View Full Version : Household debt manageable
24 Oct 2013 08:50 by BY CAI HAOXIANG
[email protected]
SWISS bank Credit Suisse waded into the debate over Singapore's household debt yesterday, taking the side of those who argued that the sharp rise in borrowing over the last five years was not a big deal.
This is because at the macro level, households are wealthy enough to pay off their debt with liquid assets and shares in the event of an economic shock. Moreover, a Credit Suisse survey of 300 locals found what the government had also noted: the proportion of households that might have overstretched themselves is small, and households with higher debt burdens are richer to begin with anyway.
Household debt manageable: Credit Suisse
"Household balance sheets look to be strong on aggregate," said Credit Suisse economist Michael Wan. He said that while the risk of a household debt crisis is very small, discretionary spending from over-leveraged households might still drop once America tightens its monetary policies and causes interest rates to rise.
Mr Wan's report noted how household liquid assets comfortably exceed total liabilities like house and car debt. Currency and deposits constituted 89 per cent of Singapore's gross domestic product (GDP) in Q2 2013, while household liabilities - mortgages, motor vehicles, credit cards and others - only add up to 77.4 per cent of GDP.
Apart from liquid deposits, households still hold another 48.3 per cent of GDP in shares and securities.
From a cashflow perspective, household incomes are still rising, though not as quickly as the rise in household debt. But the current household debt to income ratio of two times, having risen from a low of about 1.8 times in 2008, still compares favourably with more than 2.3 times in 2000 and more than 2.2 times in the five years following that. "We think that this is still manageable," Mr Wan said.
A Credit Suisse housing survey also found that among respondents with liquid assets of more than $200,000, 23 per cent have mortgage debt service payments above 30 per cent of income. Fewer of those with less cash had a similarly high debt burden. Some 16 per cent of those with less than $200,000 in cash fell into the category of those who pay more than 30 per cent of their income in mortgage service payments.
The market's anxiety with household debt began in July, when various organisations, including UBS, Standard Chartered, Citi and Moody's, warned that low interest rates had led to Singaporeans building up high levels of debt to finance property purchases.
The Monetary Authority of Singapore (MAS) said in July that about 5 to 10 per cent of households might have overstretched themselves beyond what the framework allowed. But MAS board member Lawrence Wong said in Parliament in August that household balance sheets are in good shape and heavy borrowers tended to have above-average incomes, which means they might not necessarily default even if interest rates rose.
In an article in BT this week, property consultant Ku Swee Yong argued that HDB upgraders might be the ones taking on excessive debt to pay for pricey mass-market new launches, and there should be targeted cooling measures to prevent that.
How much can a 44k be in debt?
30% of 44 k = 13,200/12 = 1,100.
Can only buy HDB, so sad.
http://www.stproperty.sg/articles-property/upload/article/140661__1382669028.png
http://eclaunchsg.com/wp-content/uploads/2013/08/TDSR-2-MSR_HDB.png
http://www.buysellinvest.com.sg/wp-content/uploads/2013/06/TDSR-03-580x405.jpg
http://www.homesweethome.com.sg/uploads/1/4/2/3/14239642/6156345_orig.jpg
http://sgmoneymatters.com/news/2014/02/why-is-the-ease-of-total-debt-servicing-ratio-tdsr-restriction-disappointing/
http://sgmoneymatters.com/news/wp-content/uploads/2014/02/mas-tdsr-press-release-2014-02-10.pdf
hate ABSD, TDSR! :simmering::simmering::simmering:
hate ABSD, TDSR! :simmering::simmering::simmering:
u wont be hating it if in 12mths int rate spikes ..... u might think heng ah!
u wont be hating it if in 12mths int rate spikes ..... u might think heng ah!
Maybe you can share what is the chance of the interest rate spike.
You think Japan will have interest rate spike.
http://www.richdad.com/Resources/Rich-Dad-Financial-Education-Blog/May-2014/japans-extraordinary-monetary-experiment.aspx
Against this very troubling background, the BOJ launched its extraordinarily aggressive program of fiat money creation at the end of 2012. It announced that it would create about Yen 60 – 70 trillion (the equivalent of roughly $600 -700 billion) a year for two years, thereby doubling the monetary base.
This program is similar to the Fed’s program of Quantitative Easing, but it is three times larger relative to the size of Japan’s economy than the Fed’s program was (at its peak) relative to the size of the US economy.
The BOJ uses the money it creates to buy Japanese government bonds. By the end of this year, it is expected to own Yen 190 trillion worth of Japanese government bonds or 16% of the total.
The BOJ’s policy clearly boosted Japan’s economy during 2013. The creation of so much fiat money caused the Yen to depreciate by 30% by the end of 2013. The weaker Yen improved the export earnings and profits of Japanese corporations, and thereby fuelled a stock market boom.
The Nikkei rose 60% in 2013. Higher stock prices created a wealth effect, which, combined with some fiscal stimulus last year, brought about a nice pick up in GPD growth, which accelerated to 4% during the first half of the year.
phantom_opera
05-05-14, 06:45
what spike? low interest rate is here to stay ... get used to it
Ha ha ha! The usual rumour-mongering and scaring tactic to scare you all out of borrowing money to earn more money! :p
Low interest rate is here to stay for a LONG LONG TIME! Too bad that many people will not be able to take advantage of it because of ABSD, TDSR, SSD! :beats-me-man:
what spike? low interest rate is here to stay ... get used to it
phantom_opera
05-05-14, 08:19
Ha ha ha! The usual rumour-mongering and scaring tactic to scare you all out of borrowing money to earn more money! :p
Low interest rate is here to stay for a LONG LONG TIME! Too bad that many people will not be able to take advantage of it because of ABSD, TDSR, SSD! :beats-me-man:
TDSR pushes some to offshore loans
Banks outside S'pore not obliged to report to credit bureau here
Borrow in YEN and hedge with interest rate swap :rolleyes:
6 mths. post tapering end which puts it at sometime end 2015.
"The central bank added that it would keep interest rates near zero for a "considerable time" after its bond purchases end. But in response to a question at the press conference, Yellen said that a "considerable time" could be as short as six months."
http://money.cnn.com/2014/03/19/investing/stocks-markets/
Ha ha ha! The usual rumour-mongering and scaring tactic to scare you all out of borrowing money to earn more money! :p
Low interest rate is here to stay for a LONG LONG TIME! Too bad that many people will not be able to take advantage of it because of ABSD, TDSR, SSD! :beats-me-man:
yeah u are the joker that would laugh when people go bankrupt from blindly over leverage. then u want to move in hope can catch durian ? profit from other people demise?
typical.
i have 2 questions:
when recession
1) does value of assets increase, no change, or decrease ?
2) does value of debts increase, no change, or decrease ?
i have 2 questions:
when recession
1) does value of assets increase, no change, or decrease ?
2) does value of debts increase, no change, or decrease ?
the other important question is in Recession would the person be laid off? Will can still afford the repayment of the debt?
6 mths. post tapering end which puts it at sometime end 2015.
"The central bank added that it would keep interest rates near zero for a "considerable time" after its bond purchases end. But in response to a question at the press conference, Yellen said that a "considerable time" could be as short as six months."
http://money.cnn.com/2014/03/19/investing/stocks-markets/
Watch the video and tell me it is not true.
Hidden Secrets Of Money
https://www.youtube.com/watch?v=DyV0OfU3-FU
Why would people go bankrupt by leveraging? How do you define "over leveraging"? You think people cannot deal with their financial business? May be you are the only one who can't? If so, please put all your money in custody with govt, don't need to expect other people to do the same. :tsk-tsk:
And for all we know, Olam is one of the most heavily leveraged company (in the world I have ever come across) and yet Temasek is trying to take-over it! Tell them: "don't leverage! Else will go bankrupt!"? :rolleyes:
yeah u are the joker that would laugh when people go bankrupt from blindly over leverage. then u want to move in hope can catch durian ? profit from other people demise?
typical.
Everyone have a choice, leverage or work pass 65. If you cannot help yourself the government will help you to work pass 65.
What Are Your Views on Extending Re-employment Age Beyond 65?
https://www.reach.gov.sg/YourSay/DiscussionForum/tabid/101/mode/3/Default.aspx?ssFormAction=[[ssBlogThread_VIEW]]&tid=[[15245]]#top
Why would people go bankrupt by leveraging? How do you define "over leveraging"? You think people cannot deal with their financial business? May be you are the only one who can't? If so, please put all your money in custody with govt, don't need to expect other people to do the same. :tsk-tsk:
And for all we know, Olam is one of the most heavily leveraged company (in the world I have ever come across) and yet Temasek is trying to take-over it! Tell them: "don't leverage! Else will go bankrupt!"? :rolleyes:
http://www.scmp.com/news/hong-kong/article/1311915/2008-financial-crisis-led-surge-suicides-international-study-finds
2008 financial crisis led to surge in suicides, international study finds.
5,000 more globally killed themselves in wake of lay-offs, study finds.
But in Asia there were around 1,600 fewer suicides than expected, according to the research, released yesterday by medical and educational institutions from Hong Kong, Taiwan and the UK.
Paul Yip Siu-fai, of the University of Hong Kong's Centre for Suicide Research and Prevention who took part in the study, said the findings appeared to be linked to rising rates of unemployment caused by the financial crisis.
Published July 23, 2013
5-10% borrowers over-leveraged on property purchases: MAS
By
Siow Li Sen
THE Monetary Authority of Singapore (MAS) is concerned about Singaporeans over-extending themselves with property loans.
If mortgage rate were to rise by 3 percentage points, proportion of borrowers at risk could reach 10-15 per cent, from estimated 5-10 per cent now who are already over leveraged on their property purchases, MAS said on Tuesday.
Singapore's banking system remains sound and local banks have strong financial positions, are well capitalised with prudent provisions against loss, said Ravi Menon, MAS managing director.
"They have healthy buffer against property price reductions. Average housing loan-to-value ratio in banking system is just under 50 per cent," he said.
"It is household sector we are concerned about," he said.
At aggregate level, household balance sheets are resilient. Cash and deposits exceed household debt.
"But the health of balance sheet is not uniform across all households," said Mr Menon.
"Many households could have over-extended themselves, fueled by low interest rates and stretched loan tenures," he said.
"It is so tempting and easy to borrow when interest rates are so low," he said.
A vast majority of mortgage loans in Singapore are on floating rate packages, which means households will face higher monthly repayments when interest rates normalise.
MAS estimated 5-10 per cent of borrowers have probably over leveraged on their property purchases, which is defined when they have total debt service payments at more than 60 per cent of their income.
Last month, MAS introduced the total debt servicing ratio framework where a borrower's total monthly debt payments must not exceed 60 per cent of monthly income.
When a 44K can borrow 1.8 million that is over over leverage.
But MAS never tell you he is only 60 % LTV.
They chose to tell you what they want you to know.
http://www.scmp.com/news/hong-kong/article/1311915/2008-financial-crisis-led-surge-suicides-international-study-finds
2008 financial crisis led to surge in suicides, international study finds.
5,000 more globally killed themselves in wake of lay-offs, study finds.
But in Asia there were around 1,600 fewer suicides than expected, according to the research, released yesterday by medical and educational institutions from Hong Kong, Taiwan and the UK.
Paul Yip Siu-fai, of the University of Hong Kong's Centre for Suicide Research and Prevention who took part in the study, said the findings appeared to be linked to rising rates of unemployment caused by the financial crisis.
Road crossing also can get you killed.
Asians are generally very very much leveraged on properties than westerners!
The fact that there are fewer suicides in Asia means it has nothing to do with being leveraged!
May be the Westerners should believe more in owning properties and leveraging and they will have less suicides (which is the result of no money in pocket and no property and still have to pay rent (they like to rent))! :tongue3:
http://www.scmp.com/news/hong-kong/article/1311915/2008-financial-crisis-led-surge-suicides-international-study-finds
2008 financial crisis led to surge in suicides, international study finds.
5,000 more globally killed themselves in wake of lay-offs, study finds.
But in Asia there were around 1,600 fewer suicides than expected, according to the research, released yesterday by medical and educational institutions from Hong Kong, Taiwan and the UK.
Paul Yip Siu-fai, of the University of Hong Kong's Centre for Suicide Research and Prevention who took part in the study, said the findings appeared to be linked to rising rates of unemployment caused by the financial crisis.
So, those idiots will tell you that it is the right of the govt to set law to ban you from crossing the road otherwise you WILL get SURE killed hence they are just pre-empting! :banghead:
Road crossing also can get you killed.
Tdsr ratio... u are still paying artifical high interest rate to BANK n enrich those GREEDY bankers as you cannot refinance as you bt previously. . No different. ..
Tdsr ratio... u are still paying artifical high interest rate to BANK n enrich those GREEDY bankers as you cannot refinance as you bt previously. . No different. ..
Any interest you pay are called High because the money your borrow from the Bank was created by them.
Would you like to borrow money from me and I just create it and loan it to you with interest.
It is more important how you manage the money you get from the bank than the interest you are paying.
If you cash out like the America and spend it instead of invest it, than that is going to killed you sooner or later.
If you pay 3% and inflation is 6% are you better off or worst off.
So, those idiots will tell you that it is the right of the govt to set law to ban you from crossing the road otherwise you WILL get SURE killed hence they are just pre-empting! :banghead:
perhaps u donno there are jay walking laws. :cool::cool::cool:
Asians are generally very very much leveraged on properties than westerners!
The fact that there are fewer suicides in Asia means it has nothing to do with being leveraged!
May be the Westerners should believe more in owning properties and leveraging and they will have less suicides (which is the result of no money in pocket and no property and still have to pay rent (they like to rent))! :tongue3:
In case u had ur head in a hole when Lehman crashed. i can't help educate you.
Given that you have no brain to think and delve deeper in the real reason of Lehman collapse, I can't educate you too.
The real reason is more than what has been portrayed about property loans which you are referring to........... :o
In case u had ur head in a hole when Lehman crashed. i can't help educate you.
Given that you have no brain to think and delve deeper in the real reason of Lehman collapse, I can't educate you too.
The real reason is more than what has been portrayed about property loans which you are referring to........... :o
Well given u are blinded and cannot tell the effect of the crash either. Its a waste of time to even educate u.
The effect of the crash?
What is the effect of the crash when CLOBS closed?
What is the effect of the crash due to scams and pony scheme like Pan Electric, Enron etc?
What is the effect of the crash because of tulip maniac?
Most importantly, Lehman fell not because of genuine property deals, and please don't try to implicate that for causing Lehman to fall! :doh:
Well given u are blinded and cannot tell the effect of the crash either. Its a waste of time to even educate u.
The effect of the crash?
What is the effect of the crash when CLOBS closed?
What is the effect of the crash due to scams and pony scheme like Pan Electric, Enron etc?
What is the effect of the crash because of tulip maniac?
Most importantly, Lehman fell not because of genuine property deals, and please don't try to implicate that to Lehman falling! :doh:
here I help u google. I feel charitable this morning. :D:D
Lehman's final months[edit]
In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was apparently a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and decided to raise $6 billion in additional capital.[6] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.[6] In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.[6]
So With the credit being pull how many families lost their home becoz they cannot pay the mortgage ? how many people was over extended credit they should not be getting and all of the sudden the credit got pulled and was foreclosed?
Popularity of Subprime Mortgages
What is a subprime mortgage? The “prime” interest rate is a rate established in the financial sector that banks are charged on loans. Many banks establish mortgage rates related to the prime rate, such as prime plus 2%, or some similar margin. Subprime mortgage loans are those for which the interest rate for consumer borrowers is higher than the prime rate, and it means the borrowers have higher payments and causing the loans to be .
What does this have to do with Lehman’s failure?
These and other factors trickled both up and down in the financial industry. Lenders and consumers were affected; however, the industry as a whole, including investors, correspondent institutions to mortgage lenders, stocks based in real estate, felt the ripple of the decline in property values and shortfalls in mortgage loan repayment.
Ha ha ha! Just because you can google makes you smart? Please read carefully, the real cause of Lehman crisis - it is not about proper mortgage loans! Proper mortgage loans will never result in Lehman crisis! :rolleyes:
here I help u google. I feel charitable this morning. :D:D
Lehman's final months[edit]
In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was apparently a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and decided to raise $6 billion in additional capital.[6] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.[6] In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.[6]
So With the credit being pull how many families lost their home becoz they cannot pay the mortgage ? how many people was over extended credit they should not be getting and all of the sudden the credit got pulled and was foreclosed?
Popularity of Subprime Mortgages
What is a subprime mortgage? The “prime” interest rate is a rate established in the financial sector that banks are charged on loans. Many banks establish mortgage rates related to the prime rate, such as prime plus 2%, or some similar margin. Subprime mortgage loans are those for which the interest rate for consumer borrowers is higher than the prime rate, and it means the borrowers have higher payments and causing the loans to be .
What does this have to do with Lehman’s failure?
These and other factors trickled both up and down in the financial industry. Lenders and consumers were affected; however, the industry as a whole, including investors, correspondent institutions to mortgage lenders, stocks based in real estate, felt the ripple of the decline in property values and shortfalls in mortgage loan repayment.
Ha ha ha! Just because you can google makes you smart? Please read carefully, the real cause of Lehman crisis - it is not about proper mortgage loans! Proper mortgage loans will never result in Lehman crisis! :rolleyes:
wah lau.. did I sat Lehman crisis is cause by people going bankrupt? since u are at it. can u tell me what is proper mortgage loans? isn't TDSR suppose to also to ensure proper mortgage loans too? I am pointing out the fact a Lehman event will have on the lay person that are over leverage. with int spiks and dropping prop prices and possible joblessness. You are so quick to encourage people to over leverage. Why leh? u hoping people demise can bring u opportunity?
it only show how myopic n selfish you are. :axekiller: :axekiller: :axekiller:
TDSR?
TDSR suka suka 60%?
They suka suka LTV only 80%, then suddenly 60%, then suddenly changed to 50%? :tongue3:
They can't make up their mind what is the required sum to be on the safe side and keep changing goal-posts along the way? :rolleyes:
By the way, LTV still 90% for HDB? Why not 80%? :tongue3:
can you tell us your understanding of "sub-prime loans"? Then you will understand the opposite of "sub-prime loans" is proper mortgage loans! :samurai-killa:
wah lau.. did I sat Lehman crisis is cause by people going bankrupt? since u are at it. can u tell me what is proper mortgage loans? isn't TDSR suppose to also to ensure proper mortgage loans too? I am pointing out the fact a Lehman event will have on the lay person that are over leverage. with int spiks and dropping prop prices and possible joblessness. You are so quick to encourage people to over leverage. Why leh? u hoping people demise can bring u opportunity?
it only show how myopic n selfish you are. :axekiller: :axekiller: :axekiller:
TDSR?
TDSR suka suka 60%?
They suka suka LTV only 80%, then suddenly 60%, then suddenly changed to 50%? :tongue3:
They can't make up their mind what is the required sum to be on the safe side and keep changing goal-posts along the way? :rolleyes:
By the way, LTV still 90% for HDB? Why not 80%? :tongue3:
can you tell us your understanding of "sub-prime loans"? Then you will understand the opposite of "sub-prime loans" is proper mortgage loans! :samurai-killa:
bro, why bother? to a moron, 1+1 never equals 2
TDSR?
TDSR suka suka 60%?
They suka suka LTV only 80%, then suddenly 60%, then suddenly changed to 50%? :tongue3:
They can't make up their mind what is the required sum to be on the safe side and keep changing goal-posts along the way? :rolleyes:
By the way, LTV still 90% for HDB? Why not 80%? :tongue3:
can you tell us your understanding of "sub-prime loans"? Then you will understand the opposite of "sub-prime loans" is proper mortgage loans! :samurai-killa:
when was is 50%? u suka suka luan piew. I wonder who suka suka here.
Maybe can u them me what is the cause for foreclosure?? u cannot answer u want to ask me a question? LOL!!!!
bro, why bother? to a moron, 1+1 never equals 2
Here come the 2nd Stooger!!!!! WELCOME! ur friend very lonely without u!
for u 1+1 = 11! which every way u want to twist it!
like flip prata
can you tell us your understanding of "sub-prime loans"?
when was is 50%? u suka suka luan piew. I wonder who suka suka here.
Maybe can u them me what is the cause for foreclosure?? u cannot answer u want to ask me a question? LOL!!!!
TDSR?
TDSR suka suka 60%?
They suka suka LTV only 80%, then suddenly 60%, then suddenly changed to 50%? :tongue3:
They can't make up their mind what is the required sum to be on the safe side and keep changing goal-posts along the way? :rolleyes:
By the way, LTV still 90% for HDB? Why not 80%? :tongue3:
can you tell us your understanding of "sub-prime loans"? Then you will understand the opposite of "sub-prime loans" is proper mortgage loans! :samurai-killa:
can you tell us your understanding of "sub-prime loans"?
Can you tell me the impact of the Lehman Crisis on over leverage folks?
Who is over leveraged?
Those with 80% LTV proper property loan is NEVER over leveraged! :tongue3:
Can you tell me the impact of the Lehman Crisis on over leverage folks?
Who is over leveraged?
Those with 80% LTV proper property loan is NEVER over leveraged! :tongue3:
Yeah but at what entry price they went in verses those today? And what make u who sure these group of 80% don't have people the keep rolling their credit card ? N multiple house loans?
So can u tell meh what's the impact of a Lehman event have these folks ?
You are telling us that these people can't manage their finances?
And this is different from Lehman who was dealing with sub-prime mortgage loans! And you haven't figure out what is "sub-prime mortgage loans"? :rolleyes:
Yeah but at what entry price they went in verses those today? And what make u who sure these group of 80% don't have people the keep rolling their credit card ? N multiple house loans?
So can u tell meh what's the impact of a Lehman event have these folks ?
You are telling us that these people can't manage their finances?
And this is different from Lehman who was dealing with sub-prime mortgage loans! And you haven't figure out what is "sub-prime mortgage loans"? :rolleyes:
LOL!!! u are contradicting yourself if they can manage their expense they wont be in that situation.
So can you tell me what is the impact of Lehman event on thses people? keep dancing ard. ?
20131020 世纪大讲堂 日本泡沫经济溯源与启示
15年来中国最有价值的电视节目
https://www.youtube.com/watch?v=zvYOxEkxYd4
Not all Bubbles are Bubble, Not all Loan are Sub-prime Loan.
empty vessels make the most noise
Japan's bubble economy traceability and Inspiration
After World War II, after the Japanese full advantage, the use of the international context of the Cold War, creating a long-term economic growth miracle, and quickly became the second largest economy behind the United States in the world. After the second half of the 1980s to the early 1990s, was the turning point of Japan's economic development. Stocks, real estate and other asset prices rose sharply and severely abnormal expansion of Japan's bubble economy to generate rapid and continued expansion during this period. However, a sudden burst of the bubble economy, not only caused a drastic shrinking of assets and non-performing loans of financial institutions increased rapidly, and hit the real economy in Japan, resulting into a stagnant economy, companies going bankrupt, unemployment rising, consumer inflation and a serious shortage and so the vicious cycle of tightening various contradictions among intertwined. Weakness in the Japanese economy unbearable economic development from the peak hit bottom, and into long-term depression or recession state, delayed so far.
Particularly serious is that after the collapse of the bubble economy to stimulate economic recovery in the Japanese government's long-established expansionary fiscal policy will not only have little effect, but the resulting fiscal deficit continues to expand, "alligator" effect increasingly prominent sovereign debt continues to expand, more now Humpty risky sovereign debt crisis in Japan planted the seeds. International community in general to fiscal balance and proportion of GDP gross debt to GDP ratio of two indicators to measure a country's sovereign debt, observed since 1985, Japan's sovereign debt changes can be found, since the collapse of the bubble economy, the Japanese government long-term deficits, fiscal deficit as a percentage of GDP continues to improve, except for a few years, but in the late 1990s, this proportion has been maintained at around 6%, which is twice the internationally recognized safety standards. Especially since the rapid expansion of the fiscal deficit in 2009, three years to 411 trillion yen deficit, ¥ 376 trillion and 418 trillion yen, a share of GDP over the same period was 8.73%, 7.81% and 8.93%. Meanwhile, the total value of Japanese government debt is climbing, with an average annual growth of more than 40 trillion yen. 2011 Japan's total debt to nearly 10 trillion yen, accounting for more than 200% of GDP over the same period, have hit record levels, which means that Japan's per capita burden of 7,216,000 yen. High prices lead to Japan's sovereign debt and the global economy will face a huge risk. Currently, Japan became all developed economies, countries with the lowest sovereign credit rating.
Japan's bubble economy and the collapse of the generation is not accidental, but in the ups and downs of the international situation, domestic economic development and long-term existence of the many hidden dangers in the outbreak inappropriate economic policy stimulus.
First, Japan's economic development is the fundamental cause of structural problems generated by the bubble economy
Japan's postwar economic plan adopted mandatory administrative guidance, industrial policy has a strong government-led colors "catch up strategy", while promoting rapid economic development and catch up with other developed countries to achieve the target, the structural problems have become increasingly prominent . Such as over-reliance on external demand, declining industrial competitiveness, corporate ownership structure irrational structural problems in economic development distorts the efficient allocation of resources, resulting in the lack of investment opportunities in the real economy, a lot of capital freed from the real economy and the excessive focus on foam industry. This became the root cause of the bubble economy generates.
1. Too dependent on external demand weakens the ability of Japan to deal with the currency appreciation. The face of limited domestic market demand, Japan has been implemented since the 1970s, "trade nation" strategy to exit the first national policy, external demand led economic transformation. The late 1970s, except for a few years, the contribution of exports to economic growth rate has remained at about 30%. The first half of the 1980s, Japan's dependence on external demand not only rise further, and more dependent on the U.S. market. 1983-1984, Japan's exports to the U.S. by 29.2% and 35.3%, respectively, of its total exports. Japan's trade surplus with the United States continues to expand, is facing trade friction between the U.S. and Japan, the dual problems of deficit and trade deficit is also growing, the United States urged the appreciation of the yen. Reached in September 1985 "Plaza Agreement" forcing the sharp appreciation of the yen. A heavy blow to the long-term appreciation of the yen rely on low-cost and low-cost advantages of Japan's export trade, total exports from the 1985's 41.96 trillion yen fell to 35.29 trillion yen in 1986, 1987 and further dropped to 333,100 yen . Traditional export industries such as textiles, steel and other development severely hampered, and drag the whole economy. Appreciation of the yen led to the recession crisis spread to the whole of Japan.
2 Lack of industrial development goals less hindered technological innovation capacity to enhance industrial competitiveness. With the transition to the international economy, and most of the industry has entered a mature stage of development, has achieved overtake Japan's lost a clear industrial development goals. At the "crossroads" of industrial policy in Japan is no longer active, actively seeking potential industries, enhance industrial competitiveness, but passively, passively relying on export-oriented manufacturing sector has been formed, and form a "competitive The 'one into the industry' supporting uncompetitive 'Jiucheng industry', "the fragile structure. At the same time, technological innovation capability is also increasingly becoming inadequate to enhance industrial competitiveness stumbling block. Japan's industrial performance has been hailed as a technological innovation system in Japan Committee "has continually enhanced dynamic adaptability" is based on "the introduction of technology" basis, while the dependence developed technology is very low. 1980s, with the United States and Europe to catch up with the overall technological level and trade friction intensifies, foreign technology has been unable to meet the supply needs of Japanese technology development. However, the weak support basic research can not get rid of Japanese technology and imported imitation model of technological development, technological innovation can only focus on the medium and low technical level, the lack of high-tech development capabilities. Meanwhile, have a competitive advantage in manufacturing technology and IT because Japan can not properly grasp the development direction or indulge in its own superiority and innovation opportunity missed, resulting in their industry in dire straits.
3. Unreasonable corporate ownership structure distorts the stock price formation mechanism. In the main bank system and major shareholders direct control of the typical characteristics of the Japanese enterprise system to effectively compensate for the post-war Japanese companies a serious shortage of equity capital deficiencies. However, with financing from the early Japanese companies rely mainly on indirect financing to bank loans to stocks, bonds mainly issued a major shift in the way of direct financing, under such a system of corporate ownership structure unreasonable increasingly obvious shortcomings, seriously distorted the stock price formation mechanism.
On the one hand, the trend of growing corporate ownership, improve the ability of the enterprise's share price by mutual agreement. Institutional ownership phenomenon is not unique to Japan, but Japan's corporate holdings percentage since the 1970s has remained at around 70%, the highest among developed countries. Legal ownership of the stock limit the free movement of such corporations as the publisher enough to form a monopoly on the stock market and price manipulation. On the other hand, mutual shareholding structure of the enterprise to reduce the need for monitoring. Japanese companies is to establish a stable multi-shareholding relationship with affiliated companies such as suppliers, vendors for the purpose. According to the Economic Planning Agency survey showed that up to 84.7% of the equity investment enterprises to "closely subsidiaries, affiliates" for the purpose, only 15.3% is to "short-term funds." Corporate cross-shareholdings essentially formed a hostage effect, cross-shareholdings so that each business interests are closely tied together, reducing the need for monitoring, thus greatly increasing the autonomy of managers, resulting in "internal control" for the excessive competition for investment opens the door.
Second, financial reform contributed to the alienation behavior of financial institutions, in order to inflate the bubble economy fueled
Largest bank as the main advantages of traditional Japanese financial system that can optimize the allocation of limited funds. However, due to high long-term economic growth, high savings brought enormous wealth accumulation and rising yen attract large impact on capital inflows, capital of Japan in the early 1980s, it has become abundant by the shortage. The face of weakening business "disintermediation" tendency intensifies and the main banking system, relying solely on bank loans to large enterprises has been difficult to achieve development needs of banks, strictly separate operation also deeply bound banks and other financial institutions in the capital market their fists. At the same time, major Western countries led by the U.S. criticize Japan's exchange rate policy, requiring the elimination of financial control, financial markets open voice heard. Japanese financial openness is imperative.
(1) Financial liberalization became a hotbed of breeding bubble economy. Requires the development of domestic financial institutions and international finance capital requirements under the dual pressure of opening Japan to rapidly launch after 1984 years ago, aimed to achieve "liberalization of interest rates", "financial regulation liberalization" and "liberalization of international capital flows," the financial liberalization and internationalization of the yen. However, overwhelmed by the rapid, multi-domain and unbalanced financial liberalization makes the investment risk and credit risk capital market system gushing out. First, under the accommodative financial environment, the continued appreciation of the yen and the rapid development of the capital market dual stimulation, Japan, many banks and non-bank financial institutions, together with international capital, such as venture capital went into the Japanese stock market and real estate market; Second, liberalization process a variety of free-rate financial products for a lot of money for land speculation in stocks and provide convenience, but also created the conditions for the U.S. and Europe as well as the timing and Japanese companies engaged in financial speculation; Third, financial liberalization has been skating on thin ice in the neglect of the financial institutions establish effective supervision and risk prevention mechanism, which "does not break up" financial liberalization is exacerbated by the expansion of financial risks.
2 bubble economy financial institutions become the most important promoter. For a long time, the Japanese government for financial institutions to implement the so-called "convoy" type of protection, resulting in Japan's financial system has been filled with "Japanese banks will not fail" myth. In this over-protective structure, Japanese financial institutions risk awareness is very weak, a serious lack of effective regulation, the loss of survival of the fittest competition mechanism, the financial industry's pervasive "moral hazard." In the "never fail" confidence, supported by banks and other financial institutions to expand credit blind, in stocks and real estate investments, the most important promoter of the bubble economy.
Third, the government's macro-control policy is the direct cause of the frequent failures and the collapse of the bubble economy generated
The mid-1980s, in response to appreciation of the yen, U.S. economic policy coordination, the Japanese economy began brewing from "external demand led" to "domestic demand-led" major change "export-oriented economic growth model is no longer sustainable, Japan must expand domestic demand. " To this end, Japan adopted a "dual-loose fiscal and monetary" policy mix to adjust the economic growth of the internal structure, external to seek "political power" status. However, due to financial liberalization, internationalization and globalization of business vise effective macroeconomic policy options and adjustment, as well as policy makers and stakeholders to use foam to cover up political corruption and rent-seeking behavior, resulting in excessive expansion in Japan fiscal policy and long-term monetary policy not only failed to achieve the expected, but to the already overheated economy "fuel" directly induced bubble economy.
1 continued to increase gradually implement tax reform and public investment, which greatly stimulated the rise in land prices, encouraged by the enthusiasm of the people involved in financial speculation. Massive public investment, especially in the implementation of the transformation plan metropolitan area, more directly promoted the rise in urban land prices, creating a "land prices will not fall," the "land myth." Meanwhile, the government also continued to reduce personal income tax rates, and even intends to implement up to 4.8 trillion yen in tax cuts in 1987. Under the stimulation of public investment programs and tax reform, financial institutions and ordinary people have followed suit, the land became the main target of speculation, exacerbated by rising land prices.
2 taken in response to yen appreciation and long-term monetary policy exacerbated the bubble formation and expansion. In the late 1980s, Japanese banks continue to lower interest rates, given the official benchmark interest rate from 5% in 1985 down to historically low levels in 1987 to 2.5%, and continued until May 1989. Meanwhile, the Bank of Japan put a lot of money, for four consecutive years since 1986 the average annual growth rate of the money supply remained at around 10%. Japanese government did not expect is that Japan's long-term low inflation did not absorb the "super ease interest rates," and the surge in money supply, resulting in a large excess of free money pouring into the stock market and commodity markets and beyond the real estate market, the bubble economy to generate funds to prepare the conditions.
3. "Hard landing policy" led to the collapse of the bubble economy. Amid the popular stock market and real estate industry, the Bank of Japan in May 1989 suddenly reversed direction of monetary policy, the central bank has repeatedly raise the discount rate, ending more than two years to maintain the "low interest rate" era. Subsequently, the Japanese Ministry of Finance to implement measures to control the total amount of real estate financing in April 1990, and the bank window strict controls. Meanwhile, the government develop "land value tax" in 1991 to curb rising real estate prices and land speculation. This series of stringent fiscal and monetary austerity "were punctured" bubble. Since 1990, with the stock market boom is expected to be reversed, the stock all the way down and hit bottom in 1992. Since then, the price control policy for effective land increasingly obvious, the real estate market prices loose and sharp decline in overall economic contraction in 1992, the collapse of the bubble economy.
Fourth, Japan's bubble economy of the Enlightenment to China
China's current economic situation and the Japanese bubble economy has some similar signs of overheating, such as real estate development, investment overheating, excess money supply and bank non-performing assets is too high; especially in the deeper aspects of the development model and economic structure, there are some similarities place. Whether China will step footsteps of Japan's bubble economy, academia today. Depth analysis of the reasons for Japan's bubble economy generated a comprehensive comparison between China and Japan differ in social systems and economic structures, and learn from the experiences, lessons learned, for China to avoid the pitfalls of great benefit.
1. Seize the opportunity to adjust the economic structure, to achieve development model type from the catching-up to lead the transition. Japan's period of rapid development of old ideas and policies in the highly successful development model, while its inherent flaws did not cause the government enough attention. Indulge in enhancing the economic status of Japan seems to have not realized that the big turning point of arrival. This makes the Japanese economy, "catch-up mode" after the end, not in a timely manner to cultivate their own ability to explore and develop mechanisms to miss the opportunity to put sufficient capital and technological innovation, industrial innovation combine. This is Japan's bubble economy of the most profound lesson.
And the Japanese Similarly, China is also the government-led investment-driven growth model. Despite the economic strength has leapt to second in the world, at this stage China still maintained rapid economic growth in the pursuit of a powerful driving force, but China's development unbalanced, uncoordinated and unsustainable issues are still outstanding, the adjustment of economic structure, change the mode of development has become China economy needed to solve major problems. Especially in the face of increasingly complex international economic situation, and actively improve the capability of independent innovation, accelerate the development of strategic emerging industries will be an important way to achieve development model of catching-up to lead the type of change.
2. Gradual financial liberalization to promote, establish and improve the financial regulatory system. Financial liberalization is a "double-edged sword," complicated international and domestic economic situation can easily affect a country's fragile financial system, and thus the birth of a bubble. Especially in the face of today's turbulent international financial system, financial liberalization hasty in Japan warned us that China's financial liberalization must be gradual, both "broken" and "stand." Only by deepening the financial system, strengthen financial supervision, in order to establish a mature, there is confidence in the financial markets open in order to form a stable banking system based financial system with Chinese characteristics.
3 full play to the role of government regulation of financial markets, a reasonable guide investment flows. Modern economy requires both the role of market mechanisms, but also need the macro state intervention. The Japanese government ignored under the conditions of the market mechanism is not perfect, the blindness of self-regulation of financial markets could bring the bubble economy and the financial crisis. Therefore, we must give full play to the role of government regulation of the financial markets scientific, effective and forward-looking to the situation when the economy is at risk to take full advantage of its potential development, macro-control policies to avoid mistakes. At the same time, the government should guide rational investment, especially pay close attention to investment bubble prone sectors of the economy. Lessons from the Japanese point of view, the investment of luxury consumer goods and speculative sectors most prone to the bubble economy. Thus, in the domestic industrial base is not solid background, the government should adopt macro-control means, through preferential policies to guide the emerging industry and weak industrial investment flows need of funds, such as the high-tech industry, agriculture, etc., to avoid a large number of speculative capital generation.
4. Deepen the reform of the tax system, the healthy development of the real estate market. First, deepen the reform of the tax system, an effective solution to the local government "land finance" dependency issue. Japan's bubble economy, "land-based" financing system has greatly contributed to the expansion of the land bubble. This situation is similar to the Chinese financial authority and powers of local government confined does not match the resources of the land of extreme wealth creation "dependency." China Audit Office published data show that as of the end of 2010, Chinese local government debt balance reached 10.7 trillion yuan, compared Chinese national total land premium income of about 2.9 trillion yuan. And during the "Eleventh Five-Year", the total Chinese local fiscal revenue from land sales in 2006 accounted for 38.9% jumped to 65.9% in 2010. Land not only promote China's local government finance massive debt, and makes real estate there are price rigidity. At the same time, the real estate tax reform is not complete, and so obtain land ownership and transfer of the various stages of efforts to significantly less than the tax benefit due to the rapid rise in property prices. Property wantonly "misappropriating", "enclosure" and investors use leveraged credit funds or financial speculation. Once the real estate bubble continued to accumulate, then bubble "soft landing" of the cost will dramatically increase.
The second is to control land and housing prices are expected to rise. One important reason for the formation of the Japanese real estate market bubble is national land only rise expected. This is expected both from the judgment on the limited land resources, but also for the future growth potential of overconfidence. Once formed and is expected to continue to strengthen the public will lead to a large number of industrial capital from the real economy and the flock of speculative market with high returns, resulting in land and other real estate assets due to the soaring demand, prices rose sharply. Therefore, the government must increase in order to increase the supply of affordable housing construction, control land and housing prices are expected to rise.
(Author: Dean of School of Economics and Management, Wuhan University; World Wuhan University, Department of Economics Ph.D.)
http://theory.people.com.cn/n/2012/0807/c143844-18688392.html
And what can we expect from the empty vessel? :D
20131020 世纪大讲堂 日本泡沫经济溯源与启示
15年来中国最有价值的电视节目
https://www.youtube.com/watch?v=zvYOxEkxYd4
Not all Bubbles are Bubble, Not all Loan are Sub-prime Loan.
empty vessels make the most noise
And what can we expect from the empty vessel? :D
u should know. just knock ur head a few times on the bed post a few times.
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