Singapore’s two addictions

Be in Ice or Heroin, an addiction is an addiction. The danger of all addictions is that it takes more and more to get the same high. This means it cannot be stopped or hell will break lose. It is a vicious and very destructive cycle. Our country’s two main addictions are OPM and OPT. OPM comes from statutory boards and the CPF. These money becomes cheap loans to be invested, some called it gambling for big stakes, for high returns. Theoretically it sounds good, borrowing cheap money to invest for big returns. The problems come when the returns are not enough to pay for the low interest or the high operation cost. Then what? Don’t pay back! But this cannot do. The payback can be delayed, even for generations, but the time must come when someone will call for payback time. The Americans have been very successful in borrowing OPM and thinking that it was a good thing. It was a good thing when they can afford to pay back. Now their debt has ballooned to a point that they cannot pay back. It becomes a debt that is too big to pay back and too big to default. The consequences are grave. We are intoxicated by OPM and happily plunging into the same deep end as the Americans, thinking that there is no need to pay back. The truth is that no matter how many spins and schemes can be created to delay the payback, the spins and schemes only add to the gravity of the problem. There is no running away unless we strike lottery. For the last ten years or more we have depended heavily on OPT, Other People’s Talent. We saved a lot of cost to produce these talents and we used them cheaply, making more savings. Our whole economic growth formula is now dependent on OPT. Like OPM, it is another deadly drug. There are side effects to the addiction and there is a big price to pay for. No drugs that give one a high does not come with a price. What is this price and when will be pay back time? For the moment, we only see the good side of OPT and OPM. But like all good things, they are too good to be true. Anything that is too good to be true is dangerous. And the more dangerous part of it is that we cannot see the danger of it. The fundamental economics principles of hard work, thrift, small but genuine profits, not easy profits, high productivity, better goods and better services are discarded for high risks, high returns, for easy profits that we don’t have to work for it. Like the Americans creating all kinds of fictitious and worthless paper products to be sold to the suckers. Worthless notes, toxic notes, derivatives, are illusions that will go pop as they designed to do. OPM and OPT will also go pop one day. They cannot keep piling up with no limitations like turning on the tap and they will keep following. And like all fixes, you need more of them to sustain the next high.