It's all about Amelioration

Just another weblog

What Goes Up Never Comes Down

with 3 comments

The headline reads : “The dollar was trounced once again in Asian and early European trade after a surprise tightening move by the Monetary Authority of Singapore sent the greenback plummeting against all its major trading partners”

Wow, impressive I thought. Our little island is really building a name for itself, so much so that our monetary policy decisions will actually influence the Forex majors.

Well, an amusing sidetrack that is. My interest lies in the reason behind our Government’s reliance on adjusting the SGD’s trading band to control inflation as compared to targeting interest rates. Fair enough, we are by and large an export reliant nation. Our domestic consumption has a high import content as well, which translates the fact that we are price takers in the international market and very susceptible to imported inflation. This has been the case for our monetary policy decision since the 1980s, but isn’t there a need to re look into the issue of combating inflation since the dynamics of our economy has changed in the past 2 decades?

Ultimately, the decision to use whatever monetary tools to curb inflation must have an overarching goal, which is to ensure that excessive price increases will not be a burden to its citizens and affect a country’s growth. With that in mind, I am not sure if using exchange rate targeting polices will be ideal Singapore. We just have to question ourselves, especially in recent years, what factors actually contribute to our inflation. Why is it that our cost of living seems to be creeping up on us every time we become complacent and think that we are comfortable?

I am not too certain that we can attribute a large percentage of our inflation on external factors anymore. With a large influx of foreigners, be it investors or genuine citizens hopefuls, one just simply cannot ignore domestic inflationary pressures like the rise in demand for housing and consumables. Secondly, there’s the Government’s fees and charges like your road tax, ERP,COE, utilities tariffs, and the list goes on, that is ever-increasing. The reason for it?  To control congestion and mange the population surge. One big bloody irony I tell ya especially when they are the ones who opened the floodgates. But I shall dabble more on that in the future.

Thirdly, rising land prices especially with  the government tendering state land to the highest bidder and worse, allowing  these developers to dictate prices for public housing. Again, fingers are pointed to the Government for exacerbating the already high property prices which contributes a huge chunk of overall inflation.

My concern is this. I acknowledge that a rise in the cost of living is inevitable, especially in a land scarce nation like ours. Let’s take property for example, which incidentally contributes the most to inflation.  As much as I want a massive property correction, I have succumbed to the fact that property prices will most likely hover around such prices or perhaps correct a little. I really don’t see it coming down to levels after the 1996 crash, based on the inelastic demand created by immigration and our government being that proverbial slut when it comes to big investor money. Yes, not even with the recent slew of measures to curb rising prices. The recent polices to me are a mere reaction to pacify the noise on the ground. Yes, it might soften the prices for public housing and mass market condominiums, but that’s about it. The bar of having an “affordable” home here is already set, if you can’t reach it, that’s your problem.  Sale of high-end properties like the Good Class Bungalows (GCBs) and the Sentosa Cove area will still remain well bidded just because of the current global economic landscape where hot money will continue flowing to Asia. The last thing that our incumbent will do is to take away the punch bowl from the party and be a party pooper.

But they must recognize that fact that Singapore is not just for the elitists who can blow millions in the casinos or dock their yachts over at our piers just for a party weekend. Singapore is also made up of the aunties who contributed to our economic success in the past, but collects cardboard boxes and sell them for a living now.  It is also for that young aspiring and working  adult trying to make living and start or support a family.

Ultimately, the arrival of the filthy rich to our shores will inevitably push up domestic inflation whether it’s because of their investments, or the high salaries. Hell, even the ever-increasing million dollar salary Ministers, despite good or bad times, does contribute to overall inflation. Who will suffer in the end? Simple. The middle and the lower-income groups which will basically spark a vicious cycle of debt.

Essentially, I am no economist that can conjure the best recipe to curb inflation. But I am sure that the exchange rate targeting measures has its limitations. There is only so much room that the SGD can be strengthened before it becomes uncompetitive for our exports. Thus, whether we look into interest rate targeting factors or introduce certain policies, something needs to be done. Again it begs the question: Is our government running Singapore as a city or a nation?


Written by Nabs

October 19, 2010 at 7:09 am

3 Responses

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  1. […] Singaporeans are fed, up with progress! – It’s all about Amelioration: What Goes Up Never Comes Down […]

  2. 1st n welcome back! Policies should be made for the majority of it’s ppl, which is the middle income group. That cannot be further from the truth however. Since the last election, they really took ‘Pay And Pay’ to yet another level. With the rich poor gap widening, how can the middle grp standard of living improved? Not forgetting the evaluated happiness n experienced happiness survey? What are they trying to prove and convey? One can only wonder.


    October 19, 2010 at 12:45 pm

  3. […] “..Singapore is not just for the elitists… Singapore is also made up of the aunties who contributed to our economic success in the past, but collects cardboard boxes and sell them for a living now. It is also for that young aspiring and working adult trying to make living and start or support a family.” Nabs […]

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