To the financial gurus wat is the ror tat sg can expect fr such exercise ?
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.
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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.
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.
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?
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.
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?
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.
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 people are confusing individual-to-individual loans and global economic governance and IOs.
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.
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.
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.
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
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.
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
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.
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.
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.
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.