We should be more worried about us living here especially when consumer loans spiked to over 200 billion fuelled by housing loan etc. it's a matter of time that higher interest rate is used to dampen borrowing and hope you guys would not be the ones affected then.
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Spain Plunders 90% Of Social Security Fund To Buy Its Own Debt
- Thread starter lifeafter41
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Whether it is retirement money like the CPF or welfare funds which are used to save life, eventually they need to be returned to the people. These funds should not be invested in risky investments.
Normally govt bonds are fairly stable investments but in both these cases there are underlying risks.
In the case of Spain, the investment is used to pay for debts owed and the economy has to improve substantially to be able to repay these, a tall order because for Spain it means a major restructuring of its economy and society.
In the case of Singapore, most people do not understand what the Govt is doing with the money, taking contrary positions when most investors were pulling out during the 2008 crisis, making major losses when we chickened out and liquidated our positions inspite of billion dollars losses, clear evidence that the situation had been wrongly read.
When only Singapore, Korea and Saudi, all newbies in global investment, were about the only investors left, we should be able to guess how wrong it was going to be. And yet we jumped in. This high stake casino play is the risk our retirement money is facing.
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The idea of risk-free govt bonds is trashed.
Spain is not going to turn its economy around overnight.
Why: This goes beyond bonds into the rigid labour laws, which is similar to Australia. They have not change since 1974 after the removal of the last dictator. The unions protecting sunset industries, overpaid workers and bad worker-management relationships means that businesses will not employ full-time permanent workers. Service industry & agriculture not providing enough jobs. Indians have bought out their manufacturers.
What if the govt bonds are no better than junk bonds that offer no returns to the investment. (i.e. the economy did not improve substantially as hoped)
What is going to happen next? The govt need money to make up its shortfall because of bad investment in its own govt bonds. So, it has to sell more govt bonds to raise the money. Who is going to buy the new bonds?
Investors moved out in 2008 because they realised that they are supporting a bubble economy, founded on hypothesis now discredited. Added to that is the demographic time bomb. The amount of new new housing Spain built is enough to house the entire Europe
This is why Spain is offering residency visa to rich overseas housing investors (Indians and Chinese)
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