Dear Mr. Tan
Please refer to http://www.economist.com/content/global_debt_clock Looking at the above site, USA, Canada, Western Europe, Japan and SINGAPORE seems to be having serious national debt problem. Is Singapore is worst than USA since debt per person for Sgp is $41.7k while USA is $25.8k. Do educate, thanks.
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I am not familiar with this topic. I will post your question and ask other people to comment.
National debt must be looked at in context of domestic or foreign debt. US national debt are mostly foreign held by PRC, Japan etc. even including Singapore.
ReplyDeleteSingapore national debt is mostly made of of CPF, i.e. domestic. On the international debt market, Singapore is a net creditor.
Singaopre Treasury doesn't need to issue bonds to raise money; it issues bonds to sustain and smoothen the bond markets. US Treasury issues bonds because they really need the money to rollover.
For USA, its public debt is held by China, Japan, Arabs and private fund managers.
ReplyDeleteFor S'pore a large chunk of its public debt held by CPF Board. I guess CPF now must have too much money, such that they can go around lending money to Temasek/ GIC to go shopping overseas.
Tks Vincent for the concise and clear explanation ! So we are not that bad after all !
ReplyDeleteIf you have 1 million dollar and you could generate 8% return from this 1 million, then you do not mind to pay 3% for your 500,000 debt that you owe to the bank. I believe currently, The Singapore Government is in this enviable position.
ReplyDeleteSingapore has budget and trade surpluses for many years except during recession. So, I believe the reserve is stashed in various government agencies generating return higher than the interest rate of government bonds.
What if they lost in the market????.... will cpf still be able to pay back the people who have no choice but to place it in??? Or they ness to restructure the debt n roll over to a longer period ......
ReplyDeleteYou have to separate the government from CPF Board...CPF Board "lends" money to the government by buying special non-tradable government bonds and holds them to maturity. As such, CPF Board is a creditor of the government. Losses in the market does not matter to CPF unless the government defaults.
ReplyDeleteOn the other side of the coin is the government, who borrows the money from CPF, then farms it out to GIC and/or Temasek who then invests the money on behalf. Losses in the portfolio do matter in this case, but the government has another ace up its sleeve. The Singapore government has maintained a budget surplus for years, and has quite a good sum stashed away. I think the government will be able to avoid any form of default on the strength of the reserves in the foreseeable future, and so your money in the CPF should be relatively safe.
am really glad that the comments here have helped clarified things. i was pretty shocked to see singapore in debt as well, but it's more of a technicality rather than being in a real rut like the USA (:
ReplyDeleteThere is a very big "IF" here. It assume GIC and government would made money and therefore do not default. This cannot always be true. Do you ever wonder why the government keep extending the ages for the withdrawal of our CPF monies and come up with scheme like minimum sum, etc. I reckon if without those scheme, if the government did not keep changing the rules, if the baby boomers generation is allowed to withdraw at age of 55, our government may go bust. Would we ? Maybe the soon-to-elected President can pose this question to the right ministry.
ReplyDeletewhy so sceptical about the government's management of the money?
ReplyDeleteWhy not look at it from the real positive side, which is that indeed people are living longer and older, and there have been quite a significant number of cases of people withdrawing their CPF and spending it all and having no money to last throughout their retirement and that the government is truly wanting to help most people plan for their retirement? There might be many smart people who will not splurge all their CPF savings, but the law has to be across the board since you won't know who will splurge the money and who wouldn't.
GIC/Temasek has been clocking huge earnings every year except for a few selected years. Funds , in general, possess special information and conditions to allow them to be more advantageous in securing deals (i.e: look at Warren Buffet), so I don't see how it is possible that GIC/Temasek will consistently lose money in the long run.
Please read this economist article on government debt.
ReplyDeletehttp://www.economist.com/node/13825211
Debt whether internal(via CPF) or gross is a 'shackle' on our govt's running of economy in that there must be growth above(interest rate)and govt must run surpluses to pay the interest on these debt.
Which explains IMHO why the obsession on GDP growth and runaway FTs and it's consequences whether intended or otherwise.
Please educate me.
Roll forward to 2016 -- we now have the Basic Retirement Sum at S$80K, Full Retirement Sum at S$161K and the Enhanced Retirement Sum at S$241K, plus you have to pledge your property if your CPF has less than S$80K Basic Retirement Sum...
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