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MediaCorp Pte Ltd.

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Think Differently

By TAN Kee Wee

(MediaCorp 938LIVE’s Money Talks, Friday, 21 September 2012, 7.55 am, and Saturday, 22 September 8.35 am)

The adoptive parents of Steve Jobs have two reasons to be happy on 21st September. Both originally came from Armenia. And on this 21st September Armenians celebrate 21 years of independence from the once mighty Soviet Union. But more about this later.

The second reason for Jobs’ parents to be happy is because 21st September is also the release date of the latest iPhone. This is probably their son’s greatest creation.

About 8 million iPhone 5s will be sold in the US alone before Christmas. It should bump up the US GDP growth rate by 0.5 percent. This is a significant number.

Kevin Warsh, a Fed Board governor from 2006 to 2011, last week said that the iPhone 5 would do more for the US economy than the US Fed’s latest move to print money.

If this is true, the European Central Bank, or ECB, should take note. This is because, a week earlier, the ECB said that it was ready to print more money to bump up the economies of the European Union, or EU.

Central to the ECB’s strategy is to save the euro. This is because if any euro country were to leave the Union, economic chaos is envisaged. And the euro currency would collapse.

Because of this potential chaos, many European politicians believe that the euro must be saved at all costs. Any other outcome is unthinkable. The cost of failure is too high, we are told.

Go back to the 1980s, and this is exactly what Soviet leaders were saying about their Soviet Union. In its early years, the Soviet Union did many remarkable things, like sending the first man into space.

But by the 1980s, the socialist economic system had gone rotten. It was unsustainable. The central belief of socialism was not good at motivating people to produce. There was gross inefficiency. The bills could not be paid.

At that time, Soviet leaders could not imagine any other alternative. The status quo, whereby the state told people what to do and what to produce, must be saved.

Today, the US and EU economies are in the same position. Their politicians cannot, or do not want to think of the alternative, other than to get their central banks to print money.

In 1989, one after another of the socialist countries allied to the Soviet Union started to break away. The fall of the Berlin Wall was the most symbolic. Worse, the 15 Soviet Republics, Armenia being the first, began to fight for independence.

At that time, many believed that the collapse of the Soviet Union would happen after the socialist states broke away. Today, many think that the EU would collapse soon after Greece and the others break away.

As always in life, things do not go as expected. For the Soviet Union, when the collapse finally came in December 1991, it was not due to the socialist states breaking away. Rather, it was Russia, the key member of the Soviet Union, which suddenly decided to break away from the Union.

Instead of Russia in the Soviet Union, Germany is the key member in the EU today. If the cost of keeping the EU together becomes too high, will Germany, like Russia before it, suddenly decide to break away?

Steve Jobs used to tell us to think differently. The politicians in the US and Europe refuse to think differently. We laymen must therefore prepare and think of a different ending for the European Union.

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