What is KJ's problem?

[red amoeba]

To the financial gurus wat is the ror tat sg can expect fr such exercise ?

 

[Unrepented]

Another perspective;

A stable company has many creditors, some big companies, some small companies. Among them, some are important suppliers and some not so important. Delay payments will impact small suppliers very much, even it is 1% of total creditors. And if these creditors in question do not go thru a prudent process of granting credit..........

The rest of your points, I dont comment.

My argument is not based on having 1% of the investment. It's based on the following:

1. Other countries are providing the other 99% of the requirement. If IMF needed 4 Billion and SG "gallantly" provided all 4, I would be arguing on your side. IMF's requirement is 400 Billion.

................

 

[jw5]

Another perspective;

A stable company has many creditors, some big companies, some small companies. Among them, some are important suppliers and some not so important. Delay payments will impact small suppliers very much, even it is 1% of total creditors. And if these creditors in question do not go thru a prudent process of granting credit..........

The rest of your points, I dont comment.

Bro, that's why they should and must go through the prudent process of granting credit. This point there is no debate.

The problem is also that the big company knows that this small creditor is financially sound. Whether considered important or not is arguable.
The small creditor needs to do its own assessment, but it will be difficult to outright reject the big company too.

 

[coolguy]

To me, I only know that if you lend $$ to others, always be prepared they will not return you, not mater how trusting that person is.
And if I am not comfortable with the amount, I won't lend it to you even when you "promise" you will return me.
The only safe bet you may get back your $$ back is to sign an IOU.
So to me, lending is always risky, no difference between high or low risk.

 

[steffychun]

To me, I only know that if you lend $$ to others, always be prepared they will not return you, not mater how trusting that person is.
And if I am not comfortable with the amount, I won't lend it to you even when you "promise" you will return me.
The only safe bet you may get back your $$ back is to sign an IOU.
So to me, lending is always risky, no difference between high or low risk.

you people are confusing individual-to-individual loans and global economic governance and IOs.

 

[aurvandil]

If I were the policy/decision maker, this is what I would do:

1) Put up for consideration a loan pledge that is in line with what other developed industrial nations are offering. On a per capita basis, the Singapore loan pledge is between 2 to 3 times the loan pledge of UK, Australia and New Zealand. The amount Singapore should be pledging should be between US$1.5 to US$ 2 billion given our population (FT included).

2) Before making the pledge, go the Parliament and table the pledge for discussion. Make transparent the full terms and conditions of the pledge (e.g. default risk, interest rate ).

3) Conduct a National Referendum to determine if SIngaporeans support making the pledge.

4) Based on the results of the Referendum, put the pledge to a vote in a Parliament. Lift the Whip for PAP backbenchers to vote.

5) If the vote is for making the pledge, go to the Office of the President and seek concurrence for making the pledge.

If the PAP had done all this, I don't think anyone would question the giving of the pledge of US$ 4 billion.

3. If you were the policy/decision maker, went to the IMF meeting and now the country is faced with the decision based on IMF's requirement, what do you do? Reject them and say you have other uses for the funds? The analogy I have in mind is not the Lehman papers, but more of a holding company with 100 subsidiaries asking for an interco loan from each of the subsidiaries to "fund their big project". How would you respond to such a request?

 

[cass888]

General of the Armies (minus 10 ranks) Goh Meng Seng, you sure live in some ivory tower. Nobody governs that way. Did Australia call a national referendum to put up the pledge?

Argue all you want, any money given to IMF is among (if not) the closest a country can have akin to a bank deposit for an individual. You want to call a national referendum for pledging to deposit money in a bank. You siow, is it?

If I were the policy/decision maker, this is what I would do:

1) Put up for consideration a loan pledge that is in line with what other developed industrial nations are offering. On a per capita basis, the Singapore loan pledge is between 2 to 3 times the loan pledge of UK, Australia and New Zealand. The amount Singapore should be pledging should be between US$1.5 to US$ 2 billion given our population (FT included).

2) Before making the pledge, go the Parliament and table the pledge for discussion. Make transparent the full terms and conditions of the pledge (e.g. default risk, interest rate ).

3) Conduct a National Referendum to determine if SIngaporeans support making the pledge.

4) Based on the results of the Referendum, put the pledge to a vote in a Parliament. Lift the Whip for PAP backbenchers to vote.

5) If the vote is for making the pledge, go to the Office of the President and seek concurrence for making the pledge.

If the PAP had done all this, I don't think anyone would question the giving of the pledge of US$ 4 billion.

 

[aurvandil]

We are not depositing money in a bank. We are contributing to a global bailout fund managed by the IMF to help stop the breakup of Europe. If the loan pledge is called, the default risk is probably higher than putting money in a Lehman mini bond.

Argue all you want, any money given to IMF is among (if not) the closest a country can have akin to a bank deposit for an individual. You want to call a national referendum for pledging to deposit money in a bank. You siow, is it?

 

[cass888]

We are not depositing money in a bank. We are contributing to a global bailout fund managed by the IMF to help stop the breakup of Europe. If the loan pledge is called, the default risk is probably higher than putting money in a Lehman mini bond.

http://www.mas.gov.sg/en/News-and-P.../2012/Reply-to-PQ-on-SG-4B-pledge-to-IMF.aspx

7 Should Singapore’s loan be called on, we would be taking on the credit risk of the IMF rather than the direct credit risk of countries that the IMF lends to. The IMF also has safeguards in place to reduce the risks that it takes in lending to countries. First, the IMF has preferred creditor status - which means that loans granted by the IMF must be repaid ahead of all other creditors. Countries which have historically defaulted on the rest of their debts have in most instances repaid the IMF on time and in full.

You are theoretically correct but if the IMF goes bankrupt, non-payment of the $4 billion will be the last of our worries. IMF and the World Bank should be the last two institutions left standing even if the rest of the world collapses.

 

[Cruxx]

you people are confusing individual-to-individual loans and global economic governance and IOs.

Yes, steffychun is right. Governments are different from households and individuals. They can borrow any amount they like. After all, they can just print $ to repay their creditors. What can go wrong with printing money?

 

[aurvandil]

We seem to be making progress. From a "risk free" bank deposit, you are now acknowledging that there is quite a bit of risk in this loan pledge.

With regard to the latest posting, you are falling prey to the "too big to fail" fallacy which was prevalent at the time of the Lehman crisis.

The current sovereign debt crisis in Europe is not the first sovereign debt crisis the world has faced. It has all happened before in South America. The scale and scope of that crisis was much smaller than the current crisis in Europe which involves major economies like Italy and Spain. The last sovereign debt crisis left the IMF nearly bankrupt. My expectation is that before all this is over, IMF should again come close to bankruptcy and will be seeking even more funds to stay afloat.

You are theoretically correct but if the IMF goes bankrupt, non-payment of the $4 billion will be the last of our worries. IMF and the World Bank should be the last two institutions left standing even if the rest of the world collapses.

 

[Goh Meng Seng]

Dear Aurvandil,

Cannot blame them when even MAS keep asserting that IMF is not a "risky" institution in spite of the billions of loans written off from its clients so far. Even well established writer like Ng E-Jay is ignorant of IMF, start claiming that Singapore will not lose anything even if IMF's loans have been defaulted because he thought that these monies are just our foreign reserves kept in IMF anyway.

IMF collects contributions from member states with 75% IN THEIR OWN CURRENCIES and 25% in Gold. The amount each member state contribute varies according to the size of their economy. IMF doesn't collect ALL foreign reserves of its member states. Each country will have to manage their own foreign reserves, if any.

Don't be fooled by the term "foreign currency reserves". Part of these are LIABILITIES, so to speak. I have read some Chinese writers on the issue of Foreign Currency Reserves with very good analysis. These Foreign Currencies held by the state's central banks are partly held as liabilities. One good example, when a MNC invest in Singapore, it exchanges USD into S$. Does Singapore really "EARN" these US$ as Foreign reserves? Absolutely not. This is held in custody while the MNC invest its money and repatriate profits every year from Singapore into US$. So imagine, if the MNC earns repatriate its 20% profit every year from its US$100 investment, by the fifth year, this MNC would have exchanged back its initial investment of US$100 back to its country of origin. By the tenth year, it would have expatriated an extra US$100. If it liquidated its business and pulled off US$100 from Singapore, in total, within these 10 years, Singapore would have lost US$200 in total. Thus, the initial increase in Foreign Reserves held by Singapore may not be viewed as "assets" but liability. While the MNC can invest and make money, MAS will have to hold these US$100 and try to make money out from it so that it could repay back to the MNC.

Of course, the only real earning of Foreign Currencies is from export of goods and services (via tourism as well).

Thus, if MAS is to "invest" in IMF by giving it a loan, it is taking a risk on part of our liability as held in the Foreign Reserves. IMF cannot print money nor does it have any assets apart from the gold it held in custody for its member states. But yet, people view IMF as the manager of all foreign reserves held by its member states which is wrong. It is also wrong to view loans to IMF as some kinds of "deposits". Deposits you can withdraw any time you want to but loans are totally different.

Even if it is just deposits, I will definitely choose a bank which doesn't involve in risky lending activities with a track record of various write off debts in billions.

Goh Meng Seng

We seem to be making progress. From a "risk free" bank deposit, you are now acknowledging that there is quite a bit of risk in this loan pledge.

With regard to the latest posting, you are falling prey to the "too big to fail" fallacy which was prevalent at the time of the Lehman crisis.

The current sovereign debt crisis in Europe is not the first sovereign debt crisis the world has faced. It has all happened before in South America. The scale and scope of that crisis was much smaller than the current crisis in Europe which involves major economies like Italy and Spain. The last sovereign debt crisis left the IMF nearly bankrupt. My expectation is that before all this is over, IMF should again come close to bankruptcy and will be seeking even more funds to stay afloat.

 

[cass888]

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1212056/1/.html

The MAS reiterated in its response that any such loan to the IMF will remain part of Singapore's reserves.

This is because the IMF is obliged to immediately repay the loan in the event that a country has a balance of payments need.

Captain Goh Meng Seng, either MAS is lying or you are. Will you categorically deny that what MAS is saying is true?

A loan with an institution like IMF recallable on demand is akin to deposits, because that is what my deposit with UOB is - a loan recallable on demand.

Where would you deposit your reserves then, if not the IMF?

The loan will therefore remain in the Official Foreign Reserves.

It is also wrong to view loans to IMF as some kinds of "deposits". Deposits you can withdraw any time you want to but loans are totally different.

Even if it is just deposits, I will definitely choose a bank which doesn't involve in risky lending activities with a track record of various write off debts in billions.

Goh Meng Seng

 

[Goh Meng Seng]

It is a no brainer! If such loans is recallable so easily, then most likely IMF doesn't really need our money at all!

Goh Meng Seng

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1212056/1/.html



Captain Goh Meng Seng, either MAS is lying or you are. Will you categorically deny that what MAS is saying is true?

A loan with an institution like IMF recallable on demand is akin to deposits, because that is what my deposit with UOB is - a loan recallable on demand.

Where would you deposit your reserves then, if not the IMF?

The loan will therefore remain in the Official Foreign Reserves.

 

[cass888]

Now you are being retarded.

If Sg made the loans directly to the loser nations, the loans would be difficult to recall.

But the loans were made (if called) to IMF and IMF has a commitment to repay any country who calls on the loans. Are you suggesting that the loans to IMF would not be repaid on demand? Don't make conjectures, just answer the question. So people will know how stupid you are when you stand at the next elections.

You are actually suggesting IMF is like Lehman Brothers! Even the SDP is not so stupid to question the IMF loan.

It is a no brainer! If such loans is recallable so easily, then most likely IMF doesn't really need our money at all!

Goh Meng Seng

 

[Goh Meng Seng]

As I have said, if IMF can give us back the money any time, most probably it doesn't need our money anyway. So why bother? Very simple logic.

Anybody, any institutions who borrows will have the obligation to repay back; but that doesn't mean that they couldn't go into bankruptcies. Only fools will just part with their monies to anybody who just pledges that they have all obligations to repay back.

The current idea that international financial system is built on relies heavily on leveraged credit terms. It is just a system which assumed that not everyone will fall apart at the same time, thus, someone could just patch the holes for another. Something like an insurance system. But we all know, when there are massive claims made against insurance company, it will just collapse.

It is just pure liquidity play on IMF's part in promising for immediate repatriation of money to us if we need it. That is based on the assumption that the whole system doesn't collapse or less than a percentage of loans are being recalled, so that they could get it from somewhere else to cover that hole. But such guarantee is as good as dust if multiple failures occur, which ironically, is when we needed the money most.

Goh Meng Seng

Now you are being retarded.

If Sg made the loans directly to the loser nations, the loans would be difficult to recall.

But the loans were made (if called) to IMF and IMF has a commitment to repay any country who calls on the loans. Are you suggesting that the loans to IMF would not be repaid on demand? Don't make conjectures, just answer the question. So people will know how stupid you are when you stand at the next elections.

 

[jw5]

Don't be fooled by the term "foreign currency reserves". Part of these are LIABILITIES, so to speak.

Thus, if MAS is to "invest" in IMF by giving it a loan, it is taking a risk on part of our liability as held in the Foreign Reserves.

Goh Meng Seng

Lau Goh, your 2 sentences above don't make sense.

The loan to the IMF is not risk free or totally safe, but it should not be considered risky either.
But when the IMF makes a request to the world and Singapore responds by wanting to commit 1% of IMF's total requirement, that is not unreasonable.
It's not simply about getting the best returns on this investment, otherwise just give it to the swf to invest, hahaha.
What we also want to do is to be a cooperative global citizen of the world. And if the terms and conditions of the loan are comparable to all the other countries, and it is within the country's means to lend, we should.

Btw, I guess that you want to join RP and be their candidate at the next election. Half right or two thirds right?

 

[Goh Meng Seng]

You will have to look at it carefully. Foreign Currencies Reserve can arise from different sources... from sales of products and services or FDI.

For the case of FDI, the currencies raised is just a liability which would most probably have to be repatriated in future, either in the form of profits or liquidation. Thus, it is not an "asset" earned but rather, a liability.

Goh Meng Seng

Lau Goh, your 2 sentences above don't make sense.

 

[londontrader]

Agree on the need for a reasonably large OFR. The question I posed was whether perhaps the OFR under MAS is excessively large so that MAS can toss around US$ 4 billion loan pledges without breaking a sweat and without consulting Parliament.

Also on the size on the loan pledge, Singapore's pledge is 2 to 3x the loan pledge of UK, Australia and New Zealand on a per capita basis. Is there a reason why Singapore needs to pledge so much as compared to rich industrialized countries like UK, Australia and New Zealand. If we follow what other rich industrialized countries have pledged, our pledge should be US$1.5 to US$ 2 billion.

The OFR stands at about 200+ billion USD. Is it too much? From the way SGD has been performing, the markets seem to agree with the MAS's levels. Do Singaporeans think that the OFR is overfunded? I think that's a question for the politicians to figure out (both PAP & Opposition). That's why I agree with you that some form of Parliamentary Oversight is required wrt this matter.

The size of the pledge is a political decision. That's why other politicians have nightmares about presenting this proposal to their respective Parliaments. I would very much like Tharman to have stood up in the House and actually asked for permission.

 

[londontrader]

People are deliberately evading the question - is money lent to IMF considered part of the OFR? Just like is money "lent" to UOB by way of deposit is considered part of my assets? If so, I do not know why so much ado about nothing.

And giving reserves away to losers isn't going to make Singapore a better place. It will make Singapore go downhill.

So let me make the issue clear to you:

It's about ASKING for permission (and your views) before agreeing to lend YOUR money to SOMEONE ELSE