Why a crash is inevitable
by William Pesek 04:47 AM Jun 29, 2011
Watching Greece slide into chaos from 6,000 miles away is painful. Asia, after all, was the last region to experience what Europe may be about to endure.
Asia's implosion in 1997 toppled leaders, touched off riots, set back living standards a decade or more and tarnished the International Monetary Fund's (IMF) reputation. Expect similar developments as Europe's grand monetary experiment cracks.
Asia and Europe are half a world apart and it is true that the differences are considerable. Indonesia, South Korea and Thailand were much less developed 14 years ago than their euro-zone counterparts are today. China had yet to emerge as a dominant manufacturing economy. The United States was also in a better position to offer international assistance than it is today.
With that in mind, here are five lessons Europe might learn from Asia.
One: A default is unavoidable
What makes Europe's bailout efforts so hard to watch is that they are so futile. The Greek public has been very consistent about one thing: The belief that it bears no responsibility for all the debt its leaders took on over the last decade. If that does not provide the backdrop for debt repudiation, what does?
As Greece runs through more and more of the funds its European neighbours throw at it, other dominos will fall. We saw that in Asia after Thailand devalued the baht in July 1997. Indonesia swore up and down it would not get dragged into Thailand's mess - until it was. Korea assured the world it would avoid an IMF aid package - until it could not.
The US and Japan are near recession. China's boom continues to squeeze wages in uncompetitive economies such as Greece. This won't end well for the euro zone.
Two: Recovery is quicker once debts are purged
Greece fudged its way into the common currency with the help of Goldman Sachs Group Inc's financial creativity. That leaves the government in Athens with a yawning credibility gap. When it says the country can close its budget deficit with stop-gap measures, traders roll their eyes and policy makers lose more sleep.
In December 1997, Korea caved in and sought a US$57-billion (S$70.8-billion) IMF bailout. It acted quickly to let weak companies fail, closed insolvent banks, clamped down on tax cheats and came clean about the magnitude of its debts.
Greece will have to restructure its debt, and the fallout from this will increase pressure on Portugal, Spain and Italy. If Greece had acted a year ago, markets might not be spending every waking moment on edge over how and when a default will arrive.
"Asia's crisis showed that the quicker you deal with the root of the problem, however painful that may be, the quicker you are likely to recover from it," says Mr Simon Grose-Hodge, head of investment strategy for South Asia at LGT Group in Singapore. "Europe could do worse than to heed that lesson."
Three: Don't forget reforms
In all the obsessing over debt, European leaders are taking their eyes off the need to retool in a world increasingly influenced by China. Fiscal austerity is important, of course, but so is altering policies to make economies more nimble, competitive and conducive to entrepreneurs who create jobs.
In the years following its crisis, Asia worked to open service sectors to competition. It also cut red tape and took steps to limit cronyism.
It is a work in progress. Asia is still home to many of the world's poor and corruption is pervasive. What Asia got right is that crises cannot only be about austerity. While you are trimming spending, you must be creative about generating new dynamism. Since euro nations cannot resort to currency devaluation to revive growth, reform is the only way.
Four: Growth beats taxes when repairing fiscal balance
Japan is a cautionary tale when it comes to rich nations getting incentives wrong. It issued mountains of debt, assuming for 20 years that it was only one stimulus plan away from 5 per cent growth. That never happened. Then, amid a ballooning budget deficit, it increased consumption taxes in 1997. That killed a nascent recovery.
In the current global environment, growth is the route to balanced budgets, not higher taxes. The latter would simply destroy the former.
Five: Markets are quick to forgive and forget
Yes, there is a heavy price to pay for going hat-in-hand to the IMF. The key will be conditionality. There is much griping in Asia about how the terms of Greece's IMF package are far less stringent than those forced on Indonesia, Korea and Thailand.
Fresh starts are possible, though, as the powerful gains in Asian markets over the last 14 years attest. So drop the denial, Europe. Let Greece do what it needs to do, even if it means default, and move on. Asia shows there is life after crisis. BLOOMBERG
William Pesek is a Bloomberg View columnist. The opinions expressed are his own.
Showing posts with label Financial Crisis. Show all posts
Showing posts with label Financial Crisis. Show all posts
Wednesday, June 29, 2011
Wednesday, June 22, 2011
A cautionary tale of three fiscal crises
by Simon Johnson 06:06 AM Jun 22, 2011
In today's world, there are three kinds of fiscal crises brought on by too much government spending, and three kinds of responses. We can call them the nightmare scenario, the preemptive experiment and the head-in-the-sand model.
In the nightmare scenario, a country runs large deficits for a decade or more - and the financial markets are happy to buy its debt at low interest rates. But then the markets suddenly turn, deciding that the country is going straight off a cliff. The cost of financing the national debt goes through the roof. The government has little choice but to make immediate, large spending cuts.
Higher interest rates combined with cuts in spending contract the economy and increase debt relative to gross domestic product, further undermining market sentiment. The debt ends up largely in the hands of sympathetic governments and the International Monetary Fund, which agree to roll over the loans at low interest rates indefinitely - or the country defaults.
Either way, recovery will take a long time. If you have not figured it out by now, this is Greece. Last year, its debt relative to GDP was 142 per cent, or about twice the average of most industrialised nations.
UK's preemptive approach
In the preemptive model, a government tries to get ahead of potentially negative market sentiment by bringing down the deficit over a number of years. This slower fiscal adjustment allows smaller spending cuts and revenue-raising measures to work over time. As long as the markets see that politicians are willing and able to bring down deficits, they should be greatly reassured.
This particular government has a secret weapon - a free-floating exchange rate - not available to Greece or other euro zone countries. If the currency depreciates, it will help the economy by increasing exports and tourist spending, and will boost sectors that compete against imports. The central bank can also cut interest rates.
Inflation may be a constraint on monetary policy, but moderate increases in prices and wages will help keep house values up and consumer debt down, relative to disposable income.
This model, of course, is Britain. Its spending cuts are relatively small, and although its fiscal policy is contractionary, the overall policy mix remains expansionary. The key dynamic in the eyes of the market is debt relative to GDP, so the trick is keeping up economic growth while debt comes under control. With most growth predictions in the range of 1.5 per cent to 1.9 per cent for this year, and 2.1 per cent to 2.5 per cent next year, the consensus view is that fiscal policy will not push the United Kingdom back into recession. Britain's gross debt should peak at 87.4 per cent of GDP in 2013, according to the IMF.
US HEAD IN THE SAND
The main political parties refuse to take seriously the need for new revenue. At the end of last year, instead of cutting spending or raising taxes, they recklessly agreed to extend costly tax cuts. And no one wants to deal sensibly with government-funded healthcare, the biggest future spending item of all.
This is the United States. The IMF does not like to appear critical of the US, so you need to dig deep to find its negative assessment, on Page 127 in Statistical Table 7, of the fund's authoritative Fiscal Monitor, published in April. It says gross debt will increase through the end of the forecast horizon in 2016, when it will reach 111 per cent of GDP. That's about the nastiest thing you can say about a country in today's market environment.
The problem is not that this fiscal trajectory will precipitate an immediate crisis, but that savers around the world will continue to give the US enough rope to hang itself. Interest rates are likely to remain low as long as there are no other equally attractive reserve currencies. Foreign central banks and private investors like to keep their rainy day funds in US Treasuries.
The US should take this opportunity to start gradual fiscal consolidation, not Greek-style spending cuts that would contract the economy and push up government debt relative to GDP. A path slower than Britain's would be entirely reasonable, restricting future spending increases and allowing revenue to rise as the economy recovers. A credible deficit reduction plan should lower long-term interest rates.
The danger in the US is complacency masquerading as fiery fiscal rhetoric. The debt limit debate so far has not contributed anything to fiscal stability. The spending limits on the table are largely meaningless. Ruling out tax increases makes international investors roll their eyes.
The US could do a preemptive, and relatively gentle, fiscal adjustment. Or it could wait for the nightmare scenario, when markets eventually turn against it. At the moment, the politicians just wait. BLOOMBERG
Simon Johnson is a Bloomberg View columnist. The opinions expressed are his own.
In today's world, there are three kinds of fiscal crises brought on by too much government spending, and three kinds of responses. We can call them the nightmare scenario, the preemptive experiment and the head-in-the-sand model.
In the nightmare scenario, a country runs large deficits for a decade or more - and the financial markets are happy to buy its debt at low interest rates. But then the markets suddenly turn, deciding that the country is going straight off a cliff. The cost of financing the national debt goes through the roof. The government has little choice but to make immediate, large spending cuts.
Higher interest rates combined with cuts in spending contract the economy and increase debt relative to gross domestic product, further undermining market sentiment. The debt ends up largely in the hands of sympathetic governments and the International Monetary Fund, which agree to roll over the loans at low interest rates indefinitely - or the country defaults.
Either way, recovery will take a long time. If you have not figured it out by now, this is Greece. Last year, its debt relative to GDP was 142 per cent, or about twice the average of most industrialised nations.
UK's preemptive approach
In the preemptive model, a government tries to get ahead of potentially negative market sentiment by bringing down the deficit over a number of years. This slower fiscal adjustment allows smaller spending cuts and revenue-raising measures to work over time. As long as the markets see that politicians are willing and able to bring down deficits, they should be greatly reassured.
This particular government has a secret weapon - a free-floating exchange rate - not available to Greece or other euro zone countries. If the currency depreciates, it will help the economy by increasing exports and tourist spending, and will boost sectors that compete against imports. The central bank can also cut interest rates.
Inflation may be a constraint on monetary policy, but moderate increases in prices and wages will help keep house values up and consumer debt down, relative to disposable income.
This model, of course, is Britain. Its spending cuts are relatively small, and although its fiscal policy is contractionary, the overall policy mix remains expansionary. The key dynamic in the eyes of the market is debt relative to GDP, so the trick is keeping up economic growth while debt comes under control. With most growth predictions in the range of 1.5 per cent to 1.9 per cent for this year, and 2.1 per cent to 2.5 per cent next year, the consensus view is that fiscal policy will not push the United Kingdom back into recession. Britain's gross debt should peak at 87.4 per cent of GDP in 2013, according to the IMF.
US HEAD IN THE SAND
The main political parties refuse to take seriously the need for new revenue. At the end of last year, instead of cutting spending or raising taxes, they recklessly agreed to extend costly tax cuts. And no one wants to deal sensibly with government-funded healthcare, the biggest future spending item of all.
This is the United States. The IMF does not like to appear critical of the US, so you need to dig deep to find its negative assessment, on Page 127 in Statistical Table 7, of the fund's authoritative Fiscal Monitor, published in April. It says gross debt will increase through the end of the forecast horizon in 2016, when it will reach 111 per cent of GDP. That's about the nastiest thing you can say about a country in today's market environment.
The problem is not that this fiscal trajectory will precipitate an immediate crisis, but that savers around the world will continue to give the US enough rope to hang itself. Interest rates are likely to remain low as long as there are no other equally attractive reserve currencies. Foreign central banks and private investors like to keep their rainy day funds in US Treasuries.
The US should take this opportunity to start gradual fiscal consolidation, not Greek-style spending cuts that would contract the economy and push up government debt relative to GDP. A path slower than Britain's would be entirely reasonable, restricting future spending increases and allowing revenue to rise as the economy recovers. A credible deficit reduction plan should lower long-term interest rates.
The danger in the US is complacency masquerading as fiery fiscal rhetoric. The debt limit debate so far has not contributed anything to fiscal stability. The spending limits on the table are largely meaningless. Ruling out tax increases makes international investors roll their eyes.
The US could do a preemptive, and relatively gentle, fiscal adjustment. Or it could wait for the nightmare scenario, when markets eventually turn against it. At the moment, the politicians just wait. BLOOMBERG
Simon Johnson is a Bloomberg View columnist. The opinions expressed are his own.
Tuesday, May 31, 2011
Another financial crisis brewing: Mark Mobius
31 May, 2011, 12.25AM IST,Bloomberg
TOKYO: Mark Mobius , executive chairman of Templeton Asset Management's emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven't been resolved. "There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo on Monday in response to a question about price swings.
"Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes." The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mark Mobius, who oversees more than $50 billion.
With that volume of bets in different directions, volatility and equity market crises will occur, he said. The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to US home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46% between Lehman's downfall and the market bottom on March 9, 2009.
"With every crisis comes great opportunity," said Mobius. When markets are crashing, "that's when we're going to be able to invest and do a good job," he said. The freezing of global credit markets caused governments from Washington to Beijing to London to pump more than $3 trillion into the financial system to shore up the global economy .
The MSCI AC World gauge surged 99% from its March 2009 low through May 27. The largest US banks have grown larger since the financial crisis, and the number of "too-big-tofail" banks will increase by 40% over the next 15 years.
Separately, higher capital requirements and greater supervision should be imposed on institutions deemed "too important to fail" to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.
"Are the banks bigger than they were before? They're bigger," Mobius said. "Too big to fail." The money manager had earlier said at the same event that Africa has an "incredible" investment potential and that he has stakes in Nigerian banks. "These banks are doing very well and are much better regulated than they were in the past," Mobius said, without disclosing which lenders he holds.
TOKYO: Mark Mobius , executive chairman of Templeton Asset Management's emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven't been resolved. "There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis," Mobius said at the Foreign Correspondents' Club of Japan in Tokyo on Monday in response to a question about price swings.
"Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes." The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mark Mobius, who oversees more than $50 billion.
With that volume of bets in different directions, volatility and equity market crises will occur, he said. The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to US home loans that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings in September 2008. The MSCI AC World Index of developed and emerging market stocks tumbled 46% between Lehman's downfall and the market bottom on March 9, 2009.
"With every crisis comes great opportunity," said Mobius. When markets are crashing, "that's when we're going to be able to invest and do a good job," he said. The freezing of global credit markets caused governments from Washington to Beijing to London to pump more than $3 trillion into the financial system to shore up the global economy .
The MSCI AC World gauge surged 99% from its March 2009 low through May 27. The largest US banks have grown larger since the financial crisis, and the number of "too-big-tofail" banks will increase by 40% over the next 15 years.
Separately, higher capital requirements and greater supervision should be imposed on institutions deemed "too important to fail" to reduce the chances of large-scale failures, staff at the International Monetary Fund warned in a report on May 27.
"Are the banks bigger than they were before? They're bigger," Mobius said. "Too big to fail." The money manager had earlier said at the same event that Africa has an "incredible" investment potential and that he has stakes in Nigerian banks. "These banks are doing very well and are much better regulated than they were in the past," Mobius said, without disclosing which lenders he holds.
Monday, April 4, 2011
How to behave in the markets during a crisis
by Lim Say Boon
04:46 AM Apr 04, 2011
The recent triple disaster in Japan - as tragic as it has been in human lives and suffering - provides a useful example to investors on how not to behave in the markets during a crisis.
One can easily sympathise with the horror of the moment for Japanese investors as they watched the north-east of the country's main island devastated by earthquake, tsunami and, subsequently, a nuclear power station malfunction. You can understand why they would dump their stock holdings. You can understand the powerful emotions driving their selling.
But thousands of kilometres away in Singapore, investors were also joining the herd, dumping not only Japanese equities but also Asia ex-Japan stocks.
Warren Buffet famously urged investors to - and I paraphrase -be fearful when others are greedy and be greedy when others are fearful.
And there was real fear in the markets in the days following March 11. But what I urged our clients to do by late Wednesday, March 16, was to start to buy on the fear - yes, even Japanese equities.
There had been massive "gap down" plunges on volumes that even exceeded that recorded at the peak of market fear in March 2009.
The market had oversold Japanese equities. You do not need complex "quant models" to work this one out. Here are the back-of-the-envelope calculations.
By March 16, the Nikkei had lost nearly a quarter of its value from its year high in February. Most of that - 22.8 per cent - was lost as a reaction to the March 11 disaster and its aftermath. How did that measure against other disasters?
Let's start with the Chernobyl disaster of April 26, 1986. The German market index, the DAX, lost 17 per cent over the next three months. That was the big one. The Three Mile Island nuclear accident in Pennsylvania, United States, in 1979 knocked only 5 per cent off the S&P500.
Then there was the Great Hanshin earthquake of Jan 17, 1995, which saw some 26 per cent wiped off the Nikkei. But that was over a period of nearly half a year.
And it was set against the backdrop of massive overvaluation of equities, with price to earnings multiples of over 50 times compared to the low teens today. There was also the collapse of Barings at the time, which could have compounded the pressures on the Nikkei.
And as we pointed out on March 14, it was important to keep an international perspective on this.
As terrible as the Hanshin earthquake was, it barely registered on international markets. Asia ex-Japan markets dipped slightly and then continued upwards until the Asian Financial Crisis of 1997.
What typically happens during a crisis is that investors usually take a day or so to absorb the horror of the situation before they panic. In this instance, it would have taken them to Tuesday, March 15. That was indeed when the selling was at its most intense - with huge losses and extraordinarily high volumes.
The market bounced back the very next day and has been gradually recovering since. There was a very similar pattern of investor behaviour on the Asia ex-Japan markets.
Fearful investors, encouraged by the talking heads on TV, were understandably concerned: "But what if the Fukushima nuclear reactors go into full meltdown as in Chernobyl? What if this damages international supply chains? What if ... what if ... "
Truth be known, nobody had the answers. And even now, nobody really has all the answers.
But history tells us again and again that points of maximum pain are often opportunities for maximum gain.
In 2001, when I was actively trading my own stock account, I found myself in a similar predicament, after Sept 11. Stocks gapped down everywhere. I gave in to fear and threw whatever I could out the proverbial window.
If I had held on another eight weeks, I would have broken even on the Dow Jones index. If I had waited four months, I would have made a profit. If I had just ignored all the noise and just held on - through the war in Iraq, through the collapse of Lehman Brothers, through the recent disasters - I would still be 22 per cent up on my Dow Jones index position. That is the power of time.
And never forget that markets are anticipatory.
Clients are usually startled when I point out to them the lowest point for the Dow Jones Industrial Average during the Second World War. That was late April 1942 - less than five months after the bombing of Pearl Harbour and two months after the fall of Singapore.
The writer is chief investment officer for DBS Bank's wealth management business.
04:46 AM Apr 04, 2011
The recent triple disaster in Japan - as tragic as it has been in human lives and suffering - provides a useful example to investors on how not to behave in the markets during a crisis.
One can easily sympathise with the horror of the moment for Japanese investors as they watched the north-east of the country's main island devastated by earthquake, tsunami and, subsequently, a nuclear power station malfunction. You can understand why they would dump their stock holdings. You can understand the powerful emotions driving their selling.
But thousands of kilometres away in Singapore, investors were also joining the herd, dumping not only Japanese equities but also Asia ex-Japan stocks.
Warren Buffet famously urged investors to - and I paraphrase -be fearful when others are greedy and be greedy when others are fearful.
And there was real fear in the markets in the days following March 11. But what I urged our clients to do by late Wednesday, March 16, was to start to buy on the fear - yes, even Japanese equities.
There had been massive "gap down" plunges on volumes that even exceeded that recorded at the peak of market fear in March 2009.
The market had oversold Japanese equities. You do not need complex "quant models" to work this one out. Here are the back-of-the-envelope calculations.
By March 16, the Nikkei had lost nearly a quarter of its value from its year high in February. Most of that - 22.8 per cent - was lost as a reaction to the March 11 disaster and its aftermath. How did that measure against other disasters?
Let's start with the Chernobyl disaster of April 26, 1986. The German market index, the DAX, lost 17 per cent over the next three months. That was the big one. The Three Mile Island nuclear accident in Pennsylvania, United States, in 1979 knocked only 5 per cent off the S&P500.
Then there was the Great Hanshin earthquake of Jan 17, 1995, which saw some 26 per cent wiped off the Nikkei. But that was over a period of nearly half a year.
And it was set against the backdrop of massive overvaluation of equities, with price to earnings multiples of over 50 times compared to the low teens today. There was also the collapse of Barings at the time, which could have compounded the pressures on the Nikkei.
And as we pointed out on March 14, it was important to keep an international perspective on this.
As terrible as the Hanshin earthquake was, it barely registered on international markets. Asia ex-Japan markets dipped slightly and then continued upwards until the Asian Financial Crisis of 1997.
What typically happens during a crisis is that investors usually take a day or so to absorb the horror of the situation before they panic. In this instance, it would have taken them to Tuesday, March 15. That was indeed when the selling was at its most intense - with huge losses and extraordinarily high volumes.
The market bounced back the very next day and has been gradually recovering since. There was a very similar pattern of investor behaviour on the Asia ex-Japan markets.
Fearful investors, encouraged by the talking heads on TV, were understandably concerned: "But what if the Fukushima nuclear reactors go into full meltdown as in Chernobyl? What if this damages international supply chains? What if ... what if ... "
Truth be known, nobody had the answers. And even now, nobody really has all the answers.
But history tells us again and again that points of maximum pain are often opportunities for maximum gain.
In 2001, when I was actively trading my own stock account, I found myself in a similar predicament, after Sept 11. Stocks gapped down everywhere. I gave in to fear and threw whatever I could out the proverbial window.
If I had held on another eight weeks, I would have broken even on the Dow Jones index. If I had waited four months, I would have made a profit. If I had just ignored all the noise and just held on - through the war in Iraq, through the collapse of Lehman Brothers, through the recent disasters - I would still be 22 per cent up on my Dow Jones index position. That is the power of time.
And never forget that markets are anticipatory.
Clients are usually startled when I point out to them the lowest point for the Dow Jones Industrial Average during the Second World War. That was late April 1942 - less than five months after the bombing of Pearl Harbour and two months after the fall of Singapore.
The writer is chief investment officer for DBS Bank's wealth management business.
Thursday, October 9, 2008
7 Steps to Ride out the Financial Storm
THURSDAY OCTOBER 9, 2008 TODAY
GILBERT GOH KEOW WAH
WHAT can we do to handle the current eco-
nomic crisis?
This financial storm will pass us by, but
the important thing is to hang in there. This
is what I try to live by
1 Try not to delve too much into what is being
published. Read just enough to stay abreast
of what is happening round the world. Read
motivational books rather than the negative
news to stay on top of the situation.
2 Stay positive always. Remember that as in
previous financial catastrophes, banks and
corporations have a way of bouncing back.
The same will happen for our economy: Be
patient
3 Stay lean. Cut back on unnecessary expendi-
ture. But if you smell a bargain and if you need
it, why not make the purchase? In good times,
the same dollar may not get you the same
product. Shop smartly for good deals.
4 If you are out of work, focus on getting back
into employment. Register with the Commu-
nity Development Council (CDC) employment
arm nearest you - there are five such CDCs
spread round Singapore. They also provide
financial assistance for a limited period if
you qualify.
5 If you are being hounded by banks for
repayment of mortgage or credit loans, stay
steady and face up to the credit officers.
It is best to arrange for a meeting to explain
your financial situation. Most banks are sympa-
thetic and will even arrange for the interest less
the principal to be paid over a limited period
before the situation improves for you.
The worst thing to do is to "hide" from
them. Once a lawyer's letter is issued, the banks
may not be so willing to negotiate then.
6 Network more, especially in these lean
times. I managed to find employment after 911
through networking with a long lost friend.
Even though it was part time work, at least
I had income coming in and I got my self es-
teem back. With that experience, I found full
time employment with another company six
months later.
7 Stay fit. The body is wired to the brain and
vice versa. Those who handle downtime bet-
ter are those who manage their physical and
psychological health well. When we feel good
about ourselves, we will approach a crisis
better prepared. It's time to take out those
running shoes again!
The writer was unemployed for two years from
2001 and writes this from personal experience.
GILBERT GOH KEOW WAH
WHAT can we do to handle the current eco-
nomic crisis?
This financial storm will pass us by, but
the important thing is to hang in there. This
is what I try to live by
1 Try not to delve too much into what is being
published. Read just enough to stay abreast
of what is happening round the world. Read
motivational books rather than the negative
news to stay on top of the situation.
2 Stay positive always. Remember that as in
previous financial catastrophes, banks and
corporations have a way of bouncing back.
The same will happen for our economy: Be
patient
3 Stay lean. Cut back on unnecessary expendi-
ture. But if you smell a bargain and if you need
it, why not make the purchase? In good times,
the same dollar may not get you the same
product. Shop smartly for good deals.
4 If you are out of work, focus on getting back
into employment. Register with the Commu-
nity Development Council (CDC) employment
arm nearest you - there are five such CDCs
spread round Singapore. They also provide
financial assistance for a limited period if
you qualify.
5 If you are being hounded by banks for
repayment of mortgage or credit loans, stay
steady and face up to the credit officers.
It is best to arrange for a meeting to explain
your financial situation. Most banks are sympa-
thetic and will even arrange for the interest less
the principal to be paid over a limited period
before the situation improves for you.
The worst thing to do is to "hide" from
them. Once a lawyer's letter is issued, the banks
may not be so willing to negotiate then.
6 Network more, especially in these lean
times. I managed to find employment after 911
through networking with a long lost friend.
Even though it was part time work, at least
I had income coming in and I got my self es-
teem back. With that experience, I found full
time employment with another company six
months later.
7 Stay fit. The body is wired to the brain and
vice versa. Those who handle downtime bet-
ter are those who manage their physical and
psychological health well. When we feel good
about ourselves, we will approach a crisis
better prepared. It's time to take out those
running shoes again!
The writer was unemployed for two years from
2001 and writes this from personal experience.
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