Saturday, April 30, 2011

Shedding light on vitamin D deficiency

Apr 30, 2011
By Andy Ho

THERE is a story making the rounds that many Singaporeans are deficient in vitamin D, so we had better be popping supplements of it.

A Tan Tock Seng Hospital (TTSH) study published in Clinical Chemistry in 2009 examined the blood levels of vitamin D of locals in the form called 25(OH)D3, or simply 25-D.

Without scientific consensus on the issue, two cut-off points to determine deficiency were used.

The report said that 'the prevalence of vitamin D deficiency... varies from 0-12.5 per cent (at the first cut-off) to 70-100 per cent (at the other cut-off) according to the sub-group examined'.

For example, in the latter instance, 70 to 100 per cent of Malay and Indian females were supposedly deficient in vitamin D.

But up to 100 per cent of Malay and Indian women cannot be deficient in a vitamin that the skin makes in sunlight.

Note that vitamin D deficiency, whichever the cut-off, is always diagnosed using the blood levels of 25-D, the inactive form of vitamin D. Doctors everywhere routinely use its levels as the biomarker of vitamin D deficiency.

But this might be a mistake.

Occurring in a family of related molecular forms, the one made in the skin in the sunlight is called D3. This is transported to the liver, where it changes into 25-D, the inactive intermediate form.

This is then changed in the kidneys into the active form called 1,25-D. Thus, D3 made in the skin becomes 25-D in the liver and 1,25-D in the kidneys.

Importantly, vitamin D is less of a vitamin - vitamins act as helpers of enzymes - and more of a steroid. Though the active form called 1,25-D has powerful steroidal effects, its levels are not measured.

To repeat, only 25-D levels are routinely measured. For example, the Wikipedia entry is typical in baldly asserting that blood 25-D levels are 'the accepted way to determine vitamin D nutritional status'. No reason is offered for this.

It is assumed that the two levels - the inactive 25-D and the active 1,25-D - move in lock-step. That is, a high level of 25-D supposedly means a high level of 1,25-D.

But if this is not so in real life, then low blood levels of the inactive form may not always mean low blood levels of the active steroidal form as well.

In fact, some scientists now argue that if there is a lot of an active end-product - (1,25-D) - in a metabolic pathway, there could be less of its inactive precursor (25-D) in the same pathway.

Here is one way this might come about in the case of vitamin D. In many illnesses, the body produces lots of interferon gamma, an immune substance that helps fight things ranging from bacterial infections to cancers.

Interferon gamma can activate those big white blood cells called macrophages that gobble up germs. Macrophages that have been activated by this interferon are known to produce 1,25-D itself.

Remember this is the activated form of vitamin D and it is a steroid that can have an impact on the body's immune functions.

But while 1,25-D levels may be raised by this mechanism, blood levels of 25-D, the inactive form, are known to be lowered across a whole gamut of different illnesses, from infections to cancers.

This means that there are some circumstances in which low blood levels of the inactive form of vitamin D (25-D) which are routinely measured could co-exist with elevated blood levels of the active form of the vitamin (1,25-D), which are not usually measured.

If so, the TTSH finding that 70 to 100 per cent of some of us may be deficient in (the inactive form of) vitamin D could actually mean that many in this sub-group may well have sufficient levels of (the active form of) vitamin D.

This inference seems far more reasonable, given that the skin makes the vitamin in sunlight, which Singapore has in abundance.

In sum, measuring only one form of the vitamin while ignoring the other form may lead to an erroneous diagnosis of deficiency.

Here is why all this matters: Today, vitamin D supplements are widely advocated as a way to avert a multitude of illnesses. This is because innumerable epidemiological studies have reported 'vitamin D deficiency' across a wide range of conditions, especially auto-immune ones, from diabetes to rheumatoid arthritis.

This 'deficiency' is also supposedly associated with kidney diseases, breast, prostate and colon cancers, as well as heightened risks of infections, from viruses to TB.

Yet this advice to take vitamin D supplements in these illnesses or to prevent them is based on such epidemiological studies that typically look only at the 25-D levels alone and almost never the 1,25-D levels.

What if most conditions associated with 'vitamin D deficiency' were actually correlated with sufficient or a surplus of the active steroidal form instead?

If so, could taking vitamin D supplements as advised raise your blood levels of this steroid? Might this be why people tend to report feeling better with vitamin D pills since steroids can cause some euphoria?

But too much of any steroid might eventually suppress the immune system. If so, could vitamin D supplements be actually harmful in the long run?

This is not scare-mongering either. Instead, this is a wake-up call for doctors who have patients on vitamin D supplements to check their blood levels of the active steroidal form of vitamin D as well.

Better safe than sorry.

[A story to remind us that when using proxy measures, we must remind ourselves that they are only proxies.]

Friday, April 29, 2011

Why the opposition should keep mum about its chances

Apr 29, 2011

GE 2011

By Elgin Toh

SOMETIMES, in politics, it doesn't pay to say what you believe to be true.
It does not follow that you should therefore lie about it - although many people do that. But it helps if you downplay it a little.

What am I talking about?
Let me offer a hypothetical situation.
You are a politician. You go on a talk show and the host asks you for your thoughts on a certain pop singer. A lover of classical music, you happen to absolutely loathe her tacky brand of pop music. What do you do?
Well, you pick something else about her to comment on, such as: 'It's great that she's become a role model for young people who need to know there are many paths to success.'
Now, let me offer a real-life situation.
Many opposition figures have come out to say they expect the People's Action Party (PAP) vote share to fall, perhaps sharply, in the coming General Election.
In the previous general election in 2006, the PAP's vote share was 66.6 per cent.
Some, like Mr Kenneth Jeyaretnam of the Reform Party (RP), have been talking about this for months. In February, he said his party had, during walkabouts, 'witnessed a sea change on the ground'.
More recently, Mr Steve Chia of the National Solidarity Party said on the day Parliament was dissolved that he had seen a 'groundswell of dissatisfaction' with government policies, which would cause votes to swing in the opposition's favour.
Then there is the RP 'suicide squad' challenging Prime Minister Lee Hsien Loong in Ang Mo Kio GRC. On Nomination Day, RP team leader Alex Tan told reporters his team's chances against the PM were '50-50'.
My point here is not that these predictions are wrong. Some may indeed be proven right on May 7. Indeed, most political observers expect the PAP's vote share to dip.
What I am questioning, however, is the wisdom of trumpeting such predictions. Without realising it, they may actually be hurting the opposition's chances.
Sentiment in politics is not analogous to sentiment in the consumer market. In choosing a car, consumers feel assured in picking a popular make or model. It is a sign of reliability. 'All these guys can't be out of their minds, can they?' the buyer reasons.
In Singapore politics, the opposite is probably true. When people begin to doubt the PAP's chances at the polls, many will, ironically, feel compelled to vote for the PAP.
There are a few reasons for this.
For one thing, most Singaporeans cannot even begin to imagine a non-PAP government in power - not least because it has delivered good governance for more than half a century.
Two, none of the opposition parties is ready to govern. Since the 1963 GE, when the Barisan Socialis posed a serious challenge to the PAP, no single opposition party has fielded candidates in more than half the seats, let alone come close to forming a government.

That is not to say, of course, that all Singaporeans will vote for the PAP. Some 30 to 35 per cent of them consistently do not. Those who cross the non-PAP box, however, do so with the assurance that the PAP is likely to form the government despite their votes. Most simply want more checks and balances in Parliament.
PM Lee was probably spot on when he said in a television dialogue two weeks ago that even voters in opposition-held Hougang and Potong Pasir wanted the PAP as the national government.
What does this mean for the opposition?
In the opposition's current state of unreadiness, playing up its chances of making enormous strides is likely to harm them.
Doing so may cause some voters to harbour doubts about one thing: whether the PAP will hold on to power after Polling Day. It has been the consistent wish of most voters, including those inclined towards the opposition, for the PAP to remain in power.
The voter may ask: 'Will a freak result bring about a hung Parliament or even dislodge the PAP? Might property and stock prices take a plunge after Polling Day? I'd better play safe and do my part to prevent that from coming true.'
Indeed, in democracies where voting is not compulsory, political parties have even been known to do the opposite: play up their rivals' chances in order to motivate their own supporters to vote.
During the 2008 Taiwanese presidential election, for example, key Kuomintang (KMT) activists went on talk shows in the final days of campaigning to suggest that internal party polls showed the KMT in danger of losing. KMT's Ma Ying-jeou won with 58.5 per cent.
Voting here is compulsory. But the same logic applies, only to a lesser extent.
Swing voters may well have been thinking about spoiling their votes or casting sympathy votes for the opposition. But talk of a 'sea change' or a 'groundswell' - or worse, a '50-50' chance of unseating the PM - are predictions that may well scare swing voters into voting for the PAP.
If the opposition knows anything about voter psychology, it should change tack. Unless, of course, it is so confident of its appeal it thinks voters would not baulk at a change in government.

Tuesday, April 26, 2011

Warning signs of future asset bubbles

Apr 26, 2011
By Peter C.B. Phillips & Jun Yu

STABILITY in the world financial system is a valuable international public good. Like peace and a stable climate, its benefits are largely taken for granted until they are lost. Legislators, regulators and central bankers are guardians of this public good. Their collective responsibility is to implement standards that preserve it.

Leading financial representatives have sought conditions to promote a stable framework of world banking - beginning with the Basel I Accord of 1988, followed by the Group of 10 and Group of 20 leading economies, and now a wider set of 27 country jurisdictions in Basel III.

The global financial crisis drew attention to the complexity of the task of modern banking regulation and surveillance. The explosion of new financial products, skilful packaging of assets, and creative new trading milieus in the increasingly sophisticated financial industry have left regulators to play catch-up.

Can anything be done to avert such crises in the future? Have the seeds of future crises already been sown, with impending sovereign debt defaults in the European periphery, booming commodity prices, asset price inflation in Asia, and global trade imbalances that pose long-term structural and exchange rate adjustment problems?

Amid this global scenario, central bankers, regulators and policymakers convened in Sydney on March 24 and 25 to discuss Basel III and the future of international banking.

On Thursday next week, Singapore will be the venue for a major financial symposium that will follow up on these themes and explore their relevance in this region. It will convene central bankers, leading commercial bankers, finance industry specialists and academics to discuss the financial future and the role of regulation, governance and central banks in ensuring financial stability.

To avert future crises, many central bankers have expressed concerns about escalating asset prices and indicated the need for more pro-active policy in combating asset bubbles.

Former US Federal Reserve vice-chairman Donald Kohn indicated in a speech last year that 'policymakers should deepen their understanding about how to combat speculative bubbles to reduce the chances of another financial crisis'.

In his Basel III speech, Reserve Bank of New Zealand governor Alan Bollard flagged various tools to help dampen future asset and credit bubbles and maintain the stability of his country's financial system.

In Singapore and Hong Kong, governments have introduced several measures to curb real estate bubbles, including stamp duties and lower mortgage percentages.

An important presumption in this strategy to combat speculative bubbles is that they must be spotted as they emerge, not just after they have collapsed. The common mantra of 'you cannot define it but you know it when you see it' has long been applied to pornography. While this may suffice for obscenity, a quantitative standard of evaluation is needed in the case of financial bubbles. That topic is now an active arena of academic research.

We have developed a statistical diagnostic tool that signals the presence of an asset bubble in data. We used this diagnostic tool to assess evidence of financial exuberance on Nasdaq in the 1990s. That work shows statistical evidence of exuberance 15 months prior to former US Fed chairman Alan Greenspan's December 1996 speech, which famously introduced the term 'irrational exuberance' and flagged an emerging problem.

To illustrate the detection mechanism, we applied the same technology to real estate prices in Singapore.

In the chart, the blue line shows the monthly Singapore Residential Price Index. The green line which tracks market exuberance is derived from the blue line by using a sophisticated statistical tool. The red line is the threshold. When the green line crosses above the red line, the diagnostic test signals the presence of market exuberance.

As shown in the chart, there was real estate exuberance for most of 2007 and 2008 (the first shaded area). Interestingly, some evidence of another bubble emerged in late 2009 (the second shaded area) and was still ongoing in January this year. The latest reports indicate some market softening following the new stamp duty charges and loan to valuation limitations introduced on Jan 14. We expect the empirical effects of these changes to become evident in our test indicator when the data is available.

These diagnostics help predict the temperature of the prevailing real estate market. As the chart shows, in May 2007 we would have been alerted to emergent bubble conditions in real time. A similar alert would have occurred in October 2009.

In this way, the methods provide early warning diagnostics for financial asset bubbles. They may be used by policymakers in timing the measures that are being considered by central bankers to dampen financial asset and credit bubbles.

Peter C.B. Phillips is sterling professor of economics at Yale University and distinguished term professor of economics at Singapore Management University (SMU). Jun Yu is professor of economics and professor of finance at SMU and director of the Sim Kee Boon Institute for Financial Economics. They are co-chairs of the Annual Conference on Financial Economics: A New Global Financial Landscape to be held on Thursday next week.

Monday, April 25, 2011

Teach people to detect baloney online

Apr 25, 2011

By Massimo Pigliucci

IGNORANCE is the root of all evil, according to Plato, who also famously gave us a still-current definition of its opposite: knowledge. For Plato, knowledge is 'justified true belief'. That definition is worthy of consideration as we reflect on the perils of ignorance in the 21st century.

Plato thought three conditions must be met in order for us to 'know' something: the notion in question must actually be true; we must believe it (because if we do not believe something that is true, we can hardly claim that we know it); and, most subtly, it must be justifiable - there must be reasons why we believe the notion to be true.

Consider something we all think we know: the Earth is (approximately) round. This is as true as astronomical facts can be, particularly because we have sent artificial satellites into orbit and seen that our planet is indeed roundish. Most of us (except a lunatic fringe of flat-Earthers) also believe this to be the case.

What about the justification of that belief? How would you answer if someone asked you why you believe the Earth is round?

The obvious place to begin is to point to the aforementioned satellite images, but then our sceptical interlocutor could reasonably ask if you know how those images were obtained. Unless you are an expert on space engineering and imaging software, you may have some trouble at that point.

Of course, you could fall back on more traditional reasons to believe in a round Earth, like the fact that our planet projects a round-looking shadow on the moon during eclipses. Naturally, you would have to be in a position to explain - if challenged - what an eclipse is and how you know that. You see where this could easily go: If we push far enough, most of us do not actually know, in the Platonic sense, much of anything. In other words, we are far more ignorant than we realise.

Socrates, Plato's teacher, famously goaded the Athenian authorities by maintaining that he was wiser than the Oracle at Delphi, who claimed to be the wisest, because he (Socrates), unlike most people (including the Athenian authorities), knew he did not know anything. Whether Socrates' humility was sincere or a secret joke at the expense of the powers-that-be (before said powers put him to death after tiring of his irreverence), the point is that the beginning of wisdom lies in the recognition of how little we really know.

Which brings me to the paradox of ignorance in our era: On the one hand, we are constantly bombarded by expert opinion, by all sorts of people - with or without PhD after their name - who tell us exactly what to think (though rarely why we should think it). On the other hand, most of us are woefully inadequate to practise the venerable and vital art of baloney detection (or, more politely, critical thinking), which is so necessary in modern society.

You can think of the paradox in another way: We live in an era when knowledge - in the sense of information - is constantly available in real time through computers, smartphones, electronic tablets and book readers. Yet we still lack the basic skills of reflecting on such information, of sifting through the dirt to find the worthy nuggets. We are ignorant masses awash in information.

Of course, it may be that humanity has always been short on critical thinking. That is why we keep allowing ourselves to be talked into supporting unjust wars (not to mention actually dying in them), or voting for people whose main job seems to be to amass as much wealth for the rich as they can get away with. It is also why so many people are duped by exceedingly costly sugar pills sold to them by homeopathic 'doctors', and why we follow the advice of celebrities (rather than real doctors) about whether to vaccinate our children.

But the need for critical thinking has never been as pressing as in the Internet era. At least in developed countries - but increasingly in underdeveloped ones as well - the problem is no longer one of access to information, but of the lack of ability to process and make sense of that information.

Unfortunately, colleges, high schools, and even elementary schools are unlikely to mandate introductory courses in critical thinking on their own. Education has increasingly been transformed into a commodity system, in which the 'customers' (formerly students) are kept happy with personalised curricula while being prepared for the job market (rather than being prepared to be responsible human beings and citizens).

This can and must change, but it requires a grassroots movement that uses blogs, online magazines and newspapers, book clubs and meet-up clubs, and anything else that might work to promote educational opportunities to develop critical thinking skills. After all, we do know it is our future.

The writer is professor of philosophy at the Graduate Centre of the City University of New York.


Let GPs handle the poor, and polyclinics the elderly

Apr 25, 2011

Expanding subsidy scheme at GPs would take load off polyclinics

A DECADE ago, the Ministry of Health (MOH) introduced a scheme for elderly patients that allows them to see a general practitioner (GP) in a private clinic, but still pay subsidised po-lyclinic rates.

The idea was to allow the elderly to see a doctor near their home, instead of having to travel to a polyclinic when sick.

It took off slowly, since not many of the doctors running the 1,600 GP clinics wanted to look after such patients. Reasons cited were paper work involved in getting payment from the ministry, and having to prescribe cheaper generic medicines for these patients, similar to those at polyclinics.

However, there are now about 200 GP clinics on this Primary Care Partnership Scheme (PCPS). Last year, 32,000 eligible patients made more than 70,000 visits under the scheme. It appears to be working well, and now would be a good time to expand it to take in more people.

Currently, it is restricted to people aged 65 and older, coming from homes with incomes that place them in the bottom 30 per cent of families - in other words, a per capita income of $800 a month. The disabled from a similar income bracket, and those who are unable to work due to old age, illness or disability and who are thus receiving Public Assistance, are also eligible.

But why restrict it to the elderly and the disabled? There are good reasons to expand it to treat low-income patients across all age groups. This would then free up polyclinics to take care of another category of patients: those with chronic illnesses.

For a start, PCPS can be extended to the family members of an elderly person who is on the scheme. After all, the task of certifying the family income has already been done.

The programme can later be extended to others who fall within that income bracket. This allows low-income patients easy access to affordable health care near their homes. They can also get treatment at night, when polyclinics are closed.

This would also give a boost to neighbourhood GP clinics, which have been complaining of dwindling patient numbers as patients turn to polyclinics or hospital specialist clinics which offer subsidised care. This was raised in Parliament some years back, when it was revealed that more than half of GPs provide aesthetic treatments to bolster their income.

Letting them treat subsidised patients should boost their revenue, and keep the doctors focused on practising mainstream medicine.

Channelling low-income patients to these GP clinics will also give a breather to polyclinics, which have seen their workload go up significantly in the past decade.

In 2000, the 18 polyclinics had a combined number of 2.7 million consultations. Last year, it was 4.3 million - a jump of 1.6 million consultations.

One major reason for the huge, 60 per cent jump in numbers is the changing profile of polyclinic patients. Polyclinics were set up to care for the bottom 20 per cent. Once the bastion of the poor, they are increasingly becoming the bulwark for elderly people with chronic ailments.

In the past, most patients who went to the polyclinics were there for flu and diarrhoea. Today, three of the top four problems seen at polyclinics are high blood pressure, high cholesterol levels and diabetes. These are all chronic ailments which require ongoing care.

Polyclinics have seen the number of patients with these chronic problems go up by 4 to 5 per cent a year. Today, they look after 470,000 such patients.

Many patients with chronic ailments are older, and either have little income or are not working. Cost is a big consideration, which explains why many go to polyclinics which have subsidised rates.

A Singaporean patient over the age of 65 pays $5.20 for consultation at a polyclinic, and only 70 cents for a week's supply of each type of subsidised medicine. These are prices no GP can compete with.

These patients also get very good care at polyclinics. Perennial complaints about long waiting times are being tackled. They are now given appointments so the wait is shorter. For better continuity of care, the polyclinic tries to assign repeat patients to the same doctor, instead of whichever doctor is available.

Unlike neighbourhood doctors who practise on their own, polyclinic doctors have to follow the set of treatment guidelines drawn up by specialists. So diabetic patients all have blood tests, their feet screened and their eyes checked regularly. Polyclinics have the equipment and staff for such comprehensive care.

As a result, the number of chronically ill patients who achieve optimal results has gone up.

The National Healthcare Group, which runs half the polyclinics, reports that 42 per cent of its diabetic patients are now able to keep healthy blood sugar levels - up from just 26 per cent a decade back.

Polyclinics are fast becoming centres of excellence for treating chronic ailments, and improving.

The population is also ageing rapidly. One in five people here will be aged 65 years or older by 2030. The pool of patients with chronic diseases will grow in tandem, making it even more critical that as many as possible are well-controlled and stay out of hospitals.

It would therefore be timely for polyclinics to change their focus from treating the poor to treating the chronically ill.

It makes sense for polyclinics to ramp up their capacity to manage chronic illnesses, and let GPs take a bigger load of caring for low-income sick people with common illnesses like the cold and flu.

This would be a win-win solution for all. Low-income patients benefit because they can go to their neighbourhood GP and pay subsidised rates for care. The GPs benefit because they will see more patients and enjoy higher revenues. Polyclinics can concentrate on being centres of care for the chronically sick, who get comprehensive treatment.

Thai PM plans further minimum wage rise by mid-year

Apr 24, 2011
BANGKOK - THAILAND plans another rise in minimum wages mid-year to offset the higher cost of living, Prime Minister Abhisit Vejjajiva said on Sunday, as his party prepares for what is expected to be a close-fought election.

The daily minimum wage was increased in January between 8 baht (S$0.32) and 17 baht. The average rise was 11 baht, or 6.4 per cent, the biggest in more than a decade.

Mr Abhisit's party has pledged to raise the daily minimum wage by 25 per cent over two years. An election is expected around the middle of the year.

'A ten-baht rise early this year, I think, is not enough,' Mr Abhisit said in his weekly address, adding the next rise could come 'around May or June.' He gave no other details.

Any wage increase could fuel inflation expectations, already worrying the central bank, which has raised its benchmark interest rate six times, by 25 basis points each time, in this cycle, which began last July.

Economists expect the central bank to raise the policy rate, the one-day repurchase rate, for a seventh time by 25 basis points to 3.0 per cent at its next meeting on June 1, making it one of Asia's most hawkish. -- REUTERS

Sunday, April 24, 2011

Why didn't scholarship holders join WP?

Apr 24, 2011
Former high-fliers in civil service have chosen to join other opposition parties
By Aaron Low

There are now at least five former government scholarship holders and civil servants contesting in the upcoming General Election as part of the opposition.

Two are in the National Solidarity Party (NSP) and another two are with the Singapore People's Party (SPP).

Even the Singapore Democratic Party (SDP), which had previously struggled to attract good candidates, has one: Mr Tan Jee Say, a former principal private secretary to Senior Minister Goh Chok Tong.

These formerly establishment types are widely seen as the top candidates for the opposition this election.

So the question arises: Why haven't they joined the Workers' Party (WP) - arguably the strongest opposition party this election?

It would seem rather strange since the WP has built a reputation of being a credible, solid party that appeals to the middle ground, and the middle ground is likely to be where such former government scholarship holders hail from.

To be sure, the WP does have its own star candidate in top corporate lawyer Chen Show Mao, who is probably more highly qualified than any of these scholarship holders.

But he is a Rhodes scholar who has succeeded in the corporate world. Thus, in terms of experience, he is not cut from the same cloth as these Government scholarship holders.

Why is it that these former scholarship holders have not joined the WP? Is the party losing out on what could be a possible longer-term trend?

The conspicuous absence of former scholarship holders in WP's ranks probably boils down to three factors, say analysts.

The first is simply personal preference. Mr Benjamin Pwee, for example, a former Administrative Service officer, joined the SPP because he was invited by Mr Wilfred Leung, Mr Chiam See Tong's close aide.

Mr Jimmy Lee, a former Defence Science and Technology Agency scholarship holder, joined the same party partly because of his friendship with Mr Pwee.

As one SPP party member quips: 'You get two for one.'

A second, more significant, factor has to do with political beliefs. Former opposition member, Dr Wong Wee Nam, says that opposition parties are now more obviously standing for certain ideas and are thus better able to attract people with different leanings.

SDP's newest and biggest coup this election, Mr Tan Jee Say, is one such example.

He made it quite clear during an interview with The Straits Times that he was out to contest against the ruling party as a result of his strong stand on specific policies he believed were wrong.

These include the setting up of casinos, the influx of foreign workers and the lack of a minimum wage in Singapore.

SDP, he said, had a clear stand on all of these issues and that was partly what attracted him to it, as opposed to other parties.

Says Dr Wong: 'No one party right now is able to attract everyone, not even PAP. This bodes well for a maturing political system as pluralism and diversity of ideas among parties is important.'

But the final, and possibly most important, factor is the WP itself.

While it would seem natural for the best opposition candidates to be attracted to the top opposition party, the fact is that the WP leaders run a very tight ship, and that could have been a dampener for these high-fliers.

The NSP's Mr Tony Tan is one example of a scholarship holder who joined the WP in early 2009, but left soon after to join the Reform Party.

[In 2, 3 years he has joined 3 parties.]

Mr Tan did not respond to press queries about his move but an NSP insider said it was rumoured that Mr Tan felt WP was 'too slow, too conservative with its approach' on many fronts, from online presence to debates with the PAP on policy issues.

Singapore Management University law lecturer Eugene Tan says some of these high-fliers are out to make a big impact in the coming polls. They may not be content, therefore, to follow the slower path to prominence that WP chief Low Thia Khiang seems to advocate.

Most of the WP candidates introduced so far have spent a year or more in the party. Even Mr Chen Show Mao has been with the party since 2007. 'This shows that he (Mr Low) prefers team players,' notes Mr Tan.

Mr Low is also consciously trying to build a party around a WP brand, and seems wary of individuals who think they are bigger than the party or who expect special treatment, said a WP member, who spoke on the condition of anonymity.

In the light of the attention that these former scholarship holders have attracted, does the WP policy make sense? Or is its overly-cautious approach causing the party to lose out on recruiting some good talent?

Another WP member said: 'I agree with this cautious approach. I think it's better to have candidates who are in it for the long haul as a slower approach creates stability in the party.'

It will be interesting to see how the former scholarship holders perform come Polling Day, compared to other opposition candidates.

It will shed light on whether the WP's instincts about these candidates were right, or whether it was a missed opportunity for the party in failing to recruit them.

Remark centred on WP's low-profile approach

I refer to last Sunday's article by Mr Kor Kian Beng ('The quiet reformer') on Workers' Party (WP) chief Low Thia Khiang.

I was quoted as saying: 'Actually, there are enough 'good people' coming out in the opposition, like former government scholarship holders, but they are joining other parties. Why? That says something about the WP leadership.'

The writer and I had a discussion on the progress of the WP. Both of us agreed that the WP has made tremendous progress, especially in the last few years.

However, I pointed out that the WP is still not a party that could attract a critical mass of the 'good people' that could shadow the Government in Parliament.

Scholars and good people are still scattered among the other political parties, like the National Solidarity Party, Singapore People's Party and Singapore Democratic Party.

I attribute this to the WP leadership's low-profile approach. There is nothing wrong with the leadership per se.

Dr Wong Wee Nam 

HDB flats - asset or home?

Apr 18, 2011
Perils of asset enhancement for younger Singaporeans

NATIONAL Development Minister Mah Bow Tan stressed the policy of keeping prices of new HDB flats pegged to resale market prices, and said there was nothing wrong in giving Singaporeans an asset that grew in value over time ('WP's housing proposal irresponsible, says Mah'; last Friday).

Such an 'asset enhancement' policy sharpens the divide between the rich and the poor. Households and families that have already bought an HDB flat would be able to enjoy the benefits of having the values of their homes rise, whereas young people who are yet to purchase a home, whether single or married, would be left sitting on the outside looking in.

[So this is not the divide between the rich and the poor, but the old and the young.]

In effect, the real value of the savings of persons who have not purchased a home, or who do not own property, are continually depressed by the rising values of residential assets caused by the asset enhancement policy.

[Arguing for the old, their savings are literally dwindling. The young, can increase their savings because they have income. You're running for the train and it has pulled out of the station, but once you get on it, you can relax. It's okay to have just the perspective from the young, but in trying to solve the problem, you may want to consider more than one perspective and a solution that does not impoverish another.]

The asset enhancement policy has worked in the past because real incomes grew faster than the rate at which property values grew, so the depreciating effect on the value of savings was not felt because savings grew faster than property values.

However, in recent times, two effects have set in. First, the maturing of our economy has led to slower growth in productivity, real incomes and real savings. Second, the large influx of foreign workers has driven up the demand for rental property, which has in turn made property attractive for the high rental returns they give to investors.

The young today must work harder, possess more qualifications, and earn higher real incomes to be able to afford housing of the same size and standard that their parents' generation were able to afford as they started out. This raises the danger that late bloomers today will be mired in a poverty trap, unable to afford to own their own homes, or start their own families.

Tan Jiaqi

[Seriously, review your expectations. As the population increase, housing will get more compact. That's a fact of life in Singapore and many other high density cities. If you want wide open spaces, you'll have to migrate to places like Canada, New Zealand, Australia and stay in small towns. If you want your parents or grandparents opportunities (wide-open kampung spaces, or bigger flats) you must also consider that they lived in a different time with different limitations (lower quality of healthcare, sanitation, and general quality of life), perhaps greater limitations and fewer conveniences and advantages than the young today (microwave ovens for food preparations instead of cooking from scratch, internet, travel, MRT that in effect shrinks the country and the world).

Like most critics of PAP policies, critics of housing policies only see the problem from their own perspective which is dangerous, because opposition politician can just leverage on their singular perspective and win their vote. Solve my problem, screw the others.]

Apr 21, 2011
Better an affordable home, than asset enhancement

THE Government argues that by enhancing the value of HDB homes (read: increasing the prices of homes), it gives a valuable asset to Singaporeans and a stake in the country ('WP's housing proposal irresponsible, says Mah'; April 15).

I find this problematic on several counts. First, for the majority, the home is an indispensable basic necessity, not a disposable asset. When prices of homes increase, the average home owner is not able to gain from it - while he is able to sell at a higher price, it also means he has to buy the new home at a higher price. Only the rich who can afford more than one home stand to gain.

[True. I am of the same opinion. The increased value of my flat is meaningless to me.]

Second, it deepens the divide between the haves and have-nots, for those financially less well off either find homes slipping beyond their reach, or face the heavy burden of financing a huge loan.

[Again, the haves = the older, the have-nots = the younger.]

Third, the objective of asset enhancement through rising home prices naturally conflicts with the objective of providing affordable housing. It is tough to balance the two and implement effective policies.

[Agreed! Good logical arguments regarding contradictory objectives.]

Fourth, the argument that asset enhancement ties Singaporeans to the country holds little water. Anecdotal evidence suggests that people who emigrate cite 'unaffordable housing' as a reason among others. Ironically, the rising property prices here means emigrants can use the gains from the property to buy a 'more affordable' home in a foreign country. In fact, a majority of Singaporeans are displeased with rising home prices.

[Okay, now we start to slide into speculative territory. If indeed anecdotal evidence is reflective of actuality, then we would see many Singaporeans selling their flats and migrating to other lands where the proceeds from the sale of the flats will finance their purchase of sprawling mansions. And the prices of flats in Singapore will fall due to the HUGE wave of emigrants selling their flats. And if a majority of Singaporeans are displeased with rising home prices, they would not be asking for ever-higher Cash-Over-Valuation. In fact, the COV would indicate that most Singaporeans selling their flats think the valuation is a little low. The Vocal Minority that are displeased are those that are trying to buy a flat and are being stymied by high COV. That makes them vocal. It does not make them a majority.]

Instead of thinking of increasing prices to enhance the 'asset value' of the home, we should start to recognise that an affordable home is an asset in itself. Keeping home prices low and affordable means Singaporeans, especially young people planning to start families and buy their first home, can rest assured that they will always be able to own a place to call their home.

I think this would provide a more rooted sense of belonging than that of an expensive house. We need to recognise that we are deriving much utility from that house even if its resale price remains stagnant. We need to appreciate that while stagnant prices may mean little capital gain when selling the current house, it also means not having to pay through the nose for the new one.

Let us go back to the primary objective of public housing - to provide affordable housing to the majority of the people. Let us recognise that affordable housing is an asset in itself, both to the individual and the nation.

Lai Nam Khim

[The problem is as much about timing as it is about quantity. Housing and city planning is a complex issue that is not always easy to anticipate and predict. The other point is that PAP is loathe to mess with market forces as this generally means creating artificial stress on the market that will lead to unintended consequences. What the govt should be doing is to look at the eco-system that supports the housing market to see where are the structures that can be tweaked. Simple illustration. If tomorrow the CPF effectively disallows the use of members savings to buy a flat, what do you think will happen to prices in the resale market?

The Govt recognised this contribution to the housing eco-system and tried to moderate it by capping the use of the CPF for paying HDB flats to the valuation limit. They can try lower the cap so that all purchases will require a cash component.]

Apr 21, 2011
Govt deserves due credit, but what's the endgame?

I REFER to Monday's letter by Mr Tan Jiaqi ('Perils of asset enhancement for younger Singaporeans').

While it is true that many Singaporeans have benefited from the People's Action Party's policy of 'asset enhancement', it was not that obvious a policy back in the 60s to the early 80s as I know of no records available of such a policy being articulated and deliberately pursued.

Therefore, the Government is but taking credit for what was not overtly apparent until recently. That said, credit must be given where credit is due.

[Yes. In a sense the problem is of the Govt's own making, in telling the people, you have an appreciating asset. That started the whole treating the home as a cash cow farce.]

Notwithstanding the development, the relevant question all concerned Singaporeans must ask is this: 'What is the endgame or exit strategy for such an 'asset enhancement' policy?'

If we use the records of the price development of public housing in the past 30 years (which also impacts the private one), is it sustainable? If not, what is the alternative 'enhancement' model?

Have our policy planners and political leaders done an econometric model to find out what the consequences of such a policy are? What are the various shocks in different degrees of gravity that Singapore will face from time to time and that such a policy will cause to our social fabric, if not livelihoods?

Law Kim Hwee

[Good Questions. Here are some speculation on my part.

First of all, there should be no endgame or exit strategy. That is the strategy of exploitative dictators who want to run after their fraud or ponzi scheme has crashed. The home ownership programme is intended as an on-going sustainable policy and programme.

So far no HDB flats have ran out of their lease. All HDB flats were built on land with 99-year lease. HDB is only 50 years old. Some HUDC flats were privatised and these are eligible for en bloc sales, which when transacted usually means the developer will seek a top-up of the lease back to 99 year lease. Thereafter the site is a private development, subject to the lease expiring or a topping up of the lease as required and if allowed.

For HDB flats, many old flats have been re-acquired under SERS, and demolished, and the land re-leased on renewed 99 year lease for either HDB flats or private developments. That would be the fate of all HDB flats. Prudently, HDB should start doing this when flats are over 50 years old with no flats older than 80 years old (i.e. less than 20 years left on the lease). There is probably no issue of HDB re-acquiring the flats. The relevant laws are in place, the compensation process and benefits are very fair (perhaps even more than fair).

So over the years, HDB will recover and redevelop flats, ensuring a constant renewal of flats. It is also possible that for some flats, HDB or URA may one day be willing to offer lease top-up (will need some legal framework for this) to HDB owners. The easiest would be to SERS the block, top up the lease and re-launch the block after some upgrading or re-furbishment. But this would only be done if the condition of the blocks are in excellent condition and the development is adequately intensive.

But that is a minor variation on the theme.

Over time the HDB SERS programme will continuously renew housing to match contemporary lifestyle and housing demands. At the same time the privatised blocks will pursue en bloc redevelopment as and when opportunities present itself.

What about costs? Can it be sustained? Will we have million dollar flats that parents buy and children pay off the flats that were bought before they were even born, like in Japan?

Maybe. Except that the SERS will be a way to give the people a leg up. 

May 15 2013 update:
I find my tone from two years ago, unduly upbeat. 
While I am still optimistic, the situation will need some adjustment and these are in the works. ]

Friday, April 22, 2011

High-fat, low-carb diet may reverse kidney failure

Apr 21, 2011

WASHINGTON - KIDNEY failure is a main complication of diabetes, but a lab study on mice showed that a high-fat, low-carbohydrate diet could reverse that in eight weeks, US researchers said on Wednesday.

The extreme food plan is known as a ketogenic diet and is often used to treat children with drug-resistant epilepsy. It starves the body of carbs and sugars, thereby tricking the body into burning fat for fuel instead of glucose.

The diet is so restrictive it must be devised with an expert's help. Meal options may include scrambled eggs with cream, a bacon and butter omelet, or lettuce doused in mayonnaise. Doctors theorised the diet might work for diabetics by blocking the toxic effects of glucose, a simple sugar made as the body metabolises food but that can become harmful in diabetics who lack enough insulin to regulate it.

So the team at Mount Sinai Hospital in New York took two groups of mice that were genetically predisposed to having Type 1 or Type 2 diabetes. Half were fed a standard, high-carb diet while the other half received a ketogenic diet. After eight weeks, kidney failure was reversed in the ketogenic-fed mice, said the study published in the open-access journal PLoS ONE.

'Our study is the first to show that a dietary intervention alone is enough to reverse this serious complication of diabetes,' said lead author Charles Mobbs at the Mount Sinai School of Medicine. 'This finding has significant implications for the tens of thousands of Americans diagnosed with diabetic kidney failure, and possibly other complications, each year.'

Dr Mobbs said the diet is not likely to be suitable as a long-term fix in humans, but said the findings indicate even as little as a month on the regime could be enough to 'reset' the body and avoid kidney failure. -- AFP

The cost of bipartisan bickering over US budget

Apr 21, 2011

Risk of lower credit rating if Democrats and Republicans can't agree
By Chua Chin Hon

WHEN it comes to the worrying state of public finances in the United States, the writing has been on the wall for years.

The latest warning by credit ratings agency Standard & Poor's (S&P), which on Monday changed its long-term outlook on American debt from 'stable' to 'negative' for the first time, technically says nothing that is not already known.

The agency points out, for instance, that 'US policymakers might not reach an agreement on how to address medium and long-term budgetary challenges by 2013'. Anyone who has been following the fractious debate on this issue would not come to a different conclusion.

S&P's announcement doesn't alter market fundamentals either. Yes, global stocks slid on the news, but there were other market concerns in play as well, such as the debt crisis in Europe and inflation in China.

Ultimately, there is just no credible alternative to US Treasuries at the moment, even if panicky institutional investors are looking to diversify their investments.

The agency's economists must know this as well. So why go out on a limb like this and draw the collective scorn of their peers in the US?

One possible explanation is that the message is aimed not at economists, but rather the warring factions in Washington, particularly freshmen Republican lawmakers who are spoiling for a protracted fight over the country's purse strings. This could account for why the seven-page ratings report came with a 10-page explanation.

By injecting itself publicly into the conversation and going well beyond the usual polite warnings issued by institutions such as the International Monetary Fund, S&P's blunt message to the Democrats and Republicans seems to be this: Don't assume the partisan warfare is risk free, and understand that the ensuing gridlock will have real, not abstract, consequences.

To drive home its point, S&P warns specifically that there is a one-in-three chance that America could lose its top credit rating over the next two years if lawmakers do not come up with a credible plan to bring down the budget deficits.

The US has been given a triple A rating ever since the agency began its ratings 70 years ago. Losing this top rating would mean higher borrowing costs, a development that would worsen the budget deficit, which is expected to hit US$1.65 trillion (S$2 trillion) this year. The US national debt is already at a record US$14 trillion.

This in turn weakens Washington's ability to deal with future financial crises, and the needs of its own ageing population.

The political elites in Washington are not unaware of the problem. President Barack Obama and the Republican party's rising star, Mr Paul Ryan, have in fact used blunter language than S&P when talking about the long-term fallout.

Mr Obama warned in a speech last week: 'Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond.

'By 2025, the amount of taxes we currently pay will only be enough to finance our health-care programmes, social security, and the interest we owe on our debt. That's it. Every other national priority - education, transportation, even national security - will have to be paid for with borrowed money.'

Mr Ryan, who chairs the budget committee of the lower legislative Chamber, was no less candid, saying: 'The economic effects of a debt crisis on the US would be far worse than what the nation experienced during the financial crisis of 2008... absent a bailout, the only solutions to a debt crisis would be truly painful: massive tax increases, sudden and disruptive cuts to vital programmes, runaway inflation, or all three.'

But while they agree on the seriousness of the problem, their proposed solutions cannot be more different.

Mr Ryan's plan to slash the deficit by US$4.4 trillion over a 10-year period essentially calls for a major scaling back of the welfare state. This would involve eliminating two major government-run medical programmes for the poor and the elderly, and major cutbacks on social welfare benefits - policies which no Democratic leader can agree with.

To jump-start economic growth, he proposes to extend tax breaks for the wealthy and corporations so that they would be motivated to invest and create more jobs.

Mr Obama countered with what he called a more 'balanced' proposal to cut US$4 trillion over 12 years that would still allow the country to preserve its current social welfare system, albeit with some painful reforms. To increase government revenue, however, he would raise taxes on the rich - a non-starter for Republicans who are against tax hikes of any sort.

The duelling plans reflect the deep philosophical differences between the two political parties. Conventional wisdom in Washington suggests that this argument can be settled only at the voting booth next November when the presidential and legislative elections are held.

No doubt the point of having elections in the first place is to settle these fundamental differences in a peaceful manner. That's what democracies are meant to do. But at the same time, a serious solution to the fiscal crisis takes time to implement and demands long-term commitment from both sides. It simply cannot be a one-sided approach that one party undertakes, which the other party tries to overturn.

As the S&P report rightfully points out: 'For any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.'

Mr Obama has reacted by maintaining that the Democrats and Republicans can reach a deal. US Treasury Secretary Timothy Geithner also insists in new interviews that the prospects for a bipartisan deal are better than ever.

Let's hope they are right, and that the S&P's provocative move doesn't end up being ammunition for an uglier political battle in the months ahead.

Wednesday, April 20, 2011

What kind of campaign will it be?

Apr 20, 2011
GE 2011

As PAP meets stronger opposition, will the debate be civil?
By Chua Mui Hoong


The long-awaited Writ of Election issued yesterday puts Nomination Day on April 27. The minimum nine days of campaigning will run from April 27 until May 5. May 6 will be the mandated Cooling-off Day, when no campaigning is permitted.

Singaporeans go to the polls on May 7.

But, in fact, the informal campaigning began weeks ago, with political parties introducing their candidates.

As GE 2011 officially gets under way, a swirl of questions abounds. Just how big a deal is this General Election? What is this General Election about? And what kind of election campaign will this prove to be?

The first two questions have to be taken together. The short answer: This General Election is a big deal.

It is a big deal to the incumbent People's Action Party (PAP), which has staked its leadership renewal on the result, saying it is likely that the next prime minister is among the slate of 24 new candidates it is fielding this time.

The PAP manifesto says this election is about 'securing our future together', as dark clouds gather on the horizon: Political turmoil in the Middle East playing havoc with oil prices, an uncertain recovery in the West and the ongoing nuclear crisis in Japan.

The PAP tends to consider every election as critical to Singapore's future - because as the governing party intent on being returned to power, it needs and seeks a mandate from the electorate that gives it the constitutional and moral authority to govern through its five-year term, and allowing it to make decisions for the good of Singaporeans even if these prove unpopular in the short term.

This emphasis on the gravity of elections is principled and correct, and voters must give the election the serious attention and consideration it deserves.

But GE 2011 is a big deal not only for the PAP. It is a big deal for the opposition as well, marking its coming of age in Singapore's young political history.

It is true that many opposition parties are still personality-driven and unable to work together. But there is a leap in quality of candidates, some of whom have academic credentials equalling those of the best PAP candidates. It is not only the Oxbridge and Ivy League credentials of candidates like Chen Show Mao, Kenneth Jeyaretnam, Tony Tan Lay Thiam, Hazel Poa, Benjamin Pwee and Jimmy Lee which mark the opposition's maturing.

It is the sheer fact that so many capable people who have made a success of their careers are willing to enter opposition politics. This means their spouses and families, close friends and possibly their employers all have to support their decisions.

Singaporeans above 40 will remember the days when opposition candidates were dismissed as bicycle thieves, mavericks with axes to grind or were deemed to have some deep-seated character flaw. Those careless with their words also risked being sued for defamation; and if they lost, being ruined financially by the resulting damages. That risk remains, but this is clearly no longer a deterrent to many people with so much to lose.

Just as it takes a whole village to raise a child, it takes a whole eco-system of people around one opposition candidate to support his or her entry into politics.

What this tells me is that the barriers to entering opposition politics are falling. A psychological barrier has been breached this General Election, and more good candidates are likely to step forward next time.

Whether good credentials translate into higher votes or more seats for the opposition, however, remain to be seen.

If there is going to be more competition in the political system, it is better for all parties concerned to learn the art of engaging civilly with one another sooner rather than later, and better for them to practise competing for votes in a rational, civilised manner that appeals to voters' better selves, without appealing to emotions or resorting to inducements.

The next question on people's minds is what kind of campaign this will turn out to be. Debates on the finer points of party manifestos are expected. But with the PAP remaining the only party in a position to make policies as it is expected to be returned to power, debate on policy options proposed by the opposition will remain as sideshows to some, entertainment to others, and leave many cold.

What many people are wondering is whether the PAP will continue its trajectory of going for a more gentlemanly campaign style.

The 2006 General Election was the first led by Prime Minister Lee Hsien Loong. As political campaigns went, it was notable for its civility and attempts at fairness. As I wrote back then, there was less gerrymandering, less use of the carrot and stick approach towards voters and a less harsh tone in politicking. The only discordant note struck was the attack on opposition candidate James Gomez.

This General Election so far has the same hallmarks of civility, less overt gerrymandering and no explicit use of the estate upgrading carrot. The PAP has also posted its possible line-up of candidates for all constituencies on its website. It reserved the right to make last-minute switches, of course, but even this level of disclosure is unusual for a party known to hold its cards close to its chest and make use of every incumbent advantage possible, including the element of surprise.

One question is whether the PAP will revert to its old strategy of singling out one opposition candidate to attack on his motivation, character or political views. Past targets included Francis Seow in 1988, Jufrie Mahmood in 1991, Tang Liang Hong in 1997 and James Gomez in 2006.

But in the 2006 General Election, the hardball tactics stopped mid-campaign. PM Lee acknowledged that some people thought the attacks on Mr Gomez were 'overkill'. Two days before Polling Day, the PAP decided to 'refocus' the campaign back to issues that mattered.

If that preference prevails, then maybe GE 2011 will be hardball on issues and policies, not on personality.

In the heat of campaigning, as candidates counter each other's viewpoints, it is all too easy to lose track of what really matters. Which is that GE 2011 is truly about Singapore's future. It is about jobs and homes and the cost of living. It is also about the nature of the political system and how political parties engage with each other in a modern democratic system.

How the financial meltdown differs from Fukushima

Apr 20, 2011
By Mark Roe

FINANCIAL commentators have likened Japan's nuclear catastrophe to derivatives' role in the 2008 financial meltdown.

The resemblance is clear enough: Each activity yields big benefits and carries a tiny but explosive risk. But the similarity between the two types of crisis ends where preventing their recurrence begins.

For the Fukushima nuclear power plant, a 1,000-year flood and ordinarily innocuous design defects combined to deprive the reactors of circulating water coolant and cause serious radiation leaks. In financial markets, an unexpected collapse in real-estate securities and design defects in the derivatives and repo markets combined to damage core financial institutions' ability to make good on their payment obligations.

While the basic risks originated outside the systems - a tsunami for Fukushima, and over-investment in real-estate mortgages for financial institutions - design defects and bad luck meant that the system could not contain the damage. In the United States, AIG, Bear Stearns and Lehman Brothers - all with large derivatives and/or repo investments - failed, freezing up credit markets for a scary few weeks.

We now understand the Fukushima risks and design defects well. Not so for the derivatives risks that jeopardised the global economy. For Fukushima, crews are valiantly trying to stop the radiation leakage. But for derivatives, the analogous efforts are misdirected and would not save us from financial fire next time. We are rebuilding derivatives and related financial structures atop the same, still-active faults.

Financial players use derivatives to transfer risk: One player assumes the risk of, say, euro fluctuation, but does not want yen risk, while for another it is the opposite. So the former promises to deliver euros next June 1, while the latter promises to deliver yen. If one currency declines relative to the other, the loser pays the difference.

Repos are financing transactions. Financial firms sell assets, such as treasury bonds or real-estate securities, for cash, and promise to buy those assets back - that is, to repurchase them or, for short, to do a 'repo' - typically the following day. But with the cash coming from short-term repos making up much of core financial firms' balance sheets, tremors in financial markets could hit them hard, drying up repo financing for a few, as occurred in 2008. Some, like Bear Stearns, then failed.

Individual derivatives and repo transactions are hardly nefarious. Each alone legitimately transfers risk to those better able to bear it, or backs financial holdings. But, when overused by systemically vital firms, they can blow up the financial system, owing to its design defects. Even today, about 70 per cent of the core US financial firms' liabilities are very short- term loans, like overnight repos.

In the US, the main design defects are in bankruptcy law, which exempts derivatives and repos from most regular bankruptcy constraints. For example, investors holding derivatives and repo contracts with a weakened financial institution can grab the firm's assets ahead of - and at the expense of - its regular creditors, possibly sealing its fate when, with a little extra time, the firm might have survived. Such runs were the ruin of AIG, Bear Stearns and others during the financial crisis.

Worse still, because derivatives and repo investors jump to the head of the repayment line in so many ways, they have less incentive to foster market discipline by closely monitoring their counterparties' solvency and carefully rationing their exposure to any single counterparty. They typically get repaid, regardless.

True, someone has to come first. Other financial players take on more risk because derivatives and repo players' bankruptcy exemptions put them first. Usually, we would expect the others to have an interest in more market discipline. But the next player in line is too often the US government, as guarantor of too-big-to- fail financial institutions, and it is poorly positioned to regulate these markets on a day-to-day basis. It is not financially nimble, it is often captured by the regulated, and when economic times are good, no official wants to spoil the party.

The US Congress had a chance to fix this design defect in the major financial overhaul that it enacted last summer via the Dodd-Frank Bill. But it did not.

If investors in derivatives, repos and credit-default swaps lacked favoured treatment, they would behave differently. Above all, they would insist more often that their counterparties be well capitalised. They accepted the risk implied by ultra-thin capitalisations when it was mainly US government money on the line; they would be more reluctant to do so if it was mostly their own money that they were wagering.

The public perceives Fukushima-type risks and derivatives risks differently. Many fear nuclear risks, which are vivid, slowing the industry's development amid safety concerns. But the derivatives and repo markets present risks that are poorly understood, difficult to communicate in the media, and hard for politicians to debate and resolve. During a crisis, these markets attract public attention and scorn, but, as the economy steadies, ordinary people lose interest, leaving the financial industry to control its own destiny with legislatures.

For Fukushima-type risks, analysts are already discussing how nuclear plants can be designed and built to contain earthquake and tsunami risks via passive cooling. It is possible, the thinking now runs, to design and build nuclear plants that can keep the fuel rods cool even if all power is lost.

But little of importance has yet been done to prevent the damage that derivatives and repo bankruptcy priorities could cause in another financial system meltdown. New rules to require end-users (such as oil companies using derivatives to guard against unexpected oil price changes) and others to put up good collateral are being developed. But these rules do not address the main problem: the weakened incentives for market discipline for core financial institutions. It is as if we reacted to Fukushima by better handling gas emissions in oil-shale projects.

We should be examining how to make derivatives and repo investors assume the full risk of their decisions when dealing with systemically vital financial institutions. Instead, we survived the financial tsunami of 2008, only to rebuild in the same place, on the main financial fault lines, using the same flawed design.

The writer is a professor at Harvard University's Law School.


US debt row masks deeper woes

Apr 20, 2011
By Ezra Klein

UNITED States Treasury Secretary Timothy Geithner does not want the market to smell his fear. 'I want to make one thing perfectly clear,' he said on Sunday. 'Congress will raise the debt ceiling.' But if there was truly so little doubt, Mr Geithner wouldn't have been peppered with questions about it on the Sunday shows.

Raising the debt ceiling may be economically necessary but it's politically lethal. Only 16 per cent of Americans want the debt ceiling raised, according to an NBC/Wall Street Journal poll. Senator Marco Rubio said he wouldn't vote for an increase unless it included 'a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid' - everything on the conservative agenda, basically.

And this is where things get dangerous. Republicans and Democrats both bear substantial blame for the country's rising deficits. The Bush tax cuts and the Medicare Prescription Drug Benefit and America's various wars - none of which have been paid for, and all of which are ongoing - are major contributors to the mounting debt, and all were passed by Republican majorities. The debt ceiling had to be raised seven times during the George W. Bush years, and the policies that helped drive those increases - not to mention the financial crisis that followed them - have not been undone under President Barack Obama.

But the Republicans want to pin the debt on the Democrats, and they want major concessions in return for their vote. Democrats, however, aren't going to agree to the Republican plan to deny partial responsibility for the country's debt and hold the country's credit rating hostage in order to reshape the government along more conservative lines. Fear over exactly this sort of political gridlock is what led Standard & Poor's to downgrade the nation's credit outlook to 'negative' on Monday.

To understand the danger posed by the debt ceiling, it helps to understand the financial crisis. A lot of banks and investors held assets based on mortgages they thought were safe. They weren't. That meant that no one knew how much money they really had, or how much money anyone else really had. So the market did what woodland creatures do when they get confused and scared: It froze. And so too did the economy. As the unemployment rate shows, the economy still has not completely thawed out.

If Congress fails to lift the debt ceiling beyond its current limit of US$14.29 trillion (S$17.8 trillion) - or even waits too long - the chain of events will be similar, but the asset under question will be America itself, not some newfangled Frankenstein bond made out of mortgages. Which means the aftermath would be much, much worse.

'The cornerstone of the global financial system is that the United States will make good on its debt payments,' said Mr Mark Zandi, chief economist at Moody's Analytics. 'If we don't, we've just knocked out the cornerstone and the system will collapse into turmoil.'

Throughout the financial crisis, America's great advantage was its status as the single safest investment in the world. That makes it easier for it to borrow money to ease a downturn. It makes it easier for its central bank to buy bonds to keep interest rates low. It gives it tools and flexibility that, say, Greece simply doesn't have. But all of that is based on the market's perception that America's debt is, indeed, a safe investment, that the US government will pay it back, that it won't inflate its way out of the fiscal holes it digs, that the political system will make tough decisions when necessary.

Confidence, once lost, is hard to regain. 'It's like a cat which jumps on a hot stove,' said Mr Bill Gross, co-founder of Pimco. 'Burn it once, and it doesn't jump back on there.'

Mr Gross, incidentally, not only thinks the stove is getting pretty hot; his firm is also turning up the heat: Pimco is now betting against Treasuries. If he's right, however, and the various foreign and domestic investors buying and holding Treasuries end up getting less than they were expecting, or undergo a lot of strain and anxiety while Congress dithers, they'll probably start putting their money elsewhere.

At that point, the 'then what' looks pretty scary. Balancing America's long- term budget won't be easy. But it'll be much harder if rising interest rates become a noose on the recovery. 'Once the interest rate starts to rise, the ballooning of the interest-carry cost on this debt will scare the bejesus out of the system, and it'll be a feedback loop into the market,' said Mr David Stockman, who served as former president Ronald Reagan's budget director.

In other words, the more the market worries about America's ability to repay its debt, the harder that debt becomes to pay back. High interest rates slow economic growth and increase the amount it has to pay to borrow, both of which mean its debt will grow as a percentage of the economy.

Which gets to the essential irony of this whole conversation: By taking the debt ceiling hostage in a bid to address the deficit, Congress could provoke the exact calamity it's seeking to prevent. What Americans worry about when they worry about the deficit is that the market will lose confidence in the country's ability to pay back its debts and begin charging more to buy Treasuries. There's no quicker way to undercut the market's confidence in the US government than for it to walk up to the abyss of default.

The likeliest disaster here will not be caused by Congress refusing to raise the debt ceiling. And, as Mr Geithner says, Congress will raise the debt ceiling. Eventually. But there'll be a lot of partisan posturing between now and then.

In 2006, then-Senator Barack Obama lodged a protest vote against an increase in the debt ceiling - a vote he's since called 'a mistake'. The US economy, however, is weaker than it was then, the deficits are more worrying and the markets are more fragile. So the normal Congressional bickering could prove especially dangerous.

Earlier this month, Congress waited until the last possible minute to avert a shutdown - waited so long, in fact, that the government was technically unfunded for a few moments - and we could see it wait till the last minute on the debt ceiling. But the last minute may be too late.

'The risk is not that we get to July and run out of desperation measures,' said Citigroup's Mr Peter Orszag, who previously served as Mr Obama's budget director. 'Both political parties realise that would be crazy. But the worry is you're in June, and you think you have time, and the market blows apart early.'

In the end, the debt ceiling is not just about the debt ceiling. It's about America's capacity to solve its economic problems. If the two parties can come to a grand bargain on debt and deficits by the end of next month, then great. But if they can't - and that's where the smart money is - the debt ceiling is not the moment to demonstrate to the markets that Washington is broken.

Once the pin on that grenade is pulled, there's no putting it back in.


Pregnant mothers' diet linked to child obesity

Apr 20, 2011

What expectant women eat could alter DNA of their babies, study finds

WELLINGTON: An expectant mother's diet during pregnancy can alter her baby's DNA in the womb, increasing its risk of obesity, heart disease and diabetes in later life, an international study has found.

Researchers said the study provided the first scientific evidence linking pregnant women's diets to childhood obesity, with major implications for public health.

'This is a major breakthrough because for the first time it gives us the potential to work out the optimal diet a mother should eat,' Professor Peter Gluckman from Auckland University's Liggins Institute said.

'That's likely to vary slightly from mother to mother, but it could be a major tool in addressing the obesity epidemic.'

The study, conducted by scientists in Britain, New Zealand and Singapore, showed that what a mother ate during pregnancy could change the function of her child's DNA through a process called epigenetic change.

Children with a high degree of epigenetic change were more likely to develop a metabolism that 'lays down more fat' and become obese, researchers found.

Such children were around 3kg heavier than their peers by the time they were aged six to nine, Prof Gluckman said.

'That's a hell of a lot of extra weight at that age,' he said, adding that the extra fat was likely to be carried into adulthood, raising the chances of developing diabetes and heart disease.

The researchers used umbilical cord tissue to measure the rate of epigenetic change in 300 babies, then examined whether it was linked to the children's weight when they were aged six to nine.

'The correlation was very strong, we didn't believe it at first, so we replicated it again and again,' Prof Gluckman said.

The study found the effect was not linked to either the mother or the baby's weight at birth, meaning a slim woman could deliver a small baby which still went on to became obese because of changes triggered by diet in the womb.

Prof Gluckman said the rate of epigenetic change was possibly linked to a low carbohydrate diet in the first three months of pregnancy, but it was too early to draw a definitive conclusion and further studies were needed.

He said one theory was that an embryo fed a diet containing few carbohydrates - which provide the body with energy - assumed it would be born into a carbohydrate-poor environment and altered its metabolism accordingly.

This meant it stored more fat, which could be used as fuel when food was scarce.

Prof Gluckman said the study, which will be published in the journal Diabetes next week, confirmed long-held suspicions that poor prenatal nutrition could have a major impact on adult health.

This meant health officials battling soaring obesity rates should look at policies designed to improve the health of expectant mothers, rather than simply focusing on trying to help overweight adults, he said.

'It provides the most compelling argument yet to give greater weight to improving maternal and infant health as a means of reducing the burden of chronic disease.'


Tuesday, April 19, 2011


Apr 19, 2011

Democratic model: Don't copy it blindly

By Sanjay Perera

SINGAPORE is not a run-of-the-mill state. It has come of age, with citizens asking how we can make this country better and keep democratic practices functional. We also ask whether we can have a First World political system.

Reading some of the discussions so far, I wonder if some Singaporeans believe that a First World political system is one benchmarked by the United States.

In fact, the US is no paragon of democracy. But to understand that, we need to know what we mean by democracy. Here, it should be stated upfront that there is no common definition of democracy. Democracy is just an ideology.

No one knows exactly what it is, but most can point to aspects of it as practised worldwide. At most, we can identify some characteristics normally associated with states considered democratic.

This includes having regular elections for voters to select representatives, and in a fair, transparent manner.

Democracies also adhere to laws, respect human rights in law and in practice, and have checks and balances among different arms of government.

Let's evaluate the US - so highly regarded as a democratic country - by the above criteria.

Indeed it has many laws passed based on democratic principles, but some of the laws have not been enacted consistently.

In World War II, the government interned Japanese-Americans in concentration camps, fearing their split loyalties as the US fought Japan.

Do democracies host concentration camps? If so, what is the difference between them and a fascist state?

Despite its much-vaunted system of checks and balances, America was unable to stop such gross injustices against its own citizens. In fact, appeals to patriotic duty were used to justify the internment. It is true that subsequent governments apologised for the internment and offered reparation. But this does not erase the blot on its record.

There was massive unrest and deaths before America passed its civil rights Bills in the early 1960s. So was it not a democracy before those Bills were passed?

Is there a checklist that determines if a state is a democracy? What are the criteria and who determines them?

Some may argue that America has become more democratic since World War II. But how effective have the checks and balances been in stopping America from unilateral military engagement against other states since then?

America indeed has a First World political system - one rife with First World levels of divisiveness abetted by bipartisan resentment, with its intelligentsia agonising over the breakdown of civil trust amid bitter bipartisan battles.

Singaporeans should not have rosy notions of democracy; nor should they believe the illusion that democracy will cure Singapore's problems.

We should not be seduced by the rhetoric about a First World Parliament, and believe that the country should strive for a political system that emulates those of First World countries.

America and Western European states may be First World in terms of their economic output, though even that position is under threat by other rising states. But their political systems are certainly not in the 'First League'.

Rather than get stuck over labels about 'First World' this or that, Singapore must evolve a political system consistent with its own culture and practice, and true to its history.

Let's say we have a hung Parliament after the coming elections. Would we only then be qualified to tell the world with pride: 'Look, we finally have a democracy.'

The more relevant question is what system the country needs, in order to promote as much freedom as we want to allow ourselves, and what system of government gives fair and equal opportunities to all, while looking after the least advantaged in society.

It is unimaginative to hanker after a so-called First World political system, or worse, to seek to model Singapore's political system on that of the US.

Above all there is one democratic practice we should all strive for: to cast our votes to good purpose, and unite in common purpose for the good of all.

The writer is a former journalist.

Clarifying the terms behind the debate

By Elvin Ong Jiayun

MUCH ink has been spilt recently on analysing the coming general election in Singapore in the mainstream media and on online platforms. A debate has emerged on the relative merits of a single-party system versus a multi-party system, with many writers presenting strong cases for one or the other.

One potential pitfall in any debate is that concepts used may become ambiguous and confusing. This results in proponents of opposing sides arguing past each other. There is a need to clarify important ideas and distinguish between different terms, so that parties debating the topic are in agreement on what is being discussed. Then there is a need to pay close attention to the examples and evidence used to support one's arguments.

In the ongoing debate between proponents of a single-party or multi-party system, it is not clear what many authors intend to convey by using the word 'systems'. They could refer either to the number of parties in Parliament, or the number of parties in government (as in a coalition), or even the number of parties contesting for election. Arguably, 'systems' may even include other forms of government such as the civil service and the judiciary.

I suggest the following three clarifications to demystify the debate:

First, one needs to understand the distinction between parties being part of Parliament and parties forming the government. A party can form the government and successfully pass legislation as long as it controls over half the seats in Parliament. This is regardless of how many other parties there are in Parliament.

In this case, there is a single-party government, and a multi-party Parliament. Britain has experienced such a type of democracy throughout most of its history.

Alternatively, if no party controls more than half of the seats in Parliament, then different parties will have to come together to form a coalition government. The present British government is a coalition between the Conservative Party and the Liberal Democratic Party. In a coalition that controls more than half the seats in Parliament, parties typically work with one another to propose and pass legislation.

Second, there is a need to distinguish between the executive power to run a government, and the legislative power of Parliament to make laws.

In Singapore, the ministries have the power to create, develop and implement various public policies to benefit Singaporeans. The ministries' power comes from laws that Parliament had passed. But the day-to-day work of making decisions for the country is carried on within the ministries, without having to go back to Parliament all the time. It is only when there is a need to create new laws or change existing laws that parliamentary approval is needed.

For example, the Electronic Road Pricing system was instituted by the Land Transport Authority (LTA) to manage traffic congestion. New legislation was needed to empower the LTA to introduce this new policy. Parliament had to debate the policy, and then approve the laws to allow it to be carried out.

Third, there is a need to distinguish between a theoretical claim and the empirical evidence used to support that claim.

In a robust debate, theoretical claims should be backed by empirical or statistical evidence. Debate should be based on real data, not just hypothetical scenarios.

This makes one's argument more coherent and convincing to others.

In fact, research exists on the difference between a single-party and multi-party system. The political scientist Arend Lijphart's landmark study in 1999 investigated the policy performance difference between 36 majoritarian and consensus democratic governments over 20 years.

Majoritarian democracies are those whose governments have a clear majority (above 50 per cent) of seats in Parliament. Consensual democracies typically have coalition governments.

He found that majoritarian democracies did not outperform consensus democracies on macroeconomic management of inflation, for example. Consensus democracies did better in the quality of democracy, democratic representation, and the 'kindness and gentleness of their public policy orientation' - such as being more environmentally conscious. He also found no trade-off between the effectiveness of government and the development of democratic consensus.

[This is a pretty good article in terms of defining the terms clearly. However, at this point, instead of comparing apples with oranges, he's comparing rotten apples with rotten oranges.

The debate isn't between "majoritarian" and "coalition" or "consensus" government. It's between one-party dominant democracy, and a two-party (or even multi-party) democracy where two or more parties take turns to win a majority to run the govt. 

In this dichotomy, "majoritarian" and "consensus/coalition" govt are on the same end of the spectrum as far as I am concerned. The advantage of a two-party binary oscillating govt is not much better than a coalition of parties forming a govt. In either case, short-term political consideration trumps long-term objectives. 

In fact, I would argue that a binary oscillating democracy is locked in a thesis-antithesis infinite loop that never breaks through to synthesis. The reason is simple, the people have not found a party that promises and delivers.

Similarly, in a democracy where the votes are split between so many equally pathetic, partisan, narrowly focused political parties that could never hope to represent even half of the voters to win a convincing majority, the voters have not found a party that represents their common ground and common interest enough to win their support and mandate. 

In either case, the party or parties in power are only on probation and most never get confirmed.

In contrast the PAP has been confirmed over many elections.]

As the political scene in Singapore matures over the years, there inevitably will be more debates about our political system and various public policies.

[What may be certain is that common ground will shrink, interests may become narrower, and the PAP may find it harder to pull the voters together.]

The key challenge in maintaining the high quality of debates in the public realm is not necessarily to focus on the content of the debate itself. Rather, we need to pay careful attention to the concepts and terms used, and the rigour of the evidence raised to support the arguments.

The writer is doing his master's programme in politics at St Antony's College, Oxford University.


Forget ASX, go for London and New York

Apr 19, 2011


Failed merger bid gives SGX chance to look at other possible tie-ups

By Goh Eng Yeow

AUSTRALIA has faced a hammering from its own investment community for killing a proposed marriage between the Singapore Exchange (SGX) and its Australian counterpart, ASX, which would have turned them into a global force to be reckoned with.

Yet, barely observed beneath the din condemning Australia for its decision which jeopardises its reputation as a country welcoming of foreign investments, is the jubilation of some local investors, with research houses like OCBC Securities and CIMB raising their price targets for SGX.

As one blogger, a former financial journalist who calls herself Auntie Lucia, put it: 'Enough time has been wasted already pursuing a nightmare.'

In her view, SGX's boss Magnus Bocker should get down to doing the real work of running the SGX and not waste any more time trying to replicate his previous successes at the Swedish exchange OMX where he masterminded a series of take- overs. Her greatest fear is that 'those who call the shots at SGX may decide to lead it into another costly, pointless and time-wasting dance leading to yet another cul de sac'.

And it would seem that Mr Bocker is in agreement, telling reporters in the aftermath of the failed takeover that SGX's 'primary focus' had always been on organic growth.

But that statement flies in the face of the rapidly changing international financial landscape, where the mating season for global stock exchanges has heated up further since SGX made an A$8.4 billion (S$11.1 billion) bid on the ASX last October.

In the last two months, the Deutsche Borse has announced a trans-Atlantic merger with the NYSE Euronext to create the world's biggest stock exchange, while the venerable London Stock Exchange said it was tying the knot with the Toronto Stock Exchange.

If the SGX chooses to stay celibate after its costly failure to mate with the ASX, it runs the risk of having its competitive position eroded, as mammoth exchanges exude a greater appeal to attract listing aspirants.

And if this is not enough to shake its resolve to stay single, there is the challenge posed by fresh competitors like 'dark pool operators' which try to lure business away from stock exchanges by offering fund managers alternative trading platforms.

So, the costs of failure may well be an emasculated SGX trying to fight a rear-guard action to protect whatever market share it enjoys, while bigger and more powerful rivals encircle it and try to eat its lunch.

In turn, this may dent Singapore's ambition to play on the global leagues with the likes of London and New York, as it jostles with Hong Kong, Mumbai, Shanghai and Tokyo for top spot in Asia.

So what is the SGX to do?

Put aside the political rhetoric and it is plain that Australia was not ready for the kind of transformational merger as envisaged by Mr Bocker.

Given the considerable time and effort - not to mention millions of dollars - already spent, one alternative for the SGX is to take a 15 per cent stake in the ASX first and then mount a full takeover, when Canberra makes the regulatory changes.

But as veteran investor Denis Distant observes, rather than flog a half-dead horse, the SGX should let the failed bid become history and look for another bourse to merge with.

Market watchers recall that in the same week the ASX-SGX deal made news last October, Nasdaq OMX chief executive Robert Greifeld was in town to ink an agreement with Mr Bocker to allow SGX-listed firms to cross-list on the technology heavy New York-based stock exchange.

So it is conceivable that the two men may get together again to do a deal together to marry their two exchanges. As Mr Bocker was also a former Nasdaq top executive, he would be in an enviable position to make any tie-up a win-win combination.

It makes sense too. An SGX-Nasdaq-OMX tie-up would create the world's first round-the-clock share trading platform and give investors the ability to trade across three major stock exchanges straddling three time zones.

As Nasdaq has a market value of $5.6 billion, the SGX would find it considerably cheaper to swallow than the ASX would have been. The result would be a world-class bourse hosting about 4,000 listed companies worth $6.9 trillion.

Similarly, there have been suggestions for a possible link-up between the SGX and the planned London-Toronto merger. This would fulfil Mr Bocker's goal of creating one of the world's largest commodities stock exchanges with exposure to over 4,500 companies, worth a staggering $8.2 trillion.

Better still, the combined market value of the London and Toronto exchanges works out to only $8.6 billion - or less than the $11.1 billion which the SGX was willing to fork out for the ASX.

So if the SGX plays its cards right, it might even be able to grab two exchanges for less than the price that it was willing to pay for the ASX.

One wild card in such a deal would be Mr Thomas Kloet, the designated president of the merged London-Toronto exchange. He was the first chief executive of SGX when it was formed from the old SES and Simex exchanges here, so it is likely that he would have a better understanding of the hurdles that may be involved in such unions.

But the memories of his time at SGX may not be sweet, and his position at the head of the proposed London-Toronto entity could prove an obstacle to merger with SGX.

A tie-up with Nasdaq or a mega three-way deal between Singapore, London and Toronto may seem like wishful thinking to some now.

But there is no reason why it should not materialise, given the rapid manner in which huge bourses are getting into bed with each other.

For the SGX, Australia's rejection of its marriage proposal may yet turn out to be a blessing in disguise.