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.

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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.