Greek Complexity

Top 3 myths about immigration

Short and informative video about immigration:

This is about America not about Singapore but I can't imagine the conclusions would be that different for Singapore or anywhere else.

Japan has outperformed the US over the last 20 years

Really? So says an op-ed in the NYT. The writer presents some strong arguments to bolster his case, including:

The fallacy of the “lost decades” story is apparent to American visitors the moment they set foot in the country. Typically starting their journeys at such potent symbols of American infrastructural decay as Kennedy or Dulles airports, they land at Japanese airports that have been extensively expanded and modernized in recent years.

America’s growth in recent decades has been overstated by as much as 2 percentage points a year. ... This factor alone may put the United States behind Japan in per-capita performance.

The Japanese are consistently among the world’s earliest adopters [of expensive, new high-tech items]. If anything, it is Americans who have been lagging. 

There are, I think, plenty of other facts he ignores, but this is still interesting to chew on. More: The Myth of Japan’s Failure

Gambling

A friend posted this on his Facebook page a few days ago:

The number of old aunties and uncles I see trying to draw cash at the ATM room next to the casino at RWS is shocking.

RWS is Resorts World Sentosa, one of Singapore's two new casino-cum-entertainment complexes.

Several people posted comments expressing shock and concern. Someone suggested increasing the entrance fee levied on Singaporeans and Singapore Permanent Residents to dissuade them from entering. This is currently about $100 AFAIK. Someone else suggested barring them entirely and only allowing tourists in.

My friend said in response to the commenter who suggested increasing the fee:

Then the aunties will just want to make back more of their "sunk" cost. Gambling, if you haven't already noticed, is price inelastic.

...and in response to the barring suggestion:

Barring Singaporeans is not a good option because it opens other cans (of worms). It could imply that Singaporeans aren't able to control themselves (in some cases true) and changes the casinos' status to that of some foreign enclave. The cruise ship model was still the best - less access of the actual and not contracted sort, but then no revenue to gahmen. :)

I commented:

Did they look well off? If they want to gamble with their money, isn't it their choice?

Also, if the objection is to their age, would you rather they were young people just getting started on their careers, parenthood, first home, etc? Or middle-aged ones with growing children soon to enter expensive universities and with older parents to support?

One simple way to discourage gambling is to have the levy be a percentage of the amount wagered. That immediately brings down the odds of success. Gamblers, especially big ones, would understand this.

The percentage idea I'm talking about doesn't have to be a small single-digit percentage. It could even be 100% or more of the amount wagered. But, similar to what my friend said, this could end up discouraging gambling so well that government revenues (from Singaporean gamblers) actually go down in absolute dollars.

No simple answers, but what do you think?

It's finally that time

Time for me to capitulate and create a Politics category for this blog. I tried to sneak this in a while back by creating a "Government/policy" category but I might as well go the whole hog.

And for my next trick: a copy-paste of a short discussion I had on a friend's Facebook page (minor edits done for sake of flow and grammar).

Friend's post: Now Singaporeans remember, we need another 900,000 foreign workers on work permits

[a few inconsequential comments followed by...]

Person A: Guys, a huge portion of them fill the construction industry. Without them, who to build our ever increasing housing demand?

Bicycles and the economy

How bicycling will save the economy (if we let it) | Grist

from www.grist.org via mrbrown

Imagine getting a $3,000 to $12,000 tax rebate this year. Now imagine it coming again and again. Every year it grows by around a thousand dollars. Imagine how this would change your daily life.

Yes, but, but... if I ditch my car in favour of a bicycle, how can I show people I have too much money than I know what to do with?

Sign of the times

From eBay:

Own half of a house for $16,000 and receive Income

This is how it works;

You put up the $16,000

We go in halves on a house in the Palm Springs Ca. Area using yours and my income to qualify for the mortgage.

1. I pay the down payment and closing costs out of the $16,000.
2. I make ready the house to rent.
3. Until rented I pay the mortgage.  
4. I rent the property to a third party
5. The rents go into a joint account.
6. The joint account pays the mortgage, Property Taxes, Insurance and any other expense we may have.  Anything over that amount is profit and can be paid out to us.  The monthly payment will be around $550 a month.  We will be able to rent the property for $950 a month.   And that is how you can own half a house and get a second income at the same time for $16,000.
7. But in this case there is more; you see these properties sold for over $300,000 in 2006 before the housing crash.  We will buy for under $100,000 if we act now.  So there is a good chance the value of the property could double in around five or ten years for a really nice profit when we sell.
8. There is no other legitimate investment that is this safe and pays this much over time.
9. For best results Act Now while the newest houses (built between 2003-2007) are still available.

Interesting. And what makes this joker think anyone who is willing to put up $16,000 while he puts up zero will be willing to give up half the rental income and capital appreciation?

To the pedants out there: I know he says he will pay the mortgage until the property is rented out, but there's nothing preventing him from renting it to a passing hobo for a dollar a day. Also, note the fine print about how the initial $16,000 is used.

Global financial crisis? No, Western financial crisis

Kishore Mahbubani, an outspoken former diplomat (there's a contradiction for you) and current academic in Singapore, is a person whose views I usually find myself detesting, their generally being of the aggressively far-right variety, continentalistic (as an analogue to nationalistic, if I may be allowed to coin a neologism) and full of just plain preachy know-it-all-ness. Imagine therefore my surprise when I read an article by him in the FT yesterday, in which he comes across as quite reasonable and accurate. My favourite bit was:

Indeed, if the Thais and Indonesians did not come from inherently polite societies, they would say to the US and Europe: "The time has come for you to administer the same bitter medicine you prescribed to us: stop living beyond your means."

The article makes several other very good points, which I won't bother quoting here because then I might as well copy-past the entire article here.

The one thing I still disagree with him pretty strongly on is his notion of Asianness, something I consider quite nonsensical. As I've ranted before in a different context, there is no such thing as Asia. Or to be more specific, there is no one correct definition of Asia beyond the purely factual geographic one (and even that isn't clear -- is Turkey part of Asia? Is Australia? Eastern Russia?). So for someone to claim to speak for all of "Asia" is silly at the very least. For someone who happens to come from one of Asia's smallest countries to attempt to assume this mantle is just absurd.

Still, this article is very much worth a read.

Link: Asia has had enough of excusing the west

Economists and historians

Gideon Rachman writes in the FT that economists need to be swept off their throne. He says:

Joseph Stiglitz, another Nobel prize-winning economist, has suggested that: “If science is defined by its ability to forecast the future, the failure of much of the economics profession to see the crisis coming should be a cause of great concern.” Yet Prof Stiglitz’s conclusion is disappointingly mild: economists must simply search for new “paradigms” – and then presumably go back into the business of scientific prediction.

For somebody educated as a historian, there is an obvious alternative conclusion to draw from Prof Stiglitz’s opening observation. And that is to conclude that the entire attempt to treat economics as a “science ... defined by its ability to forecast the future” is misconceived.

[...]

Some might respond that such a critique exaggerates the hardness of “hard” science and the softness of economics. Maybe so: but then again buildings constructed according to the laws of physics seem to stand, whereas policies and trading systems constructed according to the “laws” of economics have a nasty habit of collapsing.

There's not much that's new here. Others have raged against economists and economics in the past, though few may have made the case for historians in economists' stead.

What Rachman doesn't state explicitly is that human memory is short. We don't remember most things beyond a couple of generations (we just weren't there) and forget many things that happen within our own lifetimes. That's where the systematic study of history comes in.

Link: Sweep economists off their throne

Some "dream"

Worth a read. Excerpts:

Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That's freeing up cash to use in other ways.

Ms. Richey's family of five used some of the money to buy season tickets to Disneyland, and plans to take a Carnival cruise to Mexico in March. Mr. Fernandez takes his girlfriend out to dinner more frequently. "We're saving lots of money," Ms. Richey says.

[...]

 Ms. Richey and her family made the move to Club Rancho Drive in August, when she was already several months behind on the mortgage. With Mr. Robbins's help, she recently sold the house on Caspian Drive for $195,000, money that the bank will accept to settle the $430,000 mortgage debt. She's also considering walking away from the mortgages on her two rental properties.

Showing a visitor the personal touches in her new home, including a $1,800 dining set she bought with some of her newly available income, she notes the advantages of being a renter rather than an owner. "You take a risk for the American dream," she says. "I don't have to worry about paying property tax, homeowners' insurance, the landscaping, cleaning the pool or any repairs."

[...]

With an income of about $8,300 a month and a rent of $2,200, Mr. Fernandez says he now has the wherewithal to do things he couldn't when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.

Shouldn't people like this be in jail? I borrow money from you, decide later that I'm not paying and can walk away scot-free. Hang on, not just scot-free. I spend the money I've "saved" by buying myself goodies.

As one commenter said:

These people can walk away because US laws are designed to allow this. Here in Canada you cannot walk away from your home without very severe consequences i.e. the banks will take ALL your savings + property + might even garnish your wages. In the US you can just walk.

Leaving aside the moralities of this behaviour (and the proud photos that the defaulters are happy to pose for), doesn't anyone see that this simply lays the foundation for the next debt crisis? And more broadly, what does this say about the validity of contracts? What are these so-called analysts thinking when they come up with stuff like:

"It's a stealth stimulus," says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. "The quicker these people shed their debts, the faster the economy is going to heal and move forward again."

Are defaulters just shedding debts or also racking on new ones, which they will again default on in future? Cheat me once, shame on you. Cheat me twice, shame on me.

Awww, those poor bankers

Ok, so I reused this title. But this time it's another group with a misplaced sense of entitlement.

If you haven't been hiding under a rock for the past one and a half years, you will have an inkling of the fact that large banks, mostly in the Western world, have been having a heck of a time dealing with the credit crunch. Governments have provided bailouts, central banks have provided lifelines, strategic investors have lost lots of money... Yet after all this, some bankers think they continue to be entitled to the kinds of bonuses and perks (Citigroup's new jet?) they received during the good times. What nerve... The ones responsible for this mess should be subject to clawbacks and instead they ask for more.

Fine, that's still what one would expect. Ask, and if ye receive, take it.

What I definitely don't understand is people who are not bankers standing up and saying that bankers should continue to be paid their wildly exorbitant salaries. Lex recently argued that bankers needed to be paid their "massive bonuses" (their words) as long as they were properly structured to align bankers' interests with shareholders'. So are they saying that past bonuses were awarded willy-nilly with nary a structure in sight? They also say that the average bonus last year was "just $112,000". Here's another choice bit:

Troubled banks may struggle to attract talent if they limit compensation to base salaries that have historically been a minor component of overall compensation. Many of the best bankers, often already wealthy enough to retire if they wanted, simply may not bother turning up for work if that is all that is on offer.

More here.

To which I responded with a comment on their website. It's somewhere on this page (sorry, there's no direct link).

The average bonus was "just" $112,000? What world are you living in, Mr Journalist? I find this sort of statement completely offensive--and I work on the buy side not as a milk delivery boy. Pity the poor average banker in your universe who only made $400,000 last year and now finds himself on the street begging for $100 bills to wipe his tears away. For goodness sake, can't you find more worthy causes to champion?

Bonuses are awarded for performance, they are meant to be over and above base salary and they are meant to be (generally) discretionary. If the performance doesn't cut it, the bonus goes out the window. As it should in these times. This doesn't mean that we will have multitudes of poor bankers suddenly unable to feed themselves (unless they can only stomach caviar and champagne everyday). It will only mean fewer cocktail parties on private yachts. All the better.

Besides, if the average bonus is "just" $112,000 --and I don't believe that-- whence all this noise about pay caps not being appropriate? Why will all these "average" wage-earners suddenly bump up against salary caps?

And finally, who knows, once the rules have been reset, perhaps supply and demand will help even things out. If there aren't enough high-flying bankers available when the spigots are turned off, who cares? The ones left behind will by definition not be as greedy as the ones who leave. Bankers have always been a hugely overpaid bunch. Let the job market now adjust to a more reasonable equilibrium in this new reality.

And finally, if you read nothing else on this issue, then read this. Paul Wilmott demolishes the argument that bankers are properly incentivised in this article.