any easy credit, you can only blame US for infusing so much hot money into the global economy. Singapore's approach to growth has always been to cut costs (which unfortunately include our wages) and increasing productivity (same method, different angle).

ron said...

There will NOT be any meltdown here in Asia, especially Singapore.

Even the IMF rescued Indonesia.

With China & India chugging along, Singapore will have constant growth.
It may not be exciting growth but there will still be Hokkien Mee and ERP.

I do not understand why many people love to promote a negative picture of global economics.

Do you see less cars on our roads?
Do you see prices getting cheaper?
Do you see your employer's new BMW?
Do you see less food?

This very hazy notion that the world is going into tailspin was
painted early on.. I gave it a chance to be clearer. Alas, the turmoil, riots did not appear.

The stock market is up
The COE is up
The ERP is up
The house prices are up
Even salaries are up!

Redstar said...

ron said...

"There will NOT be any meltdown here in Asia, especially Singapore"

Some contrarian thinking here may be useful.

The 1990's Asian Financial Crisis struck after Asian markets were up and roaring, particularly Singapore stocks.

After the melt-down, some blue-chips even vanished. DBS Land/Pidemco became Capitaland; DBS Bank/POSB Bank became one merged business entity; property investment companies then which were considered a sure bet folded eg, SBS's property arm lost big time, and closed down for good.

"Alas, the turmoil, riots did not appear" - protests occurred in France (retirement age revised), UK (university fee hike), transport strikes in Portugal this week etc.

I see many old people selling tissue paper, young people doing unproductive work like selling over-priced properties, unemployed PMETs soaring as bosses prefer young, cheap foreign manpower who are bound by their contracts and cannot leave even when subject to humiliations & harsh treatment.

Japan was in bubble territory. Asia ex-Japan is inflated by emerging market hype and hot money, low interest cheap money. It is not supported by strong fundamentals. It is supported by financial gimmicks, market manipulations and Ben Bernanke's mad money-printing.

Can dishonest money policy be sustained in the longer term, at the expense of prudent savers and retirees to bail out fraudulent banks & risk-takers in all kinds of speculative markets? The decline of Singapore starts when we start behaving dishonestly with our financial system and let greed consume our beliefs of justice, equality, sacrifice (the rich must pay higher tax and estate duty, the unemployed must not pay 7% GST) and righteousness.

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