I expect the global economies to go through a difficult time over the next two years. Many analysts and economists are worried about the debt crisis in USA and Europe and the slowdown of the economies in the advanced countries.
We should be prepared for a difficult time for the Singapore economy. We can expect more people to become unemployed.
If I were the Finance Minister, I would implement the following measures:
We should be prepared for a difficult time for the Singapore economy. We can expect more people to become unemployed.
If I were the Finance Minister, I would implement the following measures:
- Allow unemployed people to make monthly withdrawals from the CPF account. The amount should be sufficient to meet their monthly expenses. This can be for a period of 12 months and may be extended.
- If there is insufficient balance in the CPF ordinary account, allow negative balance to be accumulated (with interest at 2.5% per annum). The negative balance will be recouped from future contributions, when they find a job. If it remains negative at the time of retirement, it can be a charge on the property that has been purchased with CPF funds
- The monthly repayment of the mortgage loan can be deferred during the period of unemployment.
If the unemployed people are not required to sell their property during this distressed time, the property market need not collapse - which was what has led to the problem in the USA and Europe.
Tan Kin Lian
9 comments:
Dear Mr.Tan,
In the last recession in 2008/09, I have very little cash with most money tied up in property, shares, bonds, foreign currencies and the ill fated investment in structured products that have since been written down to zero. I was also sitting on large paper losses and can not take advantage of the excellent value opportunity then.
I learned an expensive lesson taking advice from relationship managers. Since then I have liquidated 90% of the investment in the post 2009 bull market.
I am happy to stay liquid in the coming recession but should opportunity opens again, this time i have the resources to take advantage of it. I pity those who invested in the inflated property market, a correction of up to 405 is possible.
rex comments as follow,
it is unrealistic to expect banks to act as charity and allow its jobless customers to defer mortgage payments. no bank would want to do this as it offers no advantages from a business perpective, and on the contrary to start a defer payment scheme is to open pandora box of bad debts. It is not good for the preplanned liquidity position of banks when they take account of the total loans on the bank and anticipated cash flow via the monthly payments. I find the proposal of Mr Tan rather naive unfortunately.
Likewise, whilst many of us would be grateful to be able to draw on cpf if we are jobless, the issue is that, if the govt is having great difficulty honouring its commitments to allow citizens to withdraw money when they reach 55, what more can we expect of them if we ask of them to withdraw cpf when we are jobless. I find it rather an unrealistic proposal.
Conceptually, i guess Mr Tan is requesting to draw on one's savings. If that is the case, we might as well go for the National Reserves of Singapore which in a large part composed of taxes of singaproeans and many other pooled contributions. In times of trouble the govt could tighten its belt on the super redundnant numbers of staff and humongous pay of the rulers, or draw on the national reserves.
If the answer is no, then well, evrybody gotta rough it out maybe work as maids overseas. Philippines was once the jewel of the east but it got from bad to worse. Greece can go bankrupt. Singpaore also can go bust, of course.
The tragedy of it all is that we have a useless Mainstream Media which does nothing to reveal truths, so many people will be caught by surprise. Recently they just discovered that due to "statistic compilation error" the number of drug abusers are on a very high rise trend rather than dip trend. How absurd. Nothing is safe, we have very bad governance of numerous issues, of late.
rex
your proposal will never get approved. Where will Ah Ching get the money to become Asia's most powerful woman if the kitty is depleted?
Reply to Rex
The banks now grant mortgage loans where their loans have higher priority than CPF. In the event of a default, the value of the property is usually higher than the loan extended by the bank and as the bank has higher priority than CPF, the bank is able to defer payment without taking any risk (as the risk is shouldered by the owners' balance in CPF. There is no charity involved - the bank is earning good interest and has low riks - when they defer the monthly payment. What is needed is for the finance minister to encourage the bank to extend this facility.
"We should be prepared for a difficult time for the Singapore economy. We can expect more people to become unemployed."
But small medium companies businessmen are advocating government to let in more foreigners to come to Singapore to work and these businessmen are also advocating govt to pay for training/upgrading of foreigners skills.
It is very obvious that working class Singaporeans are at the losing end.
This is thinking outside the box.
Looks like deja vu 2008 all over again - Gold and Oil Prices and equities falling, US$ spiking up sharply, rental values falling sharply. Next year should be pro Equity as it's US Presidential Election. Surely Obama dun want to be the only one term President on record.
Meantime, PAP Govt and employers in Singapore be more compassionate to employees, use other methods to cut costs rather than retrenching, and Govt helping citizens to cope.
Maybe just wistful hope only, Singapore is the most dog eat dog place in the world, either you die or I survive kind of mentality.
Looking into the crystal ball, there seems to be a silver lining for countries like Singapore, Malaysia and Indonesia this economic chaos bring.
The Americans are at their wits end, been there, done that, in fact everything, but could not create jobs or pull the economy up. The last resort - trade wars with China, since US has no manufacturing on home soil, Americans will divert their attention on Singapore, and base their factories here, i.e. there would be a demand for commercial space. Back home they could survive on their own, they have all the agricultural products to consume, and the world's biggest oil reserves, (though many of these oil reserves are presently frozen by legislation), and whatever industrial products they need they import from their SEA factories, bypassing China.
So now Cash is King, wait for the chaos to plummet like shit, and move in for the kill, in industrial properties, by then banks could lend you at most 30% of valuation. And maybe medical suites, as Singapore still is one of the Medical Centres in the world. Meantime, all markets have not hit panicky dirt cheap yet.
For home owners, better close rental deals fast, as long time expatriates who bought properties here the last few years are cashing in and renting instead, so catch them before the market dries up.
As we do not have any unemployment insurance, the monthly withdrawal from the CPF account is the next best thing. The unemployed CPF member is actually withdrawing his own money to meet his living expenses. If the money has run out, he is getting money from the government but has to pay back with interest (at the CPF rate). The government money can be allowed as a charge on his property that he holds.
He may not have sufficient money for his retirement, but he needs the money now to live on (and not to borrow from the bank at high interest rate on his credit card). The immediate needs is more important that the needs in the future on retirement.
If the CPF needs someone to make a financial assessment before allowing the money to be withdrawn or borrowed, they can get a report from a qualified financial adviser (who has to submit the report in a certain format prescribed by CPF). It is better for the financial adviser to do this type of work, rather than to sell financial product to earn a commission - and give a bad product to the consumer.
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