Tuesday, June 19, 2012

Scenario Forecasting - Singapore 201X

I'm not a regular reader of Senang Diri, but his latest post seriously irked me.

As much as I get the idea behind him exploring the security implications of a political transition to a non-PAP government, the post was heavy on the scaremongering and extrapolation ad infinitum, and thin on substance.

And the final flourish? "This is Year 0 and Singaporeans have gotten the government they deserve." Subtext: You would be a fool to risk the PAP falling from power. Better the devil you know, than the devil you don't. Stay safe: vote for the men in white.

You know what that sounds like to me? Too big to fail. Like banksters holding everyone hostage while they pile up their bonuses and construct their grand plans for everyone else. Having the PAP continue to have their way is no reason to feel secure. Quite the opposite in fact.

While flaneurose may not have as many page views as Senang Diri, I think I too will channel my inner Peter Schwartz, and try my hand at scenario forecasting.

I'll take creative licence to scaremonger and extrapolate endlessly too, but let me paint for you a different, and dare I say, more plausible scenario for Singapore in 201X.


With the massive debt overhang from decades of trade and fiscal deficits, largely brought on by the abandonment of the gold standard and the Bretton Woods system, as well as having in possession the exorbitant privilege of issuing the world’s reserve currency, the US government’s debt situation finally comes to a head in 201X.

The proverbial straw that breaks the camel’s back are the massive debts from the Great Recession of 2008 that were never written off, but were instead transferred onto sovereign balance sheets. The Federal Reserve and the US government, captured by financial and special interests, continues their destructive policy of quantitative easing in an effort to inflate away debts and avoid writedowns of US debt. They are confident that the US dollar will continue to maintain its reserve currency status as “there is no credible alternative”.

Meanwhile, the European Union (and the UK) first implodes under a mountain of debt, then breaks up in spectacular fashion. Belatedly, the European Central Bank also revs up its own printing presses to arrest the crisis, but the damage has already been done.

China, being a mercantilist economy more dependent on its trade partners than it cares to admit, prints as well, keeping the value of the Yuan low to maintain export competitiveness and export-driven growth. But global markets will have none of it. Demand has dried up everywhere. Meanwhile, the massive amounts of bad debt in China’s state banking system start to take their toll. The shadow banking system in China also starts to exert profoundly negative effects on the economy. Stir in a real estate collapse into the mix, and you have politically destabilizing developments in China as once reasonably prosperous Chinese citizens revolt against a situation where growth turns negative for the first time in a generation.

Debt-ridden countries make the conscious decision to default on their debts, either through outright repudiation of debt, or through stealth default via inflation. Inflation everywhere runs at a rate of at least 7% per annum for the foreseeable future. Interest rates respond by rising concomitantly, leading to more rounds of default. The astronomical notional value of derivatives in the global financial system acts as an accelerant to the crisis, nay, apocalypse.

Global trade and commerce dries up everywhere as developed countries that formerly ran trade deficits erect trade, capital, currency and immigration controls to ringfence their own economies from global economic turmoil, and to husband their most valuable resource: domestic aggregate demand. These measures are largely implemented by politicians swept into power on a wave of nationalistic sentiment and a revolt against the status quo. A new era of trade protectionism dawns.

Small countries highly dependent on external trade and capital flows, and who have deliberately structured their economies that way, are the biggest losers.

In Singapore, the economy suddenly grinds to a halt from a reversal in the hitherto-thought unstoppable trend of increasing international trade and globalization. At the same time, with globally high inflation and interest rates (and bond yields), the real value of Singapore’s sovereign wealth funds, tied up in various “investments”, plummets. All of a sudden, the emperor wears no clothes, and is poverty-stricken to boot. Needless to say, the Sing dollar isn't looking pretty. Singapore politicians start to panic, torn between digging into the kitty to fight the crisis or leaving untouched what has sudden been cut in half, or worse.

The large foreign professional workforce starts leaving, either for better prospects elsewhere, or at least home, where the living is cheaper or where social safety nets exist, albeit greatly diminished in real terms. This provides cold comfort to the average Singaporean professional, as the number of jobs is vanishing faster than the competition for them.

The sudden loss of such a large proportion of the population creates an accelerating downward spiral in the economy, extremely difficult to reverse even if the will to apply massive fiscal stimulus did exist. Politicians who are penny pinching in good times are unlikely to loosen the purse strings in tough times. The austerity hair shirt beckons. And of course, the local real estate market, fueled by debt and capital flows from since the previous decade, starts to implode. Debt, again, shows itself to be a problem even in the formerly prosperous city state.

Meanwhile, the poor unskilled foreign workforce remains in Singapore, abandoned by irresponsible employers, unable to return home, or unwilling to do so since they borrowed heavily to pay for passage here. Crime of all stripes, petty, violent or venal, starts to skyrocket. The authorities respond by forcibly deporting undesirable foreign elements. Expect riots and violence to ensue.

Too bad the authorities can’t deport the bottom 30% of the local born Singapore population as well. Struggling right through the good times, their collective living situation deteriorates even further into the teeth of the crisis, unrelieved by substantive social safety nets, real or imagined, permanent or stop gap. *They* start to contribute to societal disintegration as well.

The top 20% of the Singapore resident population, fatly fed from the boom years, treated with kid gloves (see Woffles Wu) and feted by the government, start to reconsider their choice of home. After all, they aren’t Singapore citizens, not really, since they’re actually “global citizens”. Turns out the Boston / London / Switzerland / *insert city of reference here* of the East is a lot grubbier than once thought. Hey, if the formerly top property developer here had the tagline of “Own the Original”, why not “Move to the Original” too?

So the elite of Singapore leave, taking their wealth with them. I would not be surprised to see more than one cabinet minister's family among them. The people who were formerly the toast of the town now toast their goodbyes and take off, tossing the last flute of champagne aside at Jet Quay in Changi Airport and breezily swanning through the departure gate. Of course, they don't forget to collect their goodies stashed at FreePort on the way out. 

If you’re smart and lucky, well, you might just be able to slip away right on their heels. Do turn off the lights when you leave.

For everyone else, enjoy the darkness.

Tuesday, June 5, 2012

Quick Thoughts - "MPs rev up lobbying for more buses in their estates"

The front page article on today's Straits Times was "MPs rev up lobbying for more buses in their estate."

This is going to be a short and easy post, because shredding this article isn't going to take much effort.

The editors of the Straits Times obviously want to paint the story as one showing how the earnest, hardworking MPs (from the PAP) are doing all they can for their constituents as far as improving bus transportation in their wards go.

There's only one issue. If these PAP MPs truly had their constituents' interests in mind, they would have petitioned the government for better public transportation long ago. Instead, they whistled their way past the problem while hewing to the government's stand that "There's nothing to see here. Move along."

This is not your grandfather's "lobbying", as odious as that word is, bringing to mind bottom-feeding K street lobbyists. No, this is something more objectionable. Your PAP MPs are grandstanding and chest beating, jostling for advantage and strenuously protesting their constituents' needs now that there is official acknowledgement that "a problem exists". Funny how what wasn't a problem before suddenly afflicts every part of Singapore now. Our PAP MPs have never seemed more hollow and self serving.

In addition, to the astute and the observant, this is also a vivid demonstration of political influence. It's not going to be about which ward needs the most help. It's about who's closest to the center, and also where the most political points can be scored. It's about favor, reward and patronage.

Articles like this make me angry. Furious in fact. Our media isn't spineless or irresponsible. It's simply evil. It deliberately misleads, obfuscates and whitewashes. It makes people stupid to read it, smothers citizen engagement and in doing so, saps the vitality of the nation. Good citizens are thinking citizens. Calling the Straits Times the Singapore version of Pravda would be high praise.

Second, it has not escaped my attention that just two days ago, the results of a survey were published showing that overcrowding on public transportation by foreigners was a major gripe of survey respondents when asked about their attitudes towards foreigners and immigration.

It is no surprise then that the government is choosing to move in a big way to address public transportation woes. In doing so, it hopes to blunt criticism of its own immigration policy.

Again, there's just one problem, if you actually think about how people behave and how they think.

I think the unhappiness with foreigners here is multifaceted, and the average Singaporean, while being fed up to the back teeth with the situation, would probably still find it hard to articulate exactly what they're unhappy about. Add to that the fact that most people know instinctively that it is not politically correct to express disquietude over the situation, lest one be accused of being xenophobic. Nonetheless, the negative feelings remain, unexpressed.

This is why there are explosions of anti-foreigner vitriol and rhetoric every time some incident involving a foreigner happens, which in recent weeks have involved, as the stars would have it, traffic accidents. Three words apply here: incoherent, inchoate rage.

What is the most visible sign of what has become increasingly an intolerable situation? Answer: overcrowding on public transportation -- by foreigners. It is visible, and it is OK to criticize. And it's clearly a government created problem through their lack of investment. Types like Saw Phaik Hwa who didn't exactly endear themselves to the public also made public transportation fashionable to criticize.

That doesn't mean that alleviating the public transportation situation will absolve the government of blame for their immigration policy. Wishful thinking.