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.

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.

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).

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.

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.

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.

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