WHY DR TONY TAN SHOULD SAY SORRY FOR MULTI-BILLION DOLLARS LOSSES IN FOREIGN BANKS
Dr Tony Tan was born into a banking dynasty as the nephew of Tan Chin Tuan. He was a Finance Minister. He is a bank tycoon with significant stakes in Overseas Chinese Banking Corporation. He was Chairman and Chief Executive of OCBC.
He has been in GIC from its inception till the end of June 2011. When the $24.2 billion purchases were made on UBS and Citigroup, he was both the Deputy Chairman and Executive Director of GIC. He was effectively, the Chief Executive of GIC.
Normally, GIC does not take significant stakes in any business. In the case of UBS and Citigroup, it made exceptions under the leadership of Dr Tony Tan. The outcome has been disastrous. Multi-billion dollars losses can be seen from the stock price charts of both Citigroup and UBS. Citigroup had a reverse stock split which may confuse some observers. Its stock price has fallen far more than that of UBS.
If Dr Tan had used OCBC shares or capital to purchase these two foreign banks, OCBC will be in very deep troubles or even bankrupt today. Just because he used the reserves of Singaporeans does not mean he should shamelessly escape responsibilities and accountability. If the Prime Minister can say sorry for the escape of Mas Selamat, why can't a Presidential candidate own up to his expensive mistakes that cost every Singaporeans; few of whom are as wealthy as he is.
Dr Tan may not live to see his foreign banks stocks return in value to their prices in early 2008. So, why does he emphasize long term with his spectacles logo for his campaign? His most appropriate logo should be a GIANT SORRY!
http://singaporereserves.blogspot.com
Thursday, 25 August 2011
Wednesday, 24 August 2011
WHAT GIC DOES NOT REVEAL RAISE ALARMS AND RED FLAGS
WHAT GIC DOES NOT REVEAL RAISE ALARMS AND RED FLAGS
Dr Tony Tan has been with GIC since its inception. It reveals nominal returns but not ABSOLUTE returns. Nominal returns only apply well to closed end funds. GIC gets fresh capital very often from budget surpluses and net inflow of Singaporeans' hard earned Central Provident Funds. Hence, absolute returns ought to be revealed because nominal returns can mislead and hide unpleasant or even ugly truths.
Allow me to provide a simple illustration. Closed End Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. In year two, the fund went down by 50 percent. He ended year two with $1.5 billion. Nominal returns says that the closed end fund had 50 percent returns over two years or 20-odd percent annualized returns per annum. His absolute returns over two years is half a billion dollars. The nominal returns is reliable because there was no fresh inflow of capital from third parties.
Super Marketing Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. However, due to his great marketing skills and the millions of middle class people and poor folks who entrust him with more money, he started year two with $100 billion to manage. In year two, the fund went down by 50 percent. He ended year two with $50 billion. He has LOST $50 billion in year two. Yet, nominal returns says that Super Marketing Fund Manager also had 50 percent returns over two years or 20-odd percent annualized returns per annum. However, his absolute returns over two years is $2 billion minus $50 billion. In other words, he lost $48 billions. Yet, his nominal returns gives the impression that he has a remarkable track record.
For the above reasons, GIC must declare its absolute returns before the upcoming Presidential Elections. This is especially so because bank tycoon Dr Tony Tan's purchase of two foreign banks has caused Singaporeans to lose many billions dollars.
http://singaporereserves.blogspot.com
RE: DID TEMASEK MISRECORD INVESTMENT PROFITS BY $40 BILLION OR MORE?
For years, I assumed that Temasek Holding’s summary data on its investment profits are beyond human error. However, when I finally looked up the annual reports, many questions arise that call for superurgent review by the Singapore Government.
Our Government has won global praises and respect by being willing to identify and admit even the mistakes of organizations under its oversight. On this basis, can the Singapore Government please examine evidences that Temasek Holdings may have misrecorded its investment profits by $40 billion or more?
Will the reputation of Singapore and the pride of many Singaporeans be damaged if such a GIGANTIC mistake is allowed to persist?
Page 22 of the 2010 Temasek Holdings Report and page 16 of the 2006 Report both show a sharp rise in Temasek market value in 1993 from less than $20 billion to more than $60 billion. This is attributed to the listing of SINGTEL. Was this rise of more than $40 billion misrecorded as investment profits? Was SINGTEL transfered to Temasek in the same year 1993 at an extremely low book value before listing rather than at fair market value? Isn’t “inherited money” supposed to be recorded as capital infusions instead?
What was the precise amount that might be misrecorded? Was it $41 billion, $48 billion, $53 billion or $61 billion?
To see why certain accounting is questionable, let us look at a hypothetical AAA fund manager with a wealthy uncle called Sam. Mr. AAA inherited a GIFTEL company in 1993 from Uncle Sam with a market value of $60 billion. However, the historical book value of GIFTEL was only $20 billion. Hence, GIFTEL was transfered into Mr. AAA’s portfolio at the historical value of only $20 billion. In the same year 1993, GIFTEL was listed on the stock exchange with a market value of $60 billion. Mr. AAA delightfully attributed the $40 billion rise in value of his portfolio from $20 billion to $60 billion to his supreme fund management skill.
Is it morally right or wrong for Mr. AAA to treat the inherited money of $40 billion as performance profits? If it is wrong for Mr. AAA to do so, why should it be alright for Temasek to do the same? Isn’t it necessary for Mr. AAA to treat the $40 billion rise in value as capital infusion rather than performance profits? Why did Temasek fail to treat the $40 billion or higher rise in value during listing as capital infusions also? This is especially so when SINGTEL was transfered to Temasek only in 1993 – the same year SINGTEL was listed. (Page 98 of 2008 Temasek Report)
The above illustrates that inherited money must never be recorded as performance profits. Moreover, SINGTEL did not rise in multi-billion dollars value within one single year. It took many years of toil, sweat, tears and intelligence of many people for this to happen. Has Temasek taken over the credit that belongs to the tough work and smart work of many other people by a mere accounting stroke?
Are there any other companies besides SINGTEL that might have boosted Temasek’s performance record in a controversial manner? Shouldn’t Temasek revamp its accounting to take away the effects of the many billion dollars worth of “inherited money” on its portfolio performance?
http://singaporereserves.blogspot.com
ENDNOTES:
1) The chart in page 22 of the 2010 Temasek report only allow readers an estimation as it is too small. A similar chart in page 16 of the 2006 Temasek report is much clearer. While more information is desirable to get a clearer picture, the current information is sufficient to deduce questionable accounting as it involves tens of billions of dollars. The overstatement from SINGTEL alone may be about $40 billion to about $60 billion.
Dr Tony Tan has been with GIC since its inception. It reveals nominal returns but not ABSOLUTE returns. Nominal returns only apply well to closed end funds. GIC gets fresh capital very often from budget surpluses and net inflow of Singaporeans' hard earned Central Provident Funds. Hence, absolute returns ought to be revealed because nominal returns can mislead and hide unpleasant or even ugly truths.
Allow me to provide a simple illustration. Closed End Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. In year two, the fund went down by 50 percent. He ended year two with $1.5 billion. Nominal returns says that the closed end fund had 50 percent returns over two years or 20-odd percent annualized returns per annum. His absolute returns over two years is half a billion dollars. The nominal returns is reliable because there was no fresh inflow of capital from third parties.
Super Marketing Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. However, due to his great marketing skills and the millions of middle class people and poor folks who entrust him with more money, he started year two with $100 billion to manage. In year two, the fund went down by 50 percent. He ended year two with $50 billion. He has LOST $50 billion in year two. Yet, nominal returns says that Super Marketing Fund Manager also had 50 percent returns over two years or 20-odd percent annualized returns per annum. However, his absolute returns over two years is $2 billion minus $50 billion. In other words, he lost $48 billions. Yet, his nominal returns gives the impression that he has a remarkable track record.
For the above reasons, GIC must declare its absolute returns before the upcoming Presidential Elections. This is especially so because bank tycoon Dr Tony Tan's purchase of two foreign banks has caused Singaporeans to lose many billions dollars.
http://singaporereserves.blogspot.com
RE: DID TEMASEK MISRECORD INVESTMENT PROFITS BY $40 BILLION OR MORE?
For years, I assumed that Temasek Holding’s summary data on its investment profits are beyond human error. However, when I finally looked up the annual reports, many questions arise that call for superurgent review by the Singapore Government.
Our Government has won global praises and respect by being willing to identify and admit even the mistakes of organizations under its oversight. On this basis, can the Singapore Government please examine evidences that Temasek Holdings may have misrecorded its investment profits by $40 billion or more?
Will the reputation of Singapore and the pride of many Singaporeans be damaged if such a GIGANTIC mistake is allowed to persist?
Page 22 of the 2010 Temasek Holdings Report and page 16 of the 2006 Report both show a sharp rise in Temasek market value in 1993 from less than $20 billion to more than $60 billion. This is attributed to the listing of SINGTEL. Was this rise of more than $40 billion misrecorded as investment profits? Was SINGTEL transfered to Temasek in the same year 1993 at an extremely low book value before listing rather than at fair market value? Isn’t “inherited money” supposed to be recorded as capital infusions instead?
What was the precise amount that might be misrecorded? Was it $41 billion, $48 billion, $53 billion or $61 billion?
To see why certain accounting is questionable, let us look at a hypothetical AAA fund manager with a wealthy uncle called Sam. Mr. AAA inherited a GIFTEL company in 1993 from Uncle Sam with a market value of $60 billion. However, the historical book value of GIFTEL was only $20 billion. Hence, GIFTEL was transfered into Mr. AAA’s portfolio at the historical value of only $20 billion. In the same year 1993, GIFTEL was listed on the stock exchange with a market value of $60 billion. Mr. AAA delightfully attributed the $40 billion rise in value of his portfolio from $20 billion to $60 billion to his supreme fund management skill.
Is it morally right or wrong for Mr. AAA to treat the inherited money of $40 billion as performance profits? If it is wrong for Mr. AAA to do so, why should it be alright for Temasek to do the same? Isn’t it necessary for Mr. AAA to treat the $40 billion rise in value as capital infusion rather than performance profits? Why did Temasek fail to treat the $40 billion or higher rise in value during listing as capital infusions also? This is especially so when SINGTEL was transfered to Temasek only in 1993 – the same year SINGTEL was listed. (Page 98 of 2008 Temasek Report)
The above illustrates that inherited money must never be recorded as performance profits. Moreover, SINGTEL did not rise in multi-billion dollars value within one single year. It took many years of toil, sweat, tears and intelligence of many people for this to happen. Has Temasek taken over the credit that belongs to the tough work and smart work of many other people by a mere accounting stroke?
Are there any other companies besides SINGTEL that might have boosted Temasek’s performance record in a controversial manner? Shouldn’t Temasek revamp its accounting to take away the effects of the many billion dollars worth of “inherited money” on its portfolio performance?
http://singaporereserves.blogspot.com
ENDNOTES:
1) The chart in page 22 of the 2010 Temasek report only allow readers an estimation as it is too small. A similar chart in page 16 of the 2006 Temasek report is much clearer. While more information is desirable to get a clearer picture, the current information is sufficient to deduce questionable accounting as it involves tens of billions of dollars. The overstatement from SINGTEL alone may be about $40 billion to about $60 billion.
Sunday, 21 August 2011
Thursday, 18 August 2011
DR TONY TAN LOST MULTI-BILLIONS DOLLARS OF SINGAPOREANS' MONEY
DR TONY TAN LOST MULTI-BILLIONS DOLLARS OF SINGAPOREANS’ MONEY
Dr Tony Tan spent $24.2 billion of Singapore's hard earned reserves to buy UBS and Citigroup less than a year before the 2008 banking crisis struck. The billions of dollars he lost for Singapore may mean nothing or very little peanuts to him. However, billions of dollars means far too much to every Singaporean.
How can Dr Tony Tan be the President to audit his own horrendous mistakes that cost Singaporeans billions of dollars (thousands of millions of dollars)!
http://singaporereserves.blogspot.com
How many generations of children will the average Singaporean need just to save $24 million? Multiply that by 1,000 times. That is how much money Dr Tony Tan was willing to lose for Singapore. His timing of the purchase was so terrible. The price he paid was even more terrible. Both UBS and Citigroup almost went bankrupt even after Dr Tony Tan’s multi-billions dollars to them at Singaporeans’ expenses. Both banks needed many billions of dollars of bailout money from their governments to survive.
How can Dr Tony Tan be the President to audit his own horrendous mistakes that cost Singaporeans billions of dollars (thousands of millions of dollars)!
On 31 Jan 2008 , AsiaOne reported thus:
EVEN after taking significant stakes in UBS and Citigroup, the Government of Singapore Investment Corporation (GIC) could still invest in another distressed bank, if the deal is worthwhile, the agency's deputy chairman Tony Tan revealed in a briefing to The Business Times.
"We will look at any deal that is shown to us. We have a duty to do so.We would still have the capacity if we find it worthwhile to invest," he said.
"Whether it would be of the same size as what we are now doing is a matter to be decided."
Isn't that scary? He has a “duty” to lose more money by buying more banks at horror prices? Are we watching some horror movies? Lets hope GIC didn't buy many more banks in smaller pieces at the worst times and at the worst prices.
Please spread this message to every voter. The future of Singapore depends on you!
http://singaporereserves.blogspot.com
Dr Tony Tan spent $24.2 billion of Singapore's hard earned reserves to buy UBS and Citigroup less than a year before the 2008 banking crisis struck. The billions of dollars he lost for Singapore may mean nothing or very little peanuts to him. However, billions of dollars means far too much to every Singaporean.
How can Dr Tony Tan be the President to audit his own horrendous mistakes that cost Singaporeans billions of dollars (thousands of millions of dollars)!
http://singaporereserves.blogspot.com
How many generations of children will the average Singaporean need just to save $24 million? Multiply that by 1,000 times. That is how much money Dr Tony Tan was willing to lose for Singapore. His timing of the purchase was so terrible. The price he paid was even more terrible. Both UBS and Citigroup almost went bankrupt even after Dr Tony Tan’s multi-billions dollars to them at Singaporeans’ expenses. Both banks needed many billions of dollars of bailout money from their governments to survive.
How can Dr Tony Tan be the President to audit his own horrendous mistakes that cost Singaporeans billions of dollars (thousands of millions of dollars)!
On 31 Jan 2008 , AsiaOne reported thus:
EVEN after taking significant stakes in UBS and Citigroup, the Government of Singapore Investment Corporation (GIC) could still invest in another distressed bank, if the deal is worthwhile, the agency's deputy chairman Tony Tan revealed in a briefing to The Business Times.
"We will look at any deal that is shown to us. We have a duty to do so.We would still have the capacity if we find it worthwhile to invest," he said.
"Whether it would be of the same size as what we are now doing is a matter to be decided."
Isn't that scary? He has a “duty” to lose more money by buying more banks at horror prices? Are we watching some horror movies? Lets hope GIC didn't buy many more banks in smaller pieces at the worst times and at the worst prices.
Please spread this message to every voter. The future of Singapore depends on you!
http://singaporereserves.blogspot.com
Sunday, 14 August 2011
RISE UP FOR SINGAPORE, NOT FOR ANY PARTY
RISE UP FOR SINGAPORE, NOT FOR ANY PARTY
Based on feedback, I must pause to declare that this is a Pro-Singapore blog. I have never been a member of any political party. If my intention is to support the opposition, I would have done so before the Parliamentary Elections.
MOST HORRENDOUS MISTAKE SINCE BRITISH SURRENDERED SINGAPORE
For years, I had assumed that our government only makes infallible decisions. I therefore thought I can live happily ever after as a quiet and private citizen. I am a beneficiary of the many excellent decisions our government has made. My preferred quietness and privacy was jolted by a review of the 2008 Presidential decision to make limitless guarantees of all foreign banks deposits in the light of the upcoming Presidential Election. It is the most expensive decision Singapore has made since the British surrendered Singapore.
PRESIDENTIAL RESPONSIBILITY
This topic should have been initiated and discussed elaborately by the aspiring Presidential candidates rather than by me. Sometimes, I wish I have zero knowledge of finance. Then I can enjoy a peaceful life of love, romance, comedy, courtship, marriage and parenthood. As they say, “Ignorance is bliss”. However, mass ignorance is disastrous.
BETTER SOLUTIONS BEFORE NEXT CRISIS
I therefore feel a sense of responsibility to convey my human understanding of the pros and cons of limitless bank guarantees. I hope it will help our government and President make better decisions before the next crisis strikes like a lightning global earthquake, tsunami, volcano, hurricane and blizzard combined.
FATAL ATTRACTION AND ARCHILLES HEEL OF INFALLIBILITY
The everlasting truth of central planning is that one bad decision can wipe out many excellent decisions made over many years. This is a sacred, indisputable reality when there is an over-concentration of power and money. It is as real as the law of gravity. It is suicidal to go against it. The eight words, “NEVER PUT ALL YOUR EGGS IN ONE BASKET” conveys this truth better than 700 billions pictures. Beware the Fatal Attraction and the Archilles Heel of the strongest and wisest central planning. It is a beauty trap, a honey trap and a money trap. The past victories of Archilles can deceive him to think that he is infallible. That thought of infallibility alone can be the cause of his own downfall.
http://singaporereserves.blogspot.com
RISE AND SHINE FOR SINGAPORE
I beseech you as fellow Singaporeans to study the articles in the blog objectively. Read it two times, three times or as often as it takes for you to comprehend it. If need be, please seek the insights of your fans, idols, peers, professors or superiors.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
http://singaporereserves.blogspot.com
Based on feedback, I must pause to declare that this is a Pro-Singapore blog. I have never been a member of any political party. If my intention is to support the opposition, I would have done so before the Parliamentary Elections.
MOST HORRENDOUS MISTAKE SINCE BRITISH SURRENDERED SINGAPORE
For years, I had assumed that our government only makes infallible decisions. I therefore thought I can live happily ever after as a quiet and private citizen. I am a beneficiary of the many excellent decisions our government has made. My preferred quietness and privacy was jolted by a review of the 2008 Presidential decision to make limitless guarantees of all foreign banks deposits in the light of the upcoming Presidential Election. It is the most expensive decision Singapore has made since the British surrendered Singapore.
PRESIDENTIAL RESPONSIBILITY
This topic should have been initiated and discussed elaborately by the aspiring Presidential candidates rather than by me. Sometimes, I wish I have zero knowledge of finance. Then I can enjoy a peaceful life of love, romance, comedy, courtship, marriage and parenthood. As they say, “Ignorance is bliss”. However, mass ignorance is disastrous.
BETTER SOLUTIONS BEFORE NEXT CRISIS
I therefore feel a sense of responsibility to convey my human understanding of the pros and cons of limitless bank guarantees. I hope it will help our government and President make better decisions before the next crisis strikes like a lightning global earthquake, tsunami, volcano, hurricane and blizzard combined.
FATAL ATTRACTION AND ARCHILLES HEEL OF INFALLIBILITY
The everlasting truth of central planning is that one bad decision can wipe out many excellent decisions made over many years. This is a sacred, indisputable reality when there is an over-concentration of power and money. It is as real as the law of gravity. It is suicidal to go against it. The eight words, “NEVER PUT ALL YOUR EGGS IN ONE BASKET” conveys this truth better than 700 billions pictures. Beware the Fatal Attraction and the Archilles Heel of the strongest and wisest central planning. It is a beauty trap, a honey trap and a money trap. The past victories of Archilles can deceive him to think that he is infallible. That thought of infallibility alone can be the cause of his own downfall.
http://singaporereserves.blogspot.com
RISE AND SHINE FOR SINGAPORE
I beseech you as fellow Singaporeans to study the articles in the blog objectively. Read it two times, three times or as often as it takes for you to comprehend it. If need be, please seek the insights of your fans, idols, peers, professors or superiors.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
http://singaporereserves.blogspot.com
Saturday, 6 August 2011
SINGAPORE PRESIDENT EXPOSED WEAKNESSES AND MAKE SINGAPORE VULNERABLE
SINGAPORE EXPOSED ITS WEAKNESSES AND MAKE ITSELF VULNERABLE
Dear Dr. Tony Tan,
Many countries including Britain, Switzerland and the United States only provided limited, finite bank guarantee during the financial crisis. British banks only provided 50,000 pounds guarantee per account. Yet, Singapore copycat Hong Kong to provide limitless, infinite guarantees with our hard earned reserves that is s...o scarce, so precious and so representative of our cumulative sacrifices like national services. Why didn’t Singapore resist the pressure the way Britain, Switzerland and many other countries did? Isn’t Switzerland more vulnerable to banking than Singapore is? Generally, the countries that provided limitless guarantees were weaker countries like Iceland and Ireland which got into troubles. By providing limitless guarantees, didn’t we become more vulnerable by exposing ourselves to hundreds of billions of dollars of potential losses?
http://singaporereserves.blogspot.com/
Dear Dr. Tony Tan,
Many countries including Britain, Switzerland and the United States only provided limited, finite bank guarantee during the financial crisis. British banks only provided 50,000 pounds guarantee per account. Yet, Singapore copycat Hong Kong to provide limitless, infinite guarantees with our hard earned reserves that is s...o scarce, so precious and so representative of our cumulative sacrifices like national services. Why didn’t Singapore resist the pressure the way Britain, Switzerland and many other countries did? Isn’t Switzerland more vulnerable to banking than Singapore is? Generally, the countries that provided limitless guarantees were weaker countries like Iceland and Ireland which got into troubles. By providing limitless guarantees, didn’t we become more vulnerable by exposing ourselves to hundreds of billions of dollars of potential losses?
http://singaporereserves.blogspot.com/
Thursday, 28 July 2011
CENTRAL PROVIDENT FUNDS ENDANGERED: SOLUTIONS PROPOSED
CENTRAL PROVIDENT FUNDS ENDANGERED: SOLUTIONS PROPOSED
Presidential candidate Dr. Tony Tan recently spoke about “how close we were to a total collapse of the world financial system in 2008-2009”. (Straits Times 20 July 2011)
This contradicts Minister Lim Hng Kiang’s 2008 statement four days after Singapore guaranteed $700 billion deposits of various currencies. $150 billion reserves was set aside for this limitless guarantee. Minister Lim said “$150 billion backing is an amount that will be ample to meet any eventuality except the most remote.” If we were so close to a total collapse as Dr. Tan says, that means we were close to losing more than $150 billion reserves. Didn’t MAS think the fall of Lehman Brother was most remote too?
The U.S. Stock Market fell 89 percent during the Great Depression. Our reserves will be worth pennies on the dollar if the global economy had collapsed. However, depositors are still entitled to their $700 billion in cash at the click of the mouse. How is Singapore going to raise so much cash so fast? Such pressures will cause Singapore’s currency to fall and devalue our Central Provident Funds. Moreover, our liabilities for foreign currencies’ deposits will rise.
Why did the limitless guarantee cover foreign banks which had financial troubles in hundreds of billions of dollars? Why did it last till end of 2010? Even if a limitless guarantee is needed, it should cover only the Singaporean banks like DBS, OCBC and UOB. Moreover, shorter time frames should be used to enable regular reviews.
Looking forward, laws must be enacted to ensure that only a limited percentage of our total reserves can ever be used for bank guarantees. PERCENTAGE is the most important word here because value of reserves plunge when markets plummet like waterfalls.
Britain used anti-terrorism laws to freeze Iceland’s assets. Total bank deposits in Iceland was only a small fraction of the bank deposits in Singapore. If a “total collapse” had occurred, Singapore’s reserves may not be enough to cover the $700 billions deposits of various currencies. Singapore’ indebtedness may far exceed that of Iceland. Governments worldwide may also freeze Singapore’s assets.
To avoid foreign governments confusing our Central Provident Funds with our reserves, Singapore should progressively give Singaporeans freedom to take out their CPF money as and when they wish.
Singapore must not try to play the role of Bernanke with our Central Provident Funds. Bernanke may print unlimited quantities of money but our Central Provident Funds are limited.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
Presidential candidate Dr. Tony Tan recently spoke about “how close we were to a total collapse of the world financial system in 2008-2009”. (Straits Times 20 July 2011)
This contradicts Minister Lim Hng Kiang’s 2008 statement four days after Singapore guaranteed $700 billion deposits of various currencies. $150 billion reserves was set aside for this limitless guarantee. Minister Lim said “$150 billion backing is an amount that will be ample to meet any eventuality except the most remote.” If we were so close to a total collapse as Dr. Tan says, that means we were close to losing more than $150 billion reserves. Didn’t MAS think the fall of Lehman Brother was most remote too?
The U.S. Stock Market fell 89 percent during the Great Depression. Our reserves will be worth pennies on the dollar if the global economy had collapsed. However, depositors are still entitled to their $700 billion in cash at the click of the mouse. How is Singapore going to raise so much cash so fast? Such pressures will cause Singapore’s currency to fall and devalue our Central Provident Funds. Moreover, our liabilities for foreign currencies’ deposits will rise.
Why did the limitless guarantee cover foreign banks which had financial troubles in hundreds of billions of dollars? Why did it last till end of 2010? Even if a limitless guarantee is needed, it should cover only the Singaporean banks like DBS, OCBC and UOB. Moreover, shorter time frames should be used to enable regular reviews.
Looking forward, laws must be enacted to ensure that only a limited percentage of our total reserves can ever be used for bank guarantees. PERCENTAGE is the most important word here because value of reserves plunge when markets plummet like waterfalls.
Britain used anti-terrorism laws to freeze Iceland’s assets. Total bank deposits in Iceland was only a small fraction of the bank deposits in Singapore. If a “total collapse” had occurred, Singapore’s reserves may not be enough to cover the $700 billions deposits of various currencies. Singapore’ indebtedness may far exceed that of Iceland. Governments worldwide may also freeze Singapore’s assets.
To avoid foreign governments confusing our Central Provident Funds with our reserves, Singapore should progressively give Singaporeans freedom to take out their CPF money as and when they wish.
Singapore must not try to play the role of Bernanke with our Central Provident Funds. Bernanke may print unlimited quantities of money but our Central Provident Funds are limited.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
Sunday, 17 July 2011
HOW ONE DECISION MAY BANKRUPT SINGAPORE
One week after Iceland faced bankruptcy, Singapore guaranteed $700 billions deposits of various currencies. This blanket guarantee included foreign banks which had financial troubles in hundreds of billions of dollars.
Singapore’s reserves were used to back this guarantee. Our reserves represent the cumulative sacrifices, sweat, toil, tears, heartaches and headaches of numerous Singaporeans both present and past. Our savings are meant for our children, our aged, our beloved, our homes, our medical needs and to protect us from ruthless enemies. Yet, they were all placed in jeopardy by one single decision alone.
The U.S. Stock Market fell 89 percent during the Great Depression. Our reserves will be worth pennies on the dollar if the global economy had collapsed. However, depositors are still entitled to their $700 billion in cash at the click of the mouse. How is Singapore going to raise so much cash so fast? Such pressures will cause Singapore’s currency to fall and devalue our Central Provident Funds. Moreover, our liabilities for foreign currencies’ deposits will rise.
During market crashes, bank assets like loans and investments also fall dramatically in value. Massive banks' failures will make Singaporeans liable for most of the $700 billions deposits. Singapore can become indebted to many wealthy foreign depositors. Britain used anti-terrorism laws to freeze Iceland’s assets. Governments worldwide can also freeze Singapore’s assets.
Let us assume a scenario when Singapore becomes liable for $500 billions of depositors’ money. Our reserves had fallen in value to $400 billion. Singapore becomes indebted by $100 billions.
Blanket guarantee gives the weakest banks' depositors top priority claims to Singaporeans' reserves. This is true even if the weakest banks fall because of frauds, negligences, mismanagements, stupidities or speculations. Several foreign banks were in trouble when our local banks remain strong. This means Singaporeans' savings were placed on the front line for foreign banks' depositors to lay claims on. Lehman Brothers fell even though it had US$691 billion assets in Nov. 2007.
Since foreign banks had the greatest likelihood of failing, foreigners had the greatest likelihood of claiming the greatest amount of money from Singaporeans' sweat stained savings. Thus, the poorest Singaporeans will have to help pay off the richest foreign depositors.
Why did Singapore give a limitless guarantee? Isn’t this a terrible precedent for Singapore to set? Even the United States only raised the guarantee from US$100,000 to US$250,000. Why did the guarantee last till end of 2010? If there was major capital flight into Singapore, this could increase our absolute exposure drastically.
Parliamentary approval should be required to raise the guaranteed deposit above a preset limit. Parliamentary approval should be required before any foreign bank deposits can be guaranteed. Blanket guarantees are NOT sustainable and have led Ireland and Iceland into troubles. Laws must be enacted to ensure that only a limited percentage of our total reserves can ever be used for bank guarantees. PERCENTAGE is the most important word here because value of reserves plunge when markets plummet like waterfalls.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
http://singaporereserves.blogspot.com
Singapore’s reserves were used to back this guarantee. Our reserves represent the cumulative sacrifices, sweat, toil, tears, heartaches and headaches of numerous Singaporeans both present and past. Our savings are meant for our children, our aged, our beloved, our homes, our medical needs and to protect us from ruthless enemies. Yet, they were all placed in jeopardy by one single decision alone.
The U.S. Stock Market fell 89 percent during the Great Depression. Our reserves will be worth pennies on the dollar if the global economy had collapsed. However, depositors are still entitled to their $700 billion in cash at the click of the mouse. How is Singapore going to raise so much cash so fast? Such pressures will cause Singapore’s currency to fall and devalue our Central Provident Funds. Moreover, our liabilities for foreign currencies’ deposits will rise.
During market crashes, bank assets like loans and investments also fall dramatically in value. Massive banks' failures will make Singaporeans liable for most of the $700 billions deposits. Singapore can become indebted to many wealthy foreign depositors. Britain used anti-terrorism laws to freeze Iceland’s assets. Governments worldwide can also freeze Singapore’s assets.
Let us assume a scenario when Singapore becomes liable for $500 billions of depositors’ money. Our reserves had fallen in value to $400 billion. Singapore becomes indebted by $100 billions.
Blanket guarantee gives the weakest banks' depositors top priority claims to Singaporeans' reserves. This is true even if the weakest banks fall because of frauds, negligences, mismanagements, stupidities or speculations. Several foreign banks were in trouble when our local banks remain strong. This means Singaporeans' savings were placed on the front line for foreign banks' depositors to lay claims on. Lehman Brothers fell even though it had US$691 billion assets in Nov. 2007.
Since foreign banks had the greatest likelihood of failing, foreigners had the greatest likelihood of claiming the greatest amount of money from Singaporeans' sweat stained savings. Thus, the poorest Singaporeans will have to help pay off the richest foreign depositors.
Why did Singapore give a limitless guarantee? Isn’t this a terrible precedent for Singapore to set? Even the United States only raised the guarantee from US$100,000 to US$250,000. Why did the guarantee last till end of 2010? If there was major capital flight into Singapore, this could increase our absolute exposure drastically.
Parliamentary approval should be required to raise the guaranteed deposit above a preset limit. Parliamentary approval should be required before any foreign bank deposits can be guaranteed. Blanket guarantees are NOT sustainable and have led Ireland and Iceland into troubles. Laws must be enacted to ensure that only a limited percentage of our total reserves can ever be used for bank guarantees. PERCENTAGE is the most important word here because value of reserves plunge when markets plummet like waterfalls.
writejt@gmail.com
http://singaporereserves.blogspot.com
Yours Sincerely,
Joseph Tan
http://singaporereserves.blogspot.com
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