Wednesday, July 18, 2007

Illusion of Wealth?.....

The other day I went to my favorite mutton soup stall and found out the price has increased to $4 from $3.5. Rentals at nearby condo have increased by a whopping 40-60%. We all know that the stock & property markets are booming.


Our M3 has expanded by 23% y-o-y. M3 for those who don't know economics is the broadest measure of money in our economic system. M3 is closely associated with inflation. Well there is alot more money sloshing around in our economy than a year ago.

From my belcony, I can see numerous cranes building condos that will soon surround me. Anyone looking out will have little doubt that the economy is booming....but all it takes to build these condos is the willingness of more homebuyers to take up bigger housing loans that they have to pay off over 25 years. My friend working in the margin department of a local brokerage told me the stock market boom is in part fueled by the amount of margin debt which expanded by serveral times in the past year. You can feel very rich if you're willing to borrow for that HDTV, surround sound system, Europe Holiday....you can keep our retail sector growing....

But how is the REAL economy doing, take say, our key electronics sector:

Not too well I'm afraid. Looks like MM Lee's Golden Period will be built on a stock market bubble and condo boom. Well as long as Singaporeans are willing to keep paying more and more for condos and working until their golden years to pay for it, I guess we can keep stretching this Golden Period ...until....

3 comments:

Anonymous said...

Well, Banks are lending out money created out of nothing but just bookkeeping entries. If you are interested to know how it works, go to Google and look for the video titled "The Money Masters". The banks here used the same principle of 'fractional banking'.

LuckySingaporean said...

I've seen the video Money Masters.

Too many claims some evidence. I generally believe banks are accumulating wealth at a far faster rate than other parts of the economy. Fractional banking in itself is just a mechanism through which banks lend and make money...it is legitimate. Banks make money by taking risks, the borrower might default. However, some people argue that the profits are disportionate to the risk due to the monopolistic position of banks as lenders.

In recent years consumer debt has become a big issue with aggressive predatory lending by banks on credit cards and unsecured debts. It preys on the human weakness ...and a person in debt ends up a slave.

I don't dismiss the Money Masters video just that I don't have the means to check out what they are saying. But I would say the video is very interest and provide another angle.

Anonymous said...

what is wealth in Singapore? With a combine income of more than $15K, i still feel poor.

Stay in HDB, drive a Jap car with 2 kids. Dun even dare to think about upgrading