It is a nice gesture to receive some money from the government. They say that it is a social move, to share the fruit of our labour with Singaporeans and the reason is a benevolent one.
I believe however, it also doubles up as a weapon of economic defence.
When a country starts to take moves such as raise taxes, cut spending or goes into austerity, it sends a very loud signal that this country is in trouble. Maybe it has run out of money and needs help.
In the world of investment and trading, there exist a species of traders that thrive on bad news. These are the short-sellers. They attack a company, a country or a currency by shorting the product and feed the market with even more bad news. The lower the prices go, the better for them.
Singapore protects against shorting activity through various means:
- We do not disclose the full assets of GIC and Temasek
- Through strong PR; we’re seen as a wealthy, stable country
- Through good debt servicing, such as the AAA ratings we currently enjoy.
So now, we’re telling the world that we are going to increase GST and there is only one reason why a country would want to raise taxes: it is struggling. If you’re a short-seller, this is news you can really use.
To combat the risks of attacks on our currency, we’re doing these things:
- Raising the taxes incrementally
- Raising them over a course of 7 years
- Not raising them immediately
At the same time, we have money to give every single citizen. Between $100 to $300 for all 3 million of us, all thanks to a budget surplus. That’s an even stronger signal that this country is not in trouble, in fact, it is the mirror opposite – we’re strong, stable and secure, put your investments here!
On that point, the country is not in trouble… if we take defensive actions. If you know that your health will be deteriorating in the next 20 years (and chances are it will), won’t you want to shore up money and buy lots of insurance today?
That’s exactly what the administration is doing.
Healthcare costs are going to increase, very obviously because we are elderly heavy. The country is well equipped for the near future, and is taking normal steps to prepare for the distant future. It is nothing more than an average decision for a policymaker on an average day. Except the consequences are anything but average.
So whilst you’re enjoying your Ang Bao money, it is worth a think about how this money impacts the nation and how it has defended the country from speculation.