COVID-19: Retrenchments

[Jamesc]

Classical economics is very simple. The market will always correct itself and the gov should just use interest rates to control the economy.

So in a recession with many people having no jobs the gov should just lower interest rates to 0.1% and thousands of businessmen because interest rates is so low will borrow billions and start making new factories and employing thousands of people.

We all know the next TV will be 8k so for example businessmen will borrow money and build these 8k TV factories now to take advantage of the low interest rates and sell 65" 8k TV for a low $1500. 

The problem with this theory is if people have no jobs and no money they will just buy necessities like food and not buy new 8k TV even if its really cheap like just $1500 for a 65".

So these really smart businessmen are NOT going to borrow billions to build new factories to make TV that people will NOT buy no matter how cheap and good value they are.

So what's the solution?

John Maynard Keynes who saw the failure of free market economics say the economy is like a car. When economic growth slows down like in a recession its the gov job to press the accelerator and pump more fuel to the engine.

The gov needs to inject money into the economy. So if the gov gave everyone in Singapore $20 a week for the next 6 months most people will just spend the money and that means say 5 million people spending an extra 100 million this week and another 100 million next week and 100 million every week for 6 months.

So what will the extra $20 spending do? I will take the kids to Mac and buy them all happy meals. Someone else will take his gf to the cinema. People that are hungry will go supermarket and buy bread or rice or instant noodles.

Someone else else might go for a hair cut so now the barber will see extra business and earn a bit more money and treat his wife to a nice candle light dinner. The restaurant owner seeing more business and making more money might buy his wife a new dress and the dress makers selling more will spend the extra income on some new gold clubs and the money will keep flowing through the economy.

 

 

[Jamesc]

So which theory works?

Well we all got $1200 right that's like everyone getting $46 a week for 6 months.

And up to 75% of our income is subsidized to stop people tio pok right?

Because if a lot of people lost their jobs they will stop spending in shops, restaurants, hair dressers and when these business get hit they will retrench their staff and the vicious cycle goes on.

In a free market no one will subsidize our income and if companies have to chop free market economist say chopping us is the best thing as we will just get jobs in other companies.

But in a recession how many companies will be hiring?

Even USA a free market country the gov pumps billions into banks to stop them going bust.

In a true free market the banks going bust is good because they were inefficient and new banks will be setup that are more efficient.

But in a recession as banks go bust how many new banks will be created that will be more efficient?

Its just fantasy economics.

[Yewheng]

7 hours ago, Jamesc said:

So which theory works?

Well we all got $1200 right that's like everyone getting $46 a week for 6 months.

And up to 75% of our income is subsidized to stop people tio pok right?

Because if a lot of people lost their jobs they will stop spending in shops, restaurants, hair dressers and when these business get hit they will retrench their staff and the vicious cycle goes on.

In a free market no one will subsidize our income and if companies have to chop free market economist say chopping us is the best thing as we will just get jobs in other companies.

But in a recession how many companies will be hiring?

Even USA a free market country the gov pumps billions into banks to stop them going bust.

In a true free market the banks going bust is good because they were inefficient and new banks will be setup that are more efficient.

But in a recession as banks go bust how many new banks will be created that will be more efficient?

Its just fantasy economics.

The 75% of the money that is subsidze by the government will need to see where is the source from. If it is from the government savings from rainy days. Yes it would help a lot. However if it is coming from money printing or borrowed money, then it is only delaying the problem and or pushing the higher cost for future generations to bare though higher inflation or through direct and indirect taxes. 

Edited July 21, 2020 by Yewheng

[Jamesc]

6 hours ago, Yewheng said:

The 75% of the money that is subsidze by the government will need to see where is the source from. If it is from the government savings from rainy days. Yes it would help a lot. However if it is coming from money printing or borrowed money, then it is only delaying the problem and or pushing the higher cost for future generations to bare though higher inflation or through direct and indirect taxes. 

But in our free market we CANNOT do this.

Free market NO subsidy.

You betrayed our Free Market Vision.

You say subsidy good you are one of those Keynesian lovers.

You cheated me badly you don't love Free Markets just pretend to make me happy only.

The Free Market is PERFECT the more people disturb it the less efficiently it works.

So you want the Free Market or the subsidy?

To me its very clear as I always say to every customer service officer.

Its not the principle its the MONEY that is IMPORTANT.

 

[Yewheng]

41 minutes ago, Jamesc said:

But in our free market we CANNOT do this.

Free market NO subsidy.

You betrayed our Free Market Vision.

You say subsidy good you are one of those Keynesian lovers.

You cheated me badly you don't love Free Markets just pretend to make me happy only.

The Free Market is PERFECT the more people disturb it the less efficiently it works.

So you want the Free Market or the subsidy?

To me its very clear as I always say to every customer service officer.

Its not the principle its the MONEY that is IMPORTANT.

 

Originally if businesses save for rainy days and no government intervention, then this will not happen. 

 

There is trade off ba. Like if we compare this covid-19 to Spanish flu. Herd immunity or not? If herd immunity = a lot more people would had died or no herd immunity a lot less people would had died but at economic cost. That brings the 2nd point of saving for rainy days. How levered up businesses is will also affect businesses to survive.

 

If businesses are levered up and not saving as much for rainy days. The question is why? Maybe it's businesses bad decision, or maybe it could also be government involvement that led to businesses unable to save as much as they wanted or maybe it is also sky rocketing rental that is the cost. Maybe it is all of the combination. If we could remove the one that can be easily done like remove as much need for government intervention as much as possible way before covid-19, perhaps now this covid-19 outbreak and government interfere due to it cost people life. Then perhaps many businesses might be in better position to survive this with some government support like reducing rental and etc? Rental cost is always a big issue. Why? Who set the target land price? Market or the government decide okay I am targeting this set price, if anything lower, we will not go ahead or sort of? 

An example.. Look at this article.. So who set the land price bidding? Bidder or government? Haiz.. 

https://www.straitstimes.com/singapore/offer-price-too-low-bid-for-dementia-village-rejected

Edited July 22, 2020 by Yewheng

[Volvobrick]

14 hours ago, Jamesc said:

So which theory works?

Well we all got $1200 right that's like everyone getting $46 a week for 6 months.

And up to 75% of our income is subsidized to stop people tio pok right?

Because if a lot of people lost their jobs they will stop spending in shops, restaurants, hair dressers and when these business get hit they will retrench their staff and the vicious cycle goes on.

In a free market no one will subsidize our income and if companies have to chop free market economist say chopping us is the best thing as we will just get jobs in other companies.

But in a recession how many companies will be hiring?

Even USA a free market country the gov pumps billions into banks to stop them going bust.

In a true free market the banks going bust is good because they were inefficient and new banks will be setup that are more efficient.

But in a recession as banks go bust how many new banks will be created that will be more efficient?

Its just fantasy economics.

Jamesc should be the finance minister - our gahmen got it all wrong all along! They cut ministars and civil service's salary and no bonus, now this group will feel poor and cut their spending, leading to more economic contractions. Jamesc would have increased their salaries and given lots of bonuses so they feel rich and spend more to save the rest of us. 

And receiving $46 per week won't make one feel rich and go out to spend the $46.  Jamesc probably would give all the 93 Bn to me, make me feel so rich I would spend 92 Bn in the local economy (can't go overseas, remember?), generating 92 bn GDP, instead of the miserly 23 bn the gahmen expects from it lousy actions. 

I think I would have to get fellow MCFers to help me spend too. So tough to spend so much to save Singapore.

Ps. No wonder the party vote share dropped so much. Wrong policies. 

 

 

Edited July 22, 2020 by Volvobrick

[Jamesc]

53 minutes ago, Volvobrick said:

Jamesc should be the finance minister - our gahmen got it all wrong all along! They cut ministars and civil service's salary and no bonus, now this group will feel poor and cut their spending, leading to more economic contractions. Jamesc would have increased their salaries and given lots of bonuses so they feel rich and spend more to save the rest of us. 

And receiving $46 per week won't make one feel rich and go out to spend the $46.  Jamesc probably would give all the 93 Bn to me, make me feel so rich I would spend 92 Bn in the local economy (can't go overseas, remember?), generating 92 bn GDP, instead of the miserly 23 bn the gahmen expects from it lousy actions. 

I think I would have to get fellow MCFers to help me spend too. So tough to spend so much to save Singapore.

Ps. No wonder the party vote share dropped so much. Wrong policies. 

 

 

Love your post. 

[Porker]

21 hours ago, Jamesc said:

Please support Yewheng as Financial Minister.

He knows how to run the economy better than anyone else.

The Australian Femdom Party

Pardon him James. He really wanted to study Economics at Harvard and be a luminary like Nouriel Roubini but the best he can do is teach at Mycarforum and quote Peter Schiff

[mersaylee]

14 minutes ago, Porker said:

Pardon him James. He really wanted to study Economics at Harvard and be a luminary like Nouriel Roubini but the best he can do is teach at Mycarforum and quote Peter Schiff

Where’s that PS these days?

pangsai? Kekeke 

[Jamesc]

You are absolutely right.

Because no Free Market lah.

I went to Tiong Baru market, Ang Mo Kio and Bedok market to do Onsite survey.

and all the stalls tell me Rental very high.

How to save for a rainy day?

1 hour ago, Yewheng said:

Originally if businesses save for rainy days and no government intervention, then this will not happen. 

 

There is trade off ba. Like if we compare this covid-19 to Spanish flu. Herd immunity or not? If herd immunity = a lot more people would had died or no herd immunity a lot less people would had died but at economic cost. That brings the 2nd point of saving for rainy days. How levered up businesses is will also affect businesses to survive.

 

If businesses are levered up and not saving as much for rainy days. The question is why? Maybe it's businesses bad decision, or maybe it could also be government involvement that led to businesses unable to save as much as they wanted or maybe it is also sky rocketing rental that is the cost. Maybe it is all of the combination. If we could remove the one that can be easily done like remove as much need for government intervention as much as possible way before covid-19, perhaps now this covid-19 outbreak and government interfere due to it cost people life. Then perhaps many businesses might be in better position to survive this with some government support like reducing rental and etc? Rental cost is always a big issue. Why? Who set the target land price? Market or the government decide okay I am targeting this set price, if anything lower, we will not go ahead or sort of? 

An example.. Look at this article.. So who set the land price bidding? Bidder or government? Haiz.. 

https://www.straitstimes.com/singapore/offer-price-too-low-bid-for-dementia-village-rejected

 

[Sdf4786k]

On 7/20/2020 at 10:01 AM, Yewheng said:

Like that gg.. The world will become even more imbalance. 

what IF no one knows the true value of the "dollar" and if one were to react like george soros and short the ringette, the world economy would collapse.

So print enough that can not compute the dollar and everyone continue in bliss?

Because, when the music stops. those who were prudence will be upset. 

Those who enjoyed the abundance will also be upset, just that less upset as they have a taste of the good life.

And those who are just watching on the side wondering what has gone wrong will be in  distraught 

So printing money like kicking the can down the road can be a good thing till someone else picks up the can and call it rubbish . Else someone recycle the can and make good use of it.

[Jamesc]

5 minutes ago, Porker said:

Pardon him James. He really wanted to study Economics at Harvard and be a luminary like Nouriel Roubini but the best he can do is teach at Mycarforum and quote Peter Schiff

Haha must teach him to quote Adam Schiff my hero.

[noobcarbuyer]

Which economic theory (Keynesian vs Austrian) will write me a cheque for my S$23,225? 

Whichever can do so, i will support. 🤣

[mersaylee]

17 minutes ago, noobcarbuyer said:

Which economic theory (Keynesian vs Austrian) will write me a cheque for my S$23,225? 

Whichever can do so, i will support. 🤣

Jamesconomic theory is better...Free Free Free!!! no blank cheque one

[CYHew]

Usually the country would use a combination of monetary policy (through interest rates) and fiscal policy (govt taxes/expenditures) to stimulate the economy.  Of course, in severe condition, the govt may resort to Quantitative Easing (QE) to inject liquidity and funding into the economy.

[Yewheng]

35 minutes ago, CYHew said:

Usually the country would use a combination of monetary policy (through interest rates) and fiscal policy (govt taxes/expenditures) to stimulate the economy.  Of course, in severe condition, the govt may resort to Quantitative Easing (QE) to inject liquidity and funding into the economy.

Priting money does not solve the problem. It only delay the problem and make it bigger for future generation to solve. Like QE, does it really solve the real economic problem? Look at housing bubble, stock market bubble? 

[Angcheek]

Every dollar printed is a debt . 

😄🍻🍻🍻 hard to understand but thats reality 

[CYHew]

37 minutes ago, Yewheng said:

Priting money does not solve the problem. It only delay the problem and make it bigger for future generation to solve. Like QE, does it really solve the real economic problem? Look at housing bubble, stock market bubble? 

Can't disagree with you.

But if every country is actually doing this, then the world scale remains in balance. Printing money is a last resort to provide a stop-gap solution for extreme situation, with the central bank taking recovery measures to "redeem" the excess money at a later stage when economy revives.  This happened in 2008/2009 global financial crisis.