Whilst the daily front-page items in the Taipei Times, China Post and the Chinese language newspapers concentrate on judiciary rulings, defense issues, the proposed petrochemicals plant in Changhua and of course the ongoing political soap opera within the DPP in the run up to next year's election, there is a scarcely noticed shadow issue, which, when it is apprehended at all, appears on the latter pages of the business sections (and just once in a letter published three years ago on February 23rd 2009).
That issue is the fragility of Taiwan's current monetary system.
On April 16th this year, Amy Su reported on the claim by the Alliance for Fair Tax Reform (公平稅改聯盟) that, contrary to the Ministry Of Finance's published figure of NT$4.85 trillion, the government's total debt adds up to more than four times that at approximately NT$21 trillion - or just shy of NT$1 million per person.
If that figure is correct, then the implication that may have for long term interest rates and consequently the stability of the NT dollar ought to be apparent; the government of Taiwan is effectively bankrupt, and with similar situations existing in both the U.S. and in China (not to mention Europe) - there can be no-one to turn to for help.
Next year's administration - whichever party it is - will face a simple choice: either begin to actively deal with this problem now or keep trying to put it off until financial meltdown arrives. It is better that both political parties admit now that this problem exists and stop pretending that economic growth and public spending can be "stimulated" indefinitely.
Any strategy for dealing with this problem must include two broad aspects of reform: one is reform of the monetary system with a return to commodity-based currencies of inelastic supply; the other is a systemic policy of privatization to encompass education, healthcare and other social services which, together with administration costs, currently account for over 60% of annual expenditure (or just over NT$1 trillion per year).
Neither of these two policies would avert entirely the serious economic fall the people of Taiwan face in the future, but they may help to break that fall somewhat, making it easier for the 23 million people on this island to cope.
Yours freely,
Michael Fagan.
(Sent: Saturday April 23rd 2011. Published in the Taipei Times Monday April 25th 2011.)
Addendum: I am always pleased to see my letters published, but whoever was at the desk today just had to go and dick with my numbers so that my NT$21 trillion is now misprinted as NT$15 trillion:
"...contrary to the Ministry of Finance’s published figure of NT$4.85 trillion (US$168 billion), total government debt is in fact more than four times that at approximately NT$15.7 trillion — or just under NT$1 million man, woman and child in the nation."That's not what I wrote and the alteration is both innumerate and illiterate. Not happy about that.
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