“The global financial crisis came without warning, like a tsunami” SM Goh 19 Oct 08, Straits Times
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?
So the local pages over the last 2 weeks have been filled with news that Singapore has slipped into a recession. And it seems like everywhere you turn there is news of impending doom. In fact the tone is getting a little worse everyday.
Last week, the government stressed that it was only a technical recession, meaning 2 consecutive quarters of contraction, as if it was a statistical abnormally, and not a real cause for concern. Over the next few days, news of slower growth then of possible pay cuts, then the snowball cummulated to last night’s admission by Mr Lee, that we are in a recession and that the next 12 months will be hard. At this pace we could start hearing them talk about bracing for job cuts in about 2 weeks.
Now, to the average Singaporean this is all pretty sudden. Two months back the government was telling us that everything was fine, and this years growth forcast would be in the 4% region, and suddenly today, we are being told we’re in a recession. So what happened?
If the news is to be believed, Singapore is an innocent bystander caught up in a global financial crisis, originating from America, and created by greedy investment bankers with their fancy derivatives product. And that is was a storm that came suddenly and without warning.
FALSE ON ALL COUNTS
Except maybe the greedy part.
The financial crisis had been raging for the last year, since August 07. Bank after bank in US and Europe had fallen. Did everyone forget that it was just last year that DBS and it’s local counterparts, wrote off billions in their sub prime holdings? Leading to the then DBS CEO’s urge to spend more time with his family?
Anyone who has not been stuck in the local propaganda would have seen this coming from a mile away. The fact is that the government, with their million dollar ministers, and high flying scholars would have seen this coming too. ( They better, since their justification for the higher pay is that they’re smarter and more competent.) Which means that they are deliberately keeping the news away from the people.
Over the course of the last year, I have often been amazed at the buying frenzy happening around me amid the global difficulties. I seem to recall a whole newspaper section dedicated to the topic of BoomTown at the end of last year, in light of the increased luxury spendings by local Singaporeans, the impending casinos and converting the southern islands into the playground of the super rich.
The government had admitted that they wanted to transform Singapore into a Monaco of the East, and there was a concerted effort to push the whole nation in that direction. Suddenly everything was glamourised and vibed up. Even the papers were bragging about Singapore climbing up the party city rankings.
Almost nothing happens in Singapore without government planning, and this was part of it’s new plan. In light of what it was trying to achieve in terms of branding itself, it had to keep the bad news at bay. If you told the people that a recession was heading their way, would they still be as inclined to go out and buy $1000 phones, $6000 TVs and live it up every friday night? Probably less so, and that would have put a damper on their grand plans. Of course it’ll also be difficult to justify that huge pay hike they gave themselves at the begining of the year.
Now to the cause of the recession.
Yes this is a financial crisis, but the cause of it is the asset bubble burst, more specifically a burst in the US housing bubble. (More on the technical details of the causes in a later post) Given that finance is one of the 4 pillars of the Singapore economy, how could a financial crisis not affect Singapore? It’s funny how in the same breath, the papers can trumpet that we’re one of the most open economies in the world, and then turn around and say that the global financial troubles will not affect us? We’re either open or we’re not, make up your mind. If we’re and open economy, then you have to take the good together with the bad.
So sudden recession? I don’t think so. The reaason why most people think so is the direct result of selective propaganda, that was designed to keep the bad news from people for as long as possible, and then put the blame on someone else.
