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3 Ongoing Global Developments Singaporeans Should Be Aware Of

Sun Tzu’s Art of War says, when you know yourself and your enemy, you can fight and win a hundred battles. Get informed!

#1: Negative interest rate policy is an experiment, with unknown consequences

If you have been keeping track of the global economy, you would be aware that Europe and Japan have engaged in negative interest rate policy. The simplified rationale being, if you penalize saving, people will spend their money instead, boosting the economy. However what’s the big deal you ask?

Firstly, such policies were considered impossible as recently as a few years ago. Today, two of the largest central banks globally (behind the US’ Federal Reserve) have embraced it. A quick Google search on the subject will yield discussions on both positive and negative consequences. For example, we have already seen some short-term negative market distortions occurring in Japan’s money markets.

Given that interest rates have already been kept so low since 2008 – this is the equivalent of going all-in at the poker table, and signals desperation from central banks. With no historical precedent, no one knows what will actually happen.

The gist is that this has potentially far-reaching and unpredictable consequences. If the USA follows we are likely to see very significant effects locally. Interest rates affect everything in your everyday life (from personal fixed deposits to car loans) so it would be prudent to keep up with everything that’s going on.

#2: Impact of Artificial Intelligence on Future Jobs

You’ve probably heard of AlphaGo, the robot that beat the human world champion of Go. Media coverage of developments in AI has increased substantially in recent years, so most people are aware of this. However, just like in the early stages of Facebook and Apple, the public is generally underestimating the impact this will have on our future.

Again, a quick Google search will yield many discussions on the future impact of AI. While it is unlikely we are going to see a “Terminator” scenario, the common consensus is that AI will displace many workers from their jobs, to varying degrees in different sectors.

Perhaps the most common misconception is that white-collar jobs will be safe from automation. Anyone working in the top investment banks will tell you otherwise, from back office functions (like IT) to front office ones (like trading). Another example is the automation of journalism and data reporting, with machines writing reports that are unrecognizable from human-written ones.

Taking a leaf from the unemployment that occurred during the Industrial and IT Revolution, it would be wise for Singaporeans to not be complacent in their current careers and research on how to better prepare for future changes.

#3: Every major city has been facing Singapore’s current economic issues

The 2015 elections brought the grievances of disgruntled Singaporeans to the surface – some big issues being income inequality, foreigners taking our jobs, public transport and insanely high property prices. The irony is that the source of pride of many Singaporeans – that we live in a first-world developed city-state – is also the reason why we face such these problems.

Property: Because of Singapore’s stellar reputation as a first-world city that is very business-friendly, real estate here has been a top consideration for foreign investors in recent years. Also, historically low interest rates since the 2008 crisis have enabled people to take on increasing amounts of credit to purchase assets such as property. However, this has happened in not just Singapore, but in major cities like New York, Hong Kong and London.

Income inequality: Easy credit conditions have basically reflated all asset prices since 2008, thus we have seen a multi-year bull market in stocks, property and so on. These are all assets that would see substantial capital appreciation for richer well-placed investors, enlarging the gap between the have and have nots.

Immigration: By opening up to foreign talents, the overall economy benefits but the unfortunate consequence is that some local workers will be made less employable. Again, this is not limited to just Singapore, but almost every major city. The difference is how the respective governments balance out overall growth with local workers’ interests.

The common theme exhibited is that life is getting less comfortable for the middle class globally, not just in Singapore.

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