Saturday, November 22, 2008

Time Will Heal

The world is soaked in a gloomy mood as economic crisis looms.

The people are urging the Singapore government to extend help to the poor, the businesses and the sandwich class - practically everyone is yelling for help. This is not surprising considering the sharp downturn since September. Giants such as Lehman Brothers and AIG have collapsed or are being nursed, leaving every other person feeling jittery.

The Prime Minister said earlier this week that the 2009 Budget will be advanced by one month to January. All eyes will be watching if they will get what they wish for. Just like previous budgets during bad times, I do not expect a happy ending for everyone. One has to be realistic - the government can only give out so much.

I was at our Dinner and Dance last week. I would not say that it was extravagant in any way but the event gently nudged me to feel out of sync with the somewhat cheerless mood outside the ballroom. The party was planned way before the dark clouds were imminent. Otherwise, I believe that there might not be one considering the thick air of pessimism at the moment.

When the Development Bank of Singapore (DBS) retrenched 900 of its workers, it started the wave of jobs cutting. Despite the unhappiness of the Workers' Union, more employers are expected to do the same. 2 days ago, Neptune Orient Lines (NOL) said that they will axed 1,000 jobs. Looks like the party has started.

Else where in the world, companies take turn to announce their job cutting measure. US bank Citigroup group has just announced plans to axe about 52,000 new jobs, on top of 23,000 cuts already made in April this year.

In Croatia, the government has banned Christmas and New Year parties in the public sector because of the global financial crisis. Japan's economy has entered its first recession since 2001 and the eurozone also officially slipped into recession since it was launched in 1999.

Companies on the brim of bankruptcy are looking to their government to render help. General Motors, Ford and Chrysler are having some breathing difficulties and it is unclear if the US government, after spending US$700 billion to save the banks, will dish out more money to help the motor industry.

Some economists are arguing against government bailout as that will bring greater damage to the recession. Economic recession is a 'natural cleanser' to weed out weak companies. Companies in dire situations will be forced to reorganize and the winners will come out of recession stronger and the rest will be history.

Spending taxpayers' money to bail out badly run companies will not benefit the economy in the long run. Such government intervention will only delay the much needed 'healing process'.

Companies are not the only ones struggling.

Iceland, with its economy heavily dependent on the banking sector, is on its way to bankruptcy unless other economies come to the rescue. Feeling disappointed that 'old friends' such as UK and US are not willing to help, Iceland turned to Russia. When Iceland sought US$6 billion loan from Russia, many were nervous that Russia might be planning to "buy Iceland or good money". After weeks of delay, the International Monetary Fund (IMF) finally agreed to deliver a financial package to rescue the North Atlantic nation.

No one knows exactly when the dark clouds will be blown over. In a longer term, many believe that the current crisis will end after some kinks in the global economic fundamentals are ironed out.

They always say, 'time will heal'. Meanwhile, you just have to grit you teeth.

Stumble Upon Toolbar

No comments: