THE NOISE in the global economy is getting louder.
The noise in Singapore is also growing louder as the ruling Lee family squabbles over a number of issues including the late Lee Kuan Yew’s house on Oxley Road.
On a larger scale, geopolitical uncertainties centring on the US, the Middle East, Russia and North Korea are adding to political uncertainties in the US and Europe and economic uncertainties everywhere, especially China.
It’s hard to keep track of what’s going on and why.
Experts are trotted out by the media to have their say, and then they will come out again after a short period to either say the same thing, or something diametrically opposite from what they said earlier.
It’s mind-boggling.
In today’s highly connected, globalised world, uncertainties are accentuated manifold, and impede the lives of ordinary people. Financial crises seem to be emerging as the rule rather than the exception. And the biggest crisis could be just around the corner, if Jim Rogers is to be believed.
The billionaire, who now resides in Singapore, recently told Business Insider that the debt build-up and high asset valuations have made the global economy even more vulnerable than it was in 2008, and that the next crash will the “the biggest in my lifetime”.
Rogers noted that what sparks the next crisis could come from anywhere, when no one is looking.
The Melting Of Iceland
He cited Iceland going broke in 2007 which ultimately led to both Bear Stearns and Lehman Brothers going broke. This time he says it could be one of the broke American pension plans, or a war, or a country that isn’t on the radar.
Any such events would be considered black swans, occurrences that are typically extremely difficult to predict, but have a broad and major impact.
As a side note, you should not believe anyone who identifies specific black swans before they occur. By definition, black swans come surprisingly.
As ever, human behaviour plays a big part in precipitating financial crises, and this was also something that Rogers alluded to in his recent comments. History is repeated and lessons are not learnt. Or more accurately, any lessons learnt tend to become forgotten after a period of time.
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There have been many studies done in recent years on indicators that portend financial crises. Indicators cited include currency volatility, downturns in stock markets, declines in trade and real estate prices. Low interest rates since 2008 have made it harder for investors to find yield.
For example, money sitting in pension funds right now is making much less than prior to this prolonged period of low interest rates. This is creating huge worries about retirement funding shortfalls as populations age.
Frosty Relations
If Rogers is right and something big and nasty is around the corner, what would that mean for Singapore?
In Singapore, long viewed for its steady government, the fissures in the relationship between the Lee siblings — Prime Minister Lee Hsien Loong and his brother and sister, Lee Hsian Yang and Dr Lee Wei Ling, respectively, could be viewed with some alarm, though such situations are not uncommon in family set ups, and perhaps should be viewed as such.
In the last three decades, Singapore has experienced several economic cycles punctuated by crises like the Asian Financial Crisis in 1998 as well as the Global Financial Crisis in 2008. Previous financial crises have shown that Singapore suffers a lot on the downside when things go pear-shaped for global and regional economies, but rebounds faster than most others when things start to improve.
Whether it does the same now could depend on Singapore’s ongoing economic restructuring efforts and the confidence in them. However, such efforts are not as clear-cut as they used to be. This has even been affirmed by the Singapore government.
PM Lee said last month that as Singapore’s economy continues its restructuring, helping the government with the “urgent” task of convincing workers to continually upgrade their skills is something Community Development Councils can do. He noted that while the government has rolled out initiatives and schemes under the SkillsFuture movement to support skills upgrading, these alone are not enough, since “for many people, it is also a mindset change”.
Can ordinary Singaporeans deliver as they have done time and time again since independence? The jury is out on that one.
Productivity gains typically mean job losses. Can new jobs be created as the economy is restructured? This is not only a question for Singapore but for all countries. The view now is that many primary school children today will eventually work in jobs that don’t even exist at present.
This is a scary thought for policymakers because their job is to figure out what these new jobs are going to be.
Thus It Was Unboxed by One-Five-Four Analytics presents alternative angles to current events. Reach us at 154analytics@gmail.com
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