Oxymorons (Saving Money)

‘USA wants to China to raise the value of their money so they can export more to them. However, doing so results in unemployment for China.

USA then devalues their dollar while China devalues their currency. Weaker currency means inflation at home.

So why save money when countries are making their money less valuable?’

Governments print trillions of dollars everyday to pay off debts. With this amount of money floating in the system (when money is used to pay off debts to other countries.), value of the currency depreciates. Money you’re holding on to loses its value even without you doing anything.

This is why ‘Saving money’ is an oxymoron.

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“So easy to get money, so hard to clear”

This blog post is in reference to today’s Straits TImes article 

So hard to clear debt

Imagewhere it is highlighted that it’s ridiculously easy to borrow unsecured loans, but incredibly hard to repay the interests, which rack up to a whopping 24%

 The next few points come across as pretty pretentious given someone who hasn’t owned single credit card in his entire life, but I feel is some points I’ve gathered after reading the article.

Firstly, many reasons why such debts are incurred is due to accidents, unexpected hospital bills and medical charges.

So this comes to my first point

Insurance

ImageBefore I start this point, let me mention that I am no insurance agent, nor anybody related to the sales of insurance or its companies. I personally feel insurance is one of the most important, if not the most important thing you need to own. Insurance, despite its sometimes hefty payments, are what creates the safety net to fall upon in case of such incidents. Nobody can safely say ‘I’ll never get into an accident’. Insurance is needed to cover this probability of getting in an accident. The amount you pay monthly will definitely beat having to borrow money to pay for hospital fees you’re not ready for.

Besides, insurance can also be another good form of investments. More on this will be described in future blog posts.

 

 

Doodads

Sometimes, credit cards are used to buy luxury items and services such as spas, facials, dining, etc. The incredible discounts that each card offers is amazing, and there’s simply no reason to ignore this privilege right?

Wrong.

The amounts may come out as minuscule, but racked up, they can come up as a sum much more mind-blowing than you first imagine. $100 may seem no different from $150 on a credit card bill, but as these payments added up, there’s an inevitable headache coming your way.

Pay through your cards, but don’t pay using your card. Only buy things you are sure you can afford.  

 

Liabilities

Probably the worst things you can buy using your credit card is what I have defined as a liability. In any case, let me define it again, is that liabilities are things that take money out of your pocket.

By using credit cards to purchase a liability (a sports car, a yacht) etc you incur not only interest costs from the credit card, but also money that are siphoned from the liability you just bought. This snowballs the entire situation. It will be much better instead to use cash you can afford to lose, not charging it to your credit cards.

Gambling and other bad habits

The worst type of debts are those incurred for bad habits. These will usually spiral out of control and end up in a worse senario. Gambling never pays off. Go for cashflow, not for probability.

 

I know all these seems very pretentious for somebody who hasn’t even graduated and stepped into the working world. But if I, as someone inexperienced, can think of all these, I’m sure plenty of adults can as well. It’s time to take charge of our finances. Act responsibly. 

Cheers,

Theodoric

 

The Financial Crisis (Part 3)

Apologies for the long awaited 3rd installment of this series! Due to school starting and all. But here’s the 3rd portion of the 2007-2008 financial crisis

‘How did Singapore tide over the crisis?’

“Despite an average growth rate of nearly 8 per cent from 2004 to 2007, Singapore was the first East Asian country to fall into a recession from the current global economic crisis after July 2008. This clearly reflects the greater vulnerability of the Singapore economy to global economic shocks.

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The exposure of Singapore’s banks to sub-prime mortgage is limited, due to its well regulated market. The recession came mainly through the fall of the non-oil exports in manufactured goods, induced by the overall deterioration of economic conditions in the US and Europe.

Economic conditions in Singapore have been affected by the huge loss in wealth from the collapse of the stock market that came with global crisis. This depressed domestic demand, reducing consumption and investment in assets. The immediate concern in the ‘liquidity-crunch’ from the financial crisis has been to provide sufficient liquidity in the system. To assist companies to get access to credit facilities, the Singapore government announced a S$2.3 billion loan facility for local companies (including SMEs) through its business financing scheme on 21 November 2008.

Both Europe and United States are still Singapore’s key export destinations, accounting for nearly 33 per cent of the total non-oil exports over the last few years. The ASEAN countries – Indonesia, Malaysia, and Thailand – accounted for nearly 20 per cent and Northeast Asia accounts for around 24 per cent of Singapore’s non-oil exports.

A rapid export recovery in Singapore seems very unlikely given the IMF’s revised growth forecasts for the major industrial economies – the United States to -0.5 percent, the European Union to -0.7 percent, and Japan to -0.2 percent in 2009 – and the World Bank’s downgrade of growth for China from 9.2 percent to 7.5 percent in 2009. It is difficult to see Singapore exporting itself out of this recession in the short haul as it did in the 1997 Asian economic crisis (with a spectacular v-shaped recovery). This crisis is likely to be long and protracted.

The government’s fiscal stimulus is also unlikely to have little impact on the growth, given the small share of the domestic demand to total demand, although it should provide some relief for vulnerable households in the lower income group.

Singapore’s economic fundamentals might be strong, but a number of things can be done to cushion the downturn and to promote economic recovery.

Domestic Issues

1. Labour productivity in the economy has been declining. The cost of training is lower during a downturn, so the downturn provides a good opportunity to train and retrain productive workers in the economy. The announcement by the government to set aside S$600 million for training and upgrading of workers is in the right direction to improve the human capital of the workers but hardly adequate. CET programmes need to be targeted at specific sectors and upgrading of skills in both generic and technical skills of workers will be equally important.

2. The evidence is that the duration of unemployment has a direct impact on the re-employment of workers. Workers out of the work for an extended period lose part of their human capital and are unable to secure similar paying jobs. Given that the current recession might be a long and a protracted one, workers require extended period of training and upgrading in specific skills. Training grants need to be extended beyond CET training to provide for general education and skills for workers to acquire post-graduate diploma and even university degrees. This will have a stronger impact on re-employment and retaining productive workers in the labour market.

3. In a long and protracted recession, the economy needs to restructure and new industries with new technologies must emerge to create a robust economic upturn. The structural changes and emergence of new technologies from the current economic downturn in China, European Union and United States will change the global configuration of production networks. New industries will have to be created to link up with new production networks and fiscal incentives will be needed for local firms to innovate and adopt the emerging new technologies.

4. Entrepreneurial and innovative activities are equally driven by large and small firms. Currently, there is only a limited role for small firms in the manufacturing due to the dominance of larger firms (multinational corporations and Government linked-companies). A recent OECD report highlights the role of innovation by smaller firms in countries such as Korea, Hungary, Luxemburg, Portugal, Austria and Belgium (OECD Science, Technology, and Industry Outlook, 2008). The current downturn provides an opportunity to develop stronger and more innovative SMEs in Singapore.

5. There is a need to scale back government service fees to ease the pain of the downturn on local firms and households. There has been a hike in government rates and fees since 2004. As unit labour costs fell (by -2.7 per cent), services costs increased (by 6.2 per cent) between 2004 and 2007 (see ESS, Third Quarter Report, MTI).

6. In the current downturn, companies should be encouraged to make wage adjustments rather than quantity adjustments in terms of retrenchment. In 2004, the government introduced the wage restructuring policy and the key objective of the policy is to increase the flexibility of the labour market to external shocks by allowing greater flexibility in wages.

External  Issues

ASEAN (ASEAN-10 ) is Singapore’s hinterland with a population of nearly 540 million and it can play an important role in stabilization and growth in the region. A larger single market in ASEAN would provide a stronger economic base to manage and ride out systemic external shocks such as the current global crisis.

The economic crisis provides an ideal opportunity to accelerate the integration of ASEAN Economic Community (AEC). Intra-regional trade in ASEAN and Asia will be key factors in export growth as export markets in United States and European Union lag. A single market would heighten regional competitiveness, attract to foreign direct investment and facilitate the expansion of trade flows in the region and globally. With the emergence of stronger China from the current global crisis, ASEAN can complement the new industrial structure that will emerge in Asia.”

-Quoted from http://www.eastasiaforum.org/2009/01/05/riding-the-global-economic-crisis-in-singapore/

This goes to show how vulnerable Singapore is when dealing with foreign markets. Singapore is and will always be the one small island that is quite dependent on the markets in US, UK and Asia itself. However, our current economic climate today goes to show how the government was able to implement policies to combat the financial turmoil in the US, and the very fact that the Sing dollar is still strong goes to show how good a job they have done. Supporter of the Singapore governement or not, you have to admit they have done an incredible job to allow Singaporeans to ride over this storm.