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Are you ready to come out on top from a recession? (Part 1)

Wednesday, August 21, 2013


Really? Not save more money har?

Things have become too expensive in Singapore. You name it and the price is probably much higher now than just a few years ago.

This has led to not just a few people thinking that a recession is probably good for the country as it will bring down prices and that these lower prices are beneficial to Singaporeans. This is pretty one sided in thinking.

Nonetheless, there is more and more talk of an impending recession and some "gurus" are seeing precursors of the 1997 Asian Financial Crisis now. Would it be Thailand to lead the pack again? Or would it be Malaysia or Indonesia?

I have been through quite a few recessions and I can say with certainty that they were not pretty. In severe cases, people lost their jobs and their homes. In many cases, people took pay cuts and had trouble making ends meet. The 1997 Asian Financial Crisis was particularly depressing for many.


I am very sure that recessions make life for the common people more difficult.

The only people who benefit from recessions are the rich.

When a recession hits, we will read in the papers how the very rich lost millions of their wealth and, perhaps, this makes the general population feel better. However, what the rich lost is mostly just on paper. It is immaterial to them. They are still very rich, in many cases, and their lives go on unaffected, especially if their assets are still generating meaningful income.

After a recession, we would read in the papers how the very rich emerged even richer! Why? They made use of lower prices to buy more income generating assets which would see their prices rise in an economic recovery! Recessions are good for some people and they are the rich!

So, recessions are not natural equalisers. Recessions usually make the gap between the rich and the poor bigger.

Do you have what it takes to benefit from a recession?

Find out in Part Two: here.

Related post:
STE's story: The Millionaire Next Door.

A bit of history.

14 comments:

Cory said...

Very Motivating at this dip time.

Kelvin said...

Hi AK71,

Have to agree with you. Recessions are the time when the greedy lose and the wise gain. It's sort of creative destruction on a human scale. =)

AK71 said...

Hi Cory,

I hope Part 2 lives up to expectations. :)

AK71 said...

Hi Kelvin,

The greedy will lose? Oh my. I was getting ready to be very greedy too. Cham... -.-"

AK71 said...

As investors look out for the release of minutes from the Fed's July policy meeting, economists say a repeat of the Asian crisis of 1997-98 is unlikely, and recent developments are unlikely to derail the real growth of Southeast Asian economies.

The Thai baht hit another 13-month low on Wednesday amid selling by hedge funds; the Indonesian rupiah hit a four-year low on bond outflows, while the Indian rupee has depreciated about 12 per cent this year.

In addition, downward revisions to growth for some Southeast Asian economies have sparked fears that a repeat of the 1997 Asian financial crisis may be on the horizon.

http://www.channelnewsasia.com/news/business/singapore/recent-developments/785530.html

AK71 said...

Singapore shares were headed for their fifth straight session of decline, the longest losing stretch in nine months, led by falls in consumer sector stocks as the region’s economies are roiled by worries about a withdrawal of the U.S. monetary stimulus.

“The favourable cost environment is also likely to reverse in light of rising fuel costs and inflation concerns, which pose potential challenges to operating margins and hinder the ability of companies to pass on price increases to consumers,” said OCBC analysts in a note.

http://www.theedgesingapore.com/the-daily-edge/business/45173-shares-fall-for-5th-day-consumer-stocks-lead.html

Tien Song Chuan said...

Recession and depression is good! It is a good chance to clean up the capitalist system of corruption. It is just like a PC reboot. Clean up corrupted memories. There are too many bubbles producing useless things wasting resources.

AK71 said...

Hi Tien,

That is an interesting take. Well, from certain perspectives, recessions are good, I have no doubt. However, the hardship that they will cause regular working class people makes me shudder. Been there. :(

Tien Song Chuan said...

I remember 1997 crisis clears out the crony capitalism, dot-com crash clears away all the fake tech companies, 2008 clears the toxic credit products. In every case there is some malfunction of the capitalist system that needs to be cleaned up. So whats left is the essentials that is necessary for true human progress.

AK71 said...

Hi Tien,

It is debatable if the sub-prime crisis was cleaned up or has the can been kicked down the road. ;p

At the end of the day, the ones who suffer most in a recession are the common working people.

So, although I recognise that recessions will happen and, like you said, even necessary, I also feel that the gap between the rich and the poor will widen because of recessions. This cannot be a good thing.

Tien Song Chuan said...

The welfare of the common people, the inequality etc cannot be undertaken by capitalism. Capitalism is just a tool , like a knife or a gun, it is mindless. This job is the job of the government of the day.

AK71 said...

Hi Tien,

And I don't expect capitalism to do anything about issues related to welfare either. That is not the purpose of this blog post. :)

AK71 said...

Nearly two-thirds of local businesses felt that Singapore's economic climate has declined in 2016 and nearly half of the companies polled expect the situation to worsen in 2017, according to latest findings from the National Business Survey released on Wednesday (Dec 28).

The 2016/207 edition of the survey, which was conducted by the Singapore Business Federation (SBF), received responses from more than 1100 companies across different industries.

Source:
http://www.channelnewsasia.com/news/singapore/businesses-find-2016-tough-expect-2017-to-be-tougher-survey/3398018.html

AK71 said...

... raises the probability of Singapore tipping into a technical recession in the immediate term or even a full-blown recession in 2017.

To understand this, it is important to know how economists define technical recessions: "An economy that experiences two consecutive quarters of negative economic growth as measured by a country's GDP"

Why is a technical recession indicator important to me? This indicator forms the basis of how companies, big or small, plan their annual expenditure going forward. When the country is in technical recession, companies tend to head into their emergency room, brush the dust off their "let's start restructuring our expenditure book" and implement cost cutting measures.

If we look at Singapore's headline unemployment rate, it is one of the lowest in the world. Nonetheless, if we look deeper into this, the area with lowest unemployment belong to the lower-skilled jobs. PMETs (professionals, managers, executives and technicians) are the ones facing the brunt of the disappointing economy. This is because labour in Singapore is really expensive and PMETs are usually the most expensive sort of labour.

Source:
http://news.asiaone.com/news/business/singapore-may-fall-technical-recession-what-means-singaporeans

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