Saturday, September 3, 2011

Ponzi Island 4: Our huge FX reserves are monumental shame

Forex reserves are ponzi
Summing up the recent Eurozone crisis, Germany is accumulating too much reserve and on the other side of the coin, Greece is incurring too much deficit. In the crisis, Germany's claims against Greece shows up in the form of Greece owning lots of monies to German banks. Greece is going to default unless a bailout is arranged, either way, Germany is going to foot the bill.

The German experience has shown that accumulating huge reserves eventually harm the creditor nation.

The reserves of Singapore, in another perspective is debt of USA. While fingers are pointed at US government's profligacy, nevertheless the East Asia governments are equally guilty in financing the US debt ponzi.

Singapore's reserves is a manifestation of enslavement
Since the early 1980s, Singapore already has accumulated too much reserves, and the yield was really bad. That was the reason that government set up GIC, an even worse solution to manage reserves.

At that time, signs of troubles including low birthrate, started to show up because PAP has been forcing our woman to work. The reserves are also signs that PAP are depriving us of consumption and forcing us to work too hard. PAP could have slowed our accumulation to do something good by
  • retiring woman from work to become mother   
  • implementing health insurance
  • free education
  • improving income inequality

PAP waging war against babies
Unfortunately, PAP did exactly the opposite. Our reserves sky-rocket especially when more woman are forced to work as the home mortgages goes up to 30 years in the unrelenting real-estate inflation. From the early 1990s onward, PAP went more crazy by importing more foreigners in order to earn those useless paper that we already have too much. We are even more sterilized.

Upsetting the middle class worldwide
For USA's middle class, a huge current account deficit means that the capitalist are shipping jobs out, injuring the equitable society. It is a symbols of exploitation and creation of unemployment.

In short, PAP creates a nefarious economic system not only enslaving its citizen but facilitate the enslavement of middle class in developed countries.

The people will not get to spend their fruits of labor
Similar to Greece's default to Germany, in the form of bailout or debt restructuring, our reserves is going to end up in default, but in a different manner. USA is going to print monies, resulting to hyper-inflation wiping off our savings.


E said...


I have been keeping track of your blog for some time. Thanks for all the sharing.

Just wondering: on a personal level how do you think one can safeguard our wealth to minimize the effects of (hyper)inflation/devaluation?
Buying gold/silver?


Veritas said...

My strategy is investing in gold and silver.

Right now, our government discourage us going into precious metal by imposing a GST if we want to buy real stuff and waiver GST if you buy UOB gold account.

If you do not monitor market carefully, I think the physical stuff is a way to previous wealth.

If you want to maximize gain, I suggest you can put $ into leverage ETF like UGL, or something even more risky like AGQ.

But I would like to warn you to pull out of these 2 ETF into physical if there are signs that big banks going bankrupt, as that will wipe off the ETF.

And its best to divest in various jurisdiction. HK is a good place to buy gold as there are no GST. I think Dubai and Switzerland is good place as well.

Nevertheless, no matter where you divest, u still faces gold confiscation. The last major confiscation occurred in USA.

When the elite get broke, you can be sure they find excuse to confiscate people's savings,

Veritas said...

A word of caution. In the time of hyper-inflation, the non physically backed ETFs may just go burst.

Also during economic downturn, precious metal will be hammered by central banks.

The physically backed ETF may be subjected to confiscation as they are easy target.

For people who want to invest in precious metals using ETF, to protect against any calamity, there is a need to constantly monitoring the market and economy.

In the long run, the way of precious metal is up unless central banks stop printing.

Anonymous said...

I am harping the same issue again: the country's reserves are only historically tracked in US dollars; theoretically the US government bonds, and for that matter Japan and UK and Euro denominated sovereign bonds cannot default because their central banks have a weapon called printing press. When tracked in real purchasing power, or hard assets like precious metals, farmland or even agriculture commodities like rice or wheat, the story is different. This allows the singapore government to spread the mis-information that our reserves are "safe" and have been earning real returns (compared to ridiculous assumptions of inflation like 2% for last 30 years). Even in Sing dollar terms, GIC and temasek's portfolio have been badly losing their value, and the Sing dollar itself is losing value against precious metals and agriculture commodities (don't believe: how much is a kg of AAA Song He rice 10 years ago vs 2011? Ans: $1 per kg in 2000, today $2.4/kg, retail price - 8% per annum COMPOUNDED) Who will challenge these destruction of value? Who will challenge the elites continuing to draw millions of salaries while their incentives continue to allow them to erode and destroy our reserves? True that all the sovereign wealth funds are destroying value by betting on stocks (a huge gambling casino that will probably go the Nikkei 225 route in a year or two) or US government bonds. The problem is the top knows the problem but prefers to play along this fiat devaluation game to maintain their status quo in power.

Veritas said...

September 4, 2011 6:06 PM

Rice is an controlled item which PAP regulates in a way to prevent market entry.

You can get only cheaper rice by choosing NTUC-branded packaging. Other than that, the price can be higher than countries.

Next, we are actually a system of slavery. Just that whip is replaced by debt or monopolistic pricing on necessities.

Veritas said...

I want to add, there are really significant rice inflation over the past 10 years.

Many experts seems to agree that once food price get above 40% of our income, a country will be at risk of revolution.

Anonymous said...

Hi Veritas,

I don't own any gold but thinking of. However, do you think gold price will correct in the short to mid term? As at now, it's trading at US$1,895.40 per oz. I'm only participating in the losing stock market.

Also, I am somewhat puzzled when I read the papers 1 to 2 weeks ago that Thai properties are advertised to be over S$200k and London properties are below that. It's kinda strange to me as cost of living is higher in the UK and I would thought that's the case for housing too. Then looking at Sg, properties seemed overpriced! Is it that wealth has shifted to the Asia and the rise of Asia and the decline of the West will be in the near future?

Then again, as a Singaporean who may stay here for very long, I may eventually need to be tied down by housing loan. Rental for long term would be must more costly. I could still stay with my parents now but future is uncertain.

Please advise me. Thanks.

Veritas said...

I do not think London real estate can be that low. However, it is true now that the whole world is in asset inflation thanks to fed.

I think Gold will go much higher, although short term correction is possible. I think longing gold is probably the only sure win investment strategy.

I think gold going to at least 2500 USD is a no brainer, probably in 2 years. Unless there we are going to tax the rich, the world is going for shorter and shorter economics cycle.

Each recession will be bail out by QE sacrificing the poor the enriching the rich.

I am aiming for much higher gold price instead.

I am not in any real estate because I often cannot correctly predict the price movement.

In 2000s, I predict a sustain bear in real estate judging from our low birthrate.

It turns out that PAP rigged the housing market by importing FT.

If Lee Hsien Loong really turn the FT tap off, we can have a housing glut as early as 2013 when houses come online gradually.

However, there are too much multi-dimensional forces such as PAP monies work.

And PAP can create real estate bull again by turning on FT tap anytine they like.

Ultimately, the real estate market in Singapore is controlled by PAP, which makes it hard to predict.

Veritas said...

I cannot really predict the west is doom as they have survived so many crisis such as WW1, WW2, and at each time, there are often many doom monger. Nevertheless I think this time they really have real trouble.

In fact, the eastern countries seems to be following Japan footstep into decline as they cannot stop oppressing their citizen, especially using land price and housing debt.

HK is now showing Japan disease. In SG, we should already be in downhill due to LKY oppression. The FT policy is just rounds and rounds of heroin, making our problem bigger and bigger in the future.

Anonymous said...

Hi Veritas,

thanks for the advice :)