Too Big To Fail

"The Treasury, the Federal Reserve and the FDIC said the federal government would guarantee roughly $300 billion in losses at Citigroup on its troubled assets and inject $20 billion more into the bank. That new capital injection was on top of the $25 billion given to Citigroup weeks ago as part of the $700 billion bailout passed by Congress in October. "- CNN

Citigroup as the fourth-largest bank in America and empoly over 300,000 workers is considered a financial giant that is "too big to fail" by government. Failing of such a big instituion will have negative repercussions not just on those employed by Citigroup but the economy as a whole. In times of financial crisis, loan freeze and groomy economic out-look, government must minimize any risk that will further dampen the economy. However, there are opposing voices from the tax payers, questioning government about "bailouts" to "those who cause the problem-namely the bankers". Furthermore, will this act of government bailout and rescue plan further increase moral hazard by other banks to take on excessive risk??

It is a necessary decision for the government to enact this rescue plan amist political unfavoritism on ths side of tax payers but it is a measure that must be taken to prevent the crisis to snowball further into a deep depression. The most important thing to do now is to boost investor and consumer confidence to the pre-financial crisis level but it is a tough thing to do as people are worrying about retrenchment, cutting down on consumption, employers are more careful about employing new workers, investors are doubting when the stock market will improve and even banks are more careful on loans, leading back to insufficient funds for prospective investment that may give the economy a boost. A look at the recent news will further paint a gloomy economic outlook- with paycuts for civil servants in Singapore and the fearful picture of ten of thousands of fresh graduates in China applying and fighting for the limited bank job opening of about 1000 position and willing to take up salary of as low as S$600. I guess the worst have yet to come as the snowball gets larger.

Reference:

http://money.cnn.com/2008/11/24/news/economy/bush_treasury_statement/index.htm

http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm?postversion=2008112411

COE at $2 !!

Result of COE open bidding for November 2008 is stunting. COE price for Cars (1600 cc and below) dropped from the usual 10k+ to $2!! Maybe Singaporean already feel the impact of a recession and cutting back on consumption and luxuries. Retrenchment of staff from major banks like DBS and Citigroup may have affected ppl's confidence on their job security and this further lead to lower consumption. As mutiplier K can be said to aid in a mutiplier effect in times of boom leading to economic growth and GDP to increase, like wise in times of recession, it will have its regressive effect. Few weeks ago, Mr Goh urge Singaporean to spend and he use paradox of thrift to show the irony of "saving too much". How long can the domestic driven consumption sustain and cushion our economy? We will see when the big wave hits us.

Parted

She's been with me since I was undergoing NS, she accompanied me till I ORD and followed me into my uni-life. Can't forget the times i spend alone with her. The wonderful memories and numerous fun moments she gave me. It's sad and I am feel quite unbearable when I have to let her go... I play with her one last time before I send her away far away to the game shop. Yup... I finally sold my sony ps2.