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5/27/2008

It's happened, what to do?

This is about what sum up the proceedings on tackling rising cost of living. Lim Hng Kiang said, "we 'cannot completely insulate ourselves' from the global price hikes." The govt is looking at other measures, no cutting of GST or petrol taxes or that sort of things. Anyway our petrol tax is 'modest,' only 44c a litre. And the govt's policy is to maintain price stability etc. Have prices been stable? Many have reached a point when every cent counts, when every little increases are no longer affordable. Can understand this or not? Oh, the high inflation rate will cool off later in the year. It is only temporary. Really, are we expecting the prices to go back to where they were before after the cooling off period? Obviously not and they will stay at current level. So how would temporary once off handouts going to help in the long term? And workers are not going to expect pay rise or substantial pay rise to offset the high inflation cost. The solution, please tighten your belt.

7 comments:

Anonymous said...

That is the way that adults used in kidding the kids, because they know Singaporeans will get used to it and forget the pain soon enough. Yes, just tighten your belts while they tighten the noose around your neck.

redbean said...

there is a chinese called talk 'wind cool words.' fen liang hua.

when one has millions in his bank account, it is so easy to call people to tighten belt. many of these people tightened until no holes to tighten any more. now must use raffia strings to tie their pants.

Matilah_Singapura said...

> And the govt's policy is to maintain price stability etc. <

Maybe in communist Russia, but in the real world that is impossible for anything over a very short term.

Any govt that makes a claim about "price stability" is saying things to make the people feel better.

No one, no institution can beat the market at setting prices.

Prices of all goods fluctuate over time. It is just right now people have a "new" experience. Only a few years ago, everything was "cheap". The hotels were practically giving food away at their cut-price buffets.

Economic life moves through phases. There is no cause for alarm. Anyway, worrying about it only makes you feel worse. Prices are set by the market. Nothing you can do about it -- except drop the taxes and excises on the goods and services.

redbean said...

giving subsidies is tempering with the market and distorting the market.

what about maintaining price stability? not tempering with the market, not distorting the market?

heads, i am right. tail, you are wrong.

Matilah_Singapura said...

The institution which tampers with the market with the objective of "price stability" is the central bank -- MAS.

Here's a simple example -- assuming round numbers, linear relationships, -- for purposes of illustration only.

Obejective: to reduce the PRICE of fuel

Method: Central bank intervention.

MAS's policy instrument is not interest rates like many other central banks. MAS uses FOREX -- the value of the SGD relative to (???) -- they won't tell you specifically (Lee Kuan Yew says it must be kept secret). Anyway MAS buys and sells currencies to maintain the SGD's value at a certain level.

OK. Suppose fuel is now SGD2 per litre, and the objective is to get the price down to say, $1. What the MAS does is to appreciate the SGD using the FOREX mechanism -- selling off foreign currencies and aggresively buying SGD, and perhaps gold.

Now the SGD is worth TWICE what is was, and the price of fuel is HALF (as well as the price of other imports).

Now S'pore exports cost her trading partners TWICE as much, people's wages are -- in global terms -- twice as high.. and in a few weeks there is total economic collapse as S'pore is now totally uncompetitive in economic terms.

With economic collapse comes social disintegration, most people have lost their jobs, fights are breaking out, people are committing suicide...

... but so what? You have cheap fuel, cheap rice, cheap food -- all imports cheep cheep cheep!

redbean said...

let me explain in simpler terms. subsidy is like a man carrying 50kg of weight on his shoulder and you go in and tahan a bit for him with your hand, to make it lighter.

what i think singaporeans are looking for is not to add more weights on the man's shoulder. maybe take a kg or 2 off.

simple enough to understand? if not, read again after you sober up.

Matilah_Singapura said...

Mate, I have better things to do than read your economically fallacious posts more than once -- which is already painful.