Ten years ago, on Saturday, September 13th, 2008, the world was about to end.
Ten years ago, on Saturday, September 13th, 2008, the world was about to end.
21 September 2018
This was when the 2008 financial crisis hit.
Today we look at global statistical data and see that economic growth worldwide seems stable, even increasing to more than ever before.
Why then should we be reminded of this seemingly old and bad history?
You see, before I come to the actual point of this letter you should know that I am just back from a most interesting tour through Europe – And now, upon arrival back at home I have to admit life in Bali is as good as it gets, compared to most other places I know.
I could be asking myself why on earth did I subject my dear family to stepping into an aluminum tube for transport, breathing re-processed other people’s exhaust air and once arrived there living uncomfortably out of the suitcase?
It seems that after a while enjoying the good life here in Bali becomes so bleedin’ normal, that we long for a fresh change from the good to the imagined better. That must have happened, there was no other reason to leave.
After all, leaving here seems silly, because the charge for one hour parking in a Munich park house was the equivalent of a decent meal for two, including drinks, in my favorite mini restaurant “Wild Ginger” in
Jl, Jero Gadung, near our first office.
A small Coke in an Italian standard restaurant was 5 Euro 50 , about Rp 85,000. For the same amount the daughter could have enjoyed drowning in Coke here in Bali. Looking at value for money, it doesn’t make much sense to leave, right?
But then, who wants to make himself look silly only? Therefore I also admit we had many exciting and interesting days touring the old continent.
We also brought a hand full of fridge magnets back to Bali,
but more importantly plenty food for thought and with this we move to today’s topic:
On the tour I met some old friends and made new ones. My friends from the old times are not super wealthy. Still we had a lot of fun. I was also fortunate to be introduced to some so called ‘high net-worth individuals’, or as we would say very rich people.
The discussions were sometimes clouded by the third cocktail between the two first ones, but based with focus on their situation in the investment world and about present world economic events.
Here is what emerged when I told them I come from Bali:
“You are fortunate to live there, - or Indonesia as such, when the next global crisis hit the ground”.
(Note - not “if”, but “when”, they said).
They explained that about 7 out of 10 of their international business partners share the view that a global crisis is coming. “Likely 2019, or at the latest in two years”.
They explained that international interest rates will rise. They have to and we see it happening now. “Going up is manageable. However, if there is a recession, the economy slows down and debts turn bad, there will be no jobs and less affordability. The next financial crisis will likely be bigger than the one in 2008 which occurred when the credit market froze up.”
Now, we have the choice to we believe them, or not. Should we get nervous, only because some elderly men who claim to have “their sources” raise the finger with the warning “the next crisis is already in the making…?”
Again, the world wide percentage of GDP (Gross domestic Product) is higher than ever and Donald the Terrible is assuring us that the strong US Dollar indicates that all is well and America, including it’s leading currency and economy is on the way to be great again. Not many take this serious any more.
However - why on earth may we expats here in Bali spend a thought about world economic events?
“Who cares? Can I have another Bintang please”…
Well, you only have to imagine that world trade comes to a grinding halt from the humble beginnings, which Uncle Donald is dishing out right now with his trade restrictions. Surely tourist numbers will dwindle, because everyone is sitting fearful on the pocket instead of spending.
Such a situation would be similar to the global economic crisis of 2008. Or maybe worse, as today the worldwide lending, led by the USA, and which became excessive in 2008, is considerably higher.
Dying trade, less tourists, no money coming in, local businesses are going to struggle, prices come down as competition is getting harder, (hey, isn’t that something good?)
No, it isn’t, because we can imagine unhappiness, even desperation all around or maybe even violence? We will come back to this again …
First a quick jump back to 2008.
The New York Federal Reserve was a zoo. Imagine NASA headquarters on the day a giant asteroid careens into our atmosphere. That was the New York Fed: all hands on deck, top human panic!
The crowd included future Treasury Secretary Timothy Geithner, then-Treasury Secretary (and former Goldman Sachs CEO) Hank Paulson, the representatives of multiple regulatory offices, and the CEOs of virtually every major bank in New York, each bringing armies of bankers, only to see large financial institutions breaking down with no quick fix solution.
Not going into detail, but hundreds of thousands of people lost money or even all their possessions. However, worst of all the international community, was fearing that the downturn in business and uncertainty if and when all may come back to normal affected almost everyone.
According to the International Monetary Fund, global debt is now at a shocking record high of $164 trillion, or 225 per cent of world GDP – an increase of 43% from 10 years ago!
In the strong economies the interest rates are going up, leading to a slowdown of the economy. Defaults in repayments of loans will be the result and start the downwards spiral.
If we believe those warning voices, what to do next?
No iced cappuccino after lunch anymore? Driving to Denpasar by night only to save fuel?
I suggest to keep enough cash on the side to weather a period of difficulty. Although we cannot eat money, but initially in a crisis cash provides valuable flexibility.
If you then see there is still enough money left to purchase something of everlasting and increasing value, come to UbudProperty.
It is a fact -owning foreign real estate is an excellent way to diversify your assets. No government agency can force you to repatriate real estate from another country. If your bank accounts are seized and capital controls enacted, your investment is safe. Out there are many who would love to come to Bali, but presently are held back by conventional thinking. Once life becomes critical overseas, many want to come and the property market will see another boom. Simple logic.
Another interesting discussion subject was when Mike asked the question: “where to go when the dust hits the fan?” Where can we feel safe; where is enough food to survive the worst imaginable situation; where are cost of living reasonable and more like this.
Two of my new acquaintances said the same: “ Go to New Zealand. It is isolated, unaffected from political aspirations, plenty of nice fish and steak to eat, and not reachable by the hungry mob of neighboring poor countries”.
Interestingly Iceland has been named to be the most peaceful country in the world for the tenth year running. Just that the thought of the long dark month’ of winter there surely is not helping planning migrating to there.
There is the Global Institute for Economy and Peace. Their official list of the safest Countries looks presently like this:
Iceland (No. 1)
New Zealand
Austria
Portugal
Denmark
Canada
Czech Republic
Singapore
Japan
Ireland (No.10)
I have no special expertise on security issues, but would argue that in a severe global crisis European Countries are under threat to be overrun by neighboring poorer Countries, such as North African or Middle Eastern ones. Also being close to Russia poses a possible exposure in war time.
From the list Canada is a valid choice, Singapore certainly not, because Singaporians rely heavily on water, food and energy imports and the US trade. Japan and Ireland have the disadvantage of cold climate, and not enough natural resources.
A better list would include net exporters of food, countries that are isolated (preferably by sea), and countries that can take care of their energy needs (particularly electricity in the short term and hydrocarbons in the medium to long term).
Most countries in the southern hemisphere would be pretty resilient like South and some parts of Central America, Australia and - nice to find out: Indonesia too.
Although Indonesia is nowhere mentioned in the dozens of reports about the safest Countries in case of … but Indonesia shares many of the same features which have been attributed to Safe Countries, according to GPI (Global Peace Index).
The GPI also reviews internal safety, such as how many police are there per head of capita, and is the military strong enough to protect the citizens, are the Politicians responsible, etc.
Anyone who is interested in finding out more, here is a useful link: https://en.wikipedia.org/wiki/Global_Peace_Index
On internal safety in Indonesia, namely Bali, there could be books written, which is not the idea here.
Just this: according to United Nations Office on Drugs and Crime, out of 218 countries, Indonesia is listed 9th for lowest intentional homicides per capita at 0.5% for 2014. (Last official data) That’s really low compared with e.g. Canada at 1.4%, which is already considered low compared with the US at 3.9% .
Theft is more likely to happen in times of despair, but I’d rather give up some portable items, than being part of the 3.9 % of intentional murder victims in the US.
Sure, much of the Indonesian Police Force is said to be corrupt. But there are many and many also committed to their duty. I have to think here of this famous hidden video recording, where a Balinese Police Officer collected a Rp200.000 traffic fine and spent the money afterwards with the same tourist, drinking beer. However, if to become Police officer you have to pay several hundred Million Rupiah to be accepted for the job, the scenario becomes more transparent.
There are about 450 provincial Police stations in Indonesia, aimed to grow to over 500. I could not find data of policemen per capita, but this is relative on an island with drastically changing population numbers, relating to the tourist seasons. In terms of numbers, we see plenty of police. Already apparent to everyone when the Governors family drives for shopping. Let’s trust in their sense of duty when the time comes.
Bali is relatively isolated. No need to fear that continental mobs would make it across. You sure also do agree that the Balinese people are peaceful and friendly to the point that being their neighbor makes you near part of their family.
Make friends with neighbors, support them if needed and in times of serious trouble, I trust no one will go hungry.
Traditionally the most serious security threat to Indonesia is violence between ethnic and religious groups all over the country, - except Bali amongst very few other regions. Here the overwhelming majority is Hindu. Some say : ” but aren’t there many Muslims in Bali too?” Yes, however, they came to Bali in order to earn more money for their families than they could earn in Java. Religious tensions such as are flaring up in Jakarta at times are almost unheard of here. Furthermore, Muslims also are peaceful by nature of their belief and taught not to kill other than in self defense. (not talking about ISIS here).
And more on the plus side of the balance sheet in crisis times -
Heating expenses? Nil. Electricity cost? Close to Nil. (Just must go to bed with the sun).
Food? Very soon home gardening would become popular and take care of essentials again.
Of course all of the above is only general observation and to each topic there would be oodles more to say, but you sure get the idea - we have reason to feel good about our choice of location.
Now let’s go out, get some iced lemon tea and forget whatever was said here – for the moment.
See you next month, same place different topic
This was when the 2008 financial crisis hit.
Today we look at global statistical data and see that economic growth worldwide seems stable, even increasing to more than ever before.
Why then should we be reminded of this seemingly old and bad history?
You see, before I come to the actual point of this letter you should know that I am just back from a most interesting tour through Europe – And now, upon arrival back at home I have to admit life in Bali is as good as it gets, compared to most other places I know.
I could be asking myself why on earth did I subject my dear family to stepping into an aluminum tube for transport, breathing re-processed other people’s exhaust air and once arrived there living uncomfortably out of the suitcase?
It seems that after a while enjoying the good life here in Bali becomes so bleedin’ normal, that we long for a fresh change from the good to the imagined better. That must have happened, there was no other reason to leave.
After all, leaving here seems silly, because the charge for one hour parking in a Munich park house was the equivalent of a decent meal for two, including drinks, in my favorite mini restaurant “Wild Ginger” in
Jl, Jero Gadung, near our first office.
A small Coke in an Italian standard restaurant was 5 Euro 50 , about Rp 85,000. For the same amount the daughter could have enjoyed drowning in Coke here in Bali. Looking at value for money, it doesn’t make much sense to leave, right?
But then, who wants to make himself look silly only? Therefore I also admit we had many exciting and interesting days touring the old continent.
We also brought a hand full of fridge magnets back to Bali,
but more importantly plenty food for thought and with this we move to today’s topic:
On the tour I met some old friends and made new ones. My friends from the old times are not super wealthy. Still we had a lot of fun. I was also fortunate to be introduced to some so called ‘high net-worth individuals’, or as we would say very rich people.
The discussions were sometimes clouded by the third cocktail between the two first ones, but based with focus on their situation in the investment world and about present world economic events.
Here is what emerged when I told them I come from Bali:
“You are fortunate to live there, - or Indonesia as such, when the next global crisis hit the ground”.
(Note - not “if”, but “when”, they said).
They explained that about 7 out of 10 of their international business partners share the view that a global crisis is coming. “Likely 2019, or at the latest in two years”.
They explained that international interest rates will rise. They have to and we see it happening now. “Going up is manageable. However, if there is a recession, the economy slows down and debts turn bad, there will be no jobs and less affordability. The next financial crisis will likely be bigger than the one in 2008 which occurred when the credit market froze up.”
Now, we have the choice to we believe them, or not. Should we get nervous, only because some elderly men who claim to have “their sources” raise the finger with the warning “the next crisis is already in the making…?”
Again, the world wide percentage of GDP (Gross domestic Product) is higher than ever and Donald the Terrible is assuring us that the strong US Dollar indicates that all is well and America, including it’s leading currency and economy is on the way to be great again. Not many take this serious any more.
However - why on earth may we expats here in Bali spend a thought about world economic events?
“Who cares? Can I have another Bintang please”…
Well, you only have to imagine that world trade comes to a grinding halt from the humble beginnings, which Uncle Donald is dishing out right now with his trade restrictions. Surely tourist numbers will dwindle, because everyone is sitting fearful on the pocket instead of spending.
Such a situation would be similar to the global economic crisis of 2008. Or maybe worse, as today the worldwide lending, led by the USA, and which became excessive in 2008, is considerably higher.
Dying trade, less tourists, no money coming in, local businesses are going to struggle, prices come down as competition is getting harder, (hey, isn’t that something good?)
No, it isn’t, because we can imagine unhappiness, even desperation all around or maybe even violence? We will come back to this again …
First a quick jump back to 2008.
The New York Federal Reserve was a zoo. Imagine NASA headquarters on the day a giant asteroid careens into our atmosphere. That was the New York Fed: all hands on deck, top human panic!
The crowd included future Treasury Secretary Timothy Geithner, then-Treasury Secretary (and former Goldman Sachs CEO) Hank Paulson, the representatives of multiple regulatory offices, and the CEOs of virtually every major bank in New York, each bringing armies of bankers, only to see large financial institutions breaking down with no quick fix solution.
Not going into detail, but hundreds of thousands of people lost money or even all their possessions. However, worst of all the international community, was fearing that the downturn in business and uncertainty if and when all may come back to normal affected almost everyone.
According to the International Monetary Fund, global debt is now at a shocking record high of $164 trillion, or 225 per cent of world GDP – an increase of 43% from 10 years ago!
In the strong economies the interest rates are going up, leading to a slowdown of the economy. Defaults in repayments of loans will be the result and start the downwards spiral.
If we believe those warning voices, what to do next?
No iced cappuccino after lunch anymore? Driving to Denpasar by night only to save fuel?
I suggest to keep enough cash on the side to weather a period of difficulty. Although we cannot eat money, but initially in a crisis cash provides valuable flexibility.
If you then see there is still enough money left to purchase something of everlasting and increasing value, come to UbudProperty.
It is a fact -owning foreign real estate is an excellent way to diversify your assets. No government agency can force you to repatriate real estate from another country. If your bank accounts are seized and capital controls enacted, your investment is safe. Out there are many who would love to come to Bali, but presently are held back by conventional thinking. Once life becomes critical overseas, many want to come and the property market will see another boom. Simple logic.
Another interesting discussion subject was when Mike asked the question: “where to go when the dust hits the fan?” Where can we feel safe; where is enough food to survive the worst imaginable situation; where are cost of living reasonable and more like this.
Two of my new acquaintances said the same: “ Go to New Zealand. It is isolated, unaffected from political aspirations, plenty of nice fish and steak to eat, and not reachable by the hungry mob of neighboring poor countries”.
Interestingly Iceland has been named to be the most peaceful country in the world for the tenth year running. Just that the thought of the long dark month’ of winter there surely is not helping planning migrating to there.
There is the Global Institute for Economy and Peace. Their official list of the safest Countries looks presently like this:
Iceland (No. 1)
New Zealand
Austria
Portugal
Denmark
Canada
Czech Republic
Singapore
Japan
Ireland (No.10)
I have no special expertise on security issues, but would argue that in a severe global crisis European Countries are under threat to be overrun by neighboring poorer Countries, such as North African or Middle Eastern ones. Also being close to Russia poses a possible exposure in war time.
From the list Canada is a valid choice, Singapore certainly not, because Singaporians rely heavily on water, food and energy imports and the US trade. Japan and Ireland have the disadvantage of cold climate, and not enough natural resources.
A better list would include net exporters of food, countries that are isolated (preferably by sea), and countries that can take care of their energy needs (particularly electricity in the short term and hydrocarbons in the medium to long term).
Most countries in the southern hemisphere would be pretty resilient like South and some parts of Central America, Australia and - nice to find out: Indonesia too.
Although Indonesia is nowhere mentioned in the dozens of reports about the safest Countries in case of … but Indonesia shares many of the same features which have been attributed to Safe Countries, according to GPI (Global Peace Index).
The GPI also reviews internal safety, such as how many police are there per head of capita, and is the military strong enough to protect the citizens, are the Politicians responsible, etc.
Anyone who is interested in finding out more, here is a useful link: https://en.wikipedia.org/wiki/Global_Peace_Index
On internal safety in Indonesia, namely Bali, there could be books written, which is not the idea here.
Just this: according to United Nations Office on Drugs and Crime, out of 218 countries, Indonesia is listed 9th for lowest intentional homicides per capita at 0.5% for 2014. (Last official data) That’s really low compared with e.g. Canada at 1.4%, which is already considered low compared with the US at 3.9% .
Theft is more likely to happen in times of despair, but I’d rather give up some portable items, than being part of the 3.9 % of intentional murder victims in the US.
Sure, much of the Indonesian Police Force is said to be corrupt. But there are many and many also committed to their duty. I have to think here of this famous hidden video recording, where a Balinese Police Officer collected a Rp200.000 traffic fine and spent the money afterwards with the same tourist, drinking beer. However, if to become Police officer you have to pay several hundred Million Rupiah to be accepted for the job, the scenario becomes more transparent.
There are about 450 provincial Police stations in Indonesia, aimed to grow to over 500. I could not find data of policemen per capita, but this is relative on an island with drastically changing population numbers, relating to the tourist seasons. In terms of numbers, we see plenty of police. Already apparent to everyone when the Governors family drives for shopping. Let’s trust in their sense of duty when the time comes.
Bali is relatively isolated. No need to fear that continental mobs would make it across. You sure also do agree that the Balinese people are peaceful and friendly to the point that being their neighbor makes you near part of their family.
Make friends with neighbors, support them if needed and in times of serious trouble, I trust no one will go hungry.
Traditionally the most serious security threat to Indonesia is violence between ethnic and religious groups all over the country, - except Bali amongst very few other regions. Here the overwhelming majority is Hindu. Some say : ” but aren’t there many Muslims in Bali too?” Yes, however, they came to Bali in order to earn more money for their families than they could earn in Java. Religious tensions such as are flaring up in Jakarta at times are almost unheard of here. Furthermore, Muslims also are peaceful by nature of their belief and taught not to kill other than in self defense. (not talking about ISIS here).
And more on the plus side of the balance sheet in crisis times -
Heating expenses? Nil. Electricity cost? Close to Nil. (Just must go to bed with the sun).
Food? Very soon home gardening would become popular and take care of essentials again.
Of course all of the above is only general observation and to each topic there would be oodles more to say, but you sure get the idea - we have reason to feel good about our choice of location.
Now let’s go out, get some iced lemon tea and forget whatever was said here – for the moment.
See you next month, same place different topic