No Debt Ceiling, Never leave Debts for future generations, Will Singapore default debts?

 

No Debt Ceiling, 

Never leave Debts for future generations,

Will Singapore default debts?  

[Debts involve investment risk, even if it is guaranteed by the government.  This is especially true when investments and risks are lacking in transparency, not disclosed.  And as Lawrence Wong reminds us ‘things can happen very quickly’. So do investments and risks. ]    

In principle, Singapore will not face the debt ceiling problem like the US.  Government will issue more bonds, securities when we have more CPF monies, and more revenues. 

We also operate a balanced budget and most importantly, the government insists on no debts for future generations.  So, it is very unlikely the government will default on debts, especially CPF monies.  

Government  issues different kinds of securities as debts.  These debts also obtain very high credit ratings.   However, they are involved in different types of investments. 

All investments involve risks and risks are related to returns.  MAS and GIC have low risk preference while Temasek involves higher risk and higher return. No one can guarantee a zero risk investment, even if you put money in a bank.

If you hold US$ securities, or place money in a US bank,  there are risks.  The recent debt ceiling or bank bankruptcies show the potential risks. Not to mention, FTX or other cryptocurrencies or high tech investments.   

So, there is a potential risk that our investments face.  This is particularly true when there is no transparency, no check and balance. 

One way to avoid default is to raise tax, cut subsidies, welfare, extend retirement age, and cut pension benefits.  This is what the Western European countries do, like the recent happening in France.  

Singapore did the same things on a smaller scale, CPF withdrawal age, GST, less medical subsidies, tuition fees...  

Lawrence Wong reminded us that things can happen very quickly in politics.  In the financial world, things can happen even faster than politics, just look at the bank bankruptcies.   

We may not see debt default in Singapore.  In return, we will likely see more increases in taxes, fees, expenses, but less medical, social benefits.   And we  don’t know whether this is due to investment risks or a balanced budget.