May 11, 2011

The Recycling of PAP Ministers and the Fall of the US Dollar

From the TODAY newspaper:

Risk of crisis if US loses AAA rating: GIC
04:46 AM May 10, 2011

by Chris Howells

SINGAPORE - A major crisis could erupt if the United States loses its triple-A credit rating, according to Government of Singapore Investment Corp (GIC) deputy chairman and executive director Tony Tan.
"We face the possibility of another major financial and economic crisis if the world's risk-free asset, hitherto US bonds, loses its AAA credit rating in a disorderly manner," Dr Tan said at a 30th anniversary conference of GIC yesterday.
Speaking at the same event, Prime Minister Lee Hsien Loong, who is also a deputy chairman of GIC, said: "The US has had its credit rating put on negative watch. It hasn't affected bond rates so far. But whether or not the rating agencies' views affect the market, the reality of the unsolved problem is that this fiscal challenge is looming and growing. That must eventually affect the confidence in the economy and the ability of Americans to continue to finance their debt, and, ultimately, with international implications, the value of the US dollar."
The comments come after Standard & Poor's last month cut its long-term outlook on US sovereign debt to negative, from stable, while keeping its triple-A rating. The ratings agency cited political gridlock in Washington over plans to cut government deficits as a key reason for the downgrade. 
First, a small digression. Some of you are still misguidedly mourning the defeat of foreign affairs minister George Yeo in the recent General Elections. For you believe that this means that Singapore has lost the services of a very talented, capable man.

But look carefully at the article above. See that name Tony Tan? Yes, that's our former Deputy Prime Minister (who was also our ex-Defence Minister, ex-Education Minister, ex-Home Affairs Minister etc).

Tony Tan retired from politics in 2005. But as you can see, he didn't end up as a quiet old man passing his days away by doing taichi and growing orchids in his garden. Today, Tony continues to hold a variety of important appointments. Among other things, he is the Deputy Chairman of GIC; and the Chairman of Singapore Press Holdings.

Ex-PAP ministers never really die, until they are really dead. They just get recycled into other lucrative roles, whereby they still get to control your CPF money, your mainstream media and various other aspects of your life. Sure, their public profile ceases to be so high, but they're not going to give up on the money so easily.

So members of the George Yeo Fan Club need not fear. Hsien Loong is probably identifying job vacancies for George now. If there isn't any existing vacancy, Hsien Loong will probably just create a new job for George.

Back to the TODAY article. I think that the title is misleading. Tony did not say that there is a risk of a crisis if the US loses its AAA rating. Tony said that there is a risk of a crisis, if the US loses its AAA rating in a disorderly manner. There's a difference.

Personally, I do not think that the S&P decision to place the US on negative watch was a surprise to anybody. Since the financial crisis, no one really cares that much about S&P ratings anyway, since they are no longer considered that reliable - remember how AAA-rated CDOs collapsed almost overnight into less than junk?

Relative to Asian currencies, the US dollar has been steadily declining for a long time, and the decline will just go on and on, quite irrespective of anything that S&P has got to say about it. My own financial adviser has told me to stay out of US dollar assets, unless they are one of those funds which also use USD/SGD hedges. And the main reason why gold and silver prices had been going crazy is that investors worldwide have been getting out of the US dollar and needing somewhere else to jump into, eg precious metals.


Anonymous said...

But regardless of what happen to the US dollar, and as PAP will continue to rule, Singapore will continue to have peace and prosperity, isn't it?

I cannot imagine Singapore will not be peaceful. Just like I cannot imagine there will be tsunami or earthquakes here.

And property prices will remain high, cost of living will remain high, income gap will still be wide, Sing dollar will still be strong, foreign talents will still come, etc, etc.

OK at worst, maybe more people will seek help at CDCs, job fairs, meet MP (thankfully PAP) sessions, more graduates drivign taxis, etc etc.

So what else will change? For the worse, that is?

Tai Yew Mun said...

Erm... If LHL is deputy chairman of GIC, does that mean he's drawing a 2nd high paying salary derived from tax payer's money?

Amused said...

Mr Wang,

Yes, US dollar is falling, but so are Euro, Yen, RMB, and the Singapore dollar. Compare your "strong" currency against Gold, Oil, Food prices and you'll see that it is not worth as much as before. All currencies are simply depreciating at varying rates.

Anonymous said...

Because by virtue of being foreign minister, I suppose George Yeo would have a wider international profile than other ministers.

So for him to lose an election will it not also have wider negative publicity too, as a result?

If I were a VIP foreigner, I will naturally ask: "Why did he lose when it is such a rare thing (in Singapore) for a minister to lose?"

Anonymous said...

Why is it such a big surprise/deal to lose a minister? Elsewhere, whole governments get voted out if they are deemed to be incompetent, no?

Mr Wang said...

Well, one negative scenario could go like this.

If you can't buy a home, you'll have to rent. If you lose your job to cheaper foreigners, you'll have no income. If there is no social welfare, you'll be broke. If you're broke, you can't pay rent and your landlord will evict you. If you have nowhere to go, you'll live on the streets.

So Singapore will end up with more homeless citizens on the streets. When young people are homeless, they turn to crime. So you'll see more crime. Having casinos in the country makes things worse. Casino culture lends itself very easily to fostering crime culture, including activities such as drugs, prostitution, illegal moneylending, corruption, money laundering or just outright robbery.

Anonymous said...

One thing is for sure, he won't be asked by PM Lee to be our next President. He's too young and good for it and it would be such a rude thing to do (asking him).

Kevin Jang said...

Ministers never really lose, even when they retire. They have a pension to boot, and lots of money, in millions, deep into their pockets, and they might even have the chance to work somewhere else in the public or private sector where they can be recognized. So no, they do NOT lose out in any way.

Anonymous said...

Aiyah...ask them to join NTUC's always recruiting b4 election

Anonymous said...

In reverse, let's look at Chiam See Tong. He was a full time MP. I believe he is now jobless and classified under unemployed.

Anonymous said...

At least Chiam is only unemployed.

Goh Meng Seng is now homeless after selling his house to finance his campaign.

Seriously, I am just joking. Haha.

Anonymous said...

Well, that is actually an overstatement to say that Goh Meng Seng is homeless after selling his home. He probably settled for less in a smaller place, or if not, is staying somewhere else with some other family? As for Mr Chiam, is he entitled to any pension even as an opposition MP, or is it just not there at all for him? Would be good to know.

Arguably, the battle for opposition party politicians here is an uphill one. I have encountered various Singaporeans, girls especially, who simply do not care and say that they don't want any change in the government. That is seriously misinformed, because the government will always change no matter what, because people grow old, move in and out even after years of long service. Call it apathy or what not, I am surprised that even educated Singaporeans can make this remark that there is no need for them to care about who is in power.

Alan Wong said...

How can any PAP MP ever lose out even if they have lost the election ? Even a scumbag like our Horsing Minister will be greatly desired by some big time developer. It's the connections and influence that counts.

Otherwise why would any developer offer some discounts to our PAP Ministers but not to any Tom, Dick or Harry like you and me ?

Anonymous said...

And what is the point of voicing grievances only at the stage when they are affected by Government policies?

They should play their part, know their duties and obligations early and try to do something about it, not depending on others, say, voters in Hougang and Aljunied GRC sacrificing to carry their burden of fighting to put right what they should not have ignored in the first place.

The PAP would, of course, like the young to be apolitical and just swallow wholesale their propaganda. It makes their job easier. That is why Singapore politics is what it is today. Is it too late to change? Time will tell!

Anonymous said...

For GY having served so many years as a minister, money is the least of his concern. You can be quite sure he's a millionaire quite a few times over! I think his problem will be psychological - how to cope with the sudden loss of Power and Authority and Prestige. Those are the very reasons why some old people who can't even walk steadily refuse to let go. . .

Anonymous said...

I am sure most of you might have read this TR on the pension money that a minster gets?

We Singaporean gets CPF for life, the Minister gets life money instantly!

DareToAct said...

If US loses it's AAA rating NOT in a haphazardy manner, the world will be fine. Similarly, if PAP loses it's dominance over the next two GE and eventually unable to win enough seats to form government, it is okay for Singapore. As by then (2020?), no one will be surprised at all.

Anonymous said...

Up till now, I still cannot get what Dr Tony Tan means by "in a disorderly manner". Does he mean that there is method and order even in the way in which the US dollar loses its AAA rating????? The one thing I have issues with in terms of politicians' or former politicians' use of such vagaries of language is simply that it purports to say a lot more than it really means. It's just like Donald Rumsfeld's speech on why the USA should invade Iraq, which was not only hypothetical, but even sounded vague in that it did not give a real reason as to why the USA should do so, but restated in various other ways that the US must do it.

Anonymous said...

I am a great George Yeo fan. I would say that he would make an even better Prime Minister than the present one so if Hsien Loon can work out a succession plan that has George replacing him the nexy election I am sure this would be hugely welcome.

How about it?

Anonymous said...

Yes that's the US and its triple AAA rating.

But is you have one driver of a car (or Go forbid an airplane) and he decides to have a seizure or get drunk (it's happened before) then you are really in the dog house.

Even if the PAP is all up to the mark and the investment geniuses of the world that is no guarantee that they will CONTINUE to be geniuses and to have a steady hand.

What happens then?

Anonymous said...

George Yeo should be smart and learn from his experience. If he cannot make headway as a Minister convincing the Party to moderate its hardline policies what chance does he have now that he is no longer an MP let alone a Minister.

If he really wants to do something or Singapore he shouldresign from the PAP, set up his own movement to promote change or if unused to working alone like most of us folks join the SDP/NSP/WP/SPP or SDA.

Anonymous said...

Hello dear Singaporeans or should I say Sinkies ( I do have a sinking feeling and it's not from watching the earthquake film on Japan).

A posting on a Facebook has a new citizen from the PRC no less asking his compatriots to form a party to run in the next election so as to INFLUENCE the PAP against the call to reduce immigration.

I am sure this rather bold suggestion would be taken up by, say, immigrants from India, Serbia, Japan, South America, Russia etc.

Now did the highly paid Ministers and MPs thought this MIGHT happen when they opened the floodgates?

Would you dismiss my question as another case of thoughtless provocation? Ministers should know that the issues (political, cultural, social and security) raised by the call by this new citizen is ALARMING and VERY SERIOUS.

Would they all noe repent for their thoughtlessness?

Anonymous said...

George Yeo and Lim Hwee Hua - are they both quitters? Only lost one battle and they are calling it quits? Where's the conviction?

How can they use the word "old" when our MM Lee is 87 and still refusing to let go?

auntie lucia said...

Mr Wang, I don;t think Dr Tony Tan was ever Home Affairs Minister. Please double-check!

Anonymous said...

@ Anonymous May 11 10:02

About that PRC permanent resident and potential new citizen who was suggesting that they form a new party with other foreigners to put into full swing any stop to the FT policy in our culture, I think the guy sounds particularly like a loony. Permanent residents do not have any rights in terms of voting, let alone contesting or participating in politics, not until they become citizens. And even if he was to actually try advocating a full "open doors" policy towards foreigners, do you even think that the conservative ones in the incumbent are likely to agree with that PRC loony???? That guy does sound rather dangerous though, assuming that Singapore belongs to them mainland Chinese, when its national and cultural identity is already very distinct from mainland China's. Does he assume then that Singapore will become a colony of China lol? That is totally loony.

Lindy said...

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The said...

/// I am a great George Yeo fan. I would say that he would make an even better Prime Minister than the present one so if Hsien Loon can work out a succession plan that has George replacing him the nexy election I am sure this would be hugely welcome. ///

Why do you think GY is out?

Since Low Thia Khiang was talking about tiger, ever heard of the other Chinese saying "one mountain cannot accommodate two tigers"?

The said...

/// auntie lucia said...

Mr Wang, I don;t think Dr Tony Tan was ever Home Affairs Minister. Please double-check! ///

* * *
"A member of the People's Action Party, Tan became a Member of Parliament (MP) in 1979. He was made a Minister of State in the Ministry of Education in 1979, before joining the Cabinet in 1980. He served in the Cabinet as Minister for Education (1980-81 & 1985-91), Minister for Trade & Industry (1981–86), Minister for Finance (1983–85), and Minister for Health (1985–86).

Tan left OCBC and rejoined the Cabinet in August 1995 as Deputy Prime Minister and Minister for Defence. In August 2003, he relinquished the Defence Minister's portfolio and became the Co-ordinating Minister for Security and Defence, while retaining the post of Deputy Prime Minister."

So, maybe Mr Wang confused Home Affairs Minister with the Coordinating Minister for Security and Defence. But he is not entirely wrong as the new Ministy basically serves as a homeland security ministry with bits of Home Affairs under its purview.

Anonymous said...

This is a strong hint of looming losses to come from GIC/Temasek (aka national reserves). With an unenviable portfolio that is US$-centered and a strong S$ to boot, such losses may be growing. The US$ rating is just a convenient bogeyman.

Where available hedges are short term, the unbalanced position may in fact now be largely un-hedged and exposed to the weaker US$. Hence, such bold and unconventional investment approach one may say or have said!!!!!

It was TT who portended great uncertainty soon after GIC/Temasek made huge investments in foreign banks. This was followed by the GFC and billions lost in investments in ML/UBS/Citi (thanks to the good lawyers, the Citi investment did not evaporate).

This is really about the accountability and transparency of the management of GIC/Temasek. By having such a huge hidden and unaccounted reserves (to defend the S$/economy), it always risks being raided. And raided again……

Raided!!!! Who? What? When? Where? How? Management may not be corrupt. But, competence may be lacking. This time this could be no different to paying protection money to the big bully.


Anonymous said...

just curious, why did you delete your post on george yeo & the casinos?

7-8 said...
This comment has been removed by the author.
7-8 said...

I don't agree that ministers who have been voted out of office will be parachuted into top positions. To be sure there are very few precedents. There are many ministers who have quit, but voted out? There's only Seet Ai Mee and she's not a full minister (she would have been if not for Ling How Doong). I didn't see her becoming a CEO of a GLC or something. The PAP, no matter how much electioneering they do, still regard the system as sacred and will respect the results of democratic elections. (For now.)

I think they have to quit and find their own thing (something I'm sure those 5 are more than capable of). It will be interesting to see how those guys end up.

Gilbert Koh aka Mr Wang said...

I didn't ....... The Blogger system had a major breakdown ( worldwide) and bloggers were affected. My post vanished by itself ( together with gazillions of recent posts by other bloggers around the world) only to reappear later.

As of now, the post is back but the comments are all gone.

Anonymous said...

Mr. Wang,

'As of now, the post is back but the comments are all gone.'

I smell some conspiracy 'in the going'.

I supposed, everywhere in society, whether here in Singapore or elsewhere in the world, there is an old saying :- '"WE WILL TAKE CARE OF OUR OWN KIND".

So the PAP will obviously 'take care of their own kind' which also reminds me of another saying :- "ALL ARE EQUAL....BUT SOME.....ARE MORE EQUAL" quote from Animal Farm.

Unfortunately for the most of us, we are slowly but surely, losing out to "Other Kinds".

7-8 said...

"About that PRC permanent resident and potential new citizen who was suggesting that they form a new party with other foreigners to put into full swing any stop to the FT policy"...

The full text of the article is here. In it you will find some fairly routine analysis of the election most of the way, and a tongue in cheek comment at the end about forming a political party to serve the interests of foreigners. That is probably going to be a non-starter because the number of new citizens is still relatively small.

What is more likely to happen is that they will do a lot of astro-turfing in order to stem the tide of resentment against foreigners.

Elle said...

Gold and silver and other commodities stories are just a bait to lure the retail investors .. once the prices hit the peak, the big players will just dump them .. commodities are too easy to be cornered .. and yes US dollars is on a long term downward trend .. and GIC will continue losing its asset value as the US dollar decrease in value ..