In the govt accounts – the govt. is a debtor to the CPF who buys SGS or Singapore Govt. Securities with the CPF holders’ money!
The govt. then transfers (“lends”) the proceeds of the SGS to Temasek Holdings (TH) & Govt Investment Corp (GIC) where the Singapore govt. is the majority shareholder. TH & GIC then go forward with investments.
So far so good! – but while the link between CPF & Singapore govt. is clear, the Singapore govt. & TH/GIC link is fraught with non-transparency & opaque information. This is where all Singaporeans have to be wary!
If TH & GIC were indeed successful, they could have repaid some of the Singapore govt. debt i.e. redeemed a portion of the SGS borrowings over time. To date, the Singapore govt. debt to the CPF remains fairly large & relatively static (whether any of the SGS were redeemed – will it be public info?). This ongoing debt in the govt books is a cause for concern
Previously, TH & GIC investments were funded from internally accumulated funds (forced savings from CPF) but around early 2000s, TH sought Moody’s & Standard & Poor’s bond rating. It was the first time TH sought funds from capital markets – altogether, there are 13 Temasek bond issues with the 1st capital issue beginning year 2005.
The CPF balances (i.e. Singaporean or PR workers) can either earn 2.5% p.a. as passive deposits or they can be actively invested in domestic stocks or property (recycling domestically also benefits TH)! As passive CPF deposits go, the 2.5% p.a. interest is considered financially repressive if the CPF monies are invested in higher return investments. While the capital providers (CPF) only get 2.5% p.a. return i.e. the state captures the excess returns beyond 2.5% p.a.
However, it works only if TH & GIC are indeed brilliant investors! But if TH & GIC were “incompetent” investors – then even 2.5% p.a. becomes “an albatross around one’s neck”. If one understands the financial situation since the 1998 Asian Currency Crisis & the Rise of the World Wide Web – Internet around 2000s – Singapore Inc. has been undergoing a critical transformation. The capital intensive investment growth model was partially discarded while Singapore Inc. adopted a profit maximization growth model. Elements of this profit maximization scheme are zero interest rate policy (ZIRP) & monetary easing (QE). The insidious part of the profit maximization growth model is to induce inflationary pressures ie. cost push inflation!
Such inflation robs savers of their money value i.e. if inflation is 3.5% p.a. the CPF holder suffers a 1% loss on his holdings. Over time, inflationary pressures will reduce CPF balances to a fraction of their value. This inflationary push is so clear to see – to sustain inflation, there is a huge influx of low quality migrants with basic demands; real property as an inflation hedge escalates upwards; govt. charges, fees & levies drive upwards; rent seekers move the stakes higher, etc. Singaporeans are doomed!
CPF-R-U-Sure!