What is KJ's problem?

[Goh Meng Seng]

Dear Locke,

Yes, IMF is creating Moral Hazards. With the past records of writing off bad debts, more and more countries are asking IMF and World Bank to write off their debts from them as well.

Please read my response to Londontrader. I would say it is a Catch 22 situation we are facing now. The present crisis may build up to a magnitude that the whole world may not able to manage at all. This is not just about Greece or Spain. It is the whole PIIGS. The magnitude of the present crisis may be the biggest ever, supersede 1997 Asian Financial Crisis.

I am not suggesting that we don't help out but, whatever we plan to contribute, we must be mentally prepared to write it off. It is a very realistic question of HOW MUCH? That is why a good comparison should be made with other countries, in terms of per capital basis. The size of our economy is very small as compared to many other countries. I am not sure whether we should go into this when countries like Korea, Taiwan, India etc haven't commit themselves into this one.

Goh Meng Seng

Dear GMS

It is a dog eat dog world, and Singapore has refined it to a fine art. Vis sa vis our GDP size, do u know how much Singapore contributes to a) world bank b ) asia development bank, c) Who and d) all manner of international organizations ? We give loans to the IMF because it is in our national interest, we give pittances to all other manner of international organizations because it is not in our national interest.


The fundamental question is even for market economist, do we accept some degree of moral hazard in return for greater and tighter regulation. Does the IMF create Moral Harzard ? We have to remember that if a country was not in shit, it would not have turned to the IMF to begin with. No healthy functioning government and or economy turns to the IMF. The IMF may be a loanshark but countries turn to the IMF after they have defaulted on debts to the private sector and have no other funding. The internal adjustment by the IMF is always painful but the alternative a lot lot worse.

Our national interest is a healthy stable functioning global market economy with free trade and capital flows. Dams and Development, health etc etc be dammed :_))


Locke

 

[Huat-Ah]

Wasting time DEBATING IMF...

Get a life GMS Loser aka douchebag

 

[Goh Meng Seng]

Dear Aurvandil,

Sad to say, you are right. It is quite sad to see that our opposition MPs & NCMPs in parliament do not even know how to ask questions on this issue. Ironically, it is KJ, a leader of an opposition party who isn't in parliament to raise it in court instead.

And yet, it seems that other opposition party members seem to mock at KJ's effort when they didn't even know a bit of the issue, least to say any in depth knowledge of of the whole situation.

WP may have CSM who has studied Economics cum Law and exposures in the international corporate setting. However, it is disappointing that he didn't even put up a feeble attempt to challenge PAP on this issue.

If such issue is "too cheem" for the best opposition party in Singapore, I guess we will have to get stuck with PAP for another few decades to come. It is about time to open up the depth and scope of concerns and knowledge to things like international finance, diplomacy and stuffs like that.

Focus on local issues may win them votes but to show that they are capable to grow into a party which has the ability to rule, they will need more than that.


Goh Meng Seng

To "cheem" for any political party to be interested. Political parties here are only interested in one of the 4 areas:

1) FT issues
2) Housing issues
3) Transport issues
4) Healthcare issues

 

[Goh Meng Seng]

To give readers of this thread an idea of how big the crisis is, during this later part of the year, there are $300 Billion bonds maturing from the PIIGS! This is only for this two quarters of this year....


Goh Meng Seng

 

[The_Hypocrite]

Actually GMS has brought up some valid points and at least he is not putting down the WP and directing his fire power against PAP as any proper Singaporean will do,,,there is hope for him yet....

Wasting time DEBATING IMF...

Get a life GMS Loser aka douchebag

 

[scroobal]

Referendums are never called for these things. It does not even register on the radar. Referendums are usually held for 2 major issues.

1. Impacts the core interest of the country in the way it is formed and operates. Things such as moving to a Presidential System, bicameral parliament, re-joining Malaysia etc. Its sit on the apex and one below is the 2/3rds majority in parliament to change the consitutition etc in many countries.

2. Impacts the core belief or psyche of a country. A deeply religious Catholic country deciding on abortion, or even things like Euthanasia, abolish NS and live with the consequence as the economy is in structural decline.

Honestly, referendums are not for relatively petty things like IMF pledges. With our huge reserves, this is a drop and should be covered by the mandate given to the Govt in 2011.

The issue is the lack of clarity on the control mechanism and the Govt silence.

The Indonesian loan was never disbursed. It is in our national interest and our core security to extend that loan to Indonesia at their time of need. It buys goodwill, brownie points and insurance. We did the same to Malaysia at the request of Dr M but they did not use it either.

These are essentially goes to good governance, common sense etc. This is no different to a hawker contributing to a common pool run by a committee of fellow hawkers at their centre to articulate their interest as a body, provide help in times of crisis, etc.

In this case, KJ is asking why the treasurer did not call for an EOGM to get approval to lend to another hawker centre to re-build their plumbing.

 

[Fook Seng]

In any case, a $4 billion loan (not gift) is but 1% of the national reserves - hardly deserving of a referendum.

Huh? I don't have problem having the loan debated in parliament instead of a referendum although I understand Aurvandil's concern that any objection would be voted out by the overwhelming majority of the ruling party in parliament but at least it get debated and the objection noted. But trivalising $4 billion is an unforgivable attitude. If the investors of our national reserves share this view, we are in deep trouble. Are they already having such an attitude?

 

[Huat-Ah]

Actually GMS has brought up some valid points and at least he is not putting down the WP and directing his fire power against PAP as any proper Singaporean will do,,,there is hope for him yet....

I never really keep track of what he said on this thread. Anyway IF he really changed for the BETTER...Why not ? We love to welcome him

 

[Fook Seng]

There are only two provisions for a referendum in Singapore - merger with another country and amending the powers of the President. Even the 2nd one is not even in force yet.

Does this indicate where a referendum is mandatory so that no rogue government can undertake these actions at will? To be interpreted as the only situations where referenda apply seems rather restrictive.

 

[Cruxx]

Sinkie: "Aiya 10 billion or 100 billion also liddat. Nothing to do with ordinary singaporean people what!"

 

[londontrader]

The Indonesian loan was never disbursed. It is in our national interest and our core security to extend that loan to Indonesia at their time of need. It buys goodwill, brownie points and insurance. We did the same to Malaysia at the request of Dr M but they did not use it either.

I've got a real problem with that Pledge to Suharto (10 billion if I recall correctly)
Malaysia made a similar pledge to the tune of 1 billion (I think)
There was a nagging feeling that we were bailing out SUHARTO and not just Indonesia
All this time, there was an IMF loan simultaneously being offered BUT with strict conditions. So, we could have joined in the IMF effort?
The difference was that both S'pore and Malaysia offered the money with little or no conditionality attached
Surely, some Presidential or Parliamentary oversight should have been sought (before or after the action) when we offer to bail out corrupt dictators with no strings attached?

These are essentially goes to good governance, common sense etc. This is no different to a hawker contributing to a common pool run by a committee of fellow hawkers at their centre to articulate their interest as a body, provide help in times of crisis, etc.

The pledges to Suharto were govt to govt (in 4 eyes meetings LKY style)
More like crony to crony than a pool of liked minded people helping each other

 

[londontrader]

To give readers of this thread an idea of how big the crisis is, during this later part of the year, there are $300 Billion bonds maturing from the PIIGS! This is only for this two quarters of this year....


Goh Meng Seng

Yes, the euro crisis, if not managed properly will make the 2007/8 crisis look like a picnic
These guys are borrowing money now to pay the interest on their debt, not even talking about the principal
That's why it's in S'pore's interest to play a part in shoring up confidence in the international financial system
No, the IMF will not go bust bailing out Europe because they won't and haven't lent (to Europe) enough to risk insolvency
It's the ECB and rest of Europe's banks that need to worry!

 

[londontrader]

WP may have CSM who has studied Economics cum Law and exposures in the international corporate setting. However, it is disappointing that he didn't even put up a feeble attempt to challenge PAP on this issue.

CSM unlike KJ, knows how to read and interpret Constitutional law
At the very least, CSM knows how to keep quiet and seek advice (if he is unsure) because Constitutional Law is a minefield for the novice
CSM unlike KJ is a sitting MP and has a lot more to lose than some one on the sidelines having a poke at the govt
Also, CSM probably thinks the IMF pledge is a good idea and maybe this is the wrong issue (timing) to try and start a discussion about the control mechanism

 

[londontrader]

Yes, IMF is creating Moral Hazards. With the past records of writing off bad debts, more and more countries are asking IMF and World Bank to write off their debts from them as well.

Having to borrow from the IMF is a very unpleasant experience
Trying to get it written off is even worse
There really is little Moral Hazard because these countries get into very desperate situations before agreeing to IMF terms
The debt write offs are appropriate because the countries have serviced the loans and paid off a fair part of the principal
The debt forgiveness allows these nations to spend the money on actual development efforts

I am not sure whether we should go into this when countries like Korea, Taiwan, India etc haven't commit themselves into this one.

S Korean + India have pledged to the IMF effort
Taiwan really is a special case (you should know why)
So, please do check your facts

 

[londontrader]

I stand with Aurvandil. You don't need to have IMF to bankrupt for us to lose money. You may say IMF will not loan more than what it has in hands but that doesn't stop it from the need of writing off bad debts.

Dear GMS,

How do you go bankrupt when you lend out less than you have on hand?
Even if no one repays you!

And in this case, if these loans to the PIIGS are going to be written off or just getting hair cut, who will foot the bill? IMF's own kitty won't be enough to cover that loss else they won't be asking for loans from Singapore and other countries!

1) What IMF loans? It's the ECB and Europe's banks that have loaned the most!

2) The IMF doesn't need to borrow from S'pore etc because they need to cover losses in Europe (they aren't exposed to this problem)

3) The IMF is asking for a pledge to build up an emergency reserve (money to be drawn when needed) to deal with a potential international financial crisis

4) You're saying that the IMF MIGHT bankrupt itself trying to save Europe (unlikely because they need permission from their key stakeholders to commit suicide!). If this happens, S'pore will lose that 4 billion pledge BUT it will be peanuts compared to the 100s of billions we will lose in such a crisis.

5) So, Maybe it's a wise thing to Pledge now to help prevent something worse later.

Nobody knows how much IMF's gold reserves is worth exactly,

40 to 50 Billion USD conservatively and most likely more
IMF says about 8 billion USD, which everyone knows is rubbish because of the special accounting for that Gold Reserve

This is not an ordinary crisis of individual country at distress but the WHOLE of EU PIIGS!

Actually, there are a few simple solutions

1) Break up the euro and ring fence the problem countries (there will be contagion but it can be managed with liquidity injections)

2) Get the Europeans to actually OWN the problem ie. agree that it's not a Greek/Italian/Spanish problem etc. but a European one and act accordingly

What's holding back Europe right now is POLITICS and not Economics

 

[scroobal]

Indonesian Banking including Bank Central Asia owned by our recently departed was near collapse. Many of them are tied to Singapore business interest. More importantly if Indonesia goes under and Singapore did not assist, the Indonesians will play bogeyman politics and we will be the receiving end of it. Its blood money to a large extent. Besides reserves that are set aside to fund a war from outside similar to Kuwait Govt in exile in Cairo did during the Gulf War, we keep aside blood money to pay off or buy peace.

The conditions were very specific. The daughter was called and briefed extensively by old man, MOF etc. Finally they agreed ot the bigger IMF bailout. At its heights, Credit Card Interest rate in Indonesia balloned to 64%.

The country was near tipping point to a major civil disorder. Its a political decision, not community service or a financial decision. In the end $10B was not enough and thus IMF and the sex maniac from IMF doing his famous pose while Suharto signed.

I've got a real problem with that Pledge to Suharto (10 billion if I recall correctly)
Malaysia made a similar pledge to the tune of 1 billion (I think)
There was a nagging feeling that we were bailing out SUHARTO and not just Indonesia
All this time, there was an IMF loan simultaneously being offered BUT with strict conditions. So, we could have joined in the IMF effort?
The difference was that both S'pore and Malaysia offered the money with little or no conditionality attached
Surely, some Presidential or Parliamentary oversight should have been sought (before or after the action) when we offer to bail out corrupt dictators with no strings attached?



The pledges to Suharto were govt to govt (in 4 eyes meetings LKY style)
More like crony to crony than a pool of liked minded people helping each other

 

[Thick Face Black Heart]

The example that you (GMS) provide, contains no evidence of any IMF member nation having to write off any funds loaned to the IMF. The G8 was consulted simply because they represent the main stakeholders in the IMF and World Bank etc. No IMF member nation suffered a loss on any IMF related loan as a result of this write off, nor were any of them asked to voluntarily suffer a loss.

I think you have begun to understand Goh Meng Seng (GMS). You debate with him, this is the level he will play at. After a while, you WILL get tired.

 

[londontrader]

Indonesian Banking including Bank Central Asia owned by our recently departed was near collapse. Many of them are tied to Singapore business interest. More importantly if Indonesia goes under and Singapore did not assist, the Indonesians will play bogeyman politics and we will be the receiving end of it. Its blood money to a large extent. Besides reserves that are set aside to fund a war from outside similar to Kuwait Govt in exile in Cairo did during the Gulf War, we keep aside blood money to pay off or buy peace.

We were trying to save Suharto and our cronies (vested interests)
Was there really a need for blood money when the mafia boss was on his knees?
Was that decision really S'pore 1st or certain S'porean interests 1st?
I really wonder (till this day)

The conditions were very specific. The daughter was called and briefed extensively by old man, MOF etc. Finally they agreed ot the bigger IMF bailout. At its heights, Credit Card Interest rate in Indonesia balloned to 64%.

I had somewhat of a first hand view of that episode, running an Asian Fixed Income Desk at the time and bleeding money by the minute.
64% credit card interest, 100+ % overnight rates and FX traders unwilling to commit because their reuters screens were churning too fast!
Such fond memories! After that, I could sit thru Russia, LTCM, Lehman and the likes without breaking a sweat.

The country was near tipping point to a major civil disorder. Its a political decision, not community service or a financial decision. In the end $10B was not enough and thus IMF and the sex maniac from IMF doing his famous pose while Suharto signed.

machiavelli said “There is nothing so difficult than changing the established order of things.”

We had the Indonesian opposition in for a briefing at our bank HQ in Singapore at the time. The view from the street was that nobody could save Suharto and civil unrest was inevitable. It was time for a change (plain and simple) and that process would be painful (as it always is). I think LKY and the PAP realised that after a while, the same Indonesian opposition delegation was invited to brief certain PAP fellows later (off the record of course)

To get back to the point:
These major transnational decisions really should have oversight.
Even in emergencies, one is allowed to act promptly and answer for it later
The problem with this episode is that Singaporeans were told to shut up and stop bothering impt people doing impt work

 

[Thick Face Black Heart]

Agree on the need for a reasonably large OFR. The question I posed was whether perhaps the OFR under MAS is excessively large so that MAS can toss around US$ 4 billion loan pledges without breaking a sweat and without consulting Parliament.

In this volatile climate, you really need very large OFR to maintain the value of your currency. Note that the major powers are trying to debase theirs, which makes our job easier, but that does NOT mean we don't need a large OFR. 4 billion is peanuts in the forex world. A hedge fund run by a Ph.D. can easily wipe 4 billion off his own portfolio in a split second.

London trader is correct. There is already enough money in the current govt budget to improve the lives of Singaporeans. No need OFR or Past Reserves. The issue is political will.

 

[Thick Face Black Heart]

It was not too long ago that Singaporeans lost huge sums of money when they "lent" it to Lehman mini-bonds and Pinnacle Notes. Like investing in Lehman mini-bonds and Pinnacle notes, this loan pledge is not a low risk endeavor. To this date, there has been no published material on the default risk or the amount of interest that Singapore will be earning. We also do not know if there are clauses like the infamous "credit event" which will cause this instrument to become worthless.

You are mixing it up, bro. Minibombs was about swaps and derivatives which magnified losses via leverage. There are no such toxic instruments anywhere near IMF's portfolio.