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6/04/2007

Dwindling purchasing power

At the rate the prices of things are shooting up, whatever subsidies will quickly be eroded away. Those lower income earners, including all under $5k household income, will feel the squeeze. The purchasing power of their dollar is getting smaller by the day. The only people who can cushion against a lost of income from a dwindling dollar will be those who can command a 20% or 30% salary increment. I have yet to read in the media how much has it cost the people with all the increases taking place, the 2% gst, housing, food, medical fees, transportation, etc etc. How much of the dollar has already been wiped away without the people spending the money?

4 comments:

Anonymous said...

No surprise here, considering the price increase of almost everything today. We are today what they used to say about Japan -
Rich country but poor people.

China may have a nominal GDP of about US$2.6 trillion for 2005, but after adjusting for purchasing power parity, it shot up to about US$8.8 trillion, compared to Singapore's nominal GDP of US$132 billion which, after adjusting for PPP comes up to also US$132 billion. Are we really that much better off than the Chinese?

Matilah_Singapura said...

Don't forget the "hidden" tax — monetary inflation.

According to MAS figures, money supply has increased 20%. By the time it flows through the banks and comes out "multiplied" as credit money that increases the money supply yet again. If you notice the prices of real estate and stocks are high too — all signs of a bubble.

Taxes, whether by increases in govt charges, or govt inflation of the money supply (S'poreans hit with a double whammy here) hurt the poor and low income earners the HARDEST.

This is because to them, money is a very scarce resource and any decrease in its "power" of exchange (i.e. purchasing power) for other goods means the these folks who don't have much to begin with, now have to do with even LESS.

The next to be hit are the middle (working) class — who are perennially the willing cash cows for bloodletting by the state. In all of modern history, states have walloped the working classes in their countries to INCREASE the size, power and influence of govt at the expense of the (mostly) family-oriented working people.

The rich of course are the least affected, however they stand to lose big time if they misallocate their financial resources in capital goods — i.e. factories, land, buildings plant and equipment etc. When the bubble bursts it is always the capital goods sectors which gets HAMMERED much more than the consumer goods sector. You can see this from past recessions/depressions: items like food and clothing market still ok, but factories are closed, cranes lay rusting and idle, half completed buildings stand abandoned, and so on.

Libertarians (aka anarcho-capitalists) do not use the Marxist version of 'class analysis" which roughly divides the society into poor, middle and wealthy classes. Libertarian class analysis looks at society as those who produce, and those who force themselves upon others and live off what these others produce, i.e. taxpayers — the producers who have part of their productivity taken by force, and tax consumers (or tax eaters) — those who live off the results of your hard work — money better spent on yourself or caring DIRECTLY for your family and extended family.

Applied to the S'pore context: we have a grossly overpaid class which sucks money from those who work like hell and have increasingly little to show for it.

Money (or these days, currency) is simply a medium of exchange. Nothing more. It is also a store of value, and a unit of account, but these factors are derived DIRECTLY from its nature of being a medium of exchange. Money used to be FIXED in something OBJECTIVE, like a FIXED WEIGHT of precious metals. USD20 per ounce of gold, and £1 per pound of silver, for example. Therefore when you were paid for your labour, you received a (representation) of a fixed amount of precious metal. So USD10 a day would be equivalent to 0.5oz of gold, say, and that could exchange for food, transport, children's needs etc.

The REAL purchasing power therefore, is in your own PRODUCTIVITY — what you can exchange for what you produce using the MEDIUM of money. This is why it it CRUCIAL that the value of money DOES NOT CHANGE and stays "objective".

When the world switched to PAPER or FIAT money 34 years ago, all hell broke loose. Now the govt decides what the value of the currency is and this "subjectivity" is compared daily to the currency of other countries, and thus we have freely floating exchange rates.

There is no cost to printing paper currency, as there was to producing silver or gold money (huge cost) so paper currency is not "scarce" and the govt, with their allies in the PRIVATE banking sector can virtually produce as much as it needs. Since these people (important point) GET THE NEW MONEY FIRST they are able to spend it and exchange it for goods, services and assets before this newly created money flows through the society causing prices to rise.

The elite class will always have the edge over the rest of the brow-beaten slogging population.

When there is an injection of new money, who do you think is in a position to buy a new condo, or IPO, or a bungalow?

The taxpayer, or the tax eater?

redbean said...

this is the matilah when he is high and dry, without alcohol in his blood.

Anonymous said...

Bravo!