Financial End Game Part 1

I'm going to attempt tackle the issue of the current Financial Crisis and how it relates to Singapore & the mis-steps by the ruling party in 2 parts.

I am by no means a financial guru, but will attempt to explain in layman terms, what led to this crisis and how whether the solutions presented by our ministerial talent will help save the Singapore.

This part pertains to the issues that led to the current situation

The issues that compound and create a MEGA financial crisis (Fiat Currency) and the OVER-export of manufacturing capability by developed countries.

Early economic systems was based on a simple premise- the more you could produce and export, the better off you were. Simply translated, if your country could outproduce and outexport your competition- you were the financial power of the age.

The current Financial Crisis, as initiated by the sub-prime debacle is exerbated by the existance of fiat money. Fiat money or fiat currency is defined by wikipedia as:

Fiat currency (fiat money) is money that exists because an authority or custom declares it to be money. (From the Latin fiat, which means "let it be done"). It achieves value because a government requires it in payment of taxes and says it can be used to pay debt or buy goods and services and because people trust that the value of the currency will be reasonably stable.

Turn the clock back 80 years and HYPERINFLATION was the financial crisis of the world war I era. In essence, countries simply PRINTED MORE MONEY to fund the war effort for the first war, a problem compounded by the fact that the government did not take responsibility for the fallout of such irresponsible failure.

The solution to this mess in the early 20th century was the Bretton-Woods system were basically each US dollar was pegged to a unit of gold. However by the early 1970s, the system had to be abandoned because the federal reserve had printed more money than they had gold to back each dollar printed.

In short: Fiat currency i.e. current monetary systems have NO REAL VALUE other than what the backers deem it worth. This effect causes greater volatility in the economic boom-bust cycle AND adds to inflation.

What the United States is doing is creating more debt (via Fiat system) to pay off toxic debts. You cannot pay off nothing with even more nothing.

Now, let's take a look at the Production side of the issue: Over Export of Manufacturing capabilities.

Developed countries started to take advantage of economic theory that stated: if you could produce more at lower cost and thus at a lower selling price. You could sell more than your competition by being more competitively priced.

These developed countries, the ring-leader being the U.S. started to shift it's economic engine from one that was more produce and manufacturing based to one that was more services oriented. That is to say, they discovered if you could make something for cheaper in Asia (Singapore at the height of the 5 economic tigers phase and now China circa late 90s), you could make greater profits.

At that point, U.S. economic growth depended on building stores and providing more services to sell products made in factories all over asia. Manufacturing industries in Singapore and the rest of Asia needed more energy and materials for more manufacturing output that would allow Asia to produce more for sale to the developed economies and so America could profit and grow to create more stores and services to sell these products.. ad infinitum - Nothing wrong with the system.

Except that it's unsustainable now because of HUMAN GREED.

The consumerist movement (esp. in the US) of the late 20th century cannot be fed due to it's unseen costs. Products sold today are not sold at the cost of it's real value. It's sold at the ridiculously low costs made possible by countries that with labor practices that DO NOT reflect the true value of work involved. From worker safety to regulation working hours.

Economic theory was meant to reflect the lowered costs from bulk and efficient manufacture, not from cutting corners.

Other hidden costs include raping and overharvesting natural resources in an unrenewable fashion to produce cheap goods for a consumerist culture that buys what it wants rather than what it needs.

Nature is about to undergo it's own "subprime" situation because it's currently financing human beings that cannot possibly repay and replace the loss of assets as taken from Nature. The supply curve is about to be irrepairably warped as developing countries continue to feed the insatiable hunger of the West by overharvesting to produce at cheaper and cheaper costs.