Saturday, January 18, 2014

SG meltdown: Forbes not completely flawed

I had read the Forbes article before it created a brouhaha in this town. I didn't want to blog about this but then I think I ought to record how silly it had become especially when set side by side with NYT refusal to publish our ambassador's rebuttal to their commentary on the Little India riot. Both the NYT and our ambassador were partly correct. Therefore there was no reason for the NYT to accede to our government request. Besides the quarrel must be over facts and there are truckloads of it for and against. No point starting a shooting war right unless you can be sure one side have no ammo.

So are we heading for a meltdown? It is not a theoretical impossibility. Had such a collapse being impossible, we would have ignored Jesse Colombo's article. Truth is there is some risk we might suffer a collapse but this is true for every economy in this world too, the difference being a matter of degree. In a relative world East Asian economies are at a relatively higher risk simply because our asset values are very much higher now and to add to the risk, we got there quickly and we are also running out of fuel.

Had our experts agree with Colombo, we would have suffered a collapse already. Therefore Colombo had anticipated our response. To me Colombo was just using us to serve his own career purpose. If he is wrong, few notice. If he is right everyone remembers. Such positive asymmetric risk profile, why not buy the option?

Therefore the best response from us should have been to ignore him. The more vigorously you deny or defend yourself, the more guilty or complicit you appear. But could we? The answer is No and that is most telling.

The point here is not if our markets could collapse. If you want to be in business you must always run some risks. What is important is if we crash, it is not the end of us. We have got to be safe to fail. Since no government official dared to offer this rebuttal what does it tell you? It is very easy to make investors nervous! The smart money have already sold.

So are we at risk of a collapse? The answer must be yes. However risk does not equal certainty. We will not frighten ourselves but something outside Singapore could frighten us.

Fundamentals matter but psychology matters more. That's why it is hard for economists to be credible. Now they have gone seeking salvation in behavioral economics but these are early days. Meanwhile all of us must not wait for the experts.

1 comment:

  1. you are spot on. If we are not guilty, why make a big scene defending ourselves. So either there is guilt or just plain arrogance and ignorance.