Sunday, October 26, 2008

Recession and how I think it will affect Singapore

Was reading the Sunday times today and find that many people do not really understand how the present financial crisis is going to affect us, especially the younger generation.

In my opinion, and as like many others, the actual crisis has not really hit Singapore yet. The stock market is usually 6 months ahead of the actual economy. With such a bad stock market now, it means that people anticipate bad times in the near future.

  • In an economic crisis, and in our case, also a credit crisis. Companies are not able to get their funding from banks or would have to get their loans at a higher interest rates. Hence this will hamper the company profits.
  • Since companies are not able to sell more stuff in a crisis, they will have to cut cost.Hence the workers will get lower pay or even lose their jobs.
  • When people lose their jobs, they will start to worry more and spend less.
  • Lower spending will in turn decrease the earnings from companies, which triggers a viscous cycle.
  • The government in a bid to restore Singapore competitiveness might lower the Singapore $$, making our exports to other countries cheaper but making our imports more expensive. Things like mac books, dairy products and other stuff will get more expensive. Even things like oil will get relatively more expensive and will trigger an increase in transportation, power and other cost, which will eventually be passed onto the normal people like us.
  • Hence you can see that for the common people like us, we are going to face hard times with reduced pay but increased cost of living.
This is the really simplified version that I can think of. But of course that are MANY MANY other things that will happen too.

So for you people who are spending money as though it is free, it is seriously time to control the spending. For i foresee tough times ahead of us.


Edmund said...

SPEND SPEND SPEND!!! EXCITE THE ECONOMY!!!!!! Singapore needs more people to keep spending!!!!!!! Need to break out of the vicious cycle and spending is the way :) Everyone spend $1 and its $4.8mil! Come spend in my shop thanks :D

NTUchartist said...

Haha..we should spend lah, but always spend within your means. The kind I am talking about is really anyhow spend like crazy, till you get into lots of debt and cannot pay. Then get the economy is more trouble