Thursday, December 23, 2010

Why I think Inflation going to get more problematic....

The latest CPI report shows a rise of 3.8% in Nov 2010[Link] the highest in the past few years. This is after a rise of 3.6% in Oct 2010.

"While the usual suspects continued to drive inflation in November—including transport, housing and food costs—it should be noted that all major segments within the CPI basket are seeing price increases" - Standard Chartered Bank economist Alvin Liew said in a note after the data were released [Link]

If you have been watching the markets closely, you will know that oil prices have surged past US$90 a barrel, the price of wheat has double in the past year[Link], sugar has gone up 22% this year[Link] and coffee has gone up 69% this year[Link]. The price of raw commodities,after some lag, will find its way into consumer products.

The latest COE for big cars surged to $72K up 15% from the previous bidding 2 weeks ago[Link]. Housing prices rose something like 60% in 2 years.

Remember the economic expansion in 2007 also brought rapid price increases that was way above increase in wages. The price spike also erodes the purchasing power of CPF funds lock away at 2.5%[Link] and money in savings accounts which now pays below 1%. To adjust for inflation the CPF Minimum Sum was raised by 5.1% from $117,000 to $123,000 and Medisave Minimum Sum was raised by 6.7% from $37000 to $39500[Link]. You can check the previous previous hike of these minimum sums here - the 2009 jump in CPF MS was 10.3% and 7.2% for Medisave Minimum Sum. The CPF MS is adjusted to meet the inflation adjusted target of $120K in 2003 dollars because the minimum sum was less that $120K in 2003, they adjust this figure to close the gap and for inflation. The figure you should pay attention to is Medisave Minimum Sum because it is roughly linked how fast medical cost is increasing - we are looking at escalation of roughly 7% a year here.

The problem with Singapore is the wealth generated by GDP growth is unequally distributed among the people but the rise in the cost of living has to be borne by everyone. 30% of the population has low income that is relatively stagnant....the next 30% probably see wage increase that can hardly keep up with the rise in cost of living. Corporate profits as a % of GDP is at a historic high as we push ahead with economic growth....there is a feeling among many Singaporeans that the booming economy just cause their financial woes to pile up as things become more expensive.

44 comments:

Towkay said...

Why not ship non-working Singaporeans to lower cost countries to live in? This will lower Singaporeans' cost of living and free up space for the next wave of foreign talent.

I believe this should be the main priority after PAP gets its mandate at the coming elections.

Anonymous said...

One pre-requisite of enslaving the peasants with property inflation and fractional reserve banking is:

Manipulating and crashing the food price. That is why US and Europe have been subsidizing their farmers.

During the boom years, PAP has force us into debt by ever increasing property price. We have very little buffering to wiggle during food inflation.

If food price increase 5x, I foresee lots of bankruptcy and riots. Perhaps revolution will then be inevitable all over the world.

Anonymous said...

"30% of the population has low income that is relatively stagnant....the next 30% probably see wage increase that can hardly keep up with the rise in cost of living." - Lucky Tan

The most important thing is to ensure that 66% see wage increase keep up with the rise in cost of living, or better still wages rise faster (or many times faster eg for Ministers and top civil servants) than cost of living.

They have done it successfully for the past 45 years, so no reason why not for the next 45 years.

Riots and revolution? Most probably not in our life time.

Tan Kuan Han said...

Sir, you mean Nov 2010 instead of Nov 2011, right?

Anonymous said...

In 2005, a 3-room flat in sengkang cost: $65,000 - $110,000.

At December 2010, a 3-room flat at the new BTO Punggol Topaz cost: $166,000 - $207,000.

Look at the cost of our HDB flat. It getting more and more expensive.

Anonymous said...

Rather than seeing our wealth enhanced, I am seeing our wealth being eroded away.

Imagine paying $400k for a 4-room flat, and $100k for a car. You can purchase all of these in Australia or US for a fraction of what they cost in Singapore.

The Johorians are laughing their way to the bank, as they earn in Singapore while eat and live in JB. Their Singapore income is large enough to offset the inflation in Malaysia.

I am looking at a crash in 2011. Cost of living is already rising much faster than our wages. Now, even cars are getting priced out of our reach.

Anonymous said...

"I am looking at a crash in 2011. Cost of living is already rising much faster than our wages. Now, even cars are getting priced out of our reach."
Anon 24/12/10 19:19

No lah, it won't crash. As long as "you keep riding the tiger and don't come down", you won't get eaten.

So most important is to keep riding the tiger. For example get more foreigners turn PRs in to sustain or even raise the property prices, including HDB prices.

Actually not really a problem because we are only 700 sq km so just increase the foreigners a bit more will do the trick. And the impact will also be very fast.

That's why to be small can be beautiful. You don't need too many or too long to see results.

Anonymous said...

Older people - jobless or under-employment problem.

Younger people - high costs of HDB.

The high costs of livings affect all ages.

See who are laughing to the banks??

Anonymous said...

Whatever we bought 50% went to the pocket of rent seeking landlord. Below is the explanation.

A bowl of chicken rice at JB is about 40% that in woodland. Taken account into similar cost of storage and cost of transportation from sources of production--there is no way to explain the hefty price different over a short causeway.

The only logical culprit of Singaporean paying a high price for food is the property price of Singapore.

PAP's property policy is not unlike the vampire squid, sucking vitality from Singaporean.

Anonymous said...

in a close knit family, the bread winner or the strongest will become the pillar to provide financial support to members who may yet to realize his or her fullest potential.

likewise, we should tap/tax(indirect) the resources of the rich to help the weak in our society to raise their game.

once we have a 2/3 significant in the game proper, things should be stable as we continue to help the laggards to keep up with the rests

isnt that the game plan of our gov?

Anonymous said...

"isnt that the game plan of our gov?"

no, their plan is to replace us with FTs.

Anonymous said...

we need them, FTs, to get the big fishes in and they in turn need our baits.

as to whether the gov is cooking the whales right, you be the judge

Anonymous said...

Over the next 5 years, there will be an average of 200000 foreigners per year going to come to Singapore to replace Singaporeans in the job market. As more foreigners are converted to permanent residents, the high employment rates of permanent residents will cover up the high unemployment rate of Singaporeans. Thus, the unemployment rate of local (Singaporeans and Permanent Residents) will still be nice figure to show off.

The high number of permanent residents will buy up as many HDB flats as possible. This will push up the price of 5-room HDB flat in five years time to near to $1 million. As Singaporeans cannot afford to buy their own flats, they have to rent from the flat owners who are permanent residents.

In conclusion, more Singaporeans become jobless and homeless when the next wave of foreigners arrive at Singapore.

Anonymous said...

Basically, we are slowly moving towards a scary scenario.

Tenants (Singaporeans) doing National Service and reservist to defend landlords (Foreigner PRs) who view citizens as liabities.

Good luck to Singapore.

Fox said...

If you look at the figures for Singapore's Official Foreign Reserves (OFR), you can see that the OFR has been rising rapidly since 2009. This means that the MAS has been trying to hold the exchange rate of the SGD down.

MAS has a policy of managing the exchange rate. Given that it does not practice capital control, this means that their hands are tied when it comes to fighting inflation and setting interest rates. Unless MAS loosen its control on exchange rate (which exporters hate) or impose control on capital infow (which is impossible as we are a financial hub), the hot money from the US's QE2 will probably cause inflation in Singapore.

There is no way for MAS to manage the exchange rate, have free capital inflow/outflow and have an independent monetary policy. This is a classic case of the impossible trinity.

I would watch for some SGD appreciation by the MAS if inflation gets serious enough.

Anonymous said...

"I would watch for some SGD appreciation by the MAS if inflation gets serious enough."
Fox 25/12/10 01:07

Even if SGD were to appreciate a lot, my gut feeling is it won't help much to reduce inflation.

Now, inflation in Singapore is not as bad as in some other countries.

If these countries can still be peaceful and stable despite double or triple digit inflation, of course Singapore will do much better.

Peace, stability and signs of prosperity, even if it is on the surface, is the most important thing for any govermennt, people and country, whatever the other serious problems. And for a long time.

Lucky Tan said...

Tan Kuan Han,

Corrected. Somehow my mind was on 2011...dunno why maybe elections expected in 2011 and with effects of inflation worsening wonder what people will do.

Anon 24/12/10 19:19,

The great Depression was precede by a period of inflation. Then the crash came, prices deflate but people have no jobs and wages tumbled so it didn't help that prices came down when people had no money.

anon 24/12/10 16:43:

Good point about the frational reserve banking system. People borrowed more and more and more to keep the system running. The so-called GDP growth saw an even bigger increase in debt levels which makes the ingredients for something nasty - a matter of time. In the end, we may all be Greece.

anon 18:39,

The rise in housing faster than income growth means only one thing higher debt...and that makes Singaporeans vulnerable to all sorts of economic shock.

anon 17:20,

If the PAP govt can always keep things under control so that 66% benefit from their policies and the other 44% head towards hell in the biggest income gap in the developed world...it might work but the 66% will soon figure there is a big risk of becoming one of the 44%...if you're employed and earning 5 figures a month, you may be on top of the world until you realise that you can easily become one of those structurally unemployed or be replaced by FTs.

anon 00:22,

Singaporeans have one of the highest (Israel has the highest) obligation to serve the state - NS, reservist - and the least safety net. This is another type gap really how much can you take from the citizens....before they think it is too much.

anon 21:40,

Good point. The rent collectors and banks benefit greatly from this system. If you're poorer than the average guy, you sometimes think you're better of somewhere else (JB?). What is the selling point of the Singapore system to the lower half of the populace? Especially when social mobility is declining and your status become more entrenched.

Fox,

Singapore like most countries dependent on manufacturing exports and FDI have no choice but to keep the currency relatively weak. Our old formula for growth carry with it liabilities.

Anonymous said...

The day LKY and his banking cabal chose to steer Singapore from Industrial capitalism to financial capitalism, Singapore is headed to the hell.

Few places that embrace finance and bragged they have become a "service economy" without eventually ending in disaster. Look at ponzi HK, UK, and US.

First everywhere the banksters go, the create volatility and bubbles to fleece the population

Next the so "service economy" built itself on consumption, not production. The more people service one another (unless we service foreigners), the more we consume our wealth. LKY is really an old idiot who squandered all the legacies of Goh KS.

And servicing foreigners in services such as healthcare, crowded out the locals.

While we decide to throw away our wealth by throw away means of production, China pick up all production capabilities from the world laughing all the way.

If PAP did not acceded to banksters' and landlord scheme of property inflation, and have followed a sound industrial policy, our hollowing of industries will that be that severe.

David Teo said...

With our reserves coming back on even keel again, the country will have the wherewithal to weather the inflationary storm. The music will continue and one just have to be nimble to look after oneself. When that is done, please help those who are still down and out. Vote wisely. Vote for politicians who will look after local born Singaporeans' interests. DT

Anonymous said...

"While we decide to throw away our wealth by throw away means of production, China pick up all production capabilities from the world laughing all the way."
Anon 25/12/10 09:33


Actually Singapore made the right move by moving away from production. How can you compete on cost and labour with China anyway? You don't have to be an economics expert to answer the question.

During GKS's time and even in the 1980s, it was still OK because China is still not fully capitalistic yet. In fact in the 1980s, Singapore made 75% of the world's output of hard disks!

It is not that we want to move into the service economy. It is because there are no better choices to order to survive or even prosper. Or else we will shrivel and die as we have no natural resources.

And like in all things, there is no perfect choice or system. Hence you have the negative aspects of it. What is most important is that these are well managed and controlled, which has been the case so far and I am confident will also be for a long time to come.

Anonymous said...

Re

"Actually Singapore made the right move by moving away from production. How can you compete on cost and labour with China anyway?"

I admit I am a bit too extreme. Our hollowing out is not entirely the fault of LKY, but I think he must bear significant responsibilities.

Take Germany as example. Germany has one of world highest labour cost-- instead of shifting production to China and sacking workers, she did the opposite. The tried very hard to keep and train her workers.

Eventually, she has produced ultra techicians and ultra engineers.

German having learnt their lessons in Weimar hyperinflation hates speculator. No clown in Germany made $ by flipping property on the woes of honest citizen. When I worked in Berlin some years ago, a small apartment near the town center can be less than S$200 000.

But mother fxxker like Margaret Thatcher is UK did just the opposite of Germany. She allowed employer to easily fired workers. She allowed the banksters to take over industries, sold them into parts, and move production oversea.

Then in collusion with banking cabal, they started ponzi property inflation especially in London. They embraced financial engineering instead of real engineering which make London the ponzi capital (aka financial capital) in the world.

Now UK has to pay the price for hosting those criminal banksters, while Germany is now seen as a fire brigade whenever there is any banksters-created crisis in Euro-zone.

The example of Germany teach us that--indeed, its very difficult to compete with China but that is not impossible.

A country who treated their workers decently eventually bear fruits while those collude with banksters would send their countries down to hell.

David Teo said...

I fully agree with Anon 10:56 above.
We will still need some banking services, bio science and the defense industries, etc. But maybe with my limited knowledge, let me add on a few big and small businesses we should develop: photo voltaic panels, harddisks, SD with WIFI, stainless steel fabrication with special coatings like ECTFE, industrial valves for specialty chemicals, special purpose marine vessals and offshore production platforms. These kind of industries will provide employment for local born Singaporean technicians who can be transformed into "ultra technicians" (and be properly paid). Besides the Germans, how come the Swiss can still have technicians making watches, the Swedes making submarines and Americans making simple things call "venturi valves" for airflow control? dt

Anonymous said...

I agree the Germans, the Swiss, the Swedes and even the Americans and Japanese are by tradition good in engineering and technology, especially cutting edge ones. They have top class researchers and engineers and produce products and brands renowned, sold and used worldwide. Maybe got something to do with their education system and govt policy. Although for production they may also not be able to compete on production costs with China. That's why iphones, ipods, etc from USA, etc are made (mass produced) in China.

Singaporeans? We have a tradition of mass producing engineers for a production economy in the 70s and 80s or even now.

Quality and strength in engineering and technology or bio technology? You tell me what has Singapore develop, invented and produce that capture world markets, besides the Creative brand of sound cards. In spite of getting of so many foreign talents.

Anonymous said...

Yah, we should Copy our neibors and drink heineken and pee a golden yellow river all will be rich.

Anonymous said...

Singaporean engineers are screwed by the managers. Those who were promoted to manager and upper management were generally not due to technical competency, but more of their politiking, backstabbing and wickedness.

This is the creation of PAP shaped us in such culture.

When MNC first set up shop, there is a kind of "engineering culture". The wage gap between managers and engineers are not that wide. The managers is much like a project coordinator rather than a "manager".

Many ang moh managers are also extremely technical.

When locals take over, things get ugly. The managers become dictators. The wage gap between managers and engineers get wider, and politiking become rampant.

Although east asians are inherently fond of court intrigue, things are especially bad in Singapore.

In Korea, Taiwan and Japan, the elite developed indigenousness industries by asking honest and highly competent engineers run the show.

Korea and Taiwan does not really received so much of transfer from MNC as Singapore.

Yet we failed, and they succeeded. Is it because we are inferior? I dont think so.

Our culprit is PAP government who is eager to shape a dictorial and inequality culture.

Anonymous said...

Unfortunately, those leaders past and present, despite their monopoly of Singapore's "Best Brains" and with more money than sense, are inept to say the least. What we see are creativity and innovations in milking the population to increase their coffers. CPF, ERP, COE and GST to name some. The rent seekers, bankers and corporations are those who actually benefit and of course the government. The stress and frayed nerves of locals are beginning their toll and eventually something will have to give.

They have created a frankenstein, and bigger headaches for themselves and I don't see anything happening now that will undo the damage. Instead of focusing on the strengths of her own citizens, they are prostituting themselves with cheap labour, dependence on large corporations and innovative ponzi schemes to ante the GDP figures. Then they added in RWS and MBS which will increase the GDP figures much higher, while at the same time depressing wages of locals without planning for the sudden increase of population. We could go on and on but will they listen? If we were vulnerable in the past to changes in the global economy, are we better off today?

Anonymous said...

To Lucky 25/12/10 08:34,

You mentioned that
"if you're employed and earning 5 figures a month, you may be on top of the world until you realise that you can easily become one of those structurally unemployed or
be replaced by FTs."

There is one exception to what you mentioned, i.e., peoples who are working in the govt. sector.

They will never be replaced by FTs.
On the other hand, private sector employees had been replaced by FTs, are being replaced by FTs and will be replaced by FTs.

Their pay increase over time as they receive increment every year. This is some kind of seniority based pay structure. On the other hand, private sector employees are not assured of pay increment every year.

They are paid fixed 13th month bonus whereas 13th month bonus is not practised in most private sector companies.

They are assured to work until at least 65 years old with the latest moving of retirement age from 62 years old to 65 years old.
On the other hand, private sector employees are facing difficulty to find decent employments when they are in the 40s.

They are guaranteed to be employed during recession. On the other hand, private sector employees lose their jobs or receive pay deduction during recession.

Their pay are peg to be within the top x% of private sector employees pay. This assures that their pay are very competitive.
On the other hand, the private sector employees pay who are in the top x% category may drop out from this category next year, because his job is taken over by FT. He faces the prospect of never able to return to his last drawn pay.

While the median pay of the workforce is $2400/mth, what do you think is the median pay of the peoples working in govt. sector?

Anonymous said...

A very simple question?

You want to work for ang moh manager or sinkies manager? I bet 99% would choose ang moh.

If one has expose enough, one would come to conclusion that Singaporean is one of the most wicked people and liar in the world.

This is what PAP wants. Through brain washing in MOE schools, by promoting extremely crooked characters in civil service, political appointments and by inculcating perverted values-- values like praise property speculators, extolling who is rich regardless of character, condemning the poor to hell, PAP has built a real wicked society.

Which 1st world country has the conscious to see our 80 years old ah ma work as a cleaner for $700 a month?

Taishan said...

good to see the Towkay back.

Er.. why not ship yourself to some 4th world cesspool nation where you can live in greater affluence and have even cheaper labor.

You exemplify the wickedness of the PAP.

Anonymous said...

The rich who are having a fabulous lives now, just don't be too happy. With Singapore attracting the world rich and mega rich, it is only a matter of time before their positions in society decline. Those in the top 1% will decline to top 10 for example. The way LKY structured the Singapore system is to ensure that those in the top 1% have extremely good lives, next are those in the top 5%and so on. As Singapore's resources are limited there is only a limited number who can have fabulous lives. Take for e.g. COE, don't rule out the possibility that in time to come it could well hit $500,000. The Singapore escalator is moving faster and steeper.

Clear eyed said...

I believe Towkay is only carrying on the satire abandoned by Lucky who has opted for realism now.

Anonymous said...

""纳吉送垦殖民大礼
一亿花红一月发放""

See what the Malaysians are getting!!

Anonymous said...

"The most important thing is to ensure that 66% see wage increase keep up with the rise in cost of living, or better still wages rise faster (or many times faster eg for Ministers and top civil servants) than cost of living."

That is provided if we can really get hold of the true statistics on the wage breakdown of earners (& non-earners) of singaporeans - so that we know whether the complaints are just "cocktail noise" or not.

Can you find one in the public domain (not those selective statistics that mix singaporeans & foreigners together).

Anonymous said...

"Take Germany as example. Germany has one of world highest labour cost-- instead of shifting production to China and sacking workers, she did the opposite. The tried very hard to keep and train her workers."

very good example. from second world war to one of the most democratic first world country with a coalition government.

it seems like we are veering to a path of "renting" our scare land at a very high price - & only the highest bidders can afford to pay.

Anonymous said...

To anon 26/12/10 09:43

Singaporeans are not Germans lah.

German history not same as Singapore history lah.

Singapore also not as big as Germany lah.

So what works in Germany may not work in Singapore. And vice versa.

Anonymous said...

Malaysians are smart, that is why the malaysia govt are now giving more to please the people.

Anonymous said...

Re
"
Singaporeans are not Germans lah.
German history not same as Singapore history lah.
Singapore also not as big as Germany lah.
So what works in Germany may not work in Singapore. And vice versa.
"

Pak Chung Hee of Korea and Chiang Ching Kuo of Taiwan perform the same miracle under much more difficult condition than us.

The reason we cannot make it is partly due to failed policy of GKS and but the more significant blame should goes to LKY.

If we studied the history of Korea and Taiwan, we can conclude Pak and Chiang really love their people. Great achievements are done because the leaders wants the best of their people.

LKY a total asshole who first betray his people by working for Kempetai, then betray the worker by purging the socialist wings of PAP, and finally sell Singaporean to banksters, landlords and MNC to enrich his cabal.

Pak and Chiang make sure monies goes to the best talent.

In Singapore, most industries PAP built failed, because of amakudari cabals, SAF mercenary to managers. These parasite love only to play court intrigue turning all GLC into a big harlem.

From PAP's view, the wealth of Singapore earned by hardworking Singaporean would be better of being squandered by Ho Ching, rather than bettering our life.

This is the reason why we cannot make it. We are backstab PAP.

Anonymous said...

root cause: having low interest rates will result in high inflation. thats why mas allows sg rate to appreciate hopefully markets will adjust itself. people just have to stop buying or buy less and things will go down. sg people have high wastage on food eg. buffets counters throwing food away like noboby business. of cos, in the process, the poor will suffer more. but that is in every economy and countries. the poor will always be the first to suffer and the one that suffer more.

Anonymous said...

"So what works in Germany may not work in Singapore. And vice versa."

You are right. what works in Germany may not work in Singapore.

Economic mix & structure is always complex. No two countries are similar. The current inflation (properties in particular as it forms a major cost component over your live) has a serious generational transfer of costs into the future.

In our country, one thing for sure, you do not get to know a lot of things what the officials do not want you to know. This is the BIG problem.

Singapore is not Germany. In fact, Singapore is not any other country. However, we know the problem when we see one - I mean some serious problem.

Anonymous said...

Went to a new hawker centre this evening.
So unbelievable!!
Even hawker foods are so expensive nowadays. The prices hv soared again & again.
Sporean must be very rich???
The poors are very pitiful. How are they going to survive?? Even hawker foods may now be beyond their reach.

Anonymous said...

Now it seems there are more foodcourts than hawker centres. And paying $4 for a bowl of kway teow soup! Or a plate of chicken rice! And standard is no better or even worse than hawker centres!

Anonymous said...

Singaporeans nowadays are so lucky, they have all the foreigners from big countries to attend and serve them.
Singaporeans are so blessed.

Anonymous said...

Oh and they eat in airconditioned and clinically clean places too!

JUN said...

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