4/10/2019

High time to raise interest rate

Speaking in the run up to the gathering of the great and good of policy making and finance, IMF chief Christine Lagarde has called the outlook for growth "precarious" and warned that years of high public debt and low interest rates over the past decade have left many countries with limited room to act when the next downturn arrives.

Read more at https://www.channelnewsasia.com/news/business/take-five--panic-over--world-markets-themes-for-the-week-ahead-11418498

Debt, living on debt, is the opiate of the new western economy.  All their economic and monetary policies are debt based, printing money to buy debt after debt, and kicking the can further down the road. How long can this last, how much more money to print before everything collapses under the weight of debt?

Below is a summary of American debt compiled by a

'The U.S. debt was $22 trillion as of February 11, 2019. Most headlines focus on how much the United States owes China, one of the largest foreign owners.... In January 2019, China owned $1.126 trillion of U.S. debt. It's the largest foreign holder of U.S. Treasury securities. The second largest holder is Japan at $1.07 trillion....That's when it increased its holdings to $699 billion, outpacing the United Kingdom's $640 billion. 

Brazil is the third largest holder, with $305 billion in Treasurys. Ireland owns $270 billion, while the United Kingdom owns $272 billion.

Luxembourg is sixth at $218 billion. The Bureau of International Settlements believes it is a front for sovereign wealth funds and hedge funds whose owners don't want to reveal their positions. So are the Cayman Islands, holding $208 billion, and Belgium at $192 billion.

After Luxembourg, the next largest holders are Switzerland, Hong Kong, Taiwan, Saudi Arabia, and India. They each hold between $145 billion and $228 billion.'

The American debt has reached such enormous proportion that everything the Americans are doing is revolving around servicing this mountain of debt. One key point to note is that US Treasury cannot afford to raise interest rate as every 1% increase in interest rate would mean another US$220 billion of interest to pay. This sum is equivalent to the GDP of many countries around the world, including that of Singapore. The Americans cannot afford to continue to service their debt, which at an average of 2% of T bills will amount to US$440 b! A 1% increase in interest rate will balloon the interest to be paid to US$660 b! This is just to service the interest alone, not repaying the principle owed, an amount equal to the American defence budget.

While the rest of the world is held ransom by the Americans to live with low interest rate, there would be a time when the rest of the world, eg EU, China may decide to take the initiative to raise interest rate and sink the American economy into the abyss with their debt mountain. Living on low interest rate to drive the economy may no longer be an option as Lagarde has said above. The Americans would not and could not raise interest rate for their own good. The others can, just like FAA would not call out Boeing 737 Max, China's CAA could. China or EU just do it, make the first move to raise interest rates.

When would the next economic downturn come and bring down the world economy with it?


16 comments:

Anonymous said...

Total debt in the world is $750 trillion. US's debt alone is $250 trillion. That is one-third of world debt.

Anonymous said...

High time to raise interest rates in Singapore too.

PAP Govt must pay us higher yields on our CPF account balances - no more cheap source of funds! Malaysia's EPF consistently pay their citizens more than 6% since the 1960s', well above CPF's 2.5%-4% . . .

Anonymous said...

It's very frightening. I still have some useless us$ notes. I think when I next visit Australia, I will use these useless papers to screw the blondes with large melons.

Anonymous said...

PAP leaders have been short-changing the voters again and again for the past donkey years, since Lau Goh took over. Yet the idiots continue to vote the short-changers. Ironic, pathetic, tragic and very sad.

Anonymous said...

Hi 943

Who did you voted àt last GE?

Still the same....at next GE?

Hahaha........

Anonymous said...

@All,

The irony is that US is the only country to have raised interest rates significantly over the last 3 years. All other countries in the world either maintained rates or lowered them. China cut from 6.5% to 4.35%. Europe & Japan are basically negative rates.

The world economy now is tied to low rates & fiscal pump-priming (so-called Modern Monetary Theory). China is starting to embark on it with stimulant govt spending & relaxing loan criteria to companies. Which has been very good for my Greater China stocks this year.

Even with one of the strongest performing economies in the world today, US cannot raise rates beyond 2.5%, at least not at the pace of 4 hikes per year. Maybe at most 1 or 2 hikes per year. And now, there's good chance of a rate cut.

Singapore has been allowing a virtual ZIRP since 2001, aka financial repression, much longer than US or Europe. Only Japan has been longer than Singapore. Hence savers have been screwed with very low interest rates -- whether in CPF, bank savings accounts, FDs, or par insurance plans.

However this S'pore policy has been very good for companies, businesses, investors, property buyers, SG govt, etc.

By 2003/2004 you all should have changed mindset & behaviour to EARN MONEY on this new Singapore policy, instead of becoming victims like most of you here.

WSG.

Anonymous said...

@ Anonymous April 10, 2019 10:04 am
///////@All,
The irony is that US is the only country to have raised interest rates significantly over the last 3 years. All other countries in the world either maintained rates or lowered them. China cut from 6.5% to 4.35%. Europe & Japan are basically negative rates.
The world economy now is tied to low rates & fiscal pump-priming (so-called Modern Monetary Theory). China is starting to embark on it with stimulant govt spending & relaxing loan criteria to companies. Which has been very good for my Greater China stocks this year.
Even with one of the strongest performing economies in the world today, US cannot raise rates beyond 2.5%, at least not at the pace of 4 hikes per year. Maybe at most 1 or 2 hikes per year. And now, there's good chance of a rate cut.
Singapore has been allowing a virtual ZIRP since 2001, aka financial repression, much longer than US or Europe. Only Japan has been longer than Singapore. Hence savers have been screwed with very low interest rates -- whether in CPF, bank savings accounts, FDs, or par insurance plans.
However this S'pore policy has been very good for companies, businesses, investors, property buyers, SG govt, etc.///////


Maltida,

If you take an Economics exam, likely you will fail badly?

In such a short comment, (already) so many Economics concept and factual errors?

(Some more "open book" (with the entire World Wide Web for you to google and library reference books for you to verify) ?

In actual exam, it is close book (you know)

And no hand phone or any electronic device (allowed in exam)

Even "Air level" Economics students will not make such elementary mistakes?

Maltida, you "purposely" make those mistakes or you are like that?

Ⓜatilah $ingapura⚠️ said...

@ print more money

Every single time warnings about high debt has been shouted, it's been IGNORED and what follows is more debt and monetizing of debt aka "money printing", and ZERO or NEGATIVE interest rates. ie. you deposit $100 you get $99. something, ie they Makan your money.

Because everyone utang so much (including entire cuntries), they are going to print to service the loans. We're likely to see more artificial liquidity being created, because the alternative will cause interest rates to RISE and crash everything on the planet.

Unrestricted printing will also lead to a crash, eventually. However there's A FAKE "wealth effect" due to excessive money stimulus do everyone is fooled into thinking that times are really good.

Higher interest rates are the correct thing. It'll make the tide go out so those who have been swimming naked will be exposed, ie all the malinvestments will have to "face the truth" and die.

This is POLITICALLY impossible. No one likes austerity measures. People will riot. There could be blood in the streets.

Personally, I think we're going to end up with a govt created crypto currency (they can track your spending) and Modern Monetary Theory (MMT) where governments can print as much as required, with NO DEBT as security.

Anonymous said...

@Anon 11:53am,

I let my wealth & economic shiokness to be my exam result.

So far I'm able to retire before 45, with a 7-figures portfolio spitting out average of close to 5-figure dividends every month.

I don't have to do anything or I can fuck all day or sleep all day ... and $$$$$$$$$$$$$$$$$$$$$$ keeps pouring into my bank & brokerage accounts.

Best of all, SG govt cannot touch 95% of my $$$$$$$$$$$$$$$$$$$$$$$$$$$$.

WSG.

NWS said...

In 1973, I saw thru the scheme of things the PAP leadership was doing and intended to do. I resolved to save myself from their strangle-hold. So, I set out finding green pastures elsewhere, while in the mean time continued to earn a living in the public sector (admin service). Every year I brought my family overseas for holidays-cum-recce (two countries per year). I started looking for cheap and new properties overseas.

I bought one or two properties every two years (in Ireland, Scotland, England, Australia, NZ, Taiwan, HK, China, Nepal, India, Thailand, Vietnam, Indonesia and Malaysia. Now I own more than 20 good landed properties overseas, excluding those in Singapore.

Those days, the properties were cheap, strong and durable, and they financed themselves through rentals I collected every month. I just had to put out the deposits and first monthly installment.

I retired at 49. Withdrew all my CPF savings at 55; left only $20,000 in the Medisave Account, by compulsion, against my free will. (Calculate: if one person contributes $20,000, one million people would have contributed $20,000,000,000 to someone's investment (or gambling) spree?), plus paying him/her/them extravagant salary and annual bonus for the fun they enjoyed, and showed you the middle finger at the same time (with picture of Ah Meng) in the Facebook. How do you feel?

My routine:

Everyday, except Sundays, I go to the library (libraries) and read newspapers, magazines and books, watch videos and use their internet services (free of charge).

I watch movies in the cinemas 3 to 4 times per week, usually at JB because old people pays only MR$6 anytime, any day. In Singapore cinemas, old people pay $5 from Mon thru Fri, and during daytime before 6 pm only.

Every week, I give myself and my family a treat at a high class restaurant with sumptuous meals.

Every month I collect my rentals, through my property management team, and whatever is left after deducting instalment payments, maintenance expenditure, taxes and management fees, I invest in Gold and Silver. No shares or stocks - because I got burnt twice: once by George Soros and once by Dr Mahathir. The two of them "cheated" me $750,000 of hard-earned sweat and blood money. That's why I will never forget and forgive these two old foxes.

I will never touch the war stocks. It's the same as buying and selling weapons, and worst of all being an accessory to mass murders and genocides (deliberate and intentional), whether you believe it or not

Anonymous said...

Johore's Mentri Besar has resigned (or sacked). The guy who caused a diplomatic problem for the Malaysian Foreign Minister and the Malaysian Prime Minister. Also, due to his poor handling of the poison-gas and poison-water problem in River Kim Kim that lead to the closing of 111 schools in Johore.
When he purposely boarded the Malaysian ship parked in Singapore waters, I knew his days were numbered.

Ⓜatilah $ingapura⚠️ said...

@ Malay vs Malay

Mahathir and Sultan of Johor having a fight. Wah, shiok. Thew Sultan comes from a linage (his father and grandfather) of rulers who like to hantam people. His grandfather used to ride around JB with a loaded shotgun in the car. Mahathir has warned that if the sultan hantams anyone, he will be arrested by polis.

Sultan used to have his own private "army". Dr M put a stop to that. The Mentri Besar is FEDERAL officer, not state. So here we have a fight between "state's rights" and the "federation of states". This is like Abe Lincoln and the Southern States fighting, which resulted in CIVIL WAR.

Let the wayang proceed!

Anonymous said...

The USA can continue to chock up their debts as long as the US$ remains the Petrodollar and is therefore in demand by the rest of the world.

Anyone that threatens to upset the status quo ends up being sent to meet his master, like Saddam and Gaddafi.

China and Russia are trying to do their part and so far the USA is unable to do a regime change or take out Xi or Putin out.

China is smart to go nuclear first before embarking on their attempt to bring the US down to size away from oil. Going nuclear first before taking on the USA is a very important masterstroke that will make sure the USA cannot use the military threat to bring down the Communist regime as it did in Iraq and Libya for example.

So, the USA is trying other means like trade tariffs, sanctions and boycotts. The question now is who can take more of the pain of trade tariffs and whether there are alternatives to diverting sources and markets away from the traditional parties. The belt and road and infrastructure developments all over the world by China are all aimed at fulfilling it's aim of not putting it's eggs in one US basket. Time will tell.

Anonymous said...

Was it the late Sultan of Johor or his father who threatened the elder Lee, so much so that the latter dared not step into West Malaysia for a very long time, until few years before his death.





Anonymous said...

WSG, u can fuck all day? How many bullets u have. Max two times already very lucky if u do it Everyday. Soon u die earlier and unable to enjoy your ill gotten gain. To enjoy more pleasure, I suggest after firing the two maximum shots, preferable on shemales, u get them to sodomize you lor. In that case, you can enjoy more than your two times pleasure and fuck all day but unfortunately you are fuck by others­čśÇ

FAST LOAN OFFER whats-App +918929509036 said...

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius, call/whats-App Contact Number +918929509036 via email:(urgentloan22@gmail.com) Thank you.