But even his calculations are misguided. In order to be eligible to buy a flat, and get the subsidy of $11k that Mr Yap mentioned, the person in question need to be over the age of 35. But when a person is over the age of 35, the amount of his CPF contribution that goes into his ordinary account ( and as such can be used to finance his HDB mortage) goes down. For the example given, the in the ordinary account to be used monthly is $525.41, not the $575 that our Deputy CEO mentioned.

Of course the difference is only $50, andf it doesn’t make a difference to the calculation of 29% arrived at. But either our HDB head is not familiar with his own policy with regards to singles, or more likely, he is not familiar with the fact that contributions to the ordinary account goes down with age.

And who can blame him, such small variations to his own cpf account, would hardly matter to him. For someone of his pay scale, he is likely to have hit the CPF contribution ceiling anyways, and the amounts in his CPF accounts are inconsequential to him. Reminds me of a certain minister of state who once claimed that he receives his CPF statement monthly

Only someone like the person used in the example making a measly $2500 a month, would notice that his disposable income is smaller by $50 and would fall futher that as he grows older.

Notice also that in the example used, the 3 room flat in question is $200k, a simple search on the HDB site would tell you that the median 3 room flat cost $240k ( average of about $246k).  Even if we take the benchmark of affordability to be 30% ( and 30% is highly debatable), that would definately blow it.

What we have then is that, someone of average income, would need to take the maximum of loan of the maximum tenor, and still not be able to afford ( assuming 30% benchmark) an average 3 room flat.

The Japanese model should look familiar

(1) Huge government linked companies and banks

(2) Export dependent economy

(3) Focus on high value electronics production

(4) State fiscal stimulas primarily through large construction projects.

(5) Huge public sector that runs everything from pension, healthcare, media, transport

Just 2weeks back, all major news sources were still busy tripping over themselves trying to come up with a more dramatic comparison for what this recession is equivalent to. Consensus then seem to be that this one is worse than all previous recessions with the exception of the great depression.

So what has changed in the last 2 weeks for everyone to be so compulsively optimistic? Nothing.

As far as the I can see, banks are not suddenly opening their vaults, what’s left of it, to borrowers. No one as yet has implemented a way to take toxic assets off the banks books with further pain. Property prices are still 50%-100% higher than at the start of the last bull cycle. And manufacturers are still firing.

I have no doubt that we’re a lot closer to the end of the bear market now than we were 6 months ago, and people now are more focused on solving the issues now than they were then, when everyone was running around in a daze.

But really this rally looks to me like it’s driven more from greed than any sort of excessive optimism in the world.

While everyone in US is screaming for the blood of the bankers, and for their bonuses to be repaid. Should we really still be paying million dollar salaries to our ministers. Our economy is not that unlike business in a US Investment bank, in that our growth is made possible by leverage. We leverage on foreign workers, skilled and unskilled alike, in our pursuit for growth, not unlike IBs leveraging up their balance sheet. And we leverage up big time, 2/3 of all jobs created last year were for foreigners, or look at it another way, we’re leveraging our workforce by 3 times. Also we place big bets on “growth” sectors, not unlike how banks bet with their balance sheets, look at the amount of money we have thrown at the bio-tech sector. What all that ultimately leads to is a more volatile economy, one where booms and bursts are bigger than in other countries.

Our ministers are certainly paid like some of Wall Street’s best fund managers. Of course the fund manager gets paid well in a year where he made money, but if a fund manager had lost money in 4 of the last 10 years, I’m pretty sure he would have been fired, let alone get paid.

Of course the government is busy congratulating themselves on a “good budget”. And in truth it’s not too bad. But if we want to be symmetrical about things, they have taken the credit for the boom times, just look at their salary increases ( again not unlike how fund managers talk about alpha and their rare ability to make money in the equity bull run), should the government not then shoulder the blame for the current recession? After all a lot their counterparts in the big banks ( which incidentally are what they like to peg their pays to) are taking the blame and paying for it with their livelihoods.  It’s almost human nature that we like to take credit for anything that goes well, and try to shift the blame when things go wrong.

The beauty of the private sector is that people get rewarded for their ability and for taking risks, that means that when things go right, these people get rewarded a lot. But when things go badly, they bear the consequences as well. On average most people will get paid well for a few years and maybe be unemployed for another few.

Of course that is not going to happen here, because our ministers here get a much better deal than the best in US. They get paid their million dollar pay regardless of what happens. They not only have a golden parachute, they have a golden rice bowl.

Maybe that is why they have lost touch of the reality on the ground. After all why do you have to pay attention to the people and their problems when you get paid no matter what happens. The security provided to our leaders breed not only complacency but arrogance and even contempt for the average person, if the recent comments by our now famous MP is any gauge. The fact that they have to be constantly reminded in parliament to be more humane and sensitive to people, is evidence of their mindset of talking down to people.

Security in power breeds elitism and arrogance. The only way to restore their mortality is strip the government of it’s absolute power. Like what our government likes to tell us, competition is good. If that is true in the job market and business, then it must also be true in government and politics.

I’ve come to the conclusion a long time ago that Singapore is a good place to work in but not great for a good living. I can fully understand the influx of expatriates into Singapore, because as a place to work it has a lot going for it. It’s in east Asia, where even with the current recession, economic growth is likely to be the highest in the world for at least the next few years. Language is not a barrier, it’s convenient to every amenity, and most importantly, it has one of the lowest income tax rates in the developed world.

But as a place to live, I think there are many other places in the world that has so much more to offer. If it’s urban excitement that we want, London, New York, Los Angeles, Tokyo all provide a more exciting lifestyle. If it’s a more relaxed city life we’re after, Melbourne, Vancouver and Amsterdam seem to be well regarded. For nature, the list gets even longer, and for culture, well that’s everywhere else in the world.

If we do a comparison netting of cost of living and average income earned among the different cities, Singapore doesn’t really come out ahead as well. Sure Tokyo and London are expensive places to live in, but then average pay there is also higher, and netting them out assuming similiar jobs and livestyles,  the residual amount saved is not much different in real terms. ( Real being a comparison of purchasing power). A 4 bedroom flat here, is the price of a landed house on the outskirts of Melbourne. A Toyota Altis here, is 3 times the price as one in London or New York.  I would argue that Singapore is not a cheap place to live.

The only significant category that I think of where Singapore tops everywhere else is in terms of safety.

Of course every city in the world has it’s flaws and bad policies. But the world is a much smaller place now than it was 10 years ago. and we really should take a page out of the expat’s handbook in terms of doing the rational thing. You choose a place that is better for work to work, and that when you’re done with work, choose a place that is better for living to live in. As many expats come into Singapore to work, Singaporeans (mostly) can emigrate to other “better” places to live as well.

 Of course, emigration is not easy, as there will be criterias to meet, and for some it’s not really an option. As much as we think that the educational system here is flawed, it really gives us an advantage over a lot of other people when it comes to immigration criterias. For most young professionals in Singapore, making it all the way through the educational system was the hard bit, emigration test/ criterias by comparison is a piece of cake.

Yes, everything has to be weighed against the consideration for friends and family. And it’s subjective which column will end up with more weight. But until we sit down and tally up the score, we will not know if it’s actually a viable alternative. 

If you’re in the Singapore government, it must have been a bad few months.

You gave yourself a big time pay rise at the beginning of the year on the basis of your brilliant economic management. Then you had to spend the rest of the year, trying to convince the population, that the economy is still growing strongly, when it has been contracting for 9 of the last 12 months. In fact it had already started contracting before you gave yourself the nice pay hike. But no matter because the cash is already in the pocket.

Then that big economic stimulus project you had going, in spike of protest by people on social ills, stalled when Sands ran out of money to carry on the construction. No matter how much you want to make it sound like a construction, geological or logistical problem, everyone knows what kind of financial problems Sands has run into. So much for the ten thousand jobs that it was suppose to create. It now looks like, the government will have to step in to provide the cash to help complete the casino. Yes, they said they will not step in, but everyone knows a government company will step in.That will mean we have a government owned casino. Yes it will be a casino, forget the pretence of an integrated resort, because when u have limited cash to build, you will only build what is important for profits, and that will be the casino.

And this when the government bank, DBS, is being screamed at by almost everyone in the country over the lehman linked notes fiasco. I’m sure there was mis-selling in the mix ( there are investors that speak and read almost no english, just how they were supposed to understand a first to default basket option, when they signed their live savings over, is quite beyond me) Of course there might be a small minority of investors who did understand ( And I’ll say given the complexity, a very small minority), who might be hopping on the bandwagon in the hopes of being bailed out. $500 million, is a lot of life savings. Is there any doubt if the government is pro business or pro people?

 Despite all this, we have a ST poll that says that 69% of the people have “full trust in the Government’s ability to tackle the financial crisis and protect Singaporeans’ interests”. Yes, but which bunch of  Singaporean interest?

So what do you call contraction for 9 out of the last 12 months?

Talk about shifting the blame, so if we ” really go into a recession” . It’ll be our fault because we do not spend enough, ok? It’s nothing to do with a government induced housing bubble or the global financial crisis, that we’re not sheltered from.

It’s interesting that on the same day, while the PM tells us not to over react, SM Lee was saying that the optimistic scenario was a recovery in 3 - 5 years, if the financial markets do not malfunction. That is a very very big if at this point in time.

I don’t know about you, but I’ll rather believe the father than the son.

Now they’re all sorts of reports out there on the cause of the recession, and what needs to be done to prevent it. The people are blaming the poilticians for the lack of regulation, the politicians are all blaming the greedy bankers, and the bankers are all too busy trying to not lose another more money.

The blame game is never ending, so I think it’ll be interesting to just step back and look at the macro situation from a global and slightly more academic stand point.

The cause of the crisis is an asset bubble burst, most notably a property market collapse. First rule in any market, if it can go up it can go down too. A lot of asians learnt that the hard way during the 97 Asian crisis. The Americans are learning that lesson now, and the Chinese are only starting to figure out that they’re not immune too. Fact is most people need to learn the lesson themselves, learning from other people’s mistakes just doesn’t happen.

Sure credit derivatives plays a part in the whole crisis, it allowed banks to carry on their lending to far more people and for longer than they otherwise would have, by allowing lending banks to sell the risk away to other banks and investors. Make no mistakes about it, the buyers of these credit linked products know what they’re getting into, as they’re professionals with their own systems and models to value them. Of course retail clients are another matter all together.Credit derivatives was a tool, and it played it’s part exactly as it’s creators intended it to. It diversified the risk of those lendings, far and wide, so much so that swiss and chinese banks are paying the price for an american mortgage default. And ultimately by spreading the cost of the collapse, it made sure that the world shared in paying the bill for a lot of the excesses in the US markets. But  the rest of the world is not a victim here, the world cheered and poured money in to the US markets when it was hitting new highs, sharing in the massive wealth effect of the bouyant market.

Sure bankers were greedy, but that’s the nature of finance, and a time and again, even the smartest brains in the world, with the most sophisticated models, will not take into account the effects of contagion. It has been proven time and again, that models are not infallible. A lot of banks and funds got burnt when their models blew up.

But blaming the recession on bankers or credit derivatives is like blaming the tree, when someone drives into a tree. It’s not the cause of the problem. The tree was involved in the accident, but the cause of the accident is the driver.

The cause of the problem in this case is leverage. Not just bank leverage, when banks lend out 40 times what they have in liquidy cash, but also consumer borrowing. It takes 2 hands to clap. And while banks were reckless lending, consumers were recklessly borrowing as well. It has been a known fact that US consumer household debt has been at an all time high since the start of 07. The consumer was addicted to debt, more precisely it was addiction to buying.

Not just in the US but everywhere in the world, economic growth has been fuelled by debt. Debt like any medicine is nto a bad thing when it’s used judiciously. But when all economies and companies are racing for higher and higer growth rates, you have to keep adding debt to achieve the ever higher targets. After all stock prices will only go up when your growth and profits go up, the market does not reward a flat profit, even if it is a good one.

In the end it’s the nature of capitalism, it’s prone to booms and burst. It will overshoot both on the upside and the down side. Capitalism certainly has it’s flaws, and it has no moral and social compass, so it rewards and punishes indiscriminately, but it is the most efficient system known to us so far. The alternatives ofsocialism, or in the extreme communsim, have over time proven to be less successful. Over the last hundred years, this capitalistic system has shown that it does create wealth and better the lives of the people in it, of course it has also recorded some spectacular crashes and in the process destroyed and disrupted a lot of lives but over time more people benefited from it.

And that is why it was heart breaking to watch Alan Greenspan apologise for his free market view. Sure he had his faults, and was at times deemed too market friendly, but no one can say he did not give fair warning on the troubles as far back as on 2004. Sincehis famous ” irrational exuberance” speech in the 90s, years before the dotcom bubble burst, he had always maintained that he could warn of market excesses, but that he could not stop them, and that personal judgements as to when and how to interfere will always be flawed. He did warn that when an bubble deflates, like is going on now, governments will have to step in to provide social support, because that is the role of the government. Purely from a logical stand point, I can’t fault him on any of those arguments.

So who is to blamed for this particular recession? I don’t think anyone really is to blame. The political witch hunt that is going on globally, and particularly in the US, is a propaganda exercise, to be seen as doing something for the people. Afterall giving the masses a villain to crucify, is always more crowd pleasing than actually doing something constructive, but it completely misses the point.

It is the job of the governments now to provide social support to it’s citizen and tax payers to ensure that they can ride out this storm as best as possible. Because these citizens were the ones who voted them into power, and paid their taxes into the coffers of the government, precisely for a scenario like this. 

This from the head of the MAS. If Singapore is supposed to be a financial hub, how could the central bank not be aware that the banks operating on it’s shores have been struggling for the last year?