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In an era where forecasts by permabears have gotten ample attention and vindication, few are as disturbing as this:
A world recession until 2018.Europe, where Ireland was the latest domino to fall.
1937 ALL OVER AGAIN? Worse, in the US and other major economies, is the risk that it may be 1937 all over again. It was then that President Franklin Delano Roosevelt got stingy with stimulus, assuming that the Great Depression was over.
The next year saw the economy in full retreat.
If Mr Sakakibara is right, the global economy is in deep trouble.
He envisions a broad slowdown that might drag on for seven to eight years.
China can live a couple of years without US and European growth, but eight?
To head it off, governments need to up spending. And, for the most part, they aren’t. Yet the US can, and should, borrow more.
To do that, it just needs to become a bit more Japanese, says Mr Richard Duncan, author of the
There’s a single reason why Japan’s 10-year bond yields are below 1.3 per cent and Asia’s No 2 economy isn’t being downgraded. Since about 95 per cent of Japan’s debt is held domestically, there’s no risk of capital flight. Japan borrows from its companies and people, an arrangement that’s roughly the mirror image of the US.
That so many Treasuries are held in China and elsewhere makes the US highly vulnerable.
Mr Duncan, chief economist at Blackhorse Asset Management in Singapore, says the US needs another FDR-like New Deal to restore growth and competitiveness.
Funding one means greater borrowing and the way to do it is by tapping private sector cash, Japan-style.
Such suggestions are likely to fall with a mighty thud on Capitol Hill, which is moving in the opposite direction. Lawmakers calling for Mr Ben Bernanke’s head forget why the Fed chairman is taking US monetary policy into uncharted territory.
It’s because Congress failed to pump enough money into the economy in the first place.
Japan is a cautionary tale. On the surface, the 4.5-per-cent annualised increase in third-quarter gross domestic product looked promising. The detail, however, showed that deflation is worsening no matter how many yen the Bank of Japan churns into the economy.
This is anything but a typical recessionare too distracted to see it., and world leaders
In the US, the focus is on China’s currency. While a stronger yuan would be in the best interests of the global economy, it’s not the answer to all the US problems.
Japan [& Singapore ? ? ? ?] is even more obsessed with exchange rates.
And Europe is linearly focused on convincing investors that the euro zone won’t unravel.
In our time of currency fixation, perhaps a guy called Mr Yen is the ideal messenger.
Too bad his message is one of economic gloom as far as the eye can see. Perhaps even to 2018. The writer is a Bloomberg News columnist. The opinions expressed are his own.
It comes from Mr Eisuke Sakakibara, Japan’s former top currency official. He is known as “Mr Yen” for his ability to move markets.
Because Tokyo’s revolving-door politics often sends a new face to each Group of 20 meeting, he is one of the few Japanese constants in market circles. Traders may not know the latest finance minister’s name, but they know Mr Sakakibara.
Japan is the master of muddling along, decade after decade, with little growth to show for it.
And Mr Sakakibara was a key player when Japan faced everything from the Asian crisis to Russia’s default to the onset of deflation to a banking collapse that saw the demise of Yamaichi Securities.
So, when an economist with Mr Sakakibara’s background says “the world is set for a long-term structural slump reminiscent of the 1870s” when average global annual growth was about 1 per cent, I can’t help but listen. The reason for the slowdown? Governments are putting fiscal austerity ahead of restoring stable growth.
Yes, there’s an eye-rolling quality to a former Finance Ministry mandarin giving economic advice.
After all, officials there did Japan’s 126 million people a disservice by punting reform far down the road.
They just borrowed and borrowed, leaving Japan with the largest public debt among industrialised nations and no exit strategy in sight.
Yet recent data in the US and Japan and financial turbulence in Europe suggest a fresh global recession is a distinct possibility in 2011.
If that happens, what levers are realistically available to revive demand?
Interest rates are already at, or close to, zero.
That leaves increased government spending as the only real way to stabilise things.
The trouble is, there’s little support for opening the fiscal floodgates in a meaningful way.
One reason is that there’s already loads of public debt out there. As of June, Japan’s US$5-trillion ($6.5-trillion) economy had ¥904 trillion ($14.1 trillion) in debt outstanding.
Too much debt is wreaking havoc in
The US is starting to rattle bondholders with its borrowing binge. President Barack Obama’s stimulus isn’t working the magic economists hoped.
Neither is the Federal Reserve, as it goes the way of Japan with quantitative easing [QE].
J A P A N
A recession until 2018 is possible
To head it off, governments need to up spending
William Pesek
If Eisuke ‘Mr Yen’ Sakakibara (picture) is right, the global economy is in deep trouble.
He envisions a broad slowdown that might drag on for seven to eight years.
China can live a couple of years without US and European growth, but eight?
PIIGS 02
Irish PM says bailout could total $149 billion
DUBLIN
The government last night unveiled a four-year plan to save €15 billion by cutting welfare spending sharply and raising taxes to help pay for the banking crisis and meet the terms of the bailout.
Bank shares, meanwhile, plummeted for a third straight day on the Irish Stock Exchange amid growing expectation that investors would be wiped out as the government is forced to seize total control of the country’s two dominant banks, Allied Irish and Bank of Ireland.
Mr Cowen told lawmakers the €85 billion would represent an overdraft or credit line not the total required immediately and was still subject to detailed negotiations with International Monetary Fund (IMF) and European Commission experts.
Irish broadcaster
Some financial analysts declared that Ireland — crippled by both a runaway bank-bailout programme it can no longer afford and the worst deficit in Europe — will need far more cash to forestall national default in a few more years, when many government bonds and the developing EU-IMF loan come due for repayment.
“If we do take this loan, then two to three years down the road, we will be forced to restructure our sovereign debt. We will be in a full default across the entire country,” said Mr Constantin Gurdgiev, a finance lecturer at Trinity College Dublin.
He said Ireland needed between €120 billion and €130 billion now at sufficiently low rates of interest to avoid worsening its deficits.
He also said the banks would require even more if recent multi-billion withdrawals of foreign deposits were to be reversed.
“The government is completely in denial about the amount of money they’ll have to borrow,” Mr Gurdgiev said, comparing Ireland’s current plight to that of Greece, recipient of a €110 billion EU-IMF rescue in May.
“Our economy is more than three times over-indebted than Greece. If Greece is insolvent, where does that put us?” he asked.
Standard and Poor’s yesterday lowered Ireland’s debt rating by two steps, with a negative outlook.
It said in a statement that it cut Ireland’s long-term rating to A from AA- and the shortterm grade to A-1 from A-1+.
The reduction leaves its long-term grade five steps above Greece, which has the highest junk, or high-risk, grade.
— The Irish bailout could total €85 billion ($149 billion), Prime Minister Brian Cowen announced yesterday but some analysts said the figure is too small to save Ireland from eventual default.RTE said about half of the funds would be earmarked for covering Ireland’s expected deficits through 2013, the other half made available to bolster the banks’ cash reserves.AGENCIESgOOd tImIng ? ? ? ?
ecOnOmy always recOvers befOre electIOn year ? ? ? ?
shOUld have electIOn every year ? ? ? ?
Bonus cheer for civil servants
Imelda Saad and Esther Ng
imelda@mediacorp.com.sg
SINGAPORE
extra one-month bonus on top of their
annual 13th-month payment for the yearend,
taking their variable payment for the
year to 2.5 months plus $300.
With a Growth Bonus, which is now
called a Special Variable Payment, of one
month for good performers and up to
1.6 months for those who perform better —
to be given in March — many of the 74,000
civil servants will get a total payout not
seen since 1994, the last time the economy
hit double-digit growth.
The economy is expected to grow
15 per cent this year. In 1994, when GDP
growth was 10.6 per cent, a half-month
special bonus took the total amount to
3.5 months.
The Government, though, has decided
to defer the salary adjustments for administrative
officers, political, judicial and
statutory appointment holders because
of the reduction in private sector benchmarks
last year.
The Public Service Division said yesterday
that the Government will “monitor
the economic growth and movement of
the benchmarks before making any subsequent
decision on when to implement
the salary adjustment”.
Human resource consultants described
the civil service bonus as a fair
amount, given the economic rebound, and
a competitive quantum as well.
And the private sector looks set to
match the public service.
The Singapore National Employers Federation
(Snef) expects companies to give
out bonuses averaging about 2.5 months
— half a month more than last year. Unionised
companies are expected to give a
little more.
Snef president Stephen Lee said: “We
would like to urge companies to reward
workers fairly and also to reward workers
for the sacrifices that they have gone
through last year to pull our companies
through.”
In the PSD’s press release yesterday,
Minister-in-charge of the Civil Service,
Deputy Prime Minister Teo Chee Hean,
underscored this point.
“Civil servants accepted a wage reduction
during the difficult economic times
and worked hard to help turn the economy
around quickly,” he said.
“The year-end payment and Special
Variable Payment to be paid in March next
year recognise the contribution of our civil
servants in helping Singapore recover from
one of its worst recessions.
“To ensure that Singapore can continue
to grow, we will have to work even
harder to raise productivity and find new
ways of expanding the economy.”
Last year, because of the economic
slump, the payout was just 0.25 months,
capped at $750.
So unionists cheered when they heard
about this year’s bonus.
Amalgamated Union of Public Daily
Rated Workers general secretary G Muthukumarasamy
said: “We’re very happy with
the announcement and thank the Government
because for (our) union members,
who are daily-rated workers, this year-end
payment will help our lower-wage workers
to meet their daily expenses.”
Civil servants had earlier been given a
mid-year bonus of 0.5 months plus $300,
which had been one of the highest midyear
payments in five years.
And National Trades Union Congress
deputy secretary-general Halimah Yacob
was glad the negotiations with PSD proved
fruitful.
“I’m really happy, because the Government
paid in 2007 a Growth Bonus of half
a month, and that is because the growth
was 7.7 per cent,” she said.
“This year’s growth will be really
much better than 2007, so we felt that
the civil servants definitely deserve better
Growth Bonus compared to 2007.”
Many civil servants were pleasantly
surprised. Mr B K Lim, 39, said: “I didn’t
expect it. We had half a month’s bonus
in July, so to hear that we’ll be getting an
additional two-month bonus is a good
Christmas present.
“It will go into my savings.”
— Civil servants will get an>> Continued on page 4
DAVID PILLING
pharoah88 ( Date: 22-Nov-2010 18:11) Posted:
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How Foxconn signalled a new China price
Six months on, the ripples are being felt in wage inflation and more.
A third post-Foxconn effect could be the most profound of all.
If wages in China — and elsewhere in Asia — continue to rise, so will the prices of finished goods.
Hong Kong traders are predicting a 10 to 20-per-cent increase in the cost of some Chinese products next year. That would reduce the purchasing power of American and European consumers.
To policy-makers in these hapless emerging countries, the G-20 leaders have made a gallant offer:
Feel free to use capital controls.
pharoah88 ( Date: 15-Nov-2010 19:00) Posted:
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Global cooperation?
It’s every economy for itself
Andy Mukherjee
No matter what spin leaders from the Group of 20 (G-20) nations put on their rendezvous in Seoul, the reality is that they went back home clutching a lame statement and not much else.
Their shared commitment to “enhancing exchange rate flexibility to reflect underlying economic fundamentals, and refraining from competitive devaluation of currencies” is vague.
Somewhat more specific is their promise to develop “indicative guidelines” that will tell nations when their trade balances are too high or too low. However, it remains to be seen just how seriously the United States, China and Germany would take these guidelines when it comes to weaning the world off its overdependence on debt-fuelled spending by the American consumer.
The G-20 leaders couldn’t even agree on a timeline for making their first assessment of global current-account imbalances, saying that it “will be initiated and undertaken in due course”.
Changi takes a gamble on fees
Liang Dingzi
It wasn't exactly pitch forks and torches yesterday, but after an election cycle of heated debates, the electoral tsunami finally arrived.
Using the power of the ballot box, Americans decided to rearrange the map again — proving the anti-establishment wave is as deep and powerful as it has ever been.
And while neither camp can actually claim the high ground this morning, the good news for investors is the divided government that will follow in its wake.
After all, equity markets have historically favored gridlock by a pretty wide margin...
In fact since 1970, the S&P 500 has grown at a median rate of 13.5% per year in the face of divided government, versus a gain of just 9% during times of one-party control.
Eugene K B Tan
Election talk has been around for much of this year. Last Saturday, the signals got clearer when Prime Minister Lee Hsien Loong told the Singapore media in Hanoi, where he was attending the ASEAN Summit, that the Electoral Boundaries Review Committee (EBRC) had been convened.on a 30-per-cent deviation rule.
CLEARER JUSTIFICATIONS Of course, a larger deviation rule also means a higher tolerance for the size of an electoral division, which would mean, theoretically, less need to redraw any boundaries.
The committee’s work of redrawing the boundaries should studiously avoid any hint of gerrymandering.
The odd-shaped electoral boundaries that we have also erode the voter sense of identity and belonging to his constituency.
A commonly cited example is that of Braddell Heights being part of Marine Parade GRC, never mind the fact that MacRitchie Reservoir is closer to the estate than East Coast Park!
The EBRC has to respond to the legitimate expectations of a more educated electorate sensitive to fair play.
The EBRC’s recent reports were generally quite sparse in terms of detailing its thought process and reasoning. They need to be more substantive and better articulate the reasoning and justification for their recommendations.
This is one area where there can be lots of improvement.
Voters are entitled to know WHY? boundaries are drawn, and how they are done. Otherwise, it should not be surprising if Singaporeans view the redrawing of boundaries as being calculated to undermine the Opposition or, at the very least, not disadvantage the ruling party.
Ultimately, the EBRC’s work and report must not only be nonpartisan but must be seen to be non-partisan, as well. This is necessary to sustain confidence and legitimacy in the review of electoral boundaries, since that is an integral part of the electoral process.
Put simply, the process by which electoral boundaries are reviewed is just as important as the specific changes that flow from the eview. This is notwithstanding the reality that the redrawing of electoral boundaries is perceived to be inherently political, and that it is probably impossible to have perfectly distributed electoral divisions.
For now, political parties and voters will wait with bated breath for the EBRC’s report.
In many respects, the announcement was long anticipated, given that there are only 12 months left to the current Parliament’s term. Further, the fourth Presidential Elections must be conducted by August 2011. Having the two elections close to each other can result in voter fatigue and may unnecessarily contribute to a prolonged politically-charged environment.
The General Election for Singapore’s 12th Parliament will see at least 12 single-member constituencies (SMCs), fewer six-member group representation constituencies (GRCs) and perhaps the reintroduction of four- or even three-member GRCs.
With the changes to the Parliamentary Elections Act, however many they actually win at the polls, the Opposition is guaranteed at least nine seats in the House, with any shortfall made up through the Non-Constituency MP scheme.
The standard terms of reference would require that the EBRC review the electoral division boundaries and recommend changes to them. Typically, the EBRC will focus on population changes within existing boundaries in the context of larger demographic shifts across the island. In essence, the EBRC’s general mandate is to provide for fair and balanced representation through adjusting electoral boundaries by avoiding an uneven distribution of voters.
Given the increase in the number of eligible voters, and ssuming that the current MP-to-voter guide ratio of one to 26,000 is maintained, the EBRC may recommend an increase in the number of elected MPs, currently 84.
In reviewing electoral boundaries, the EBRC operates
Let’s assume the ratio of one MP serving 26,000 voters is maintained; the number of voters in an electoral division can range from 18,200 to 33,800 (30 per cent plus / minus of 26,000). Extrapolating from this, a five-member GRC can have between 91,000 and 169,000 voters — the difference between the minimum and maximum number of voters being a whopping 86 per cent!
This affects the principle of fair and balanced representationresults in different “workloads” for MPs. This also has implications for the equality of votes. A voter in a five-member GRC with 91,000 voters has effectively more voting power since it returns as many MPs as another five-member GRC with 170,000 voters. and
Take the case of the May 2006 elections. The five-member Aljunied GRC had 145,141 voters, while six-member Tanjong Pagar GRC had only 3,000 more voters. Potong Pasir, the smallest SMC, had just 15,888 voters while the largest SMC, Bukit Panjang, had 30,452 voters.
In my view, the 30-per-cent deviation rule is too high. In contrast, the United Kingdom is working towards a 5-per-cent deviation, like New Zealand. Australia operates on a 10-per-cent deviation.
If relatively larger countries with more uneven spreads of population can do with 5- to 10-per-cent deviation, our 30-per-cent deviation seems “overly-generous” in small and compact Singapore.
Monday: 01 11 2010 [ELECTION befOre Feb 2012]
A 30-per-cent deviation is too wide
Redrawing of electoral boundaries must avoid being seen as gerrymandering
Eugene K B Tan
Let’s assume the ratio of one MP serving 26,000 voters is maintained with a 30-per-cent deviation allowed. This has implications for the equality of votes.
A voter in a five member GRC with 91,000 voters has effectively more voting power since it returns as many MPs as another five-member GRC with 170,000 voters.
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Published November 1, 2010  |
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Star Cruises obtains priority berthing rights
This will allow it to cross-market its offerings with RWS By JAMIE LEE |
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LEAVE IT to tiny Singapore to tell us where the global economy is heading.
We used to look to the gargantuan United States economy for guidance on financial trends. After Wall Street’s collapse, we turned to the Group of 20 nations. More insight might be gleaned looking at an island nation with 5 million people.
The idea that a place with no natural resources and a state-capitalism model is a global bellwether will strike many as absurd.
Yet the Singapore Exchange’s attempted takeover of Australia’s stock exchange shows how Asia’s money is changing the face of finance and geopolitics as we know it.
The Singapore Exchange’s A$8.1 billion ($10.2 billion) bid for ASX might not go through amid an outcry from Australian lawmakers.
It almost doesn’t matter.
The point is that fast-growing and cash rich Asia is about to go shopping in ways that might shock the biggest developed economies.
This transaction is full of chutzpah.
Singapore’s stock market is half the size of Australia’s and the deal looks expensive.
The real issue is ambition. Singapore is clearly prepared to spend big to get economies of scale that don’t come naturally.
Expect more of this dynamic in Asia — even from smaller countries that get little attention globally.
How will the West respond when China, Japan and India go on a mergersand- acquisitions tear? And those are just Asia’s three biggest economies. Executives from Seattle to London should also expect more phone calls from acquisitive companies in South Korea, Indonesia, Taiwan, Hong Kong and sovereign wealth fund managers everywhere.
THE NEXT WAVE
China has been scooping up energy assets around the globe and has US$2.6 trillion ($3.3 trillion) of reserves to accelerate the campaign. It seeks to leapfrog over the years needed to build domestic corporate powerhouses.
In today’s world, it’s easier to buy a chunk of International Business Machines Corp than create and cultivate brands over time. As the yuan rises, tech leaders like Nokia Oyj or Motorola become cheaper for mainland executives. Why censor Google when you can just own it?
The next wave of globalisation features developing nations buying the crown jewels of developed ones, and it will be messy.
In 2005, the US Congress freaked out when China’s CNOOC bid for oil company Unocal Corp and scuttled the deal. Just wait until China sets its sights on Boeing, Microsoft or Goldman Sachs Group.
This last name has long been coveted in Asia. Government officials in Tokyo and Seoul crave having globally known, savvy and profitable financial leaders. That tends to be code for having their own Goldman.
Now, Asia could just buy the real thing.
Well, try to at least.
It’s hard to believe developed-market lawmakers would let many household names fall easily into Asian hands. Creative attempts would be made to explain why Pacific Investment Management being acquired by foreigners poses a national security threat. Or why Apple or cable news network
Never mind how these arguments might run afoul of World Trade Organization rules. The next few years will see a disorienting flurry of takeover bids from Brasilia to Beijing, putting politicians in unprecedented positions. Nationalistic tendencies will collide with globalisation as never before.
Singapore helped prove the point that Asia has money at a time when others don’t.
Its investment firms in recent years took stakes in Citigroup, UBS AG, Barclays Plc and others, shoring up some of capitalism’s biggest names. Bidding for Australia’s ASX is the next logical step and a reminder that Singapore’s long game is worth watching.
CNN must remain American concerns.BET ON GAMBLING
Take casinos, which are suddenly the rage in conservative Singapore. The government realised it had to let its hair down to net more of the tourism dollars flowing elsewhere in Asia. Welcoming casino-resorts run by Genting Singapore and Las Vegas Sands Corp was a gamble that is clearly working. So was revamping downtown to host Formula One races. Tourist arrivals are exploding, and other Asian capitals are racing to emulate Singapore’s success.
Singapore is working to reinvent itself as a biotechnology hub with reasonably liberal immigration laws to feed its development.
Its transparent financial system has been a magnet for hedge funds setting up shop in Asia. The ASX bid is recognition that Singapore can’t grow much beyond its domestic market and must look outward.
Asia wants to avoid Japan’s arrogant and ill-considered purchases during the bubble years.
Buying Rockefeller Center and the Pebble Beach golf course didn’t work out so well for investors. Officials and executives in Singapore, Beijing, New Delhi and Seoul must avoid the temptation for such vanity deals.
Opportunities abound, though. Several governments are sitting on hundreds of billions of reserves and companies are hoarding cash. Add the desire to grow economies and corporate balance sheets and you have a clear recipe for expansion — and a huge one as Asia floods markets with more equity than ever amid booming demand for initial public offerings.
This shopping spree will shake up the global power balance like rarely before.
Perhaps nowhere is this huge shift more apparent than in tiny Singapore.
BLOOMBERG
The writer is a Bloomberg News columnist. The opinions expressed are his own.
Tiny Singapore signals a giant global power shift
Fast-growing, cash-rich Asia is about to go shopping in ways that might shock developed economies
william pesek
The next wave of globalisation features developing nations buying the crown jewels of developed ones, and it will be messy. The next few years will see a disorienting flurry of takeover bids from Brasilia to Beijing, putting politicians in unprecedented positions.
Nationalistic tendencies will collide with globalisation as never before.
Any BANK withOUT nOrmalised Interest Rate wIll nOt recOver.
When Interest Rate is NEAR-ZERO, ecOnOmy is sIck and eXtremely FRAGILE, bank is at hIghest rIsk Of DEFAULT.
STAY CLEAR OF NEAR-ZERO INTEREST RATE BANKS
- Haze back in S'pore
User Photos: Air quality dips to 84 on the PSI Index - HAVE YOUR SAY: Haze returns to Singapore
APPLE
SONY
HP
products
mOre EXPENSIVE in SINGAPORE
than PRICES in AMERICA
Japan govt says economy at standstill
TOKYO
In a monthly report, the government downgraded its assessment of the economy for the first time since Feb 2009. A senior Japanese official said further pressure on the economy, which is mired in stubborn deflation, could tip it into recession.
“If the economy turns out as expected in our main scenario, we may end up describing the current situation as a soft patch,” said the official at the Cabinet Office, which compiled the report. “But if it comes under further downward pressure, it could end up slipping into recession,” he said.
The government also cut its view on exports and industrial output, saying they were weakening,
which prompted the downgrade of its overall economic assessment.
A rise in the yen to a 15-year high against the dollar added to these woes.
Faltering recoveries from the global financial crisis in developed economies have pushed global investors into emerging markets in search of higher returns, driving up their currencies.
The move has been exacerbated by widespread expectations that the United States Federal Reserve will print billions of dollars to try to lift the US economy, sparking concerns that the extra liquidity will find its way into emerging markets.
Japan’s policymakers had earlier prompted the government to draw up a supplementary budget and the central bank to offer cheap loans and to promise to buy assets.
The government said it wanted the Bank of Japan to support the economy through “appropriate and flexible” monetary policy while the two branches work closely together — phrasing it used when it announced ¥5.05 trillion ($$80 billion) in stimulus spending on Oct 8.
The currency tensions will dominate a Group of 20 finance ministers’ meeting in South Korea starting on Friday and a G20 summit in November, as officials look to tackle the economic imbalances and the threat of competitive currency devaluation.
“Currencies will be the topic that many people will be talking about ... at the G20. I hope that good ideas will be put forward there and we will explain the present situation in Japan,” Finance Minister Yoshihiko Noda said.
Japanese Prime Minister Naoto Kan said yesterday he wants to implement stimulus measures as quickly as possible to support the expansion of the economy.