6/01/2010
Can Singapore become a casualty of sovereign debt?
Unlikely. We are very cash rich and have invested several hundred billions in a diversified portfolio and managed by some of the best fund managers money can buy. No way are we going to become the first sovereign fund to turn turtle. The billions that we lost during the subprime crisis is an aberration. It will not happen again. Not our fault by the way.
The subprime crisis was not expected. So was the PIGS crisis. Unless the PIGS grow bigger and drag down a few bigger economies like UK, Germany and the EU. If that happens, no one can run, no where to run. Our hundreds of billions would become waste paper. But they are real money that comes from somewhere. Somewhere there must be owners who want their money back, to be repaid. That would be the day.
But a collapse of Europe is just impossible. Don’t even think of it. It will not happen. So, for Singapore to become a casualty of sovereign default is simply unthinkable. Don’t worry. Go ahead and take the loan to buy that million dollar property. Everything is fine.
If the impossible happens, pure speculation and imagination, what would happen to those with a million or half a million dollar mortgage to pay?
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3 comments:
"what would happen to those with a million or half a million dollar mortgage to pay?"
If the scenario painted by you really comes to pass and everyone gets fucked, you get to keep that property and pay no more because the mortgagees like everyone else has gone under, becoming non existent and all bets are off.
Before the morgagees go under, they would probably have taken back the property first, or the liquidators would do so. They have creditors too, who will see to that.
The mortgagors meanwhile may even have no pants left to wear, not to say keeping the unpaid property.
Reference:
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
And cia.gov:
https://www.cia.gov/library/publications/the-world-factbook/fields/2186.html
S'pore public debt is 117% of GDP. As you can see it is larger than Greece.
The problem is that Greece has about 11 million people but only 2million working, and therefore got punished in the bond market (I have no sympathies there: the people gwt the govt they deserve).
Public debt in S'pore is almost all financed locally (hmmm... CPF comes to mind... I have my suspicions), therefore no "foreigners" hold S'pore debt.
This also adds to the safety.
Could S'pore default: sure. I raised this point with my family at a dinner table conversation just last week. The risk is always there for sure, but I think a default though not impossible is improbable.
Anyway if there was a default, no problem. No IMF or World Bank interference --- all handled internally by very skilled ministers and their staff.
1st thing which will happen: massive pay cut across the board and rationing of govt services.
As for going out and getting a multi-million dollar mortgage to buy buy buy... I wouldn't do it because I believe there's going to be a spectacular crash after which those who have bux will be able to pick up lots of under-priced assests as those who are leveraged are bleeding all over the killing-room floor.
I might even become religious and buy some idols to pray to: to pray for a speedy spectacular correction... :)
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