8/02/2013

Singapore will not be another Detroit

Detroit City was one of the richest American city in the 60s and 70s. Ford, GM and Chrysler made it their homes and provided hundreds of thousands of well paying jobs to create a rich middle class of Americans driving ultra big cars and tearing down the highways with petrol costing only a few cents. What a good life.
 

Detroit has just declared bankrupt with a debt of US$18b and unable to pay. I thought this is too small an amount for bankruptcy. Maybe Temasek or GIC should pay for it and buy over the City. The automobile industry was long gone, the houses and factories left vacant to rot. Two main factors contributed to the fall of a one time rich and prosperous city. It happened.
 

The first is high wages. Japan took over and sold cheap Japanese cars to replace the American hunks. Cheaper Japanese labour and even cheaper labours elsewhere just made the American workers not competitive with their high wages.
The second factor was debt. The city incurred huge debt that it could not repay without the big industrial base supporting it. The demand for housing fell when jobs disappeared and the population shifted out. And very likely many homes were just abandoned or disposed off under fire sales.
 

Singapore will never be another Detroit on these two factors alone. We don’t have overpriced Singaporean workers. We only have overpriced govt and this is unlikely to bankrupt the City like Detroit. If there are overpriced workers, and if they are not competitive, they can easily be replaced by cheaper foreign workers all the way to top management level. So Singapore is safe. Not sure about the fate of Singapore workers.
 

As for debt, Singapore has very big debt, among the highest in the world. But the debt is being dissipated by several schemes. Whatever the Govt owes to the people through the CPF saving schemes, a large part has been redeemed through selling exorbitant priced public flats back to the people. And whatever still owed to the people, the minimum sum schemes will ensure that there is very little chance of the need to pay back for at least the next 20 or 30 years. And if the minimum sums can keep spiraling up to a million or two or more, then there is really no need to pay back at all, or at very minimum sum that will be very bearable.
 

The Singapore Govt thus will have no debt despite owing a lot of money to the people through the CPF savings scheme. All the debt is either redeemed or deferred to perpetuity, to till the cow comes home.
 

The only debt is incurred by the people through expensive housing and cars and high medical bills. The state is debt free and will not be another Detroit. The State or City of Singapore will always be rich, with free supply of cheap labour and with the Singaporeans funding the debt through their life savings.

21 comments:

Anonymous said...

If Singapore had not become a Detroit by now, I think it will forever not become a Detroit.

Just as if WP is still not ready to be govt by now, I think it will forever not be ready.

If you still have not become a CEO by now after working for 20 years, I think you will forever not become a CEO.

What do you all think?

Anonymous said...

I think there are exceptions.

South African Nelson Mandela was jailed for 27 years from 1962 to 1990. He later became President of South Africa from 1994 to 1999.

I hope there are also exceptions for Sinkieland.

Anonymous said...

But maybe Nelson Mandela have ambition to be President.

Does WP Low TK has ambition to be PM?

Or which non PAP Sinkie has ambition to be PM?

Anonymous said...

RB, you are right. Sinkapore will never be bankrupted, in debt or with high labor cost. We have excellent policies to deal with that. Namely the big hdb vacuum cleaner and if sucking not strong enough, we have the minimum sum scheme plus the high medical, education, Coe, erp, gst and whatever that guaranteed to suck you dry.

As for labor cost, other than the expensive political labor cost, the rest we can import from all over the world.

I am glad that we will never be another Detroit, thanks to our talented policy makers. Sinkies are just kpkb everyday without realizing how lucky they are. Knn, in fairy tale land still don't know. Not grateful right Tio Bo?

Anonymous said...

redbean
I salute your financial acumen.

Anonymous said...

Nobody wants Detroit; just too bad.

As for Sin, foreign tycoons are ever ready to seek safe haven for their fortunes here with many making this tiny rocks for their personal safeties. They need lots of locals to service them day and night, so in some sense, they are creating jobs for Sinkies.
The foreign settlers will need cleaners, amahs, baby and oldie care givers, hospitality attendants and vice crew. Can You see?
Where can go bankrupt one!

Anonymous said...

It is true
and
You can
see
yourself.
Foreigners
will save
Sinkies.
Without
foreigners
Sin kaput
and
Sinkies die.

Anonymous said...

It is true
and
You can
see
yourself.
Foreigners
will save
PAPigs.
Without
foreigners
Lee dynasty kaput
and
PAPigs die.

Ⓜatilah $ingapura⚠️ said...

As long as you don't chase the money capital away, and the productive people who best use that capital, Singapore will continue to prosper.

If not, then Singapore will die worse than Detroit.

Detroit deserves to be in the present condition. No one to blame but themselves.

Anonymous said...

There is humongous piece of rock in the Imperial Garden in Beijing, called the Prodigal's Rock. Look up the story of this piece of beautiful rock, maybe then you'll come to see the folly of the indecently rich, with their ill gotten wealth and how they blow away the family fortune.

oldhorse42 said...

How can Singapore go the way of Detroit when it is so good at making money! GIC reports steady 4% real returns. Another big fat bonus for its directors!

Anonymous said...

Indians under the bed.

Chua Chin Leng蔡镇龍 aka redbean said...

Hi guys, let's avoid racist comments ok. Thanks.

Anonymous said...

Hi mr chua, detroit is bankrupt. A local co is selling low cost buy to let houses in detroit for US $ 35K.with guaranteed returns of 45% in 3 years. Is it a risky investment? Any advice?

Anonymous said...

I would stay far away from Detroit properties. There's a reason why it is cheap. And sometimes, cheap always stays cheap.

How do they give 45% rental guarantee? Simple, mark up the selling price, which means effectively you are paying the guaranteed return to yourself...

Anonymous said...

Thank you anon2.52. The co referred to is midas development corp rather convincing and tempting with such returns. As you know, the little we get from fd savings is so miserable. Will think it over.

Chua Chin Leng蔡镇龍 aka redbean said...

Don't throw good money after bad money. It would be a different matter if GIC or Temasek buy up the whole city, inject funds, businesses into it as another Jurong Industrial estate run by JTC. But this is not possible.

The experience of many Sinkie investors overseas is that if they have not control over the properties and leaving it to strangers to manage, it is like setting themselves up as an ATM, providing free cash to strangers.

Anonymous said...

Thanks redbean. Googled midas corp , a property developer in kenya.

Anonymous said...

kenya?
Isn't that near nigeria, where olam originated?

Anonymous said...

Anon 8.38: Temasek is investing in Iskandar. But it's a little too late to go in now unless u have very strong holding power. Developers make all the money and leave investors high and dry. Early investors are up 50-100% already.

I've found another alternative place to park money, but am not here to sell anything.

Gintai_昇泰 said...

RB,
You are spot on! You're brilliant. Thks for reminding us.