Wednesday, December 4, 2013

But Risks Remain

Now we know why they were so eager to hand out the bonuses. The members of parliament had an extra $15,000, but the jiak-liao-bee hoarding the Istana like his personal fiefdom pocketed another $250,000 - and that's a conservative estimate based on an annual stipend of $3 million. Never mind the if economy is going to tank.

The (usually) unflappable Monetary Authority of Singapore (MAS) is rolling out the scary words: ensuring stability and sustainability. MAS warned not only about the home loans - accounting for three quarters of total household and liabilities - which could be a significant source of risk. Small and medium enterprises may be exposed to greater jeopardy given the uneven recovery in the demand for their goods and services. With the US starting to wind down its monthly bond-buying programme from next year, the low interest environment will soon go the way of the dodo bird. Interest rates in Singapore could rise, to as much as 7%.

The really scary bit is the MAS warning about "credit quality deterioration", since the banks have expanded cross-border lending. Apparently the gross flow for funds between Singapore and China has grown by 85% since 2008. China, which was previously a net lender to Singapore, is now a net borrower from Singapore. Here's how MAS paints it: "Cross-border banking activity may carry greater currency mismatch risk than intra-country lending... Sharp or prolonged depreciation of domestic currencies may weaken borrowers' capacities to repay such foreign currency denominated loans." Fortunately, we have legions of "Ah Long" operators who are experienced in collecting bad debts. We just have to fly them over with cans of red paint to send the appropriate message: O$P$.

One local bank assures us that, although overseas lending had increased by more than 20% in the past five years, domestic lending continues to account for the bulk of outstanding loans. The local scenario is more likely to produce the perfect storm, a concurrent erosion of household net wealth and double whammy of higher debt-servicing costs. Meanwhile, the party goes on.

18 comments:

  1. So if the China loans go kaput.
    No problem.
    Just increase interest rates to Singaporeans.
    Singaporeans will bail out any loss by Singapore banks from their overseas loans.

    ReplyDelete
  2. The perfect storm is on the horizon. Now you know why the reserves keep mounting and the citizens cannot have any share of the returns. Just in case the banks go kaput.

    ReplyDelete

  3. First as tragedy, second as farce...

    Many of these bubbles never deflated, so it's no wonder that the easiest monetary policy in world history would cause them to reflate.

    Indeed the reflation is quite deliberate - Bernanke and others believe in the "wealth effect", aka "trickle down", aka "making the rich even richer is good for everyone". Never mind that there is very little evidence for this theory, and no evidence whatsoever that it's worth the costs it inflicts. Lack of evidence doesn't matter though in economic "science", there are always other data points which can be found, invented or massaged to support any goal.

    Our political and central banking elite have borrowed the economic gains of our children and grandchildren in order to make good the losses of today's wealthy or SG Inc, and even convert those losses to massive gains. So 46% of world wealth is now controlled by 1% of the population. In the meantime wage earners and the young and asset-poor (the vast majority) have seen declining real wages, and an ever widening gap in their quality of life versus the rent-seekers.

    This can't go on forever, so it won't, but the longer it goes on, the more dangerous the political and societal consequences will be.

    It will come a point where the young who don't want to be bled dry paying hugely inflated prices for houses will consider emigrating as they discover in most places 2 1/2 times your annual salary will buy a respectable home. So why should young people be forced to pay high prices so older people and speculators can cash in? We are already seeing some of that in the grounds here. Good luck to the sucking mosquitos.

    As long as there are no cap to foreigners & PRs coming into here for speculation, the housing market will be a brutal and rude awakening for many local Singaporeans.

    Welcome to everyone's Monaco East.

    ReplyDelete
  4. We are not talking about people who owns one home or two and live in them. We are talking about those who flip before the ink is dry. Plus those foreign PR speculators who buy and hold after 5 years and sell off with big gains.

    Why can't the state allow a one capital-gains forgiveness per lifetime on real property serving as a primary residence, 2 per household; otherwise capital gains are taxed at a normal rate.

    VoilĂ : people buy only the house they need, and have no incentive to flip. Yet govt won't do it.

    ReplyDelete
  5. ".... Interest rates in Singapore could rise, to as much as 7%."

    If JP Morgan, BoA, etc were prevented from collapsing becos of "too big to fail".. then the property market, banks is also too big to fail. Interest rates, therefore will remain below 4%.. they cannot afford to have people diving off buildings. Anyway, 4% is equal to CPF rates... more likely people can accept.

    If property & banks here collapse... it will be the end of Singapore and life as we know it will disappear.

    "...This can't go on forever, so it won't, but the longer it goes on, the more dangerous the political and societal consequences will be."

    Yes it can go on. It went on since 2009 and even boosted in 2011.Talk about tapering is simply talk. No concrete plans, no action being initiated. The risk, pain, and all that is pure nonsense. The risk was present in 2009 and since then nothing has happened.

    Every quarter, there is always a pronouncement of "risks" in economies from US, EU, UK, China, Japan... Asia... yet no economy has collapsed and GDP has actually grown!!

    We need to throw out all our beliefs and references to theories.. since the mechanism of QE was implemented, nothing will follow traditional rules. It is a new era... of no collapse, no shocks, no plunges. All the naysayers have not been proven correct since 2009.. but Ben of the FED has proven that QE works... and it will continue.

    ReplyDelete
    Replies
    1. hmmm...Roubini doesn't see bubbles in the places where they were most severe in the pre-2008 period. He doesn't mention the United States or Spain or Ireland...oh, that's right, because these places have already been burst and busted.

      Trillions have already been lost betting against Roubini. Good luck, for a little while more.

      Delete
    2. You have a lot of faith that QE works. Perhaps, until it doesn't! No one saw the credit freeze that led to the emergency $700 billion taxpayer bailout in 2008. When QE fails, many countries will collapse. (You have actually witnessed that movie in last few years.) It will be bigger than the 2008 crisis that no amount of QE will help. It is so scary that I don't even want to think about it.

      Delete
    3. "This time is different" is what you are saying, no need to beat round the HDB carpark. We shall see, anyway your own kojak the copycat admitted taper will occur, sooner rather than later. Wish you luck, I really mean it :)

      Delete
  6. SG will never die one..still flushed with money to buy 2 brand new submarines worth up to $1.8b contract from ThyssenKrupp. That strategic changi expansion for our military is looking to be a real jewel, and our underground rat living.

    5 million residents living above ground. Another 3 million below ground. Together 8m global city as envisioned by 'futurist' Mr Parang.

    Huat ah!!!!

    ReplyDelete
    Replies
    1. "Sg will never die one..."

      The more I read everyday in MSM about how red dot will "weather" the taper storm, the more I believe something will happen. Yr futurist palang or ikan parang cannot save you from going 6 feet underground when the next asia financial crisis arrive, we already know in September every emerging mkt stocks and credit markets collapsed on the word taper.Hot money cold turkey will be fun for old silly boys and girls like you!

      Delete
    2. Crawl back into your hole and protect yourself... hoard all your gold, scream...: "the sky is falling! the sky is falling!".

      How many times have you forgotten to take your pills?
      Since Sept you have gotten worse.

      Delete
    3. ah peh doom, better check your stock charts ah, the penny stocks just imploded a few minutes ago, and singtel now on free fall, better go check, don't waste so much time trolling for papigs, yr heart bypass medical bill next year maybe cannot pay with singtel dividends leh,

      humms ah!

      Delete
    4. Wake me up when ST index is at 1000,
      Changi airport is quiet all day
      Orchard road no cars
      Taxi drivers begging for customers.

      Delete
    5. the Parang guy apparently said ''more than'' 8million is possible....

      a commenter brought up food and water for all these pple. these seem to be overlooked subjects.

      kuan yew has said in the past, well, we have the money to pay more. but what if the sellers decide they themselves need the food and water more than they need to sell the stuff? and how much more will we be reqd to pay, and are able to pay?

      Delete
  7. Me knows little about politics and economics, so have to trawl the Internet to have a glimpse of what
    living means.
    However, i get very frighten now,
    seems like we are living in a very
    perilous place.
    Sigh.

    patriot

    ReplyDelete
    Replies
    1. It has been a "brave new world" in the last 5 years. Businesses and governments are depending on unprecedented money printing everywhere. How long can this go on before we have to face the music? At present, many are operating as Chuck Prince, Citigroup's former CEO, once said, ""As long as the music is playing, you've got to get up and dance."

      Delete
  8. Quite sad indeed. Greed and insanity must be hereditary.

    ReplyDelete
  9. SIN Inc is part of Bilderberg Group/NWO since GCT's time according to this article.
    http://new-world-order-for-dummies.blogspot.ca/2009/04/bilderberg-group.html

    ReplyDelete