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Singapore is going to suffer an economic meltdown!

Wednesday, January 15, 2014

I saw at least half a dozen people posting THE article in Forbes on their Facebook walls and one reader was concerned enough to send the HTML link for the article to me. Which article am I talking about?

This: Why Singapore's Economy Is Heading For An Iceland-Style Meltdown.

Sensational headlines like this are bound to capture the attention and, perhaps, also the imagination of people.


According to the article, Singapore has a wealth bubble, a population bubble, a credit bubble, a property bubble, a construction bubble and our sovereign wealth funds are at risk. Put all these together and we have an epic horror movie that will put "Nightmare on Elm Street" to shame!

AK71 decided to try his hands at a sensational headline. Let's see. What about this?

AKAN DATANG:
"The Killer Bubbles of Singapore!"

Maybe, this will get the attention of the Monetary Authority of Singapore (MAS) too! Too? Yup, The MAS has issued a response to the article in Forbes.

This: Singapore is not facing a credit bubble.

First, the property market is now stabilising and new housing loans have also been declining.

Second, household balance sheets are on the whole strong and property asset values are significantly higher than the debts incurred.

Lastly, the MAS said Singapore's financial system is robust.

Read both articles and form you own conclusion. Is Singapore going to melt like Ice, I mean, Iceland? Or should the Forbes article be moved from the non-fiction to the fiction section of the bookshop?

Although I am a worrier by nature, I think this is something I will have to pass on worrying. The issues are way too big and what good is it going to do if I worry about them?

What is more important for us to do is to work with what we have and to ensure we are prepared. Up or down, we want to be OK and we should be OK if we do the right things.

Related posts:
1. How to be truly rich when the world collapses?
2. The secret to avoiding financial ruin.
3. Don't think and grow rich.
4. Be cautious even as we accept higher risk.
5. Young working Singaporeans, you are OK!
6. Millionaires emerge from bear markets richer.

8 comments:

SGYI said...

So many bubbles. If all these pops then I think we'll vanish as a country too. Everyone die together so worry for what? :p

Too bad we don't have spare land to grow our fruits and vegetables. If not at least won't die of hunger.

I think I'm a little out of point now. LOL

veronika said...

Bubble or not, bursting or popping or collapse.. will depend on the Fed's interest rates.

The last 5 years have seen rates staying low and the Feds are have proven that their strategy works. Interest rates will stay low for a long time, I dare speculate that it will stay low for the next 5 at least.

And if it should ever move higher, well, what is 100% rise from a base of 1.5%?? 3% is far lower than what I paid for my housing loan back in 1995.

It is a "shiok" world now... to have so much people consuming clothes, holidays, restaurant foods, bags, phones, gourmet coffees. And we have not included the car & the condo yet.

From New York, Tokyo, Sydney, Shanghai,Hong Kong, Singapore, New Delhi, Dubai, Paris and London... all this is happening. Bankers and policy makers are very aware of this "shiok" world.
No one is going to change the status quo. It will be very dangerous and all are happy to roll over the debt... stopping it will cause seizure.

So, that is why "tapering" has been adopted... slow very slowly.. so slow that I speculate it will take beyond 5 years... perhaps 25 years!..

Unless an odd ball politician wants to make history....

sillyinvestor said...

Of all the bubbles, one that was not addressed by MAS, or now addressed in the news article, one that in my opinion is rather valid.

The demographic bubble. I would use the word paradox.

Singapore is a small city state, there is no rural citizen which might serve as supply of "cheaper" labour, since cost of living even at the basic level is rather high. Our supply of labour comes from mainly Malaysia, although we have multiple sources, Malaysia is the closest and perhaps most socially acceptable since we share a common history.

Yet, with fertility not improving and Johorians getting a lift due to highly likely success of iskandar, is such supply always available?

We have reach a point where assimilation is taking more and more efforts although Singapore is a cosmopolitan society. The easy solution of bring in the FT to grow the economy is over, so the solution is productivity.

But how much can productivity improve? Can all sectors have productivity growth? Retail and restaurants in particular?

Many forummers I read express concern about this "bubble " too. But Singaporean ha enough of uncalibRated flow of FTs.

A paradox that will catch up, IMHO

AK71 said...

Hi SGYI,

I tried growing cherry tomatoes before on my balcony. Not easy. Even if we were given land, I think that most of us won't know how to farm it. ;p

AK71 said...

Hi Veronika,

I hear you and I believe you have a persuasive case. Why rock the boat? Things are fine now. ;)

Unfortunately, all this cheap money is going to create more problems down the road. So, money printing cannot go on forever. This much, I know.

Will they stop the printing press? I think they will have to at some point in time. Not just yet. Tapering simply means printing less money. It is not stopping.

When will they stop printing? I don't know and I don't think anyone knows for sure either.

I can only hope that what I have done is sufficient to take care of myself and my family whatever happens in future.

AK71 said...

Hi Mike,

Well, to be fair, the manpower crunch is not an issue to be addressed by the MAS. I think they have responded pretty well to the alleged credit bubble issue. :)

Singapore is not alone in having to address the issue of falling birth rate. This is a problem all first world countries have to grapple with.

Anyway, even if birth rates should increase, Singaporeans have no interest in certain jobs. So, the reliance on imported labour will continue unabated.

Things will become bad enough that at some point Singaporeans will accept that more foreign labour is required. I think that is what the government is trying to achieve.

Singaporeans say they are willing to sacrifice some growth by having less foreigners, let us do what they want.

See what happens next.


Unfortunately, in life, often, we cannot have our cake and eat it too. :(

E H said...

In a timeline long enough, bubbles will form and burst. The question is how well positioned are we to take advantage of these cycles? Quite well I must say. As retail investors, we have all the time in the world to patiently wait for dips to buy...and in amounts comfortable to hold long term with no pressures to sell. Institutional investors do not have such luxuries. So? Just prepare your warchest for now and wait for the bubble to burst.

AK71 said...

Hi E H,

A very pragmatic angle to take! I like this very much! :D

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