rafflesplaceguy Wrote:On the section where you mentioned about members withdrawing their CPF monies for purposes such as housing, in the books of the CPF Board, a withdrawal by a CPF member from his account is a reduction in the liability (i.e. a debit) of the CPF Board. From the accounting pov, since CPF Board cannot sell the bonds it is holding, the CPF Board must record a credit somewhere and I can only think of recording as a transfer to the Govt (e.g. HDB Board) or a transfer to the banks (for members who are servicing their mortgages from their OA account). While members continue to contribute to their CPF accounts, one should also not forget that most of the members also withdraw from their CPF accounts for a variety of reasons, especially for housing. And property prices being where they are now, I don't think it is unreasonable to assume that whatever monies that goes into the OA, is quickly withdrawn to service mortgage payments.
And finally, on your assertion that CPF statements are completely fake, I think you should have been careful with your choice of words. (And no, I don't mean from a legal point of view). Would one call their own bank statements fake then, since we all know that at any one point of time, the bank doesn't hold all the depositors' balances in cash.....And going by the logic of your arguments, should we also then label banks' operations as "parallel with ponzi schemes, where one person's withdrawals are funded by another's contributions.... that the cash flow mechanics are similar."?
Please look at the financial statements produced by the CPF Board. Especially on page 5, where the $187bn of assets is broken down into its key components, among them $185bn of
members' accounts. Note that the CPF members' accounts are treated as ASSETS not liabilities.
The CPF Board is not treated like a custodian who owes its assets to the beneficial owner. The CPF Board is treated like a cooperative where the members are the owners. If the CPF Board was treated like a custodian holding money on behalf of members, it would have gigantic
liabilities corresponding to CPF members' accounts, just like banks have gigantic liabilities corresponding to depositor accounts. Instead, the CPF Board is shown as holding gigantic assets and almost no liabilities relative to the assets. In other words, the CPF Board's assets are in fact CPF members' monies, as is clearly disclosed on page 5.
The CPF Board's assets (which, again, are really CPF members' assets) are primarily in special SGS, not cash. That means, when divided up and apportioned to individual members pro-rata, member account balances, despite being shown as cash in CPF-OA, CPF-SA etc, are in fact not held in cash but mainly in special SGS. This is why I say the account statement sent to individual members is fake - because the underlying cash is not there.
What happens when you make a net withdrawal e.g. downpayment for the house? Your current month's contribution is not enough to offset the drawdown and you must drawdown the cash balance shown in OA. But there is no actual cash in your OA - it's in special SGS. The CPF Board cannot sell your pro-rata share of the special SGS. Therefore the cash is met by an offset from other members who are making a net contribution. Of course, given the large sums of money, all these transactions are book entry only.
It is correct that for banks, the Ponzi parallel also applies. Again, banks are not Ponzi schemes, but the cash flow mechanics are similar. The big difference for CPF versus a bank is that in a bank account statement, the statement of your cash assets is in fact a statement of the bank's
liabilities to you as a depositor. There is not enough cash to pay you, but if you demand it the bank will somehow find a way or die trying.
But for CPF your statement is not a statement of the CPF's liability to you.
It is supposed to be a statement of what you really own and not what the CPF owes you. Of course, since you can't withdraw your CPF money except under certain conditions, this is normally a moot point. But like I said, this doesn't change the fact that the accounts are fake in the sense that the underlying assets are not in the form of cash as implied. To be more politically correct, the accounts are misleading because they do not make clear that the underlying assets are mainly special SGS and not actually cash. You have to read the CPF Board's financial statements to realize what is going on.
Again, this isn't meant to cause a panic, and indeed for a government old age/pension scheme the CPF is probably one of the least bad ones on an international basis. But I for one am not depending on the CPF for anything in old age - for my own retirement planning purposes I assume that I will not be getting any money out of my CPF account. Any person trying to plan for retirement would be wise to do the same.
tanjm Wrote:Given that the government can literally print money, SGD balances, SGD budgets, CPF monies in SGD etc are a book keeping mechanism. It doesn't really matter what the SG government does with the money, it only matters what we can do with the money or what alternative returns we can get from the money.
From a macro point of view, I only need to worry if the SG government will run actions in the future that will devalue the SGD currency. From the CPF balance point of view, I only need to ask myself : is there a viable riskless alternative for myself compared with the 2.5% rate?
I am not complaining about the 2.5% interest paid on CPF balances. I am complaining about the poor disclosure of what is being done with CPF members' money. As I pointed out earlier, the government could simply do a direct credit of the required interest into CPF member accounts without the rigmarole of issuing bonds and paying interest thereon. There must be a reason why the CPF cash balances are being borrowed.
I remember reading somewhere that one of the early uses of the CPF money was to fund the HDB's construction program. Later on HDB of course issued its own bonds, along with JTC and LTA. Today no government agencies appear to need such a huge amount of money. Changi Airport for instance is profitable according to its own annual reports ($337m profit in FY11), and PSA's 2010 annual report says it made $1.2bn in 2010, so these 2 entities at least can finance themselves.
Why hasn't the borrowed money been returned to CPF members? Where is it, and what is being done with it?
Again, this isn't to say that the Singapore government is going to collapse or that its finances are unsound. I would just like more disclosure about what is being done with CPF members' money. In the meantime I am just pointing out that the CPF statements sent to members paint a completely different picture from what is actually going on.
