2/24/2011

The Good and Bad News of inflation

January’s 5.5% hike in inflation is the second highest in two years. If this goes on every month, the inflation for the whole year will be probably 3 to 3.5%. Pardon my poor arithmetic. See the good and the bad news? Inflation is good news really. The higher the better. It means that the economy is doing very well and people have a lot of money to spend and can afford to pay more and more. Look at the high property prices and the high COEs, where got problem. The queues are there everyday.. For property buyers, the higher the inflation, the longer will be the queue as they will make instant profit after every purchase. The price will shoot up everyday. Buying property will be such a wonderful experience. A commentator, couldn’t remember his name, said that this high inflation is already expected. So nothing to worry about. It is all well planned and managed. Looking at how comfortable and happy Singaporeans are today, we can actually use inflation as a measurement of happiness index. The higher the inflation, the happier the people. At least 80% of property owners (HDB owners) will be praying that inflation goes through their flat roofs and all can be instant multi millionaires. Good for the coming general election.

5 comments:

Anonymous said...

Not too bad really.

Higher property price- queue earlier, days ahead to beat the others.

Higher COE price- shows car owners are successful people.

Higher medical fees mean our medical services are top class and why so many foreigners come here for treatments.

The more expensive things become but are still affordable by the masses, the more it shows that we are above FIRST WORLD, heaven can wait.

Must have to agree that everything is well manage.

Anonymous said...

Really?

Good for who? The elites, the rich and the loaded foreigners, or the downtrodden?

Affordable can mean borrowing to buy or pay but puts one deep in debt.

Affordable can also mean buying or spending money, that one has not earned yet, and slogging through one's lifetime to pay back.

Matilah_Singapura said...

Get used to it lah. Inflation is the name of the game. Many sovereigns are going to default. Inflation is the way that some of these debts will eventually be paid -- the rest probably will be written off.

Toward the end of the inflation cycle -- usually when the bond market kicks in -- is a spike in real interest rates -- because creditors finally get wise and see that their earnings from interest do not cover the drop in purchasing power of the money they've loaned out.

So when the real interest rate hits 3,4..or even 10, 15%...just you watch the property sector come crumbling down.

Patience, little ones, patience.

Matilah_Singapura said...

Keep an eye too on the velocity of money -- the growth in "credit money" or fiduciary media.

Credit money is the "bullshit" component -- not hard money, but just a number in a spreadsheet or an ink mark on paper stating that a sum of money is owed. Sooner or later this debt has to be paid...and either before or after the crash there is a mad rush to pay off debt called "deleveraging" and money is sucked out of the economy to service bullshit debt -- usually sky-high prices of over-priced assets.

Economy ===> into the jamban. Again, lots of opportunity here as all assets will be heavily discounted.

Singapore's sovereign debt is over 100% of GDP. Please don't take my word and look it up for yourselves.

In a low interest rate environment, the smart, prudent and responsible thing to do is to retire as much of this debt as possible. Are they doing it? NO.

So here too is an area where catastrophic failure (and opportunity) could occur.

High inflation causes lots of credit to be created, and vice versa. Lots of credit increase the instability and uncertainty in the system -- i.e. adds to the chaos. Which means opportunities to profit abound.

Some people are going to make lots of money. You better be on the right side of the trade ;-)

OKL said...

honestly worried about inflation rates, esp with the high amount of handouts in the budget this year; we are already close to full employment and current rates of inflation are already high. further stimulation of the economy is not necessary.

having said that, i think the govt will be looking to raise taxes in the 2nd half of this year.

wouldnt go so far so agree that inflation is a good thing though; deflation is just the other side of the same coin.

as for interest rates going higher, i doubt that will be the case, not until fiat currencies end... but i'm not saying that rates will not rise; they will, but with the current system- if govt spending is done correctly, the tendency for rates is to fall. as for the geopolitical implications, its another matter altogether.