Wednesday, March 18, 2009

Signs that the government still doesn't get it

The Monetary Authority of Singapore (the Singapore equivalent of the Federal Reserve) is offering subsidies to banks and financial institutions to take on newly minted graduates.

This is a primo indicator that the government still hasn't internalized the full extent of this economic crisis, just as the economic forecasts have been decidedly 'optimistic'.

Several non mainstream media commentators in the econoblogosphere have argued that the FIRE (finance, insurance, real estate) economy is likely to contract permanently (at least in the USA), because of the debt-fueled indulgences of the past.

Yet the MAS continues to support the employment of finance graduates despite finance being clearly headed for a secular downturn. Without the leverage of the recent past, or the hands-off lack of regulation, or the relentlessly running securitization machine or the endless spinning of the prices of financial assets into the stratosphere, it's going to be difficult for finance to return to its pillaging glory days.

There is of course space for the government to intervene in the job market: that's why we throw billions of dollars into biomedical research, to build a nascent biomedical industry (not that that's entirely ok, that's a different post for another day). But finance isn't a fledgling industry still struggling to prove its worth.

The irony is, when it's jobs in the manufacturing line or other related industries, the government doesn't try to shore up employment there. Instead, we advocate re-training and re-skilling through our alphabet soup of work skill development programs. We don't try to save jobs in these industries because they're "sunset industries" that are suffering from "structural unemployment".

Funny you don't hear structural unemployment and finance in the same sentence these days. If it looks like a duck and it quacks like a duck, ...

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