Plunging US Economy.. Are we in trouble?

[meekahsoh]

Alternatively, it depends on how much China/India has decoupled from the US economy. If their exports fall, I doubt there'll be another market big enough to absorb all those goods, and China's domestic consumption is supposedly quite bad.

If US falls into an recession, and China does, Asia will too.

 

[taypeng81]

ok im digressing from the topic here... was anyone at AIA towers yesterday?? you wont believe the number of people that were there. I went down to cash out one policy in the afternoon, my queue number was 1849, current number being served was 1161. i guess everyone got spooked by yesterday's front page news of a possible AIG collapse.

 

[mrekoj]

wa ... so you are one of them who got spooked ?

anyway, how long you waited ?

 

[taypeng81]

my policy reach maturity already so was more of a precautionary move to cash in first. yah but i was spooked man haha.

i didn't get in, and i figured theres no way to get in before the place closes. so went back a 'back-door' (agent friend)

 

[betsybug]

When does a Crash turn into a Depression?

I found this instructive:


The Great Crash of 1929 plunged America, and the rest of the world, into an economic depression that was to last for the next decade.

As one commentator memorably explained afterwards: "Anyone who bought stocks in mid 1929 and held onto them saw most of his or her adult life pass by before getting back to even."

So why did the Crash - which had been precipitated by government increases in interest rates to cool off the stock market boom - turn into a depression?

Simply because of the uncertainty the Crash fuelled.

No one knew what consequences of the Crash were going to be - so everyone decided to stop trading until things settled down.

Banks stopped lending money. Consumers stopped buying durable goods from shops.

The stores, in turn, stopped buying from the manufacturers.

Firms, therefore, cut back on production and laid off workers. And all of this fed on itself to make the depression still worse.

In the following ten years 13 million Americans lost their jobs, with 12,000 losing their jobs every single working day.

Some 20,000 companies went bankrupt, including 1,616 banks, and one in every 20 farmers was evicted from his land.

 

[THOA]

= betsybug

That was insightful. Perhaps you could also add data on how the Great Crash and Great Depression translate to SEA. The stats you posted is more relevant to America. How did it affect Singapore back then?

Consider that we were still under British rule and was not yet independant.

 

[betsybug]

THOA,

I've always been intrigued by how a depression happens - everyone is still willing to work, the factories and machines are still there, needs have still to be met, but nothing moves. The above post give a short answer how this starts.

For your Q on 1930s Singapore, here are some facts/figures to share (note that Singapore is normally/sometimes lumped with Malaya):

Between 1929 to 1932,
Rubber exports from Singapore - fell by 84%
Tin exports from Singapore - fell 68%
Total value of merchandise exports from Singapore - fell by 59%
Imports into Singapore - fell by 58%
Base money supply in Malaya - fell by a third
Real wages in Malaya - fell by 50%

(Source: Economic History Review, Vol.54, No.2)

Note that the Malayan economy was largely dependent on rubber and tin. That doesn't mean only the planters and miners suffered but everyone else were affected - less revenues means less taxes, lesser economic activity means less work, consumption down, so less business; everything cycles downwards.

 

[betsybug]

Some of what we saw in the past few days (collapse/bankruptcy and buyouts) also happened in 1930s Singapore as a result of the depression. Tan Kah Kee & Co., the largest Chinese business empire in SE Asia (4,700 workers in Singapore alone) collapsed. Others were bought out, merged, or also similarly bankrupted. OCBC was formed through a merger in 1932.

An anecdote: as a result of the severe shortage of money, the Inspector of Police reported a decrease of 400 cases of drunkedness in Singapore and Penang Island.

Also, migration from Malaya into Singapore turned into the island into a sort of refugee camp.

 

[empihsrow]

Aye, I'm sure this time investors and governments alike will get things right unlike the Great Depression.

But analysts have been debating on the bailing out method of the US government. Any views on this? Do you believe that $85 billion cashed into AIG[and wow, the interest rate of the loan is 11.5%] will solve the problem or create a bigger problem?

Will other struggling banks or companies do the likewise and expect help from the government or will the market pick itself up with a new found respite?

 

[Weiht]

THe thing now everyone is fearful of is the future, and looking at the past will not give u answers. If it does, then this cld have been avoided. Business 100 yrs ago and today is so different, the leading industries are replaced. Then it was the rail road that was the $$$, now no one even takes those rails anymore.

Uncertainty and fear make ppl do stupid things

 

[Weiht]

THe thing now everyone is fearful of is the future, and looking at the past will not give u answers. If it does, then this cld have been avoided. Business 100 yrs ago and today is so different, the leading industries are replaced. Then it was the rail road that was the $$$, now no one even takes those rails anymore. Investments company will show u all past performance BUT tell u its not an indication of the future.

Uncertainty and fear make ppl do stupid things. For our mkt, the worst isnt here yet. It will be when ppl get retrenched and grads cant get jobs, and ppl having trouble paying their houses but cant sell at a loss provided if there is even a buyer.

 

[THOA]

= weiht

Looking at the past won't give answers, but it can perhaps help prepare for it. There will always be a possibility of another Katrina, another 911, another Great Depression, but that doesn't mean steps cannot be taken to minimise the impact.

Anyway, I am digressing. Not my intention to nit pick on solutions, really. But the information about the impact of the Great Depression on Singapore has value.

I want to reopen the threadstarter's question again, but with a few of the following factors being kept in mind.

Here is how Singapore back in 30s different from Singapore today:

1) We are no longer part of Malaya or British rule. We are an independant republic, so if anything happens, we are on our own.

2) There is no rubber or tin or any of such resources now. We are reliant on being THE Hub of... whatever is profitable.

3) Technology has allowed us to bring in labour resources easier. But it is also easier for these resources to leave. Nothing to keep them here if the situation goes bad, really.

4) We have foreign investments. I don't know how diversified this portfolio is. Basic understanding is that the more diversified, the better.

5) Tourism seems to be the ace card of our economy right now, with the F1 and Youth Olympics around the corner, and the building of the IR. In the short-mid term, it seems to look healthy. But in order for this to remain competitive, there is a need to constantly churn out things to make it attractive - which some of us may argue may cause a "manufactured" and "artificial" representation of Singapore.

Perhaps there are many more factors to consider, but based on these (and others that you might have), what would be your intelligent guess to how the US economic situation will affect Singapore?

 

[zax]

2 words haha , "we're screwed"

 

[THOA]

From the way I see it, Singapore will be affected but there is some cushion involved because of our diversified portfolio. So we're not exactly screwed.

However, our economic safety is at the expense of alot of other things which to me are just as important, though this is not the thread to discuss further.

Oh yeah... good luck, AIA

 

[zax]

my mom is a banker and she looks hell worried haha

 

[visa]

Regardless of the cushion of our diversification, the US remains our number one trading partner in terms of quantity of goods and services. When they undergo recession, we suffer.

but won't die lah.

 

[THOA]

I find this article amusing:

http://www.latimes.com/news/opinion/la-oe-brooks18-2008sep18,0,6908905.column

 

[hecklerkoch]

Whose administration do you think will handle this crisis better?

Obama's or McCain's?

I think Singaporeans are generally over-reacting lah. Insurance companies here have a very large pool of our money (for those who buy their investment products lah) at their disposal. That's why my financial adviser friends can all go for all-expenses paid department trips to exotic destinations a few times a year.

Anyway, MAS has already said that AIA Singapore is required under the Insurance Act and Regulations to maintain sufficient financial resources to meet all its liabilities to policyholders at all times, and that AIA currently meets these regulatory requirement.

 

[dir]

85 billion from taxpayers' money to bailout AIG, and 200 billion the week before for the takeover of fannie and freddie. man, this stuff is serious. especially if it fails, monumentally. The IMF only spent what, 40 billion to help stabilise the asian economies during our last financial crisis. I'm somewhat glad we have a floating currency.
screw private debt... and people still lovelovelovelovelove about free trade.

 

[hecklerkoch]

Aiyah, what's a couple of billion dollars to the private companies in the Federal Reserve, of which some belonging to countries collecting over 600 million dollars a day in taxes?

So, the richer gets richer, the poorer gets so much poorer.

The US government pays all the interest to these privately-owned banks, the American public pays the ever-increasing taxes just to pay the interest.

America already owes a couple of trillion dollars anyway.

The world is not heading towards recession.

We are already in it.

:???: