Friday, July 30, 2010

Lee Kuan Yew's "Intellectual Class" will Run Singapore Into the Ground

“We are going to have an intellectual class, about maybe three times as big as what you have now and that will give us the dynamism, the powerful engine to carry us forward faster.” 
- Lee Kuan Yew, 28th July, 2010
Just take a look at Singapore's recent history to see what Lee Kuan Yew's "Intellectual Class" has delivered. Led by none other than his own son, PM Lee Hsien Loong, Singapore's "elite intellectuals" have bandied about policies which are slowly eating away at Singapore's social fabric and which are systematically undoing years of hard work and the foundation upon which this country has arisen.

A senseless growth-at-all-costs mentality and narrow minded focus on GDP growth has led to an open-door immigration policy which is testing the limits of this country. Due to the sudden population shock to the system, transportation, healthcare and housing infrastructure is bursting at the seams. Trains are overcrowded and overpacked, and the roads are chock full of cars. Our hospitals are showing capacity strains, with waiting times for hospital beds raising to all time highs, and doctors being overworked and underpaid. Housing price inflation in Singapore is shooting through the roof due to a lack of common sense on the part of of the Government to provide and plan for adequate housing infrastructure to accommodate the influx of foreign migrants. And while the cost of living continues to soar, incomes for most of Singapore society have either stagnated or fallen. Ostensibly, Singaporeans can now never ever retire.

Thursday, July 29, 2010

Singapore Economy Would Suffer if China Property Boom Collapses

One of the hot topics circling in the global financial news and blogosphere is the potential overheating of the Chinese economy and property market bubble. Home prices in Beijing, for example, have risen to 22 times income levels, a new high that exacerbates housing affordability problems and that raises serious questions about the sustainability of housing prices on the basis of fundamental valuations.

At the same time, reports of China's shadow banking system have started to emerge. A recent video report by TheStreet talks about the "Shark Loan" phenomenon in China. The "Shark Loan" process typically starts with a homeowner taking out a loan on the equity of his house, from a commercial bank, based on the appreciation in the market value of the house due to the booming property market. The homeowner then re-lends the proceeds from the loan to a Shark-Loan operation at a substantially higher interest rate than the homeowner is paying the bank. The Shark-Loan operation, in turn, lends the money it has borrowed from the homeowner, at an even higher interest rate, to a speculator who then bets on the housing market once again. In effect, the Shark-Loan operators are acting as "shadow bankers" in the provision of credit to speculators who would not otherwise get access to capital through traditional funding sources.

The impact of the "Shark-Loan" operations is to circumvent the constraints on credit imposed by the state that are designed to cool the credit bubble that is fueling the property boom. The Shark-loan Shadow Bankers allow the housing bubble to continue its inflation by channeling credit around the legal banking system from homeowners into the hands of speculators, who then further inflate housing prices with their purchases of property. The whole system works beautifully for everybody as long as housing prices continue to rise. But once housing prices fall and the bubble bursts, the entire system of ponzi finance will come crashing down like a house of cards.

Wednesday, July 28, 2010

A Rebuttal to Robert Reich's "Great Decoupling"

Former US Secretary of Labor Robert Reich has recently written a piece titled "The Great Decoupling of Corporate Profits from Jobs" - asserting that the US is entering into a jobless recovery which will see profits being created but not jobs.

There are several problems with Reich's analysis.

In his blog post, Reich is hypersensationalising America's structural weakness in manufacturing, and conflating it with the cyclical unemployment associated with the credit cycle. He is also (wrongly) demonising the Automakers' foreign capital investments and blaming it for the lack of job creation in the US.

As regards the credit cycle - what we are seeing now in the US economy is the deleveraging of the consumer. This deleveraging is going to take some time before it bottoms and stabilises or resumes its upward trend. Meanwhile, companies which underwent restructuring to minimise excess capacity during the downturn, are still sitting on excess capacity which are adequate to meet current levels of demand. The deleveraging of the consumer puts a downward pressure on aggregate demand. And as long as demand stays at levels that does not exceed existing production capacity, companies will not invest in new capacity (and new jobs).

Monday, July 26, 2010

Mah Bow Tan is Either Disingenuous, or Stupid (Maybe Both)

I simply do not understand how Mr Mah can make some of the statements he made that have been reported in the press today.

Dufus Statement No. 1:
"If you're a first-time buyer, there's more than enough flats for you."

Mr Mah claims that HDB is rolling out thousands of BTO flats this year. But how on earth can there be 'more than enough flats' when the flats are only going to be built in 3-4 years? A couple that is going to be married within the next 12 months needs the flats NOW, not in 3-4 years!

This is precisely what is happening to my sister-in-law. She is getting married early next year. But her BTO flat will only be completed around 2014/2015. In the mean time, she and her husband have to share a room with her relatives.

This is a ridiculous state of affairs and it is fundamentally disingenuous for Mah to state that there is adequate housing, when it is precisely the case that there IS NOT ENOUGH HOUSING to meet demand NOW, when it is needed the most. Mr Mah Bow Tan's statement is both insensitive and insulting to the many young Singaporeans trying to start a family in Singapore.

Sunday, July 25, 2010

HDB Unaffordability Exposes Economic Policy Failures - Housing Bubble to Grow and Pop

HDB officially released its 2010 Q2 housing price statistics. Key highlights from the latest housing statistics are as follows:
HDB’s Resale Price Index (RPI) rose by 4.1% in 2nd Quarter 2010 over the previous quarter, as compared to the increase of 2.8% in 1st Quarter 2010 and 3.9% in 4th Quarter 2009.

The median Cash-Over-Valuation (COV) amount amongst all resale transactions increased to $30,000 in 2nd Quarter 2010 (see Annex D (PDF 37KB)). The proportion of resale cases transacting above valuation also increased to 96%.

Singapore's HDB resale market is now out of reach of average Singaporeans. The median COV of $30,000 is now more than the annual take-home salary of an average Singaporean. Assuming that a person earning $3150 a month (gross) takes home $2500 a month (after CPF), this person would take 6 years to save up the median COV if he saved 20% of his income every month.

This means young, newly-wed Singaporeans who have been working for less than 5 years, and who are looking for housing when they are married, are effectively priced out of the resale market. The only way they would be able to afford the housing is if they were to borrow money from their parents to afford the COV to buy a resale flat.

Tuesday, July 20, 2010

Great Flood Fiasco: "Intense Storms" or Sinking Sampan?

When a major unexpected event with severe deleterious consequences occurs, those who were responsible for preventing it from happening, or were supposed to have seen it coming and have dome something about it, often give similar types of excuses for its occurrence. The typical excuse given is that the event that occurred was an event of such low probability or such low frequency that there was nothing really that could be done to prevent it or to foresee its occurrence.

There are several names given to such events... "Perfect Storms", "Once-in-a-million year event", "Outlier", "Freak Event"... all give the connotation that there was nothing that could have been done to prepare for it, and hence those who should have seen it coming should be absolved from any blame or responsibility since there is nothing they could have done in the first place.

There are a couple of notable events in recent history that have been attempted to be explained away as "perfect storms" or "outliers". These include events such as the Great Financial Crisis, which brought the entire US banking system to its knees, the Deepwater Horizon Oil Spill disaster, which is the single largest and most damaging oil spill in US history, and the recent stock market blip that resulted in the biggest intraday point drop ever in the Dow Jones Industrial Average.

In close examination, history will find that these events were actually results of Systemic Failures, rather than "outlier" events. The Great financial crisis was caused by systemic failure across the entire financial system - from excessively low interest rates by the central bank, to over-deregulation of the banking system, to overly lax lending by commercial banks, to greedy investment bankers. The Deepwater horizon spill was caused by executive decisions which put cost-cutting ahead of safety, by complacency and hubris.

Closer to home here in Singapore, Yaacob Ibrahim has attempted to explain away the recent flash floods as "intense storms" and "freak events." The most famous quote he has given Singaporeans is that floods of this magnitude happen "once in 50 years". In short, Yaacob Ibrahim is basically trying to say that the flooding is caused by outliers and perfect storms, not by a faulty drainage system.

Monday, July 19, 2010

Massive Flood Cockup Exposes Cracks in the Political System

When everything is going fine and there are no major cockups, it is easy to for a single-party state and all its institutions and appendages to give the appearance of unity and strength, and for the ruling party to cling onto totalitarian political power. However, when something major goes very wrong, such incidents tend to expose the cracks, flaws and fragilities in the system.

What used to look like a unified front starts to turn into infighting and bickering as the little generals start defending their own turf and try to push the blame for the cockup to one another. This happens when the dominant personality at the top - who previously held the system together and imposed discipline on the ranks - starts to fade from power. This also happens when the cockup was clearly part of the system, and when the blame cannot be pushed to the public.

Here is the low down of the turf clashes that have emerged in the aftermath of the flood cockup

Thursday, July 15, 2010

Singapore's Addiction to Gambling - in More Ways than One

In the news recently:

MORE problem gamblers sought medical treatment and help last year compared to three years ago.

Fresh figures from the National Addictions Management Service (Nams) showed that 17 per cent of patients seen in 2009 were gambling addicts, compared to 5 per cent in 2007. Nams treats about 2,000 patients a year.

Gambling addiction cases are among the top three form of addictions treated by Nams. Drug and alcohol addiction cases make up about 80 per cent of Nams case workload.

Speaking at the official launch of the Nams clinic at Buangkok Green Medical Park on Wednesday, Associate Professor Wong Kim Eng, Clinical Director of Nams, said the rise in gambling addiction cases is likely due to the increased awareness of Nams and its treatment programmes.

Nams has been operating from its dedicated outpatient clinic since June last year and provides services such as psychiatric assessment, counselling, and support groups for patients and families.

Singapore is getting more and more addicted to gambling in more ways than one.

Firstly, you have the obvious rise of problem gamblers as part of the social cost of the newly opened integrated resorts. While the IRs may have helped Singapore to post record-breaking GDP growth numbers this year, more and more Singaporeans are facing gambling addiction. Anecdotally, a friend of mine working in the psychiatric ward of NUH reports that there has been a massive jump in problem gambling cases being admitted to the hospital.

It is not just the gamblers themselves who suffer, the families of the gamblers pay an even higher social cost. Mothers have to suffer to pay the debts of their husbands, children have to drop out of school because their parents cannot afford school fees. Families break down and social cohesion is weakened.

Pioneer JC Girls' Deaths - The Cost of Singapore's SocioEconomic System

The straits times story of the suicides of 2 JC girls from Pioneer JC is depressing to read and is sad indeed.

TWO Pioneer Junior College classmates died within three weeks of one another by leaping from high-rise blocks of flats about a year ago, a coroner's court heard on Thursday.

Ho Yi Xin, 17, was described as a hard-working student with high expectations of herself. Her ambition was to be a doctor.

The second-year Pioneer Junior College student had been seeing a private psychiatrist since June last year as she was feeling anxious in school and at home. She had problems sleeping and could not concentrate on her studies.

Her last visit to the psychiatrist was on July 3 - the day she was found dead at the foot of Block 533 Jelapang Road in Bukit Panjang. She was believed to have fallen from the 24th storey of the block as her silver-coloured bag was found there.

At an inquiry into her death, the court heard that Yi Xin, an introvert, had confided in her classmate around May last year that she was depressed over a detention form given by her favourite teacher for being late.

Seventeen days later, her classmate, Wong Peek Yian, leapt to her death from her seventh-floor bedroom window at Jurong West Street 81. Peek Yian had found out that she had done badly in her mid-year examination and dreaded to see her vice-principal over her poor performance.

A few hours before her death leap, she had sent text messages to her boyfriend, full-time national serviceman Valentino Lee, 19, telling him that her teacher had advised her not to see him too often.

Our education system, as everybody knows, is a pressure cooker in which Singaporean students face immense social pressures to conform to society's standards.

These social pressures come from multiple angles - from parents who want their children to be doctors, lawyers, bankers or scholars. From the government, which places pressures on teachers to churn out A grades from their students. And from their peers, where everybody is competing to outperform and outscore their fellow students in order to emerge at the top of this rat race, which begins the moment a 7 year old child steps into primary school, and only ends when the child has ended his or her working career (now pegged at 65 years, according to the PAP system)

These immense pressures have a huge psychological and human cost on Singapore's young people, most of whom were never designed to take some pressures. Indeed, how is it possible for every person to be a lawyer, doctor, banker, or scholar?

Singapore Economy is Booming but Guess who is Benefiting? Duh... Foreigners!!!!

Associated Press reports that Singapore's economy expanded at a 18% annual rate in the first half of the year.

Who, however, is the main beneficiary of all this economic growth?

But of course! Foreigners!!! LOL, what is new?

SINGAPORE can expect the number of foreign workers to increase by at least 100,000 this year in response to the demands of the booming economy, said Prime Minister Lee Hsien Loong.

Speaking to the Singapore media here on Tuesday as he wrapped up a six-day visit to the United States, Mr Lee said the government had taken steps to moderate the number of foreign workers, but a rise was inevitable given the strong growth.

He added: 'It cannot be helped because with the market so tight, if we don't allow the foreign workers in, you are going to have overheating.

'But we are managing the number of foreign workers. Their levies are being calibrated to moderate the inflow.

'But even with that, I would imagine there would be more than 100,000 extra foreign workers this year. I cannot see it otherwise. We have to accept that.'

 Have Singaporeans' wages risen at an 18% annual rate this year? Are you 18% more productive than the year before?

Of course not!!!

The only way for the PAP to deliver its economic growth numbers is to do what it has been doing all along - bring in foreign capital and foreign labour. The PAP is doing exactly what it has been doing since it came to power - increase factor inputs, without increasing factor productivity.

Thursday, July 08, 2010

Straits Times World Cup Cockup - What Happened to the Sports Editor???

I found this on the Straits Times website sports section today.

Seriously, I think the editor had too many beers watching the match last night.


Tuesday, July 06, 2010

IRS Money Laundering Investigation Comes to Singapore

Just reported in the news today, "HSBC Clients With Singapore, India Accounts Said to Face U.S. Tax Probe". The IRS is investigating possible tax evasion by American citizens through bank accounts in Singapore. This follows a major crackdown on the Swiss private bank UBS for abetting tax evasion.

Just over a year ago, yours truly pointed out the risks that Singapore faced by positioning itself as a low-tax, private banking jurisdiction. I analyzed the UBS tax fraud case, and Andy Xie's accusation of Singapore being a high-rolling money laundering center. I noted that Singapore was rushing headlong into the private banking and casino business, businesses that depend on a sustained influx of large amounts of private capital, that often comes from illegally derived sources, or that is seeking to evade taxes.

The bloomberg article notes:
Several weeks ago, Downing toured Singapore, Hong Kong and Beijing, meeting with regulators and bankers about offshore tax prosecutions. He spoke to tax lawyers at a conference sponsored by New York University on June 18.

“We just took down the largest private wealth management bank in the world,” Downing said, referring to UBS. “Do you really think we’re going to have trouble doing the next one?”

The Problem with the US Economy

In his latest Op-Ed column in the New York Times, Paul Krugman makes the point that the US needs to continue transfer payments and extension of unemployment benefits to those who are suffering the worst of this economic recession (the poor AND jobless). Krugman is right that engaging in "austerity" by cutting these transfer payments is "penny-pinching in the midst of a severely depressed economy" and "is no way to deal with our long-run budget problems."

Krugman is addressing that group of Republicans who dogmatically oppose everything that the Democrats bring to the table (including financial regulation) simply because they are Republicans and that is what Republicans do (oppose the democrats) and not because they have any genuine understanding of what "Austerity" is. That word has been bandied about too much and has been misunderstood and conflated (wrongly) with genuine fiscal conservatives (like Roubini) who understand that releasing life support too quickly will plunge the economy back into depression (unlike the phony republican 'austerians', who ran massive budget deficits during times of prosperity with their misguided wars, and who pushed for the kind of deregulation that got us into the GFC in the first place). It is unfortunate that the Republicans have hijacked and adulterated the fiscal consolidation argument to further their dogmatic agenda (and have fooled many people in the process), but at least in the context of this blog post we can call them out on their bullshit.